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
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
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.
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.
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
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
(1a) To establish agreementto provide Telkomsel Autorefill
service with EDC
Telkomsel simPATI customers
(2a.2) to provide & operatebackend software application
(2a-3) Provides & operateshosting & hardware
(2a-4) To install & operate EDC
with standard debit/credit& Telkomsel Autorefill
(2a-5) To operateInformation exchange,
back-end software application with Telkomsel voucher system
(1b) To establish agreement to provideTelkomsel Autorefill
service with EDC
(3b) To arrange 30% of EDC
(3a) To arrange transaction fee = Rp. 1,250
per electronic voucher
(3c) to arrange 70% ofEDC transaction fee(paid thru Telkom)
Operation with Autorefill
Existing (prior to Autorefill)new setup
Figure 1: Illustration on Business Arrangements and Operational Relationships to
Provide Telkomsel Autorefill Service, Case Part A
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
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