bt group plc€¦ · customer management ... supplier rationalisation review value for money from...

BT Group plc Cost Transformation Teach-in

9 December 2014

© British Telecommunications plc

Agenda 15:30 Tony Chanmugam BT Group Finance Director

15:40 Shahzad Saleem Cost Transformation Managing Director

15:55 Case Study 1: Programme Compete Arthur Yu, Cost Transformation Director

Becky Warburton, Head of Cost Transformation

16:10 Case Study 2: Customer Management & Contact Centre Programme Andy Wells, Cost Transformation Director

Charlie Archer, Lead Consultant

16:25 Case Study 3: IT delivery model Rikkya Okker, Head of Cost Transformation

Tim Lancaster, Lead Consultant

16:40 Q&A

17:00 Drinks and nibbles

17:30 Close

Tony Chanmugam BT Group Finance Director


Our purpose, goal, strategy and culture

Broaden and deepen our customer relationships

Fibre TV and content

Mobility and

future voice

UK business markets

Leading global

companies

Our strategy

A growing BT: to deliver sustainable profitable revenue growth

Invest for growth

Our goal

A healthy organisation

Deliver superior customer service

Transform our costs

Our purpose To use the power of communications to make a better world

Our culture

4


Cost Transformation progress

1 opex is before specific items, depreciation & amortisation. Capex is before purchase of telecommunications licences. 2008/9 opex estimated for impact of historic Other Operating Income restatement

Capex Labour costs incl. contractors Consultancy Supplier renegotiation

Overhead Value Analysis Process re-engineering Right First Time BT-centric

Insourcing Output-based pricing Continuous Improvement

Quick wins Forensic Pan – BT

Still more than £1bn of gross

cost saving opportunities

5

5 year cost base1 reduction


It’s needed to offset the headwinds in our business

6

Cost Transformation programmes

Natural attrition/retirement

Margin mix

Inflation

Improving revenue performance

Cost reduction Cost pressures

Shahzad Saleem Cost Transformation Managing Director


8

Cost Transformation – team evolution

2005 BT Retail-centric cost transformation through forensic analysis by 10 internal consultants Initial phase: • Build the capability and the

toolsets • Overhead Value Analysis • Seven of original team

achieved BT senior positions including LoB chief finance officer, finance director, managing director & transformation director

2014 Pan-BT complete transformation system focused on cost and service improvement by 130 internal consultants Pan-BT top-down & bottom-up change: • Discovery and implementation of all E2E &

complex CT programmes • Continuous Improvement designed as the single

approach to bottom-up change in BT • Lean Six Sigma Academy • Capability assessment and development across

BT, leading to external certification designed to upskill all change people

• Sharing best practice with industry • 2-3 year assignments; projects ~3-6 months • Most successful team in BT at developing

leadership talent: • MBA • Six Sigma and Lean accreditation in-house • Behavioural Change

2011 Pan-BT in scope for proven cost transformation method by 30 internal consultants Pan-BT phase: • Launched E2E programmes • Activity in all LoBs of more

complex activities

2004 2006 2008 2010 2012 2014 2016

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Change hierarchy in BT

9

Cost Transformation team with involvement of the line

organisation

Line of Business transformation teams with involvement of the

line organisation

Line organisation supported by Continuous Improvement coaches

Teams at different levels of the organisation focus on change initiatives of

different scale and complexity

Multi-LoB end-to-end

transformation

Line of Business change initiatives

Operationally-led Continuous Improvement (CI)

Change initiatives driven at all levels of the organisation, depending on the

scale of change

Ownership Change initiatives


What’s in our stack right now and going forward?

Pan-BT process improvement – repair and lead-to-cash

Group-wide shared services

Sales effectiveness

Compete Phase II

Customer Management & Contact Centre (CMCC) programme

Networks, platforms and products rationalisation & standardisation

IT delivery model

Field force and support review

10


Three case studies in cost transformation

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Programme Compete Customer Management &

Contact Centre Programme IT delivery model

Arthur Yu

Cost Transformation Director

Becky Warburton

Head of Cost Transformation

Andy Wells

Cost Transformation Director

Charlie Archer

Lead Consultant

Rikkya Okker

Head of Cost Transformation

Tim Lancaster

Lead Consultant

Case Study 1 Case Study 2 Case Study 3

Programme Compete Arthur Yu

Becky Warburton


Programme Objective:

Drive cost transformation outside UK by applying the tried-and-tested methods we've used elsewhere across the Group, focus on:

• Review regional operating model and size our operations based on financial returns and growth ambitions • Reduce cost of failure in our processes to improve operational efficiency and effectiveness • Optimise BT’s access and core network • Improve our third-party supplier value for money

Programme Compete – Transforming cost base outside UK

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GS non-UK cost base = >£3.5bn (in 170 countries) (‘Compete’ reviews introduced in each country)

GS UK cost base = >£2.5bn (Various reviews on-going)


Opportunities Description

Telco

Access & Voice Rationalise circuit inventory & cease unused circuits

Network transformation opportunities Migration & optimisation of network structure; satellite rationalisation

Revenue and Cost Assurance Reduce revenue leakage and stop unnecessary costs

Non-Telco

Supplier Rationalisation Review value for money from each supplier and consolidate tail vendors

Insourcing Identify third-party spend / services that can be insourced

Property & Facilities Management Property rationalisation, reduction in facilities management, energy cost review

Travel and Discretionary Spend Introduce standard global policy and tighten the control

TLR/TLC

Fair Reward Identify and reduce cases where remuneration is misaligned to performance / role complexity

Subcontractor resource review Minimise subcontracted services and insource where financially prudent

Shared Service Centre review Identify activities that could sit in a shared services environment in lower cost economies

Organisational structure reviews Right-size operations and optimise spans & layers to drive operational efficiency

Service Lines Review field services, network maintenance & other delivery costs

Our methodology – Forensic analysis with strong execution

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Problem Statement

• Our internal process failures sometimes lead to BT paying for third-party access circuits for longer than we need to

Example 1: Reduction in cease lead-times on leased lines

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Results

• £21m of savings through reducing third-party access spend

• Improved customer service due to shorter customer cease lead-times and backlog reduction

Unnecessary cost due to mismatch between customer bill stop date and supplier cease date Validation Time

Income

90 day Customer Notice Period

Unnecessary costs

Cease Order Processing

90 day Supplier Notice Period

1

OLD process

1

Income

Validation Time Cease Order Processing

90 day Customer Notice Period

90 day Supplier Notice Period

NEW process

2

2 Pass the order to the cease factory to complete initial validation prior to issuing cease acceptance to the customer as this is when the “clock” begins for the 90 day Customer Notice Period

3 Customer and supplier notice periods align so there are no unrecovered cost days

Savings

3


Problem Statement

• BT Global Services’ professional services people spend time on work that is not chargeable to the customer

• More people than necessary are doing back office roles which are non-chargeable

Results

• Chargeable time and gross margin by individual improved by 10% and 17% points respectively

• Non-chargeable headcount reduced by 62%

• Still further opportunities to go after in this space

Three key areas of focus Increase time spent on chargeable work

Improve gross margin per billable employee

Reduce number of employees on non-billable work

1

3

2

1

2

3

Example 2: Utilising professional services resources

16


Problem Statement

• Complex organisational structure in Switzerland, Central and Eastern Europe leading to high cost and slow reaction to customer issues

Example 3: Rationalise operating model in Europe

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Results

• £5m annualised TLC savings achieved to date

• Sales and customer service also improved because of quicker decision making and removing cost of failure

• We have proposed and are currently implementing similar consolidation in Asia and LatAm


50%

21%

29%

Telco Non-Telco TLC/TLR

Financial outcomes

Benefits delivered so far = £180m

Identified opportunities to be delivered = c.£120m (c.£300m benefit in total once existing initiatives are fully implemented)

Further opportunities of c.£100m to be unlocked from Compete

Breakdown of benefits delivered to date from Compete (£180m)

Next steps

Strong execution to ensure successful completion

Driving further process standardisation across countries

Benchmarking and sharing best practice

A competitive cost base to support profitable growth outside of UK

Some best practice outside of the UK is applicable back in the UK, unlocking the next phase of savings

Achievement to date and next steps

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CMCC Programme Andy Wells

Charlie Archer


Customer Management & Contact Centre Programme BT’s Contact Centres

Major area of cost, >£1bn p.a.

Multiple programmes had been run around the same space; independent, LoB-focused... not strategic

Frequently a customer experience that does not meet expectations

Variable performance – no consistent efficiency or effectiveness across BT

20


21

BT has Contact Centre operations in all LoBs… over 30k people including outsourced suppliers

Other CPs

End users

Openreach

TSO

Consumer Business GS Billing

Wholesale


Our programme aims…

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Customer

People

Sourcing & location

Structure & Organisation

Commercial


Front-line efficiency & effectiveness – Focus areas

• Address the causes of avoidable contact and promote the use of self-serve channels where possible

Volume reduction

• Improve ‘one contact resolution’, reducing the number of transfers and repeat calls

Effectiveness

• Reduce the duration of each call / processing time without negatively impacting effectiveness and customer experience

Productivity

• Maximise available capacity by better managing the time when our people are taken away from their front-line activities

Utilisation

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Example 1: Transfers in Consumer

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Problem Statement

• 19% of all calls in Consumer (75k calls per week) were transferred from one agent to another… each transfer increases the cost to serve and harms our customers’ experience

Results

We have identified enablers to cut transfers by more than half to 8%:

• rationalisation of teams (operating model review)

• IVR2 / call routing improvements

• multi-skilling and improved tools

• agent training and cultural change

1 ‘retention’ 2 Interactive Voice Response

1


Example 2: Reducing call handling time in Billing

25

Problem Statement

• The duration of a call into our Group Billing team was highly variable and often very extended; this resulted in a high cost to serve and meant that customers were being held on the phone for too long

Results

Through extensive call listening, we have established how the UK volume enquiries team can reduce call duration by 34% from 773 seconds to 510 seconds

• define standard structure (not script!)

• cut the validation

• upskill to avoid referrals / consultations

• retraining to ensure all agents utilise systems / tools effectively


Example 3: Pan-BT ‘shrinkage’ standards

26

Problem Statement

• Typically 30-40% of all paid hours are not available for productive ‘front-line’ work; there was significant variation across the Group and no standard against which teams could be measured

Benchmark: 29.5% shrinkage

Results

• We benchmarked all CMCC teams against standard ‘shrinkage’ categories and built a model describing the ideal amount of shrinkage – 29.5% for ‘Business As Usual’

• Mechanisms put in place to enable teams to get better visibility of shrinkage so that it can be better managed

• Model now adapted for non-CMCC teams

Paid hours

Leave (annual + other)

Sick (short + long-term)

Breaks

Training

Coaching + performance mgt

Internal meetings

Other

Available hours


Other workstreams

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Problem

Statement

Solution

Mgt and support

No standardisation; a wide range of management spans

No shared learning / best practice in support functions

Internal and external benchmarking to establish best in class

Forensic analysis to quantify and drive standardisation

Building Group-wide shared services

UK site strategy

Disparate workforce across many sites, ranging from large modern centres to smaller clusters in local exchanges

Optimise site size, bringing together teams to enable better management

Simplify estate and provide a better working environment

Right-shoring

No coordinated Group strategy

Variable quality and cost from suppliers

Establish Group-wide principles that govern the most appropriate location and sourcing model for all activities

Implementation plan in place and transition underway

Pay and grading

Pay and conditions not aligned to market rates

Market-aligned pay and conditions negotiated with the unions

All new joiners for CMCC activities brought in on the new contracts


Conclusion

Our programme has started to transform the cost and quality of BT’s Contact Centres

Benefits generated from the programme will result in

– Significantly better customer service

• 250,000 more calls answered on-shore in Q1

• improvements in repeats and transfers in all Lines of Business

• enhanced self-serve capability

• more multi-skilled agents

– Large financial benefits (over £150m p.a. identified to date) … but there is a lot more to be done (similar opportunity again)

28

IT delivery model Rikkya Okker

Tim Lancaster


IT delivery model – Strategic sourcing We forensically reviewed the cost of failure across the entire IT lifecycle (IT cost base >£0.5bn)

Design Development Test Requirement

definition Support

Process for delivering new internal IT systems

Quality issues

Churn of designers

Quality issues

Code quality

Wasted effort Rework Defects Incidents

Causes of cost of failure

Effects of cost of failure

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Findings

• Issues in front-end of process cause cost of failure in back-end of process • Majority of cost sits in the back-end, >80% of cost incurred post design phase • We need to improve quality of early phases to reduce overall cost • We need to optimise the later phases for cost efficiency


IT delivery model – Strategic sourcing We analysed cost of failure to determine which services are best done on-shore vs. off-shore, and in-house vs. out-source

Design Development Test Requirement

definition Support

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Consolidated vendors, >£50M annualised savings

Insourced 850 roles across India & Malaysia 1:1.5 replacement ratio

Off-shore

Quality a high priority Development • Non business facing • Strategic • Complex

Insourced 850 roles across India & Malaysia 3:2 replacement ratio

Ou

tso

urc

ed

Optimise as-is Test & support • Non business facing • Legacy • Low complexity

Consolidated vendors, >£50M annualised savings

In-source all UK based work Only c.250

contractual roles still in the UK

On-shore

In-h

ou

se Quality a high priority

Requirements & design • Business facing • High complexity

No change in resourcing levels


IT delivery model – Support cost We conducted a deep dive into our IT support cost to improve operational efficiency

Support process - Before

BT call centre

(1st line)

IT support (2nd line)

£85m

Alarms

BT business

units

Code change & fix

Incidents & repairs

Manual interventions

IT support (3rd line)

£13m

Pro-active checks

4 High volume of queries

5 Low level of automation

6 Lack of end-to-end cost view

Key issues

4

5

6

1 2 3

1 High level of non-value add activities

2 Heavy management layer

3 Fixed price contracts, high unit cost

32


High level of non-value add activities

Incident fix

Code changes

Manualinterventions

Overhead &technical mgt

IT delivery model – Example 1: Reduce non-value add We used top-down techniques, but also rolled out Continuous Improvement to our vendors

1

Problem Statement

• >50% of effort in 2nd line IT support is overhead and technical management

33

Methodology

• Bottom-up (Continuous Improvement) tools combined with top-down tools

• Vendor contracts with agreements to share the cost savings above threshold

• Forensic process reviews and volume tracking

• Joint BT & vendor workshops to agree improvements


High volume of queries

No Fault inc. HTB

Problem records

Reactive

Proactive

Queries (no actual fault)

IT delivery model – Example 2: Volume review We forensically combined various data sources to uncover root causes of high volumes

Problem Statement

• Nearly 20% of incoming incidents just a query, 10% have a known root cause in the code

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4 Methodology

• Forensic review of multiple data sources

• Pan-BT engagement to address queries

• Detailed development review to fix root causes


IT delivery model – Deep dive on support cost We are on track to deliver £21m efficiency from combining IT development & support

Support process - After

BT call centre

(1st line)

Combined development &

IT support

IT support: £77m

Alarms

BT business

units

Incidents & repairs

Manual interventions

Pro-active checks

4

4

1 2 3 4 Address root causes of volumes (hard turn-back, fixes, automation)

Key changes

1 Reduced non-value add

2 Consolidated management

3 Variable, output-based contracts

35


Conclusion

We are optimising IT cost efficiency on an end-to-end basis

– we understand the cost drivers across the lifecycle

– forensic reviews, using cost transformation and Continuous Improvement

– delivered over £50m in benefits, while significantly reducing our incident and defect levels

We have more to go after

– expand our in-house IT capability in India and Malaysia

– contracts across development and support

– rationalise system estate

Potential to deliver a further 2x the benefits already delivered

36


Summary

Cost transformation continues at pace

Plenty more opportunities identified

A key part of our strategy, supporting customer service and investing for growth

37

Questions please

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