BT Group plc
Cost Transformation Teach-in
5 December 2011
Agenda
Introduction
Tony Chanmugam
Benchmarking and approach
Shahzad Saleem
Case studies
– Broadband faults
Andy Wells
– Global Customer Service Ops
Buchi Onwugbonu
– Consumer Lead to Cash
Arthur Yu
Close
Q&A
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© British Telecommunications plc
Tony Chanmugam
BT Group plc
Tony Chanmugam, Group Finance Director
Cost transformation phases
Phase 1
Initial phase
Phase 2
Forensic phase
Phase 2
Forensic phase
Phase 3
Pan-BT phase
Customer service
delivery
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



Capex
Labour costs including contractors
Reduction in consultancy spend
Supplier renegotiations
 Overhead Value Analysis
 Right First Time process re-engineering
 BT centric
 Insourcing
 Output based pricing
Cost
transformation
Investing for
the future
A better
business
Cost base reduction
Opex
£1,243m
£571m
£364m
Capex
£1,087m
£3,088m
£57m
£2,533m
£2,590m
Further cost
saving
opportunities
£377m opex reduction
in H1 2012
£16,545m
H1 2012 costs
£14,563m
included c.£55m
milestone acceleration
and £35m
FX/disposals
£15,650m
2009
Opex
Capex
FX &
acq'ns
2010
Opex
Capex
2011
c.£2.8bn reduction in costs over two years
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2011 cost base
Around a third of the cost base1 is labour cost, both direct and
indirect
Cost savings were made across all categories in 2011
Net labour costs
28%
33%
POLOs
Property & energy
5%
8%
Network & IT
Other
26%
1 operating
costs before specific items, depreciation & amortisation and other operating income
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Benchmarking
Benchmarking identifies that we have further cost reduction
opportunities
Overall we have seen some improvement
– In FY 2009, overall costs were worse than peer average
– In FY 2011, overall costs were better than average, but there remains a
significant gap to best – overall, BT is at lower end of second quartile
Even in areas where we benchmark well, there remain many
opportunities for improvement
Marketing
Sales
Technical
Network
Customer
services
care
(connectivity) operations
IT
services
Facilities
Benchmarking
quartile1
1st quartile
1 FY
2011 benchmarking against telecoms peers
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2nd quartile
3rd quartile
4th quartile
General &
Total BT
admin
Cost transformation team
Team objective: to deliver cost transformation by improving the
efficiency and effectiveness of everything we do across the business in
order to maximise long term cash generation
2005
2011
BT Retail Centric
10 internal ‘consultants’
Pan BT
30 internal ‘consultants’
 Six of the original team are
BT division/LoB CFOs
Helen Miles
Claire Watt
CFO Openreach
CFO Innovate & Design
Shahzad Saleem
Matt Davies
Group Cost
Transformation Director
Finance Director, BT
Consumer
Samantha Booth
Edward Briggs
FD Service Infrastructure
& Service Mgt
Finance Director, Customer
Service, Billing & Support
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 Dedicated cost
transformation recruits
 Trained in consultancy tools
and techniques
 2-3 year assignments
 Strong learning &
development culture
– MBAs, Six Sigma,
McAlinden
BT Group plc
Shahzad Saleem, Group Cost Transformation
Director
Cost transformation team model
 Team has evolved from a line of business focus to a team that operates
across the business, with more than a third of resources focussed on
end to end pan-BT activities
 Assignments come in from a variety of sources - Group CFO,
LoB CEOs, LoB CFOs, MDs, referrals and self sourced by team
 Team is renowned for delivering forensic analysis within a framework
which has been developed in-house over several years
 Improving customer service and sustainable cost reduction are at the
centre of what the team does
 Consultants move through a four tier model as their experience grows
 It is an industry best model which does not have a close parallel
Consultants
Tier 4
Tier 3
Tier 2
Tier 1
Low/Med
Med
Med/High
High
Stakeholders & sponsors
Direct report
to MD
MD/ direct
report to MD
MD
Board/MD
Consultant savings target
£10m
£15m
£25m
£40m
Complexity & savings
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Tools & techniques
Root Cause Analysis
Sample based testing and
detailed process mapping to
understand root cause of
failure
Benefits:
increase in productivity,
revenue protection,
potential ‘Right First Time’
improvement
Overhead Value Analysis
Detailed activity-based review
of an organisation
Benefits:
increase in productivity,
removal of process inefficiency,
scaleable cost base for future
growth
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Time of Day Analysis
Quantitative analysis of
inbound call volume profiles
Benefits:
increase in productivity,
eliminates unproductive time
Cost
Transformation
Project
‘Right First Time’ Process
Review
End to end process redesign,
identifying improvement
opportunities
Benefits:
increase in productivity,
revised processes,
‘Right First Time’ improvement
Call Handling Time
Review
Reduces call handling time
through step by step analysis
of major call types
Benefits:
increase in productivity,
reduced call handling time,
‘Right First Time’ improvement
Benchmarking
Implementation
Review against internal &
external benchmarks to
identify performance vs best
practice
Agree detailed
implementation plan with
business and monitor
progress
BT Group plc
Broadband faults process
Andy Wells
Broadband faults objective & scope
Objective: To identify the common capabilities and duplications of the end-toend broadband faults process to deliver pan-BT cost savings, without
impacting customer service
Project scope:
Wholesale
Retail
Consumer
Contact
Centre
Business
Contact
Centre
Contact
Centre
Openreach
Contact
Centre
Field
Engineers
Total c.£120m cost per annum
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Operate
Field
Engineers
Broadband faults original process
Other CPs
2
Faults
Customer
reports
fault
Retail
Contact
Centre
Faults
1
Wholesale
Contact
Centre
3
Faults
4
5
Openreach
Contact
Centre
Fault
Investigation
Engineers
Openreach
Contact
Centre
BB Boost
Engineers
Operate
support
team
Operate
Engineers
6
Broadband Boost (trial)
Operate home engineers
Issues identified
1. Unnecessary dispatch of engineers
2. Faults sent to Wholesale in error (such as
faults within customer’s own premises)
3. High volumes of internal communication
due to unnecessary and ineffective status
updates
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4. Insufficient engineering notes and manual
process in contact centre supporting
engineers
5. Multiple engineering solutions with different
repeat rates
6. Inefficient communication medium (reliance
on voice for updates)
Broadband faults revised process
Other CPs
Complex faults
Customer
reports
fault
Wholesale
Contact
Centre
Network testing call
Retail
Contact
Centre
Engineer appointing
Other CPs
Openreach
Contact
Centre
BB Boost/
Fault
Investigation
Engineers
Process improvements
1. Utilise additional procedures to actively monitor faults before engineer dispatch
2. Make Wholesale advanced diagnostic testing and profile reset functionalities available to CPs
3. Keep customer better informed by updating platform to include reliable progress status &
information on major service outages
4. Standardise engineering note format
5. Allow CPs to directly appoint an engineering solution (e.g. Broadband Boost, which can
resolve in-house broadband line issues)
6. Save time by switching update calls to e-chat
Total forecast saving >£50m per annum
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Broadband faults results & next steps
Customer experience improved due to fewer initial engineering
visits and lower repeat engineering visits
Next steps:
– Apply same revised process to Wholesale Managed Service Contracts and
Global Services broadband faults
– Pan-BT project on provision process started using same approach, with
initial focus on bundled products
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BT Group plc
Global Customer Service Operations (GCSO)
Buchi Onwugbonu
GCSO objective & scope
Objective: To identify opportunities to improve the customer experience,
reduce the cost of failure and reduce the overall cost of servicing the customer
Project scope:
Global Customer Service Operations (GCSO) provides end to end IT management
services to our customers on a global basis. This ranges from single product offerings for
SME customers, to full IT management for multinationals
GCSO
Bespoke
customer sites
Standard
shared
services
10+ sites in scope
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Service
management
(not in current
scope)
Support
functions
(not in current
scope)
GCSO approach
Plan
Gather
Data
• Agree on scope,
key issues,
timeline and
project
governance
• Agree project
participants,
roles and
responsibilities
• Establish baseline
headcount, including
recent and planned
movements
• Gather volume data,
reports, metrics/KPIs
• Visit sites, review
processes with
operations team
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Analyse
• Analyse the teams’
activities and
volumetric data
• Analyse productivity,
performance and
other measures
• Develop hypothesis
and identify key
issues
Recommend
and get signoff
• Identify opportunities to
improve productivity
through consolidation
and process
improvement
• Calculate total labour
resource and labour
cost impact
• Validate with
operational lead and
sponsor to get sign-off
GCSO high level findings & recommendations
Issues
Recommendations
Varied approach to running diagnostics
on customer queries – more time spent
on low severity incidents with no impact
on agreed service level
Introduce job notes for running
diagnostic with straightforward ‘step by
step’ guide
Teams working in ‘silos’ leading to
excessive management and admin cover
Create a centralised service desk with
more bespoke 2nd and 3rd line support.
Ten separate 1st line support desks
combined into one
Limited segregation of duties between
agents or defined activities – leading to
highly skilled & experienced staff carrying
out low skilled standard activities
Well defined responsibilities across 1st,
2nd and 3rd line agents – better alignment
of skills to issues
Huge disparity between productivity
levels of staff
Implement performance management
tool to drive efficiency
Multiple sites carrying out the same
activities with material variation in
average unit costs
Consolidate and reduce number of sites
– reduced from nine to two
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GCSO results & next steps
Improved customer service and cost reduction
Reduced processing time by eliminating non value-added
processes
Reduced overall number of sites by consolidating work into
fewer sites
Introduction of automation:
– Reduction in manual intervention
– Quicker and easier to spot issues on customer networks and resolve them
Next steps:
– Complete end to end review of major customer contracts
– Conduct productivity analysis of global standard/shared service operations
Total saving to date >£10m per annum
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BT Group plc
Consumer Lead to Cash
Arthur Yu
Consumer Lead to Cash objective & scope
Lead to Cash: The end to end process from sale through to provision
Objective: To improve the Consumer Lead to Cash process by eliminating
cost of failure across lines of business, reducing the cost base and, at the
same time, enhancing customer service
Project scope:
Wholesale
Retail
Consumer
Sales
My Order
Contact
Centre
Openreach
Service Mgt
Centre
Service
Delivery
Total c.£450m cost per annum
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Operate
Operate
Engineers
Consumer Lead to Cash original process
1
2
Other CPs
Broadband
orders
Wholesale
BT Retail
customer
Orders
Retail
Consumer
Sales
Service Mgt
Centre
PSTN orders
No visit required
3
Visit
Openreach
required
Openreach
Openreach
Provision
Workflow
Systems
Engineers
6
7
5
Retail – My
Order
4
Faults,
cancellations,
system feedback
Openreach
Service
Mgt Centre
8
Operate
Engineers
Issues identified
1. Broadband & PSTN order process
separate
2. Wholesale unnecessarily act as ‘middle
men’ in order process
3. Openreach and CP address systems not
aligned
4. Unnecessary system generated updates
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5. Multiple Openreach systems/tools to
manage orders
6. Unnecessary field visits due to CP
ordering process
7. Too many ineffective engineering visits
8. Multiple engineering visits by both
Operate & Openreach engineers
Order
close
Consumer Lead to Cash revised process
Other CPs
Orders
Orders
BT Retail
customer
Orders
Retail
Consumer
Sales
Wholesale
Service Mgt
Centre
No visit required
Visit
required
Openreach
Openreach
Systems
Workflow
Openreach
Provision
Engineers
Order
close
No touches
Retail – My
Order
Openreach
Service
Mgt Centre
Process improvements
5. Introduce single system order interface in
Openreach
6. Work with CPs to improve order management
Minimise number of Wholesale ‘touches’
processes to avoid unnecessary visits
Create unified address matching capability 7. Improve Openreach engineering practice and
job allocation process to reduce ineffective
in Openreach to offer access to all CPs
visits
Improve quality of updates from
8. Openreach engineers to provide additional
Openreach to CPs, and reduce
value-added services, removing need for
unnecessary system generated messages
additional engineering visits
1. Re-design broadband and PSTN order
process to enable efficient bundle sales
2.
3.
4.
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Operate
Engineers
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Consumer Lead to Cash customer experience
With successful implementation, process improvements will
have customer experience benefits
 Cycle time measures time taken to complete process
>2.5m cycle time days
 Reduced cycle time means customer orders are
saved per year
completed more quickly, improving customer satisfaction
 Process improvements will mean fewer unnecessary and
unsuccessful engineering visits
Customer complaints
roughly halved
 Re-design of sales process will enable more efficient
bundle sales and lead to a better customer experience
>250k fewer inbound
calls per year
 Customers will call to check order progress if the sales
process is not proceeding efficiently
 A more efficient sales process will lead to fewer calls
Reduced churn
 Customers less likely to churn if their original order has
been processed efficiently
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Consumer Lead to Cash next steps
>£50m annualised benefit to be delivered over 24 months
Detailed implementation plan in place
Cross line of business governance team will monitor progress
against implementation plan
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BT Group plc
Tony Chanmugam, Group Finance Director
Key points
£2.8bn cost savings delivered in 2010 & 2011
£377m opex savings in H1 2012
Cost transformation team focussing on end to end processes
and delivering significant cost savings
Further opportunities for improvement across the business
More to do
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Financial strategy
2011
2013
Improve revenue trends
Grow EBITDA
Grow free cash flow
Invest in
business
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Reduce net
debt
Support
pension fund
Progressive
dividends
BT Group plc
Q&A