Vodafone UK chief Guy Laurence: What’s he building in there?

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It is 18 months since Guy Laurence took charge of Vodafone UK, and set about fixing it. He opens the doors of a revamped network operation to James Blackman

How does one characterise Vodafone UK? Bureaucratic, bloated, impotent? A formidable opponent and a customer champion?

Arguably its only unique utterances in the past two years have been of job cuts and streamlining and outsourcing, or else of products that have ultimately failed, followed or been held up.

This is wayward, but there is a spoken-word piece by US songwriter Tom Waits called What’s He Building In There?, a weird tale of urban paranoia where the narrator spies on a neighbour and speculates about his activity across the way; about his banging and whistling and odd deliveries.

In a parallel (for here) tale of corporate paranoia, the UK market has watched Vodafone at a distance for the past two years and wondered what it is up to.

The dealer sector especially, that most insecure of channels, has gossipped and worried.

Because the industry around it has changed in the period, dramatically, and Vodafone, required to act urgently in the circumstances, appears to have failed to keep pace.
In 2009, it went backwards, shedding customers, revenues and profits.

O2, its fiercest UK operator rival, has posted eight consecutive quarters of revenue growth in a shrinking market, and led it for offers and innovation. The Everything Everywhere joint venture between Orange and T-Mobile, signed off July 1, has knocked Vodafone into third in its home market.

And despite group chief Vittorio Colao’s claim Vodafone is “not a weak number three”, the UK is a large market and it trails O2 in it by 15 per cent, 30 per cent and 25 per cent for revenue, profitability and customer numbers, respectively.

What does Vodafone actually lead the UK market for now? M2M installations, wholesale growth and share of the government sector?

These channels are important, clearly, but for incremental revenue in the case of the first two, and as a consequence of legacy contracts in the case of the last.

What of the rest? And what next? Has Vodafone been constructing something magnificent behind the scenes at its leafy Newbury campus, or has it been eating itself in some drawn-out corporate harikiri? “There is no hallelujah moment,” warns UK chief executive Guy Laurence.

But it has been busy. In a rare interview, and in a sign perhaps Vodafone UK is happier with itself at last, Laurence discusses precisely what he has been ‘building in there’. And it is no easy makeover; rather a deconstruction and a complicated structural and cultural shift.

Culture and soft furnishings

Shortly after Laurence entered Newbury from Vodafone Netherlands at the start of 2009, he moved to take down walls and clear desks. There are no ‘office’ rooms in Newbury anymore. Laurence sits at his desk in the open, like other staff; in sight of all.

The office spaces of the campus are cleared of junk too. Every employee has been allotted a filing cabinet,  into which they are to clear their desks at the end of each day.

It gives the place a temporary feel, but is intended to inject openness and flexibility into Vodafone; ‘hot desking’ means staff, hooked up to the Vodafone One unified communications system, can work fairly well where they choose.

There are rooms for specific tasks: blank-walled boxes for performance reviews; chambers with soft furnishings and electric fires to stimulate creativity; ‘scrumdown’ cubbyholes for problem solving; a ‘library’ room for quiet.

The warren-like basement gym has expanded under Laurence, also, with boxing lessons and Dutch ‘spinner’ bikes. There is a fee for usage of the gym, and a £50 fine for anyone using their mobile phone in the library, enforced by Laurence himself.

It sounds very nice, and is impressive as a superficial revamp. But Laurence has restructured UK functions too, and set up new departments, or “factories”, of web engineers and IT fixers, working to and segregated by their project terms.

So he has a rapid-response team across the way from him, expected to deliver fixes and solutions in 24 hours, flat.

The research and development team is housed in an adjacent building, working on quarterly delivery times.

“The problem was we had a uniform modus operandi, one way of doing stuff. Now we have our speed boats, where people have only one day to put things right.

“They only get a day; tomorrow, we start again. People are working in the other IT building on stuff for the next three-to-six months; stuff coming out for the Olympics,” explains Laurance.

“A business like this requires a very clear vision, and a way to communicate it uniformly, and deliver it through different mechanisms. Instead of one mechanism and one factory. Because if you have one factory, it operates at the slowest speed; everything comes out at the speed of the slowest part.”

Laurence’s management team sits directly ahead of him, the PR unit across the way, the finance department is at his side. He has slashed, of course, fatty layers from the Vodafone beast, to make it nimbler and to put focus on customer-facing functions.

These are deposits removed to make the business leaner for the advancing market, and not just as a function of the group’s ranging £2 billion cost-cutting exercise.

But there is impressive new building  too, and not only a minimalist-aesthete’s removal of old walls, ways and middle management.

Control room and showroom

Vodafone is in the process of equipping a smart new fixed line showroom on the ground floor of the Newbury complex, to run through its flagship One and OneNet products with potential customers and industry types. It is the kind of tech heaven foreign operators with functioning LTE networks use to show off their wares.

More impressively, Laurence has ordered the construction of a brand new network operations centre (NOC) at Newbury.

Its futuristic look, like some impenetrable lair from a James Bond movie, is by film-set designers. (Laurence once headed global distribution and marketing for MGM Studios, responsible for the Bond franchise, and he admits certain of Newbury’s creative flourishes are informed by the media industry).

When it opens next month, it will be the nerve centre of Laurence’s regime: a high-tech control room, with busy technicians and banks of flatscreens, affording UK management full sight of activity on every mast, line and device.

Laurence insists it is, in the first instance, for “the Barnsley man” who suffers a network outtage, so Vodafone can analyse network performance, respond swiftly and serve its customers.

But it is a crucial means for Vodafone to observe and manage its UK infrastructure as mobile broadband usage taxes it at increasingly great and unknowable rates.
Its “robust” network, IP-based apparently (though precisely how much is digitised remains a mystery), has been its lead marketing message of late.

And the ultra-modern NOC is, of course, another point of difference for it with O2.

Laurence says: “The thing is customer expectations go up relentlessly, year after year.

“Whoever services those customers has to meet an increasing standard. What will become clear is those that have prepared for the future versus those that are just milking the present.

“Those that are milking the present, those which haven’t invested in their networks, will find data usage goes up and their networks keep falling over.

“We have a duty to shareholders and to customers, both now and in the future. Striking that balance is important. The investments we are putting in are for the tools that meet the market needs of tomorrow. Whether our competitors choose to do that is their problem.”

Commercial propositions

But these bricks and mortar do not make Vodafone, today, lovable to punters, nor fearsome to competitors. And yet the UK business has started to make progress under Laurence.

Its revenues climbed 0.7 per cent in the quarter to June 30 (to £1,195 million), compared with the year-ago result. Its net contract additions were in line with O2’s in the period (239,000, compared with 275,000), and for the second quarter on the spin. How?

Laurence does not pause when asked to list the problems he found in Vodafone.

“We had issues with indirect distribution and product – the fact that we weren’t in Carphone, the fact we didn’t have the iPhone. We had to fix our commercial agility, particularly in the contract segment. And there remains an issue with prepay still.

“We had a lot of customer-facing process issues. We had a mindset issue. There was a lack of investment in fixed, in the enterprise area, which needed attention. And customers did not really perceive us to care about them either.”

Let us deal with each. Laurence set about resurrecting the Carphone Warehouse relationship for contract sales right off.

“Charles (Dunstone) and I have known each other a long time and we put the past behind us,” he remarks. Europe chief executive Michel Combes made sure Vodafone was a part of Apple’s broader distribution of iPhone devices in the UK once O2’s exclusive on the line ended.

And a part of Vodafone’s good contract additions in the last two quarters is plainly its availability of the iPhone – like Orange in the last 2009 quarter, Vodafone outran all the rest of the market as soon as it could offer the device (262,000 in the period to March 31 this year, compared with Orange’s 221,000 and O2’s 176,000).

But responsiveness to contract pricing by rivals in the market has also paid off. “

In the past, you could have said Vodafone was slow, bureaucratic even. I defy you to say that now in the consumer market,” explains Laurence.

“If you look at day-to-day commercial trading, then we are right up there with the guys. We have our highest net adds for donkeys’ years; we are winning customers we lost to rivals a few years ago, and that is not by luck and not because we are slow.”

Prepay revenues remain a concern, but are next on the list.

“That is not totally solved. There is a hierarchy of things that require attention, and as you work through them, you move to other issues. And right now, I’m not happy with our prepay performance. I see opportunities to improve revenues there.”

The “customer-facing issues” comprise the nitty-gritty of service and performance, a theme of Laurence’s reign; their ongoing resolution was a flipside to the March job cuts, which saw 375 positions vacated in head office and 170 created at the sharp end.

Remarks Laurence: “What we have removed we have not needed. We were inefficient. The amount of resource, both in terms of people and money, set against the customer has gone up. We have just taken out the fat, the unnecessary back-end cost, and we have also shifted people around.”

Performance review

This difficult mindset issue is a part of it, and has been addressed by all of these other elements.

“I believe we are on the way to being a challenger,” remarks Laurence.

But Newbury is no fun palace for freeloaders.

He explains: “If any department, sub-department, team, small team, individual is not running at the speed we want, then we have gone from a culture of tolerance to a culture of intolerance. Which might explain why 50 per cent of my directors have left, and why 25 per cent of the next level of managers have left.

“Because we have a performance-based culture here. We do not have a father-child relationship anymore. We talk to staff as adults. And as far as I know, we employ only people over 18.”

There has been leaks from disgruntled staff in Newbury recently about the new methods. How does Laurence assess staff morale?

“Well, you have to ask them. But you have to ask why people are unhappy as well. Some will go home and be really energised by the responsibility and the challenge of it all, and some will grumble, and say, ‘geeze, it’s not like it used to be’.”

And, really, how close is Vodafone now to that new challenger culture and empowered work force? There was a perception always of its cosseted campus, that you could walk through its corridors and remove staff at random without it registering anywhere in the system.

“We have a way to go. Once you strip out fat, there are inefficiencies you can’t see. There is stuff out of sight. You often have inefficiencies that are not the fault of the people doing the job. And, by the way, there are things in Vodafone we have not started to fix and don’t yet know we have to fix.”

Even so, questions remain about Vodafone’s reinvention in light of certain stuttering product launches.

Its new investment in fixed line services is plain with the commercial launches of One and OneNet, essential and serious-minded propositions for a brand like Vodafone.

And the loyalty/reward issue Laurence saw as he entered Vodafone has been addressed with the recent debut of its VIP scheme, a priority booking tool afforded customers for certain music, sporting and fashion events.

But OneNet, to be taken to market via the indirect sales channel, is considered to have been delayed. The VIP loyalty scheme is a catch-up only; a latent version of O2’s Priority scheme and a counter to Orange’s long-running Orange Wednesdays cinema offer.

As well, Vodafone’s heavily-marketed 360 services suite, running off a bespoke Linux platform on a couple of Samsung OEM devices, has been effectively pulled – only the content element remains a going concern, available to customers who choose a Vodafone-branded experience over sundry other sources.

These are not the actions of a fleet-footed challenger brand, nor a measured market leader, and that ocean liner tag lingers.

OneNet and VIP

Laurence defends OneNet resolutely, and reasonably. “From order-to-cash, there are dozens of touchpoints. And any company that has ripped out their fixed line will know how nightmarish it can be.

“One of the reasons we have taken our time, and had some stick for it, is because we have been figuring out every single one of those touchpoints and how to automate them.

“With OneNet, we signalled our intention a year ago. Then we put the beta system in, so we know where things have  broken or haven’t worked, or where they have fallen off the end of a conveyor belt. It is not that we are being slow, we are just being thorough.”

But is OneNet in a way a product of that highly-evolved and industrial culture at Vodafone? Because others – O2 with its Joined Up service – have put together a smart convergence-lite solution that combines mobile and fixed line services on a single bill, and sells well, while Vodafone has got occupied under the hood, perfecting a complex tool it is unclear the channel is ready for.

Not only that, but O2 has spent years honing its channel structure into an agile and responsive resource for its products, while Vodafone has tinkered and hummed about how to reorganise its Yes Telecom subsidiary in Manchester as the sorting house for indirect sales.

Or would Laurence suggest, in fact, Vodafone’s timing is good, that the market is advancing at pace and that its solution chimes with customers’ needs in an economic recession? Are its products the real deal?

“If you are sold a ‘pup’, in any market, you eventually realise and you never go back,” he says.

“In our market, we are playing with the kinds of services that are business critical. If the service goes down, businesses can’t operate. You can’t shrug that off. These things have to work to a high-level. They must be robust.

“There will always be pretenders, people to pile stuff high and sell it cheap through distribution channels. But they will be found out.”

And he takes a swipe at the inevitable O2 comparisons that have attended the launch of VIP.

“You have to be careful to contrast a London music offer with a national music offer that stretches also to people who are into fashion and into Formula 1. They are not the same thing. Not to people in Glasgow. The content of these things matters,” remarks Laurence.

O2 might take issue with description of its parallel scheme as parochial, especially since it signed with VIP-partner Live Nation way back in 2008 for sponsorship of the nationwide Academy music venues.

But Laurence makes the smart point: “In all subscription-based businesses, you need an element of loyalty and reward. You put yourself at a disadvantage in the market place if you don’t. And if you are doing it, you have to do it better than the rest. It doesn’t mean you need 10 loyalty schemes; just one that is done well.

“I’m not obsessed by breaking new ground. I am obsessed by fixing the basics and excelling in them.”

Basics and surprises

The basics? Are the basics sufficient for a brand like Vodafone?

“Yes, we have to excel in the basics, and then pick off a couple of areas where we lead. There will be consumer innovation But I don’t want 100 initiatives. I just want the basics and certain verticals we lead. And the cumulative effect of all of that will be we are extremely competitive in the most competitive market in the world.”

So, back to an earlier point; what exactly does Vodafone lead the UK market for? It would appear Laurence has, necessarily, put right certain commercial inadequacies and sought to reinvigorate the spirit of Vodafone as a challenger.

The basics are to do with serving customers better, in order to retain them and to sell more to them. But beyond that, where is the growth coming from?

Vodafone has a respected wholesale business. It has an M2M function with a useful and expanding TomTom/Renault tie-up and a sizeable new Europe-wide contract with Centrica for smart meters.

Its important One and OneNet services will, one assumes, gather momentum, and spur its share of the corporate and SME markets, which are currently “ensnared on the fixed side.”

All good. But what are we missing?

“That’s three, right there. And femtocells. That leads the world. There you go, there’s a world-beater for you – I don’t think anyone else could have done what we have done to the degree and depth we have.

“But look, yes, there is something else, which you’re missing because it is hidden from view at the moment. There is one building I didn’t take you to. But, again, it is not about having 20 of these things. No business got rich by spreading itself too thinly.”

But Vodafone must be about to set something else loose, to claw back its market position in the UK.

The sense is among market watchers, in charitable mood, Vodafone must be organising itself for a proper assault on the market, and a show of mettle. That song concludes: “What’s he building in there? We have a right to know.”

For Laurence, inside Vodafone’s Newbury headquarters, it is nothing and everything.

“There is no hallelujah moment,” he explains.

“We are in a sector where technology allows us to create new services, and to create new revenue lines. But this, now, is not a check list where the job is ever done. You cure it, and you iterate and iterate and iterate. At the same time, you are always looking at how you get ahead of the competition also.

“The job is never done. You never finish. You never get to the end; it’s not a destination, it’s a journey. It’s like with your kids; come back in three months and you will see how we have grown.”

3 COMMENTS

  1. “Those that are milking the present, those which haven’t invested in their networks, will find data usage goes up and their networks keep falling over…"

    You mean like Vodafone. Milking it's UK customers year, on year, and using the revenue from that to empire build across the world.

    Even the head of Vodafone Turkey operations recently commented on the dismal quality of rural broadband in the UK. I think Vodafone has been taking its UK customers for a ride for a long time.

    And yes, my Vodafone mobile broadband connection in the rural does keep falling over. They're shite.
    No other word for it. And expensive shite too.

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