Kelly’s hero: ‘Vodafone One’

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Vodafone UK looks to be once again behaving as its scale demands, or at least agitating to. Necessarily so, because the economic and market climates have conspired to erode profitability in UK network operations at an alarming rate, even as revenues remain fairly steady.

Vodafone has concluded it must force change in the market to improve margins and reassert its buoyancy. One clear way to achieve that is to take out the competition, to achieve economies of scale that see a bigger return on cost base (click here); another is to drill down into existing retention and acquisition models, bring new value and service to the end-user, and thereby achieve organic growth.

Vodafone’s management team has undergone huge change of personnel recently. While new group chief Vittorio Colao and new UK chief Guy Laurence look to change the market for Vodafone, new UK enterprise director Peter Kelly (pictured), joined from Nortel in September, is engaged in the more intricate task of changing Vodafone for the market.

Like his counterpart in Vodafone’s consumer division, long-serving Ian Shepherd, Kelly is tasked with adapting Vodafone for the new mobile market from within.

“It’s not about connections anymore. The industry has traditionally counted connections – mobile voice and data, and who has the most – when in fact it is about the value for customer and supplier. If you deliver long-term [customer] value, you get loyalty and, hopefully, secured revenue and margin streams,” he says.

“We have been deploying that strategy at Vodafone, and will continue to do so. But you have got to have innovative things to bring to market – in technology terms and in commercial terms.”

In technology terms, a major new aspect of its strategy is ‘Vodafone One’, a unified communications solution that provides business customers with a single phone number, either mobile or geographic, that works across fixed line, mobile and internet, and transfers between the three transmission technologies seamlessly.

In commercial terms, Vodafone is busy developing and fitting communications propositions to its criss-cross map of the UK mobile market. Kelly is in charge of 1,500 staff, serving four million UK business customers across horizontal business sectors (SoHo, SME and corporate) and vertical markets (finance, healthcard, insurance and so on).

Vodafone claims a 40 per cent share of the overall business market in the UK, and 55 per cent of the corporate sector (customers with over 250 seats).

“That commercial point is really key. There is an ever-changing landscape of investment in indirect partners and customers, investment in subsidies to handsets, subsidies to tariffs, in bundling packages to create an offer that is relevant to a particular market segment or vertical,” says Kelly.

“It is really important we weed out the value in all of these things. It is something Vodafone does well. The focus on the customer is relentless at Vodafone – in corporate all the way down to SME and in to consumer. What can we do to bring value and capability? It is about delivering communications that are relevant; it’s about driving out cost, about driving productivity in customer service.”

Vodafone looks to have finally organised itself for a concerted attack on the broader business market, or the large corporate sector at least, with Vodafone One its most innovative new proposition. Its unified communications strategy best illustrates Kelly’s “more-for-more” philosophy, to increase margins by offering essential new services at a higher price.

But the balance has shifted across the business, says Kelly, and Vodafone’s new technology propositions are now running together with a new acquisition/retention model that sees commercial parity struck between new and existing customers for the first time.

“It is a pretty obvious thing to look after your existing customer base. But this is a market in which customers tend to ‘flip-flop’. The issue of churn remains. As an industry, we look after new customers; we invest more in acquiring new business than in upgrading our existing base,” he explains.

“We need to strike a better balance; to do a much, much better job of looking after our existing customers. We are changing that commercial model in Vodafone to invest increasing attention in existing customers on our network to reduce churn through better customer loyalty and relevance.

“We have a big enterprise base and the priority is to look after it, whilst in parallel trying to find new customers. So where do we put the money [for acquisition and retention]? There has been a tendency to move with the market, and not to better understand which customers are right for our channels.

“We are increasingly looking to find out where our customers want us to put the money – we are giving them options, asking whether they need their handset estates refreshed after two years, or whether they prefer frankly that the money goes into some kind of tariff reduction or technology investment.”

Vodafone One ties together a business’ principle voice and data supplies in a neat package, from a single provider. Vodafone is to make its business offers bespoke, where possible, so customers can negotiate on service and stock.

Vodafone One works with any GSM handset, and is available to public and private sector firms on three-year flat-rate contracts, negotiable ahead of sale according to projected usage.

For ages, ‘unified communications’ has been a loose term for clunky fixed/mobile convergence, or else some happy vision of future wireless working.

But Kelly suggests large firms are biting already, enquiring after new business networking solutions that simplify processes and improve efficiencies, rather than just cost savings on disparate supplies.

“The business world is changing, and we could have a very healthy debate for longer than we’ve got about the dynamics of the fixed and mobile worlds colliding into IT to form unified communications.

“But there are real pressures on the business market today in terms of security, flexible working, home working, how to retain staff and attract ‘Generation Y’ employees if you don’t have the right modern state-of-the-art infrastructure that allows knowledge workers to become agile innovators. I mean, it is really important that companies modernise.”

Unified communications contribute just seven per cent of Vodafone’s enterprise revenues, compared with 73 per cent from voice and 20 per cent from data services. But the market is to explode, and the dust cloud it kicks up will fall across a new industry, many times bigger than mobile.

“Why unified communications? That’s the next adjacent market. There is a massive demand for unified communications when it drives short return in cost benefit, productivity and customer service. Depending on whose numbers you use, this new market is between five and 10 times the size of the market we are already in,” says Kelly.

Full article in Mobile News issue 443 (July 13, 2009).

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