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  • CHAPTER 5 LESSON LEARNED AND CONCLUSION

    CHAPTER 5: LESSON LEARNED AND CONCLUSION

    5.1. Lesson Learned

    Back in 2002, BKM was just another company in Indonesia struggling to

    survive and just tried to keep-up to fulfill its operational expenses. It was just only

    from one project, the BKM Telkom agreement for the Telkomsel Autorefill Service

    had turned BKM into a profitable operation in the following year and subsequently in

    the next years ahead, up until now (2008).

    Getting a multi-years service contract for Telkomsel Autorefill was a result of

    the passion in seeking and creating business opportunities of the Founder and CEO of

    BKM, Rudi Y. Chatab. His creativity and leadership coupled with a strong

    determination as an entrepreneur had enabled BKM to secure a long-term business

    relationship that has been a routine source of revenue for BKM since 2003.

    Arrangements were managed under many high uncertainties such as limited resources

    and ability to execute to fulfill according to the BKM-Telkom contract. First, was

    financial factor as source of revenue that was to be generated on per transaction basis,

    BKM was expected to manage the EDCs as asset rather than selling it to Telkomsel,

    and in 2002 BKM did not have sufficient fund nor the required asset for loan

    collateral; BKM had to procure 1,800 EDCs with the total value of slightly over

    US$1 million. Second, was the limited internal team that BKM had both for technical

    application software development and operational, not to mention that BKM was just

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    a very small company compared to big giants like Telkom, Telkomsel as one of the

    business units under Telkom Group, or BNI.

    Being able to finally execute the deal following the BKM-Telkom contract

    signing was another major achievement for BKM. The close relationship with local

    IT solution provider ICL (which until early 2003, was also one of the shareholder of

    BKM), which at that time was desperate to close EDC deal with BNI, was another

    factor for the successful delivery of the signed BKM-Telkom contract. A good

    relationship between Rudi and the owner of ICL enabled the business arrangement

    between BKM and ICL for electronic refill software application for ICL to supply

    EDC to BNI considering the Telkomsel Autorefill contract that BKM had with

    Telkom. Then, it followed by BKM-BNI contract for Autorefill signed in Nov 4,

    2003 (profit sharing arrangement) enabling BKM to use the EDC owned by BNI to

    fulfill BKM Telkom agreement for Telkomsel Autorefill service.

    An analogy for BKM during 2002-2008 using Timmons model on crises and

    symptoms during stages of venture growth, can be seen in Table 12: The Journey of

    BKM during Venture Growth.

    Table 1: The Journey of BKM during Venture Growth

    Wonder Blunder Thunder Plunder Asunder

    CrisesandSymptoms

    Uncertaintyofsurvival

    firmsstumbleandfall

    RobustgrowthandSolid

    managementteam

    Robustcashflow Renewordecline

    StagesofVentureGrowth,CrucialTransitionsandCoreManagementMode

    BKMin2002

    BKMin20032005

    BKMin2006

    BKMin2007

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    BKM was in Wonder mode in 2002 as the future of company was uncertain;

    hence, the company was struggling to survive. By securing a contract with Telkom

    for Telkomsel Autorefill service, then later the contract with BNI, BKM moved to

    Thunder mode following 2003, and then continued to grow to 2005. During 2003 to

    2006, BKM enjoyed a robust cash flow but unfortunately, the industry was changing

    as PC-based electronic pre-paid balance top-up services was started to grow. In 2007,

    BKM was aware that it needed to find new product and services if the company

    would like to maintain or even increase their revenue stream in the future, or the

    business will decline in near future.

    Since June 2004, Telkomsel had launched about 500 M-KIOS service

    locations as an alternative for its customer to do electronic balance top-up with GSM

    USSD (Unstructured Supplementary Service Data) command that had been available

    in every cellular handset, even on the most outdated types.

    With M-KIOS, simPATI balance top-up is done over the air using a cellular

    handset equipped with special SIM card for M-KIOS. Customers simply visit to the

    location that has M-KIOS facility and pay some amount of money in line with

    nominal value to top-up. The officer at M-KIOS location will do the over-the-air

    process to top-up the given nominal to a cellular number informed by the customer.

    In a few moments, the notification will be sent to that cellular number, informing that

    the balance top-up has been successful and the balance will be added according to the

    nominal value purchased. Available nominal values for M-KIOS service are Rp.

    20,000 and Rp. 50,000 (In 2004, about US$ 2.15 and US$ 5.38 respectively). The

    plan was to extend the M-KIOS to 6,000 locations in Indonesia, and more later.

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    M-KIOS enhanced the range of Telkomsel service for simPATI Autorefill that

    previously had been available through banks ATMs, refill from Telkomsel post-paid

    product, mobile banking and a few more mechanisms.

    Telkomsel has also started to introduce another service called T-Cash, which

    was allowing pre-paid users to have an account at Telkomsel and could top-up their

    pre-paid balance from the T-Cash account. This is a direct threat for the continuity of

    BKM business in providing Autorefill service for Telkomsel.

    5.2. Conclusion

    BKM had initiated and orchestrated all the business relationships towards the

    successful launch and operation of the Telkomsel Autorefill service. The project was

    initiated back in March 2002 when BKM showed the capability to deliver the

    voucher-less business to Telkom B2B Project. Then, the two together presented the

    proposal to Telkomsel Marketing Director, Mr. Woerjanto, which then agreed to

    proceed to five years contract. After long process, a back-to-back contract agreement

    between BKM to Telkom, and Telkom to Telkomsel was signed on November 25,

    2002. At that time, Telkom was eager to work on any new business development on

    non-telephony applications, outside their normal traditional telephony services.

    Through indirect business relationship, whereby BKMs proposal sealed with Telkom

    brand, BKM secured the project over Telkom domination (Telkom had majority

    ownership share in Telkomsel, 65%). Telkom provided the entire electronic refill

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    application hosting and hardware infrastructure for running the data center operation

    for Telkomsel Autorefill service.

    1.2.1. Case Part (A)

    Long before BKM conducted the proposal presentation to Telkom (before

    2002), Telkomsel and BNI, there were discussions between BKM and ICL. The

    discussion was on ICLs experience in providing voucher-less application on EDC

    terminals to Excelcomindo (XL), the third largest cellular operator.

    Indo ArtaCipta Lestari

    (2a-1)To sell

    back-endsoftware

    applicationfor Autorefill

    in EDC

    (1a) To establish agreementto provide Telkomsel Autorefill

    service with EDC

    TelkomselDealers

    Telkomsel simPATI customers

    Has 65%share

    ownership

    BKMsShareholders

    (2a.2) to provide & operatebackend software application

    Data CenterOperation

    (2a-3) Provides & operateshosting & hardware

    infrastructure

    (2a-4) To install & operate EDC

    with standard debit/credit& Telkomsel Autorefill

    applications

    (2a-5) To operateInformation exchange,

    back-end software application with Telkomsel voucher system

    Managing

    Voucher-based Voucher-less(Autorefill)

    (1b) To establish agreement to provideTelkomsel Autorefill

    service with EDC

    (3b) To arrange 30% of EDC

    transaction fee

    (3a) To arrange transaction fee = Rp. 1,250

    per electronic voucher

    Administrative (agreement)

    (3c) to arrange 70% ofEDC transaction fee(paid thru Telkom)

    established

    Operation with Autorefill

    Existing (prior to Autorefill)new setup

    Operation (financial)

    Figure 1: Illustration on Business Arrangements and Operational Relationships to

    Provide Telkomsel Autorefill Service, Case Part A

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    To fulfill the BKM-Telkom contract for Telkomsel Autorefill service, BKM

    needed to find financing alternatives to procure 1,800 EDC for Telkomsel Autorefill

    Service. It could be a new capital injection from shareholders, apply a loan from a

    bank / partners, setup revenue sharing with some to-be partners, etc. See Figure 7:

    Illustration on Business Arrangements and Operational Relationships to Provide

    Telkomsel Autorefill Service, Case Part A.

    See Figure 8: Summary of Case Part (A) - Q1-Q4 2002 for the summary of situation

    of each party in Case Part (A).

    Case Part (A): Q1-Q4 2002 Challenges in pursuing the Telkomsel Autorefill Opportunity

    Telkom Telkom was a state-owned

    Telecommunication company Telkom was Telkomsel major

    shareholder (65%)

    Telkomsel Telkomsel was market leader in Cellular

    Telecommunication Industry Needed to maintain strategic position

    as market leader One of the initiative was to provide

    electronic-refill service for its growing pre-paid customers

    Indo Arta