BT have announced that Gavin Patterson will be stepping down as CEO of BT Group.
Given the disquiet from numerous, high profile institutional investors about the share price (which is at a 6-year low at the time of the announcement) it’s likely he left before he was sacked.
His time in charge has been very interesting for the Group, overseeing the acquisition of EE for £12billion, the further separation of Openreach, numerous restructurings, especially in the business and enterprise space, and the launch of BT Sport – in particular with some significant investment in rights packages, and £4.5billion spent on the English Premier League football and UEFA Champions League at the peak of that.
The continued troubles of the Global Services division, in terms of financial performance, haven’t been well addressed and 2017’s Italian accounting scandal where over £500million was lost haven’t helped either.
But during that period, other telcos have found it not to be plain sailing – Talk Talk suffered significant problems with cybersecurity, when vast amounts of customer data was hacked. O2 have experienced various wobbles from Telefonica and considered pulling out of the UK market, with their sale to Three being blocked by the regulator. Orange pulling out of the UK market altogether via merger with T-Mobile
So what was it that brought Patterson’s tenure to an end and, as the title asks, how is this related to CX? Hold my beer.
BT is unique among UK fixed line telcos in that it has a Universal Service Obligation. That means it is obliged to offer a service to every address in Great Britain. Other telcos can pick and choose what service they offer to which geographies, but there is a certain level of service which BT must offer to everyone. Initially, this was nothing more than PSTN – fixed line voice – but in recent years was extended to include broadband “at speeds that permit functional internet access”.
The definition of “functional internet access” – ie how fast is fast enough – is a subject of constant discussion. And very contentious discussion, for as long as a significant number of people remain stuck with comparatively very slow speeds.
For BT, and Patterson, irrespective of how fast their lucky, full fibre, customers could get their internet access to go, the argument was always going to be won or lost on the basis of how slow their bottom-end customers’ internet was.
Particularly after the investment of £millions by the Government in BDUK – which was intended to deliver high speed broadband to almost everyone – the fact that thousands of customers were stuck with internet speeds still measured in Kb/s not Mb/s was always going to shape the discussion.
Sure, there are mitigations: There’s a reason those final few thousand customers have still got slow internet – it’s very, very expensive to provide them with faster connections – in excess of £1000 per address. And, actually, even when they’ve got access to faster connections not enough people actually upgrade to the high bandwidth services to come close to delivering a return on investment.
But those arguments, however valid, weren’t going to win. So, I suspect what has ultimately cost Patterson his job is not connecting with what customers actually expect from BT (pun intended).
However much people might have liked to complain about Sky’s monopoly on sporting rights and price rises, actually there was some advantage in having one service to subscribe to, to get all your sport – if that was your thing. The need for BT to enter that market – at a cost of £4.5billion for European and Premier League football alone – was probably not a high priority in the minds of their customers.
Especially not for those customers whose internet connections weren’t fast enough to actually be able to subscribe to the TV services offered.
It’s a little facile to argue how much faster the country’s average broadband speed could have been if that £4.5billion had been invested in the network, given BT Group’s structure with Openreach, but given that the Government budget for all phases of BDUK was around £1billion, the comparison is there to be made.
As companies like Amazon, more readily associated with content provision, enter the UK sports rights competition – with suggestions that Netflix and other content providers may join in the future – was the step into content provision it the right move, at the right time for BT? Probably not. Their subscriber base for their TV service in general, let alone for the premium sport offering, never got to the point where it was challenging Sky. And that strategic decision was squarely Patterson’s.
A similar argument could be made about the EE acquisition. Was the country sitting, twiddling its collective thumbs waiting for BT to offer a bundled mobile service? Or was this a defensive, inside-out decision by Patterson, based on perceived need for a viable mobile capability and a sense that it needed its own network – some years after selling off O2?
As CEO of a company like BT you need to be able to make bold decisions. At a time when some of the core areas of its historic revenue streams were in jeopardy (such as call charges, as IP voice loomed on the horizon), some kind of content provision was always going to be a part of that. As was mobile. However they were, so far, expensive gambles that didn’t pay off.
And it has allowed the conversation to stay rooted on the traditionally weak aspects of BT: the digital have-nots; the perceived poor customer service; the newbuild home owners waiting months for their phone connection; the network operators having to wait months or years for a new ethernet connection (which itself led to the biggest fine Ofcom have ever issued for the deemed consent issues).
BT’s mission statement under Patterson was “Number One For Customer Service” and, as its NPS scores illustrate, it wasn’t getting close to delivering this – arguably due to the distractions of Sport, TV and mobile. The numbers were changing, slowly, but not in a way that was changing the conversation or addressing what customers expected from BT.
Arguably one of the final nails in the coffin for Patterson was the 2017 accounting scandal in Italy. Not just in terms of the lost money, although pretty much any company would notice £500million disappearing, but in brand reputation. For all the adverts starring Ryan Reynolds, complete with knowing winks to camera, Jeremy Renner and other high profile celebrities, there is a perception that BT is the SAFE choice, not the EXCITING choice. It may not be flashy, but at least it’s going to be reliable and work. If I can’t buy anyone else’s service, at least I can get something from BT. The fact that they lost so much money was (excuse the mixed metaphor) the last straw for many – erosion of one of the final brand values for BT.
So, there. Customer experience is about knowing what your customers want and delivering it. Gavin Patterson’s focus on diversification into new markets wasn’t what most of his customers wanted or expected. His pursuit of this, at the expense of deprioritising the services his customers did expect (decent broadband speeds, reliability) impacted the company’s bottom line, its share price and, ultimately, his job.