From Monopoly Mindset to Market Discipline

AT&T: Learning to Compete Through CVA

The Challenge:

In the pre-deregulation era, AT&T was the dominant player in long-distance telephone service. They had no real competition. Customer satisfaction surveys focused only on AT&T customers — and those scores were high. Everyone at AT&T believed:

“If our customers are satisfied, we’ll be fine.”

But deregulation changed the game. New entrants like Sprint began offering long-distance service. Sprint ran ads declaring, “So quiet you can hear a pin drop.” Customers began switching. AT&T began losing share. And leadership had no explanation.

That’s when Ray Kordupleski, a quality manager inspired by The PIMS Principles, started asking new questions:

• What if our satisfied customers leave anyway?
• What if our real problem is competitors offering more value?

He brought in Bradley Gale and the CVA team to shift the company’s thinking.

The CVA Breakthrough:

The CVA team uncovered a surprising oversight. AT&T had been conducting a whole-of-market customer survey for regulatory purposes — meaning it included not only AT&T customers, but also the customers of MCI, Sprint, and other competitors.

But no one had ever analyzed the competitor data.

Once the CVA team dove into it, they discovered:

• AT&T customers rated their service highly.
• But competitor customers were rating their own providers even higher — on clarity, connection speed, billing simplicity, and reliability.
• Worse, AT&T’s relative value scores were declining — and no one knew.

To quantify this, the team created two new metrics:

1. Relative Perceived Quality: AT&T’s performance score divided by competitor average
2. Relative “Worth What Paid For”: AT&T’s perceived value score divided by the competitor score

When they charted changes in these metrics over time, they discovered something powerful:

A drop in relative “Worth What Paid For” predicted market share losses four months later.

Strategic Moves (Powered by CVA):

1. Built a Competitive Value Tracker
   The team established CVA as a company-wide tool. Each AT&T business unit now had to:

• Measure performance vs. competitors, not just internally
• Track value over time
• Link value metrics to future share shifts

2. Created the Customer Value Added (CVA) Score
   This became a key performance indicator. Business units were no longer judged only on customer satisfaction, but on how much better (or worse) customers perceived them compared to rivals.
3. Used CVA to Correlate Key Events and Share Impact
   They built timelines linking events (e.g. outages, rate hikes, service improvements) to CVA score changes and subsequent share changes. One outage in the Midwest directly correlated with a dip in share four months later — giving executives powerful, credible evidence.

The Result:

• AT&T slowed the decline in long-distance market share despite intense competition
• Executives gained a leading indicator of risk, rather than reacting after share loss
• CVA became embedded in strategic planning across multiple business units

Other telecoms — Bell Canada, Telstra (Australia), Orange (Europe), US West, and BellSouth — followed suit, adopting CVA to improve their own customer value positioning.

Why It Worked:

“Our customers were happy. But CVA showed us our competitors’ customers were happier. That’s why we were losing. We had the data — we just weren’t looking at it the right way.”
— [AT&T CVA Team Member, paraphrased]

CVA helped AT&T evolve from a monopoly mindset to a competitive strategy organization — measuring and improving what customers really cared about: value for money.