Simon Foot Consulting Director Ember Services

1. Simon FootConsulting DirectorEmber Services Three ways to realise the transformation opportunity – case studies from the utility and public sectors Prepared by: Ember Services November 2013 v 2.1

2. Agenda • Some context and background • Change priorities results • London Borough of Merton case study • Changing customer behaviours – the digital challenge • Contracting for change the TV Licensing story • Conclusions “ In order to change the world you have to get your head together first Jimi Hendrix ”

3. Fundamental principles apply to our activities… • Only four customer behaviours to focus on... • Buying more • Advocacy • Loyalty and tenure • Being less demanding • Within the context of what is commercially viable

4. Overview 1Identifying where change is needed – the London Borough of Merton experience 2Changing customer behaviours – Digital channel transformation 3Contracting for change – the TV Licensing experience

5. Survey results • The results from our “building blocks” survey ?

6. 1.Identifying where changecan be made, the London Borough of Merton experience

7. Is data our greatest challenge today? • How do we make sense of customer interaction data? • Using Ember’s managed analytics approach to help London Borough of MertonCouncil Tax team to identify change • Objectives • Establish reasons why Merton residents call the Revenue Service. • Establish levels and types of avoidable contact. • Assess agent call handling skills including feedback on residents satisfaction and issue resolution.

8. Why residents call…and how much work they create From an extract of 3000 calls we identified in customer own words: Workload = Av. Handle Time x No. of calls

9. Drivers of contact 31% of residents contact the council after receiving correspondence or chasing previous contacts Responding to a communication Chasing an update So issue with RFT which is costly to council and frustrating to customer

10. Our Value-Irritant model provides a clear basis for managing process improvements based on contact types Value To Organisation Irritant To Consumer Value “Avoidable contact” “Avoidable contact” Irritant

11. Merton’s value-irritant challenge Value To Council Irritant To Resident Value Irritant

12. Recent clients across industries • The Borough’s Council Tax team is taken action to… • "With Managed Analytics we’re focusing our effort where it delivers most value."David Keppler, Head of Revenue and Benefits , London Borough of Merton

13. 2. Changingcustomer behaviours – Digital channel transformation

14. The reality is that customers are changing... • These... • Manipulated as herds... • Held in queues • Imposed processes • Hidden from reality • Isolated and ignored • Sold to • Hunting in packs... • Communities of interest • Information access • Agenda control • Transparency • Clear decisions are becoming these...

15. And so the organisation has gone from... ... to paranoid • Piranhas... • At the mercy • Fearful • Reactive • Dominant • In control • Preying • How is the initiative to be regained?

16. In 60 seconds……that’s +350m tweets in the next hour! Source:

17. Customers use multiple channels themselves • In our lives, we use a wide range of channels to keep in contact with people • The line between personal use and business use has become blurred • Life is getting more complex and more connected • It is all about context As well as, not instead of though! Source: Universal McCann “The socialisation of media: Wave 6”, 2012 (N=37,600) • Customers expect to be able to use many of these channels to interact with organisations that they do business with • 29% of us are ‘super-user device junkies’ with 7+ connected devices in the home (53% have 4-6 devices). Source: Intersperience, 2012 Source: ‘Becoming Digital by Default’, Ember Services, 2012

18. Twitter vs contact centre opening hours 3pm and 8pm peaks Companies need to identify, analyse and understand when their customers want to contact them and why …Beware though don’t just monitor, manage *Source: socialbakers, Mashable March 2013

19. The art of the possible should be framed by hard science… There is a need to understand the opportunities, constraints and dependencies for your organisation of the digital customer engagement world: Customer and segments Organisation capability • Go where your customers are • Deliver what is right for your organization • Recognizing what is practicaland affordable • Knowing where the benefits are. Your digital strategy: only a subset of the possible is viable Scale/Cost benefit IT and Infrastructure

20. 3.Contracting for change – the TV Licensing experience

21. Public Sector complex outsourcing Contracts are set to reach £100bn* by 2015 *Analysts – Cantor Fitzgerald 2013 £100bn £20bn £10bn

22. The challenge Many of you have already outsourcedand many of you are probably preparing to re-let a contract “Nearly 50% of outsourced projects fail outright, or fail to meet expectations” Aberdeen Group So if you knew now what you knew then, how would you contract more effectively with your suppliers?

23. TV Licensing • In the past the environment was very different: • Thousands of customer bought TV Licensing stamps weekly at their local post office • The website was used to find a phone number to call TV Licensing • Changes of address were completed via a form you posted in • This was life in 2003, so how could the BBC contract for 10 years knowing the service requirements and environment that would be present by 2023? 25million households £3.8bn revenues £150m collections costs 12m phone calls 2nd largest prosecutor in UK 47 different ways to pay 2000 employees

24. The challenges the BBC faced • Outsource or in-house? • How do we contract for an unknown future? • What skills will the team need? • How do we negotiate with FTSE 100 companies? • Will bidders understand our issues? • How do I convince my stakeholders to change? • Public Sector outcomes vs Private Sector goals

25. TVL Before and After Moving from Moving to • Incentivised to: • collect revenue • enhance service reputation • migrate customers to self-serve • Commercial incentives aligned to business outcomes • Mutual trust and respect • Culture of joint working • Shared goals and understanding • External stakeholders and customers see ‘one business’ • Flexible and future proof • Negotiations straight forward and based on pre-agreed principles • Incentivised to: • answer the phone quickly, • keep systems running • achieve minimum customer sat • Commercial incentives drive the wrong behaviours • Expensive change management • No sense of partnership • Defensive • Reactive • Inflexible • Adversarial and expensive commercial negotiations

26. Ember approach – building on 20 years of successful outsourcing A rigorous focus on the key elements that make a real difference between success and failure: • Ensure that the operation is fit for outsourcing: Make sure processes are clearly articulated, and that key performance indicators are defined. • Invest time to articulate your requirements:Define the customer experience you want to deliver and the cost targets you aim to meet. Share that with your OSP and make sure they have a realistic plan to meet your expectations. • Incentivise to achieve business outcomes:Link your OSP’s remuneration to the achievement of the business outcomes you need to achieve – better revenue, lower cost, higher citizen satisfaction. • Make sure those desired outcomes are clear, unambiguous and measurable:Set clear goals and monitor progress diligently. • Ensure reward, linked to objectives, are appropriate:Ensure that the remuneration rewards you offer reflect the value of the OSP achievement to your business. It your OSP achieves a 5% cost reduction, that financial benefit can be shared. • Allocate risk to the party with the greatest ability to influence it: Different areas of risk are best managed by the OSP and others by the client. For example, inflation risk is best managed by the OSP as they have greatest exposure to salary costs. • Retain expert knowledge in your organisation:Make sure that your team maintains and intimate understanding of how the service works, only then will they be able to evaluate is performance accurately. • Ensure your contract is flexible and future proof:Good contracts act as a guide rather than a straightjacket. Build in review periods that will allow you to refocus and reshape your operation without financial penalty. • Build sustainable governance and structures:Ensure you have the management disciplines in place to keep your partnership on track; the procurement itself is only the first step in the journey you will take together. • Maintain a plan B at all times:Be prepared to call for re-brokering of the relationship or, if all else fails, a termination of the contract.

27. The results • £220m cost saving • £120m extra revenue • Complaints reduced • Reputation enhanced • Long term partnership secured • National Outsourcing Association award winner • Public Sector Outsourcing Project of the year 2012

28. Summary 1Use tangible analysis to drive a hard business case for change 2 Regain control of your organisation in the face of changing customer behaviour 3Build sustainable supplier relationships that develop with your business

29. Our proposition is straightforward... A new direction in customer management consulting and analytics... Insight and experience Unashamedly financially focused for our clients. Clear direction from robust analysis Hard, commercial perspective

30. Be in good company – our clients include:

31. Now… go win a campervan! • Just visit the Ember stand and let us know your investment priorities for 2014 - you will have a chance of winning one of two (Lego) campervans.

32. Simon Footsimon.foot@emberservices.comTel: 07796 148709t: @simonfoot1Li: uk.linkedin.com/in/simonfoot/Visit our website where you can download our latest whitepapers – www.emberservices.comandJoin us on linked in - Customer Management Improvement Group – Ember services