Profile: Ken Tuchman - The call to greatness
The boss of Teletech is a near-billionaire and he's done it by answering other people's phones. Richard Halstead reports
Sunday 14 September 1997
Which is the way he prefers it. For Ken Tuchman is involved in customer service, and he does go to the supermarket (in his case, the discount superstore Costco) regularly. As president of Teletech, a "provider of customer care solutions" - call centres to you and me - he feels it is important to keep his feet on the ground and concentrate on answering telephones for some of America's best-known companies.
Tuchman is also, as a consequence, one of America's richest people under the age of 40. At 37 he holds around 65 per cent of Teletech's stock, which at the end of last week traded on New York's Nasdaq market at $14 per share, valuing his holding at $550m (pounds 346m). A year ago the company's share price was flying much higher, touching $40 a share and temporarily putting Tuchman into the billionaire bracket - on paper at least.
Quite how this company came to be a wonder stock - rated on the same forward price-earnings ratio as some of the more glamorous technology stocks - is hard to fathom. If you call parcel carriers UPS in the US to check on the status of a package, or Compuserve to get help with an Internet query, the call will be answered by one of Tuchman's 7,500 employees, around a third of whom work in a converted shopping mall on the outskirts of Denver, Colorado, not far from the company's headquarters.
It does not sound as whiz-bang as, say, an Internet explorer program, but analysts believe Tuchman is on to a good thing. Research by US brokerage Alex Brown & Sons Inc estimates that US business spends $80bn on telephone sales and service, of which just $6bn is outsourced, mostly to companies doing cold-call telesales work. What little "inbound" traffic (customers phoning companies) that is outsourced at the moment is dominated by Tuchman's organisation.
According to the Gartner Group, a US-based technology and strategic consultancy, nearly 70 per cent of all customer interactions will take place over the phone in 2000. They argue that organisations which do not pay attention to the way they deal with incoming telephone-based business will fail.
In the UK, a call to PPP to talk about health insurance is likely to be answered by Teletech's 400-person call centre facility in Reigate, Surrey, which it runs as a joint venture with PPP.
A number of other companies in the UK are served by Teletech, but they would rather their customers didn't know that a Teletech employee is answering the phone.
The company is close to signing a deal to build and operate a call centre near Glasgow, which will employ around 800 people initially but will have room to expand as new contracts are won. Tuchman is reluctant to name the exact location, but says the UK will figure prominently in the company's expansion plans.
Teletech prefers to take on customers slowly, and aims for a few large corporates rather than a lot of smaller businesses. It has 40 customers in the US, the biggest of which is UPS, accounting for around a quarter of total revenues last year of $165m.
The one flaw in this strategy was exposed earlier this summer when UPS workers went on strike for a week, paralysing the parcel carrier and affecting Teletech's revenues for 1997. The company initially put out signals that the strike would not harm its prospects, but last week it told investors that third and fourth-quarter revenues would suffer from the UPS strike and from the changing marketing focus at AT&T, another large customer. The company anticipates full-year revenues of around $260m, a significant improvement on 1996 but less than analysts were expecting.
At a purely pragmatic level, Tuchman attempts to meet the needs of large corporations to deliver promises about "getting close to their customers" quickly. Senior management at large companies can monitor quality of response much more closely than they would within their own organisation, and vary the way calls are dealt with at short notice. Tuchman says that when he approaches a prospective client, "I go straight to the chief executive officer. I don't deal with middle management because they view my organisation as a threat to their power and their jobs."
Tuchman says staying in touch with the basics of his business is vital - ensuring a customer does not get bad service. It is on his trips to the discount warehouse that he comes up with some of his ideas for Teletech. Like his plan to install video-phone consoles in every large consumer electronics shop in the US, so that shoppers are connected with someone who can demonstrate exactly what the computer can do for them.
The idea stems from Tuchman's continuing obsession with businesses that deliver bad customer service. It was this experience during his time working for his father's luxury-home construction business in California in the early 1980s that originally drove him to set up Teletech.
"I was seeing products advertised in magazines that could be useful to a house we were designing and I would send off a reply card for information. I wouldn't hear anything for two months, and then a salesman might show up to see me. By then the house was under construction and it was too late."
Tuchman founded Teletech in a disused nursery school near Los Angeles in 1982. He is the first to admit that the first seven years of the business were hard work, particularly as he was trying to expand without taking in money from outside investors. "Our cash-flow situation was bad, and we were robbing Peter to pay Paul," recalls Tuchman.
Nowadays he still works hard - though he has cut down his working day to between 12 and 14 hours.
Having a video link in a store, generating instant response from customers, is the most advanced manifestation of this obsession with customer service. Eventually, the idea is to use video links for technical support for computer software and consumer electronics, so that Teletech employees will be able to show customers how to operate their purchases after they have taken them home.
But all that is still some way off. With new clients in the US being picked up at a rate of between three and six a year, and a self-imposed target of raising revenues to $1bn by the year 2000 hanging over his head, Tuchman is looking to further Teletech's reach in the international market, starting with the UK facility.
"The companies of tomorrow will not be the same," says Tuchman. "The guard is changing like never before - who would have thought that AOL [an Internet service provider] could go from a standing start a few years ago to having 12 million customers today?
"The rule of business is how fast you can get your idea to market. Those whose systems do not allow them to move quickly are doomed."
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