Lean Service Update – CWU 29th May 2012

IN CONFIDENCE

CE Benefits from Wave 1LEAN is expected to deliver 0.4% RFT improvement at Group-level

– 0.3% L2C and 0.5% T2R during 12/13– Two sub-waves impact RFT basket

UK Voice•CT has reduced by 14%

– driven by Lean and openreach’s reduced appointment book

– Further analysis will confirm impact of Lean on CT and RFT

UK Mobile•CT reduced from 83 to 47 days

– Further analysis will validate that CT improvement is sustainable and confirm impact on RFT

CE Impact of the sub-waves• Wave 1 CE commitments are all forecast to be met during realisation phase

– CE Journey Owners engaged to assess RFT impact of Wave 1

Wave 1 sub-wave TC1 Commitment Delivered so far Forecast RFT Impact

UK Data: Managed WAN CT: 20% reduction Reduced from 5 to 4 days (20%)

Target met Mgd WAN not in RFT basket

UK Data: DWDM CT: from 90 to 60 days 60 day capability now in place

Target met DWDM not in RFT basket

UK Mobile - SMEAS CT: 5.1% reduction to 60wd

Currently 47 days Target met In RFT basket

UK Voice – ISDN, PSTN, Big/Large Switch

CT: 2%-3% reduction e2e 14% reduction – incl. reduced openreach appointment book

Target met In RFT basket

UK Voice– ISDN, PSTN, Big/Large Switch

RFT: 0.5%+ improvement Journey Owners to assess RFT during benefits realisation phase

In RFT basket

Switch:Managed Bus. Networks

CT: Reduce dwell time by 33% (30 mins/tkt)

Currently 70% Target met MBN not in RFT basket

TIS: VoIP(Data Management Access)

CT: Reduce from 19 to 13 days (-30%)

12.26 days Target met VoIP not in RFT basket

TIS: VoIP(Data Management Access)

RFT: Improve CRD failure rate – from 91.5% to 99%

Currently 98.7% Will hit 99% target

VoIP not in RFT basket

Progress on wave 1 – FTE and efficienciesWave Director Domain

FTEs in Scope

Wave 1 commit-ment

Benefit FTE & OvertimeBy June

Benefit FTE & Overtimeafter June

Benefit FTE & Overtime Total

Paul TaylorUK Voice 202

Peter StewartUK Data

314

Mike CookMobile

172

Dougie AndersonBusiness Svces

98

Paul WeirVOIP Services

207

Wave 1 Total 993 195 14 209

32

38

12

67

46

Additional Wave 1 Cash BenefitsSub-con Opex: £0.3m p.a.Switch: £297k p.a. from Wipro (11 sub-contract FTE reduction effective from 31/05/2012)

Other Opex: £0.9m p.a.Switch: £600k p.a. from c3,000 fewer FE visits @£200 (being validated with FE)UK Mobile: £313k p.a. reduction in ASG costs through fewer Bridge cases (to be validated)

Vendor Opex: £TBC p.a.VoIP: Reduction of Vendor Spend (ALU on BBT, TCS for NOAS and Verint for Call Recording); Further reduction in IPX ; (TBC)– awaiting confirmation via Finance

Capex: £1.8m p.a.UK Data: Cisco kit worth £0.9m now recovered for re-use on customer premises. Further £1.1m available to recover

13

0

0

0

1

45

38

12

67

47

49

38

12

66

42

Wave 1 Closure Plan

Benefits RealisationOps & PMO finalise Actuals for all Lenses in line with month end process

Operations PIR - Operations hold review workshops & complete

Closure template

11 -13 JuneIndividual Director sign off calls

Communications & RecognitionDirectors communicate to in scope teams about the end of

wave and recognise star contributors

20 June - Steering Board Sign-off

14 June – Programme Board sign off of overall Wave 1 Closure Report

Wave 1 Closure Report

finalised per sub wave

Wave 1 Sustainability

Maintaining and building momentum after the end of a wave: MD role and resourcing

Operational Change AgentsWave 1: OCAs to coach and build Lean in FLM teams (20% time)M. CookP. Stewart VoiceP. Stewart DataP. WeirD. AndersonHR BPs working with GMs to close outstanding gaps

Lean Practice Support

Wave 1: 2 FTE to support GMs and directorsFurther 2 FTE to support mid-June onwards

Wave 2: 7 FTE to support GMs and directors

Coaching cascade MD Process confirmation cascade

Questions to ask your directors in their 1:1s

•When was your last performance dialogue with GMs?•What key improvements are you working on with your team as a result? •What Lean tools are you using? •When did you last attend a performance dialogue with your GMs’ teams and how did you coach them? •What is your schedule for attending your GMs’ performance dialogues? Can I arrange to attend one•What is your schedule for doing Go See with your wider team?

Start doing this!Plan your schedule of director performance

dialogue visits (1/ month/ director)

Reinforce requirement

with directors

Process confirmation: the method we use for ensuring standards are maintained and improved

Wave 2 Readiness

Wave 2 - Method Changes and Progress updateManager Boot Camp 9th-11th May

FeedbackFeedback

StatisticsStatistics

Method Update

Wave Approach – the Re-design period has been extended to two weeks following learning from Wave 1 that there was too much to cover within the time allocated. Week 1 current condition playback, Week 2 True North, target condition and commitment focussed.

Process Tool – taking Wave 1 learning and method input from KPMG the process mapping tool of choice has been changed for Wave 2 from IDEF to Four Fields Mapping and has been well received at boot camps.

Hypothesis based data collection – following method recommendations from KPMG Wave 2 data collection is more closely targeted ,based on hypothesis agreed with Operations. Wave 1 collected significant amounts of data that was not directly helpful for waste identification.

Data book- KPMG have recommended the creation of a data book per sub-wave that is being used for Wave 2. The data books are split in to value streams and LWOW .

Commitment deck – significant joint work undertaken between BT method team and KPMG to provide detailed commitment templates for current state and future state to provide greater clarity on the ‘Ask’ at the start of each sub wave.

Feelings after manager boot camp

Rating of training sessions

Excitement

Confidence

Understanding of role

“Awesome - should happen more than once.”

“A lot of information to take on board. Size of the task is immense but left feeling energized and looking forward to starting!”

“The airplane exercise puts the message of how small changes can make big improvements across very powerfully. “

“Still concerned on how I will be able to allocate 50% of my time”

“My biggest concern is conveying LEAN to my team members - changing their culture and re-iterating that LEAN is here to stay and everyone will play a vital part in the on-going process change”

“Coaching session was too short . It was at the end of day when energy levels were lowest”

Current State Commitment deck : Current Process Performance - specific data now required covering speed, quality and costs of the current operation.

Current State Commitment deck : Effort Loss Waterfall – data required showing how total FTE time is spent today.

A full learning review of Wave 1 has been undertaken between the BT Method team and KPMG. Minor improvements have been required to the LWOW method with the following changes implemented around waste identification and commitment approach for Wave 2:

How Wave 2 Operational Change Agents are feeling (end of Bootcamp)…

“One of the real benefits this week is having the

opportunity to listen to the people who went through this

on wave 1”

“Lean is the realisation for positive on-going work

improvement”

“I’m really excited to be going back and taking the learning

back to my own team”

“Looking forward to continuous improvement”

“I feel safe to make a mistake”“Really, really excited!!! Nervous, but excited”

“I doubt the sustainability of Lean”“Day 1 confusedDay 2 bemusedDay 3 enthused”

“An amazing experience”

“Ready to help the company change”

“Time spent as an OCA is the best time I’ve ever had in my 7

year career with BT”

“Really looking forward to rolling Lean out to my team

after the great time in Wave 1”

“Fantastic week, excited and energised for the Lean

journey ahead”

“Happy with the methods, nervous

about getting started. I believe it

will work if truly supported from

above”

“It’s a little step every day. How hard can it truly be?”

“Positive ”

“Very excited about the potential for positive change

with this unified team approach”

“It’s great to see BT take the leap of faith and buy into the long term journey

to exceed your competition and put Telco’s on the map when it comes to

operational excellence”

“First time excited that BT will be the best place to work and provide best quality services

for the customer”

“Great – first time BT has challenged the process being a failure rather than

people”

“This feels like a real opportunity to make a

difference”

“I have been pleasantly surprised by the enthusiasm shown by the teams

within my area and other areas”

“Ready to help the company change”

External insight from Nestlé Visit

Nestle visit to BT

In March, approximately 40 BT people visited the Nestle factory in York to learn more about Lean and get fresh ideas, Nestle are ten years into their lean journey…

…On Monday 14th, Nestle came to visit BT to learn more about virtual working in a Lean environment as they explore introducing virtual working for their teams

In March, approximately 40 BT people visited the Nestle factory in York to learn more about Lean and get fresh ideas, Nestle are ten years into their lean journey…

…On Monday 14th, Nestle came to visit BT to learn more about virtual working in a Lean environment as they explore introducing virtual working for their teams

As part of a reciprocal knowledge sharing relationship we’re developing with Nestle, they share the following insights with us about our Lean implementation.

They recognised:

•Our focus on Lean•Buy-in from business•Buy-in from Senior leaders•Ability to execute virtual huddles & performance boards•The standard automated performance boards•Our team members are motivated and behind the Lean programme•Involvement of teams and how our teams feel passionate about solving issues

As part of a reciprocal knowledge sharing relationship we’re developing with Nestle, they share the following insights with us about our Lean implementation.

They recognised:

•Our focus on Lean•Buy-in from business•Buy-in from Senior leaders•Ability to execute virtual huddles & performance boards•The standard automated performance boards•Our team members are motivated and behind the Lean programme•Involvement of teams and how our teams feel passionate about solving issues

Back-up

BT Mobile - SMEAS

The top graph shows all orders thatwere in the system prior to the Lean

wave and their cycle time. The sampleis made up of 573 orders with an

average cycle time of 83 days minus customer delays

The bottom graph shows the cycle timeof orders entered following the waveand is based on a sample size of 219

orders with an average cycle time of 47 days minus

customer delays

Additional orders and time are required to confirm whether the cycle time improvement

is stable and sustainable

UK Voice – Big & Large Switch

Due to the complex nature of the CSS (workflow) system data is only available for all of the queues (4000+) back until 31/12/11.The sample size from 31/1/2011 to 28/01/12 is 269 with an average of 26.8 days

Since the 28/01/12 the average cycle time is 12 days with a sample size of 13146

UK Voice – ISDN30

Due to the complex nature of the CSS (workflow) system data is only available for all of the queues (4000+) back until 31/12/11.The sample size from 31/1/2011 to 28/01/12 is 1012 with an average of 17.5 days

Since the 28/01/12 the average cycle time is 14 days with a sample size of 35970 transactions

UK Voice – PSTN/ISDN2

Due to the complex nature of the CSS (workflow) system data is only available for all of the queues (4000+) back until 31/12/11.The sample size from 31/1/2011 to 28/01/12 is 4781 with an average of 21 days

Since the 28/01/12 the average cycle time is 10 days with a sample size of 702485

Switch sub-wave: -Managed Business Networks - CT

TIS: VoIP CE Target Condition 1 Implementation

RefDeliverable Len

sOwner

Lead

OCA

Target Date

Trend Comments/Risks

6Reduce CRD failure rate from 8.5% to 1% C 20/04/2012

DMA CRD increased from 91.5% to currently at 98.7%. . Target was 99% which we will achieve. Activities completed have improved our figures. New activities have been hi-lighted to work on as part of TC2.

7

Reduce DMA cycle time from 114hrs to 80 hrs. (19 to 13 days) – 30% reduction C 20/04/2012

Cycle time reduce to an average of 12.26 days

Service Delivery - Additional Wave 1 Cash Benefits

Other Opex: £0.3m p.a.UK Mobile: £313k p.a. reduction in ASG costs through fewer Bridge cases (to be validated)

Capex: £1.8m p.a.UK Data: Cisco kit worth £0.9m now recovered for re-use on customer premises.Further £1.1m available to recover

Service Management - Additional Wave 1 Cash Benefits

Sub-con Opex: £0.3m p.a.Switch: £297k p.a. from Wipro (11 sub-contract FTE reduction effective from 31/05/12)

Other Opex: £0.6m p.a. Switch: £600k p.a. from c3,000 fewer FE visits @£200 (being validated with FE)

Service Infrastructure - Additional Wave 1 Cash Benefits

Vendor Opex: £TBC p.a.VoIP: Reduction of Vendor Spend (ALU on BBT, TCS for NOAS and Verint for Call Recording); Further reduction in IPX; (TBC) – awaiting confirmation via Finance

Wave 1 Service Delivery – Performance against Plan