In our view, Livingston has five challenges to address:
BTs recovery from the abyss peaked in quarter three (Q3) two years ago with growth year-on-year of eight percent. The corresponding figure was five percent twelve months ago, and one percent in the results announced in February this year. Any growth for what is a fixed-only business is highly credit worthy, and yet the feeling is BT should have done better. Ian's challenge is to repeat the success he has had in turning around BT Retail across the Group.
Customers and services
BT needs to evolve its portfolio to suit its customers, not technology. For example, the younger generation of students are compulsive communicators, which is good news for the industry. This generation use a mix of direct - voice, email, Instant Messaging and texts - indirect - such as social networking sites, on-line message boards, Second Life - means to communicate.
BT needs to provide these new workers with the direct and indirect communications services they need as they enter the workplace.
Central to achieving a greater understanding of customer needs is marketing. BT needs to ensure that its brand is spontaneously linked to the communications services it provides to the market segments (both decision makers and users) that matter most to it. Livingston needs to bring customers and marketing more to the fore in BT.
Networks and technology
BT needs to refresh its 21st Century Network (21CN) story and address the issue of fibre in the access network.
Livingston was reported in The Sunday Times as laying down a challenge to regulator Ofcom on FTTP (fibre to the premises) and the USO (Universal Service Obligation).
The point is BT feels it should not have to pay the billions it would cost to provide FTTP across the UK, as it is no longer dominant, and the concept of USO is outdated.
Strategy and structure
Ovum believes BT's strategy needed updating. The strategy to defend traditional services, grow the new wave and transform the business through 21CN and IT remains valid, but is now well-worn.
We would like to see its strategy expressed more in terms of customers, services (not products) and customer service.
Last year BT re-organised to create design and operate functions within Andy Green's group operations and strategy division. This includes both the BT network and IT systems. Since Andy left, it has been unclear to us who - other than the CEO - leads this division. Aligning structure to strategy is a popular business school idiom, but it also happens to work. This needs to be sorted out.
People and processes
Communications is a services business, so the service that customers receive is largely dictated by those that deliver it. Ian needs to continue to invest in integrated, automated and rationalised IT systems, but also in the people that are central to making customers happy. Investing in the former should lead to great improvements in efficiency, but one (process) without the other (people) is flawed. As Openreach has shown, investment in people can make a big difference.
Ian inherits a stable ship, but the company needs to kick-on from here. Addressing these challenges will go a long way towards achieving this.
Mike Cansfield is telecoms strategy practice leader with 19 years experience in the industry, responsible for leading Ovum’s research in this area.