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The mind and muscle behind Vonage’s success

The mind and muscle behind Vonage’s success

Alan Masarek shares a few lessons on how to get record results by providing a personalized service.

In 2014, when Vonage was a consumer-focused telecommunications services provider, before expanding into the business marketplace, it reported approximately 2.5 million subscriber lines in conjunction with mobile application services. Since Alan Masarek became its CEO that same year, the cloud company delivered record results in the third quarter of 2017. For the first time, Vonage’s Business unit US$500 million revenues exceeded the Consumer unit revenues. Now, the company’s goal is to get a 25% organic annual growth rate in this new segment.

“Communication is everything and we are all going through a digital transformation”

Before leading Vonage through a successful transformation into a market leader in business cloud communications, Masarek had been Director of Chrome & Apps for Google since 2012, after selling Quickoffice, Inc., which he co-founded in 1994. The Harvard Business School graduate has ample experience in finance, start-ups and management, including companies such as Mobile Digital Media, Inc., AHT Corporation, Advanced Health Corporation, CircleBack, Inc., Calvary Capital & Advisory, LLC, The NTC Group, AdOutlet.com, Inc. and Mobile Digital Media (MDM), which he also co-founded.

was in decline and yet the company was able to triple its profitability by providing residential telecommunication services based on voice over Internet Protocol (VoIP). With an average of 15 billion minutes of phone calls per year, it was able to enter the cloud market for businesses.

“One of the challenges when you’re in the midst of this transformation is how you get organic consolidated growth when we were way more than half consumer-oriented, and consumer was shrinking. You can’t grow fast enough on the minority segment to get consolidated growth. Now we have accelerated organic growth on the business side, which has become the largest segment, and we have correspondingly begun to stabilize the decline of the consumer segment. We’re on the cusp of very healthy consolidated revenue growth, which is a very big deal from where we came from. The results have been very strong. We’re an over one billion dollar enterprise,” he explained.

DIGITAL HELPING ANALOG

Vonage expanded beyond phone call services by creating cloud technology with a focus on driving better business outcomes for its customers. The way to differentiate was by improving communications between employees and customers through digitalization. For Masarek, the ongoing challenge is still to deliver an overall satisfying customer experience. 

“Superior outcomes emerge from the integration of businesses,” he added. “This is a perfect example. We have a big restaurant chain —of about 500 restaurants— and they have a strategic role in building a takeaway business. We won that deal not because our cloud phone system is particularly better than anybody else’s: we won because we’re now using communications to help them achieve their strategic imperative of developing a takeaway system, and that example replicates over and over again with customers.”

What is powerful about this example is how technology is impacting how food is cooked, how it tastes and therefore also impacting the bottom line. Vonage’s technology eliminated soggy fries which drove a better business outcome for this company as soggy fries/not knowing when to cook the food based on the customer’s arrival time was what was hindering the take out business from thriving.

Vonage aims to deliver high quality solutions with differentiating outcomes. In this case, it offered a different value, profit growth by improving the restaurant’s chain takeaway service with a geo-fence system that would let them receive a text message from a bot when the client was within a range of distance, with enough time to prepare their food just in time for their arrival.

“That’s about the most analog a business can get [a restaurant] (…) but you’re using a digital technology to grow revenue.” He commented that “as a company you have to be easy to buy, to sell, to provision, to service, because the user experience is not just based on whether the phone connects.”

“WICKED SMART PEOPLE”

To achieve greatness, Masarek seeks the best talents that can lead Vonage to where it’s going, which he refers to as “wicked smart people.” Every resume that comes in still goes through his desk for final approval. As part of the changes, Vonage has had to make hard choices along the way, going from 1,200 employees three years ago to around 1,800 at the end of 2017.

“I encourage mistake-making (…) We go fast, you’re never going to have all the information.

“You have to have the right metrics and Key Performance Indicators (KPI) to manage them and give them the freedom to make mistakes. This is the organization that we have created, this mind set of speed. I encourage mistake-making, it’s the old managing of fail forward. We go fast, you’re never going to have all the information. You make the decision with 80% of the information and revisit it as you go forward. Circumstances change and you have to go fast.”

Vonage has a series of “employee-first initiatives,” which break down into three categories: rewards and compensation, culture, and growth and opportunity. The organization has two programs: Accelerated Leadership Development (ALD) and Emerging Leadership Development (ELD).We have a whole set of initiatives that are manager centric, Masarek remarked, because great people can hire more great people.

The company has also successfully made dozens of strategic relationships in its supply chain with some of the largest tech companies to deliver its service around the world, including names such as Amazon, Reliance, Vodafone, Asda, NTT Docomo, Zendesk, Bullhorn, G Suite, Oracle, Panasonic and many others. “Those are massive relations to us: they are all the major carriers in the world. We have to have relationships with all those to manage the last-mile carriers.” 

“Communication is everything and we are all going through a digital transformation. I have this image that always comes up in my mind, where (managers) are in a rotary-dial phone talking to their people about the website and the mobile app, and how they have to digitally transform the business. I don’t think those folks yet fully understand how important communications are. Everything about communications is important to generate better business outcomes,” Masarek said.