Case study: Telecom imitates art at KPN

Editors note: This case study was updated in December 2016.

At KPN we knew we needed to simplify our business and that it wouldn’t be easy. Fortunately, there is a lot we can learn from others from inside and outside the telco business. The renovation of the Rijksmuseum, Amsterdam is a great example and shows many parallels with KPN’s Simplification Program. Since 1885, Rijksmuseum has been located at the Museumplein in Amsterdam. In 2013, after ten years of redesigning and reinventing itself to meet the current and future expectations of visitors, the museum reopened bringing digital and live art to the people. The ‘Rijks’ dealt with challenges similar to ours. Over more than a century it had developed and expanded continuously. With more works of art to be displayed, the Rijks added galleries, building on the same base with the same model. This resulted in a labyrinth – tourists could get in easily, but it was hard to get out – and the model had become a handicap. Brave and bold decisions had to be made because incremental changes wouldn’t do the job. The museum made radical changes with resounding success.

• Who: KPN – the leading telecom and ICT service provider in the Netherlands
• What: Ongoing customer-centric transformation to achieve better Net Promoter Score and quality improvements; using a simple, efficient operating model that is generating significant cost savings
• How: Using the Business Process Framework combined with its own customer journeys to transform from a product-oriented business to a customer-oriented, service-focused model.
• Results: +13 and +14 NPS increase respectively for residential and mobile services, and savings of €350 million in 2.5 years

Escaping the labyrinth

KPN faced a similar situation. Business has grown and expanded over the years: In the 1990s technologies succeeded each other rapidly – ISDN, Internet, DSL, mobile, TV and fiber. To respond quickly to these opportunities, we built separate product chains, all based on the similar, traditional fixed telephony model of connecting, disconnecting and reconnecting customers. This added complexity for call center agents and other employees who had to work with different systems and processes for different products. Crucially, customers also struggled to navigate numerous products and bundling options and different websites with separate log-ins and an overall lack of consistency and clarity. This situation was comparable to the labyrinth of the Rijksmuseum. KPN’s simplification initiative is directly related to customers’ demand for simplicity and ease of use. With the introduction of smartphones and tablets, they want a seamless experience of services on all devices. This requires transformation from a product-oriented to a customer-centric model with a simple access layer and single sign-on for uniform, excellent customer experience across all channels for all services. This translated into our ambition to become the best service provider in the Netherlands and to obtain an un-telco like high Net Promoter Score (NPS).

We started in 2014 and aim to redesign our operating model over a period of three years toward becoming a customer-centric, digital organization that ensures excellent customer experience – now and in future. There is one big difference between the Rijks and us: We can’t close down the shop while we do the work, which means change will happen step by step as part of a fundamental plan.

We are focusing on the full range of portfolio, processes, IT and network simplification, and digitization. Previously we have run change programs that fell short of the desired goals. We learned from them and this time we’re driving change from an overall company perspective rather than a segment or business unit.

Simplification and digitization go hand in hand

We began with two major building blocks. First we initiated extensive simplification of all portfolios to form a solid basis for further process and IT rationalization. In parallel we focused on digitization, with the digital customer journey as the starting point for redesigning all customer processes. The aim is to offer uniform, excellent customer service through one omnichannel platform, across all channels and customer touchpoints, with special focus on online sales and online service experience. To realize this simplification and digitization transformation we make use of a ‘two-speed’ change model: An agile method is used to incorporate short-cycle feedback loops from clients while a waterfall approach is used for longer term structural changes in IT.

Agile working means leaving old patterns behind and dealing with the consequences of issues like insourcing strategic resources and activities, reducing management layers and heavily investing in automated testing. It is about bringing people, processes and technology together, allowing for flexible working patterns and achieving seamless interaction between groups to enable customer-oriented changes and innovations.

Omnichannel customer experience

Consumers experienced KPN in different ways, depending on which product (mobile telephony, fixed telephony, Internet and TV) and channel (retain outlet, call center, Internet) the customer chooses. We aimed to offer uniform experiences via one online shopping and service environment – myKPN. The rollout of a uniform digital layer in 2015 enabled a unique customer experience of ONE KPN, independent of product or channel chosen. The development of the digital customer started with online sales experiences in 2015 and focused on online service experiences in 2016. Simplification of product portfolio, customer processes, IT systems and network is the second building block of KPN’s transformation program. A first step has been the phasing out of significant parts of KPN’s legacy portfolio, offering clear and simple integrated customer value propositions. In 2014 around 40 percent of the portfolio was rationalized. Further rationalization resulted in around a 70 percent reduction of KPN’s mobile portfolio in the consumer domain. Thorough portfolio simplification not only supports smooth, online customer interaction; by selectively simplifying the portfolio KPN has been able to realize synergies on the process and IT side. For example, we made the decision to merge the consumer and small office/home office portfolios as well as the copper and fiber portfolios.

Consolidation and rationalization

In the mass market KPN is integrating copper and fiber processes and IT systems for KPN and Telfort (KPN’s sub-brand offering low-cost services) and redesigning the mobile process and IT landscape into a next-generation mobile platform for all mobile services in 2015. Once customers are fully migrated, the fixed and mobile legacy supply chains will be fully decommissioned in 2016. Further, integration of supply chains and transformation of the OSS domain are planned for 2016 and onwards (see below).

Source: KPN 2015 Portfolio simplification risks drastically affecting product lines and revenues. However, we spent a lot of time sharing details with the business units about the program and the commercial possibilities. For example, simplifying the portfolio helped us to gain market share because it facilitated sales.

The framework for process optimization

For process simplification, we are using TM Forum’s Business Process Framework (eTOM) in combination with our own customer journey. The framework not only provides a comprehensive structure to optimize customer processes, it also has the advantage of ‘one language’ within the company. This has been a solid building block for KPN’s to transform to a customer-oriented model based on service-focused business. We took a holistic approach to transformation of the mobile domain with the focus on product, process, systems and organization. A blueprint of future-proof customer processes has been designed top-down, taking the customer journey as the starting point (see below).

Source: KPN 2015 Standardization across channels and products resulted in a reduction of customer and other supporting processes by more than 50 percent. A similar approach has been followed in the fixed domain where the delivery chains for copper and fiber have been integrated into one uniform business support system. The Business Process Framework was also used here to standardize and optimize all customer processes along touchpoints in the customer journey.

An important lesson when redesigning processes is to paint the broader picture, first by considering the change not solely as IT program but as true business transformation with involvement of all business stakeholders, and second by focusing on future-proof blueprints instead of rebuilding and slightly optimizing as-is environments. This reduces lead times, improves customer satisfaction and reduces cost to serve.

NPS improves

The benefits of our customer-centric transformation and simplification program are multifaceted. Not only does it bring next-wave quality improvements and increase NPS, it also delivers a customer-oriented, low-cost operating model, generating considerable cost savings and strengthening KPN for the next decade. KPN has almost completed the first phase of its simplification and transformation program. This has resulted in significant increases in NPS for consumers over the last two years, with residential NPS for the second quarter 2016 at 8 and mobile NPS at 10, up from -5 and -4 respectively in 2014. We also have realized run-rate savings of €350 million ($386 million) from the end of 2013 to the second quarter this year, and the overall run-rate savings target has been increased from more than €300m initially to around €450m by the end of 2016. Further, employees are enthusiastic about the new, agile way of working and employee engagement results show a positive trend.

At-a-glance