New Avaya CEO shifts focus towards Nortel

Avaya’s freshly minted CEO Kevin Kennedy is expected to announce a major additions to its unified communications platform architecture and the promise of cost savings.

Kennedy, who took over from Charles Giancarlo, talks about the changes he has implemented since he took charge in January, his goals and how Avaya will weather the bad economy.

Q: What are your short-term goals for the company?

Kevin Kennedy: Number one: the transition. I had time to work with [interim CEO Charlie Giancarlo ] on the transition. I’d say probably two or three of the people that report to me now, Charlie and I jointly hired even before I started. My first observation is I don’t expect a lot of churn amongst the executive staff, partly because I participated largely in who is here. The second piece is that there needed to be a shift in focus for several reasons. One is that the GDP and the industry began to contract, so that’s different as I started. Second I have a competitor that announced bankruptcy. Third, my observation was that while the team is very open to change – so that was a very positive thing I inherited – they were more focused on their functions than they were on things that were required as a team to accomplish.

Q: What have you done to deal with these challenges?

K.K.: I have formed three work streams for the executive staff. First is restructuring given the new world that we live in. The second is to focus on transitions — to think about do we have the right pricing structures, do we have the right channel, practices, certifications? Transitions could mean in general [mergers and acquisitions] if we did a small acquisition. I’d say the success of this company in the past on exploiting acquisitions has not always been excellent. The main thesis here is we needed to make sure the company aligned on transitions. The last piece was finding the beacons of growth to lead us out of the recession and what we would change in our go-to-market model. We appointed a Chief Restructuring Officer (Jim Cherico) for the first activity. We took one of our former finance leads and head of operations (Amar Pai, vice president, executive operations and strategy) and gave him the second one, the transitions and the risks associated with them. And the third, the beacons of growth and go-to-market, I personally chair that work stream.

Q: Were these your decisions or were they worked out with Giancarlo?

K.K>: Charlie stayed on site for about the first two weeks. That allowed me to meet employees, go to town halls and so forth. As I went through the first round of management reviews, what I saw was people working very well and intently to become very good at their functions but there was a need to tighten up the alignment across the team, so about four to six weeks into the job I felt that these were the three most important things to focus on, execute well on and we formed those streams about a month ago. It’s not unusual. Sometimes you have to push things and sometimes you have to pull things, and this was a time where I had to pull a fewer number of things across for success.

Q: What does the bad economy mean for Avaya’s plans?

K.K: The model we have used is the economy is likely to be flat or down through the end of 2009. You could conceive of a cautiously optimistic view that by June of 2010 we may be able to look back and say that we saw the nadir of the economic situation. Not that that horizon is by any means correct, it really was a message to our team that, you know, don’t expect next quarter to all of a sudden bounce back. We’ve got to be prepared for a tough economy for at least a year and so prepare yourselves for both improving productivity as well as serving customers and getting growth ready. If you think of it that way it makes it obvious why there’s a restructuring activity as well as a growth beacon. You want to be clear what’s going to lead you out of recession when it comes. You want to be ready for it. But you also want to take the actions necessary in case this thing is longer lived than you think it might be.

Q: Is it a competitive advantage to be privately held given that all your competitors are public?

K.K.: I’d say the competitive advantage is the discussion in a board room in a private company especially if it’s doing reasonably well is largely around share relevance and strategy. Remarkably you spend a bit less time on the immediate quarter’s results. Part of that is because those results are being monitored on a greater frequency. It occurs sort of monthly. It’s a very engaged board, but overall that board’s goal is that you have a good strategic outcome or IPO, which ultimately means you’re picking up share or gaining relevance. As long as the company is doing reasonably well, you tend to have less quarterly distractions in a private company. In that sense there is a bit of a competitive advantage. I’ll tell you one of the reasons I came here is I felt that in the bearish market that might be protracted for a period of time given the economic uncertainty, for a tech company I felt private might be a very beneficial place to be. So far I believe that as strongly or more strongly.

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