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Smit: Fostering a Spirit of Innovation

Cable Unit Chief Divulges What's In MSO's Secret Sauce 9/30/2013 12:00 AM Eastern

MCN: What’s in the secret sauce?

Neil Smit: I can say that we are probably more focused on innovation that we have ever been. We have put out 40 products over the last two years. It spurs innovation across all parts of the business so you have people think about, “Gee, how can we do a self-install kit better,” or, “How can we improve the building experience across different platforms,” and “Gee, how can we make it easier for kids to sign up via their mobile phone, and for college kids returning?” Yesterday was a record day for kids signing up via mobile phone for service. It becomes the spirit of the place.

Let’s innovate some more, and let’s do things better and faster, and let’s try it and see if it works. And I think it’s infectious in a good way, so that has been really positive. The trick is always then how to not overwhelm the field.

MCN: Who is most responsible for that performance?

NS: I give a lot of credit to the people in the field. I give [executive vice president and chief operating officer] Dave Watson a lot of the credit, [as well as] the operating presidents. They talk every day and they make sure their headquarters is aligned with the divisions, and then the division presidents talk to their regional people every day. It’s a continuous conversation and it’s touching all parts of the business on a daily basis.

I think the other thing is, if you think about it, once you get things up in the cloud, so for example with X1, we can make changes to the guide without the field having to touch anything. You can be nimble and get more products out the door without having a significant impact on the field operations, and that’s been really positive.

We’re spending a lot of time on designing self-service and customer-service aspects into the products as well, instead of after the fact saying, “Well, let’s see what we can do.”

Tony Werner, our CTO, is terrific. And he has done, and it’s probably a bad phrase for it, but it’s a hack-a-thon every quarter. You give engineers three, four, five days off to come up with new innovations to run on our platform and you open up the APIs and then they come in.

So there is all this innovation happening, but it’s also execution. We said we’re going to get out this many X1 boxes, we’re rolling it out nationally. We made that call halfway through the year — we’re going national. And boom, it’s a big task, a lot has to happen, all the markets have to be prepped and you’ve got to do the training and you’ve got to get all the scripts right for the call centers. All that stuff has to happen.

MCN: Are you meeting those goals?

NS: Oh yeah. (Laughter.)

MCN: Is there something that you see that your company or your team does differently or better than the other companies out there?

NS: I think we’re all aligned. And if we’re not, we put it on the table. It’s all about the team.

MCN: What do you do as a manager to engender that sort of teamwork? What’s your role?

NS: I’ll tell you what I generally do — I walk around every morning and I talk to every one of my direct reports to get a feel for what’s going on, what’s coming up, what should we be thinking of and connect the pieces together: “Hey, I was just over there and I heard they were working on that piece, that might affect you over here, you guys should get together and make sure we’re synched.” You want to make sure the machine is tuned all the time.

The other thing is, I’ll always set ever-higher goals. Folks give me a number and I’ll always double it just because. Or I’ll cut the time in half, set ever-higher goals because I believe in the team, that the team can deliver. If they can’t, I’ll say, “Tell me what you need to do it.”

The third thing is kind of ensuring we’ve got great talent. When we went out to build X1, we hired people from Silicon Valley and big, big companies who knew how to do this stuff . There were some existing engineers who were just as good as they come in video and we supplemented them with other people who knew how to do the business.

And the field leadership: We’ve advanced a number of people who were just stars in the business and we’ve given them more responsibility. So we’ve consolidated divisions, we’ve consolidated regions and we gave the star performers more responsibility and accountability. We’ve organized ourselves differently in many parts of the business or in many types of things that we’re taking on.

MCN: There’s been a lot of speculation about mergers and acquisitions in the cable industry lately, some speculating that Comcast will be one of two super-players. What are your thoughts about scale in the industry?

NS: I would say scale has advantages in some areas, procurement being generally one of them. I have found that scale has helped us most recently in our research and development. In order to build an X1 platform, it took a lot of man-hours and resources and having the scale to be able to do that … and it’s a platform that opens up other business possibilities and opportunities. That’s where scale really counted.

But I’m also a big believer that execution counts for a lot and that one doesn’t have to be the biggest. Execution can get you a long way. I was a midsized operator. [Prior to joining Comcast, Smit was CEO of Charter Communications.] I didn’t feel a lot of constraints.

MCN: You’ve executed well on TV Everywhere. The rest of the industry hasn’t done as well. Why not?

NS: I think we’re making progress. I think that the watch-a-thon that we did in the spring was a good example of that. The [2012 London] Summer Olympics were another good example of that where people came to expect the fact that they could view the content across multiple platforms. Our viewership was up 51%.

We realized after the Olympics that you can’t just say it, you have to show it. You have to show people that you can get it on your iPad, you can watch it on TV, you’ve got VOD if you missed it. You have to demonstrate it.

So it’s an educational process in a way as much as anything. Part of it is rights and part of it is just executing, demonstrating the value of having TV Everywhere.

It’s a major thrust for us. And that’s one of the nice things about being part of NBCUniversal, having them as a sister company, we can talk about things and test things and new ideas very easily. [NBCU CEO] Steve [Burke] is terrific about that.

MCN: You must be feeling good about the Q2 numbers in June, right?

NS: We had a very strong high-speed data quarter, video continues to perform well, we’ve reduced our losses so we continue to track pretty well with video. And phone is doing remarkably well. Infinity Home continues to ramp and it’s growing at a good rate.

We did a lot of the heavy lifting on the network side and on the cloud side and going all-digital, and all the heavy lifting that happened on the base network side that now is fueling some of the innovation and the new product rollouts, like X1 and X2 and Xfinity Home. That was an important part of our laying the base.

MCN: Comcast has reduced its subscriber losses in nine of the last 10 quarters. Will that streak continue until you have additions at some point?

NS: That is certainly the objective. I think the X1 and X2 were innovating. We’re trying to provide a fundamentally different experience to the customer and one that leverages all the tools of the Internet.

If we get better product out there and we execute well on customer service, I don’t see any reason why we couldn’t or shouldn’t go positive. Both of those things are not always easy to achieve, but I’m real pleased at the way X1 is performing. We initially had not intended to roll it out nationally this year but we saw the performance in the markets and so we’re going to be national. We’re at 86% of the footprint right now.

MCN: Are business services, which grew 27% in this past quarter, the star of the show?

NS: Business services has been our highest-growth business. We started out in small and medium business and now are entering into the midmarket. [Comcast Business Services president] Bill Stemper assembled a terrific team and built the business from scratch. They’re great products. So we’ve got high hopes for that business. We have invested a lot in it and will continue to.

MCN: Is there a plan to go deeper into home automation and home security?

NS: Yes. [Xfinity Home is] rolled out across the country now … and we have a full monitored service. (Smit pulls out his smartphone and shows a screen with different live screen shots of his house.) I get texts when the door is opened and it will kick on a camera and I can see who’s at the door.

I can turn lights on and off while I’m away, there’s the history of which door has been opened or closed. It’s running off of our Wi-Fi network in the house. You have cameras and switches and lights and water and you could hang an “I’m falling and I can’t get up” off of there, you could have a refrigerator that hooked to it. It’s a powerful growth platform — you can just keep adding things to it.

MCN: How much would I pay for this?

NS: There is an equipment up-front fee that we’re spreading over six months, but this service is $40 a month.

MCN: Programming costs are a big focal point for operators. Are cable companies in danger of pricing themselves beyond the reach of consumers?

NS: The top reason people elect to leave our service is because of value. The value has two components. Component one is the cost and component two is, “I don’t think I’m realizing the value that I’m paying.” So when we set out to do X1, we wanted to address that second equation there, which was, “Let’s help people discover all the things that they’re paying for.”

I wish programming costs weren’t going up at the rate they are, but they are. And so I feel that it’s my job to get the most out of every programming dollar that we spend.

Let’s get the customers to it on whatever platform they want to and then help them discover it in an easy, seamless way. That’s kind of my view on it.

MCN: What about the more general problem of price escalation in the industry?

NS: I think there is a concern that the price of the bundle gets too high for the average customer to afford. I think our perspective is, let’s try and ask customers what you like and why, tell us what you use, how much you use the Internet. Tell us about your needs and then [we’ll] try to create a package and a product that suits that need.

MCN: Are you worried about these other players, like Google or Netflix?

NS: I worry about everything.

MCN: How do you view the various companies that have recently unveiled plans to enter the TV business, such as Intel?

NS: I think they are formidable companies. I take them very seriously. However, I would say that we have a great platform we built. We have longstanding relationships with programmers.

We have a world-class network and we have great engineers and product people across the country. We’ve got a lab in Silicon Valley, we’ve got a lab in Denver, we’ve got offices in Seattle, engineers and developers here, so I think we have the resources and I think it’s incumbent upon us to stay ahead of the game and continuously deliver a better experience to the customers and the experience includes both the product as well as the service.

MCN: Is there anything we haven’t asked?

NS: The only thing I’d say is that from my perspective, the award goes to the folks in the field who execute. Because innovation requires a lot more work. It requires moving at a much faster pace in the organization.

I credit the spirit of this place, which is innovation and focus and everybody dives in and is all aboard. But most of the credit goes to the people in the field.

September