BT Group plc Cost Transformation evolution in BT IN CONFIDENCE Our purpose, goal, strategy and culture Our purpose Our goal To use the power of communications to make a better world A growing BT: to deliver sustainable profitable revenue growth Our strategy Broaden and deepen our customer relationships Deliver superior customer service Fibre Our culture Transform our costs TV and content Mobility and future voice Invest for growth UK business markets A healthy organisation Leading global companies Broaden and deepen our customer relationships Transform our costs Deliver superior customer service Fibre TV and content Transform our costs Mobility and future voice Invest for growth UK business markets A healthy organisation • Tighten our grip on cost transformation – Technology is constantly changing – Our customers are demanding better value for money in highly competitive markets – It provides the oxygen to invest in growth – Reducing the cost of failure in customer service also reduces costs • Deliver on our promises • It’s not cost transformation OR customer service - it’s both Leading global companies 4 Year Cost base reduction1 £1,451m Operational CAPEX CAPEX £3,088 £1,030m Operational Transit £929m Operational Transit Transit £m £1,383m Operational CAPEX Transit OPEX, £18,182 OPEX, £17,153 OPEX £16,545 CAPEX £2,438 OPEX, £16,224 £4.8bn reduction OPEX, £14,840 OPEX £12,402 2008/2009 opex & capex 2009/2010 2010/2011 2011/2012 2012/2013 2012/2013 opex & capex Further cost saving opportunities Further cost base reductions being targeted for 2013/14 c.£4.8bn reduction in costs over four years Capex Labour costs incl. contractors Consultancy Supplier renegotiation Quick wins 1before Overhead Value Analysis Process reengineering Right First Time Forensic specific items, depreciation & amortisation and other operating income © British Telecommunications plc BT centric Insourcing Output based pricing Pan – BT Cost transformation – Team history 2005 BT Retail centric 10 internal consultants 2011 Pan-BT 30 internal consultants Forensic phase: • Overhead value analysis • Right-first-time process reengineering Pan-BT phase: • E2E process improvement • Insourcing • Output based pricing • Six of original team achieved BT senior positions: • • • • • • Matt Davies (CFO BT Consumer) Clare Watt (FD BT Group) Shahzad Saleem (MD Cost transformation) Samantha Booth (MD BT Cables) Edward Briggs (OR transformation director) Helen Miles (former CFO OR) IN CONFIDENCE • • • • 2014 Pan-BT 100 internal consultants …..and growing to ~120 Pan-BT top-down & bottom-up: • E2E process improvement • Continuous improvement • Up-skill lob consultants • In-house project management • Academy Combining top-down & bottom up change: • Top-down cost transformation • Bottom-up continuous improvement Focus on cost and service improvement 2 - 3 year assignments, projects ~3-6 months Developing leadership talent • MBA • Six sigma accreditation in-house Cost transformation – Structure How does CI fit with BT’s change management approach? Cost transformation Cost transformation E2E processes Implementation Change management Continuous improvement Bottom-up change Top-down transformation Top-down transformation Bottom-up improvement Focus: • E2E process improvement • Sponsored by board/CFO • State of the art tools & methodology • Significant financial impact Focus: • Implementation of large-scale transformation programmes (£40M+) • In-house programme management expertise Focus: • Drive bottom-up improvement • Holistic focus on cost, service and engagement • Coaches train operational teams to sustain improvements Practice Training, development & method BT-wide training & development Focus: • Development & improvement of in-house tools • Training of BT business improvement community • BQF accreditation Managed as a single team – Consultants are encouraged to rotate across units IN CONFIDENCE Assessments BT-wide business improvement BT-wide assessments Focus: • Assessment of the BT-wide business improvement staff • Provide fasttrack development Process re-engineering programmes Reduce cost of failure and increase quality of service Cost Base Savings 12/13 13/14 14/15 Non consumer T2R £0.4bn • 25% fault reduction • Improved utilisation and productivity £60m L M H GS L2C £0.1bn • Reduced internal handoffs saving 24% and improving customer experience £40m L M H Network Investment £0.3bn • 25% increase in productive time by moving 35% of the workforce to a 3 day week £45m L M M © British Telecommunications plc Organisational structure Removing organisational overlaps and inefficiencies Cost Base Operate/ Design Operate with Openreach & Wholesale Management Layers © British Telecommunications plc Savings 12/13 13/14 14/15 £2.0bn • Creation of TSO • Reduced handovers in design, build and run for Networks, Infrastructure and IT £100m phase 1 L M H £0.1bn • Integration on field engineering • Reducing handoffs in both delivering services and resolving faults £16m L H H £1.3bn • Increasing span of control of managers and reducing layers up • Ensuring managers have appropriate decision making authority £50m L L H Group initiatives Reducing cost through focus on a common approach Cost Base Travel £0.1bn • Pan-BT awareness programme • Increased usage of preferred suppliers with improved rates Supply chain £0.1bn + all stock • Organisation restructure • Supplier savings • Systems infrastructure investment • Stock optimisation © British Telecommunications plc Savings 12/13 13/14 14/15 £25m M H H £20m M H H Line of business – Openreach Detailed forensic approach Cost Base Fault reduction Fleet Planning © British Telecommunications plc £0.3bn • 800k less repair visits by focusing on repeats, improved working practises, new installs and resolving in one visit £0.04bn • 10% reduction in fuel usage through retuning engines for environmental and fuel efficiency £0.1bn • Improved processes and automation which means we spend less time planning Savings 12/13 13/14 14/15 £65m M H H £4m L H H £39m M M H Procurement Business as usual plus strategic programmes Strategic Category Sourcing Tail Access overseas * Gross savings © British Telecommunications plc Savings 12/13 13/14 14/15 • Top 15 Strategic Categories (30% spend) • Transformational pan LoB programme • Increase preferred suppliers usage £90m L M H • Review of smaller supplier spend • Pan –LoB supply base consolidation • Tighter supplier creation/stop controls £35m M H H £154m* M H H • Benchmark and optimise pricing • Exploit new technologies • Insource to BT own infrastructure • Consolidate suppliers Insourcing Success from creating new jobs and opportunities for BT people through insourcing work from 3rd parties Will continue insourcing and further development of our flexible resourcing models Savings 12/13 13/14 14/15 Facilities Management • Insourced facilities services • Supply chain management • Invested in people, process & technology £16m M H H Contact centre • 500 roles in Sandwell and Accrington • 100 roles flexible sales/service in Belfast £4m L M H £17m M H H Software design development & maintenance © British Telecommunications plc • Insourcing of roles from India and in the UK • Displacement of UK subcontractors backfilled with retrained BT employees Cost transformation & continuous improvement Cost transformation (CT) Process, Organisation and systems Cost transformation Process redesign Incremental change Improvement type Cost transformation and The BT Way Value stream (VS) Value stream • • • • Continuous improvement Key process redesign within unit (C2M, L2C, T2R) Within business units or across units Focus on process redesign and value stream mapping Improving service and cost, by engaging teams and taking out the process waste Continuous improvement (CI) Team Business units Pan-BT Improvement scope IN CONFIDENCE • E2E transformation projects – often spanning across multiple LOBs • Focus on process, organisation structure, systems, incentives, etc. • Understanding cost & service impact for transformational change to allow business to make the right decision • Continuous improvement, bottom-up • Within teams (~200 to 400 people), focused on process (step) improvements and simple system fixes • Improving service, cost and team engagement by empowering bottom-up change Continuous improvement - Rollout plan Coverage Team Method 2013/2014 2014/2015 ~7,000 FTE ~20,000 Established group CI team to support rollout. ~30 group CI coaches with six sigma & lean training Group coaches supporting training & development of operational coaches Mandate 4 weeks Agree scope & benefit IN CONFIDENCE Mobilise 4 weeks Baseline Wave 2015/2016 2016/2017 Full coverage Wave 4 weeks 4 weeks Voice of customer To-be process Process mapping Wave Implement 8 weeks 4 weeks A3 & planning Realise benefits (10- 20%) Continuous improvement – Six sigma & lean based method Lean tools: Value stream analysis PDCA Kaizen workshops Six sigma tools: Control plans Control charts Process capability Lean tools: (Daily) PDCA A3 solving Gemba walk Waste elimination Six sigma tools: Line rebalancing BT Continuous improvement IN CONFIDENCE Lean tools: Gemba walk Six sigma tools: Mandate project charter Lean & six sigma tools: Voice of the customer CTQ identification Stakeholder maps Risk register Method PDCA Lean tools: Value stream mapping Waste identification (7 waste), Kaizen Root cause analysis, FMEA Issue prioritisation Team based problem solving A3 problem solving Process PDCA Six sigma tools: System measurement Data collection plan Root cause analysis & fishbone Baseline capability Statistical analysis (regression, ANOVA), takt time Six sigma framework & analytics Continuous improvement – Holistic benefits All Continuous improvement waves need to deliver all 3 types of benefits Improved cost base Measured through cost & volumes Cost transformation Holistic benefits Customer experience Improved organisational customer experience Measured through “right-first-time” and service levels IN CONFIDENCE Employee engagement Improved organisational health Measured through OHI survey Continuous improvement Consumer Change Governance – Governance Goal is to provide seamless alignment of all change activities Governance model OC Cost transformation Business unit transformation Local continuous improvement coaches - Trained by Cost Transformation - Operational teams Operational coaches - - Trained by Cost Transformation - - IN CONFIDENCE Roles & responsibilities • • Overall accountability for delivery Point of escalation where necessary • • • Plan & deliver CI waves, accountable for results Training of LOB unit coaches Develop & maintain the BT CI method • • • • Support & delivery CI waves in unit Alignment with unit transformation plans Sustain CI waves in-life Achieve benefits in unit • • • • Implement the CI way of working Drive continuous improvement in-life Create a continuous improvement culture Achieve benefits on the wave in the team
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