Executive Summary

Introduction:

 BT Group is one of world’s leading innovative service providers of communications solutions and is running its businesses in 170 countries with a scope of 100,000 employees all around the globe. Its principal accomplishments include, the provision of networked IT services universally. National and international telecommunications services are enticing the customer with high speed broadband and Internet products and services. For fiscal year 2009, BT Group reported revenue of £21,390 million.

Regulation History

In 2003 the communication act enacted a new regulatory authority called Ofcom this office was responsible for the duties previously performed by 5 different regulatory bodies like Oftel, Radio communications Agency, ITC, Radio Authority and the Broadcasting Standards Commission.

External Innovation: BT group has been using the scout services to locate new technologies around the globe via searching new technologies BT Group locate relevant technology to invest in hence ultimately moving towards convergence, as defined by the case study the convergence bring all types of services into a single platform using an application. Convergence can take place at any stage of value chain.

Compliance to the new Ofcom regulations BT group agreed to provide the competitors and new entrants with a level playing field. To ensure the process is achieved BT Group gave birth to Open Reach.  This office ensured that competitors and new entrants would have access to BT Groups infrastructure.

 Strategic Alliances In BT Group: The BT Group has an ambition to become world most integrated service provider offering range of innovative services to range of global enterprises. The BT Group utilized the strategic alliances to take its capabilities and join hands with the organizations, which are doing well in the field of telecommunication, through strategic alliances BT Group gained access to the global market and learned from the experience and expertise of the other organization to achieve its ambitions to become a truly integrated business around the globe.

Global Venture “Concert”: BT group in order to pursue it integration strategy formulated an alliance with a US telecommunication giant AT&T. With this joint venture the avenue opened for outstanding range and scale of global services. The services were of far greater scale than either AT&T or BT could ever provide while working alone or with their current alliances.

Organization structure and Innovation:  In 2005 the BT group was reorganized into following departments BT Global Services, BT Retail, BT Wholesale and Open Reach.  

Management towards Innovation:

1.Customer experience is essential to the purpose of BT’s products and services. Customers want and expect control, speed, ease, affordable costs, superior quality and majorly great experience. 2.The new generation network innovation is much need for the BT group to sustain its competitive advantage. 3.Mobility Voice over Internet protocol innovation has a prospective sustainability for BT as the existing network supports the convergence of VOIP.

1.0 External Innovation and Competitiveness

1.1 Introduction

In 2003 the communication act enacted a new regulatory authority called Ofcom this office was responsible for the duties previously performed by 5 different regulatory bodies like Oftel, Radio communications Agency, ITC, Radio Authority and the Broadcasting Standards Commission.  BT group remained a single largest player in UK but with introduction of Ofcom it was subjected to most intense competition of all time as competition not only originated from traditional competitors but from variety of companies in wireless, cable and as well as media operators

1.1.2 Regulatory framework History

• In 1981 Separation from Post Office
• 1984 Privatisation and Creation of Oftel through Act
• 1998 EU directive are enforced initially the first step
• 2003 Ofcom take control as a regulatory body
• 2005 Creation of Openreach by BT group
• 2011 EU Directive refreshed

1.2 Regulatory Steps of Ofcom:

A new entrant in the telecom market required a local access network to connect with the customer. The network work included the copper based connection amid telephone exchange and customer and the three primary forms of such connections are:

• Resale Access (RA),
• Bit stream Access (BA)
• Local Loop Unbundling (LLU)

When addressed collectively are referred to as “Competitive Copper Access” (CCA)

“By the second quarter of 2005 LLU accounted for just 2% of CCA (LLU:CCA) in the UK compared with 56% in France.” (Richard, 2012 )

UK regulator for electronic communications market Ofcom in 2004/2005 presented a number of policy improvements, particularly “functional separation” along with LLU price cuts to try to increase the take-up of LLU.

• The functional separation was fundamental in order to promote investment in LLU;
• The price decrease was the key strategy to support the growth.

Innovation and convergence occur when some external policy, Usually some form of regulation, inspires the commercialization of a regulated product or service and seeks either to increase the maximum level of convergence or increase the rate of take up of a product. In this specific case the UK, the regulatory body Ofcom, took two specific actions in 2005 intended at incentivizing BT to commercialize LLU. The agreement regarding commercialization of LLU with BT Group and a severe reduction in price demonstrates the affect that these decisions had on wholesale broadband access.

1.3 Critical Assessment to External Innovation and Competitiveness:

1.3.1 Why Innovate BT Group:

Three reasons are explain in case study for which innovation is termed necessary for BT Group to sustain as a leading company in UK.

• Telecom Cash Cows are in a serious decline and any new adventure would require years before it delivers
• In Telecom usual approach to innovation won’t help
• Lack of focus, Old structure, Stiff cultures, convoluted processes and fragmented networks need innovation to embark integration.

We have to innovate the way we innovate agreed the management of BT group.

1.3.2 External Innovation

BT group has been using the scout services to locate new technologies around the globe via searching new technologies BT Group locate relevant technology to invest in hence ultimately moving towards convergence, as defined by the case study the convergence bring all types of services into a single platform using an application. Convergence can take place at any stage of value chain. Scout teams are in

• California,
• China,
• India,
• Korea
• Japan
• Israel

The handpicked associates have helped BT not only to “be prepared” for the swiftly shifting world of communications, but to proactively embrace it. A range of new technologies has been introduced by scouting team over years. One of the significant examples is of a San Jose company 2wire. It had a high quality home gateway technology in US when ADSL broadband concept was considerably new in UK.  

“We recognized the enormous potential of 2wire’s product a long time before home networking had become established and acquired the technology for BT,” said Jean-Marc. “Even five years on, BT’s ground-breaking Home Hub product is heavily inspired by the innovative attributes of the 2wire technology.” (BT Group , 2006)

Likewise, the scouting team is credited for realizing the possible impact of voice over Internet protocol (VoIP) on customer telephony and broadband services.

Jean-Marc said: “Back in 2002, while BT was still deliberating on its broadband voice strategy, we introduced Vonage to the BT Retail leadership team and, almost straight away, the company went ahead and embraced consumer VoIP.” (BT Group , 2006)

Today, BT’s innovation scouting team has a global reputation and their valuable advice is respected by venturing community all around the world.

1.3.2 BT Response External Innovation and Competitiveness:  

Open Reach Inception:

Open reach controls the access to network in the UK, BT’s local network business, specifically set up to provide access network services and products on an equal basis to all the UK communications industry. Open reach installs, supports and maintains the wiring, fibre and connections which link tens of millions of homes and businesses in Britain to their communications providers’ networks. Open reach is responsible for providing services through broadband network.

Infrastructure sharing

BT made clear to Ofcom in December 2009 that it was willing to open its ducts to other companies. Currently Open reach provides a managed NGA product across its infrastructure on an open platform to all its CP customers, including Sky and all other UK providers. This sharing offer applies for superfast broadband.

Net neutrality:

BT is committed to an open Internet, providing consumer choice while allowing commercial innovation. BT operates according to net neutrality principles, treating all traffic consistently, regardless of source, and is fully transparent about traffic we may manage in order to minimize network congestion.

Mobility and convergence:

Computing and all forms of communication are ‘going wireless’ and will increasingly be available on the basis of what you want, where and when you want it. BT’s wireless broadband footprint, BT Wi-Fie, is the world’s largest public Wi-Fi network. We are the only broadband company in the UK to provide unlimited access at millions of BT Wi-Fi hotspots as part of broadband packages.

2.0 Vertical Integration and Competitiveness

2.1 Part “A”

2.1.1 Strategic Alliances In BT Group

A telecom company has two distinct choices to pursue growth in the global market. It can either enter directly by building the product/service offerings with its own resources in the target country, or it can collaborate with other firms. (Sylvia Chan-Olmsted, 2001)

The main strategic approach for this goal was to expand rapidly into overseas using strategic alliances with telecommunications companies. BT Group has an ambition to become world most integrated service provider offering range of innovative services to range of global enterprises. The BT Group utilized the strategic alliances to take its capabilities and join hands with the organizations, which are doing well in the field of telecommunication, through strategic alliances BT Group gained access to the global market and learned from the experience and expertise of the other organization to achieve its ambitions to become a truly integrated business around the globe. Ofcom surfaced as a regulatory body and presented new strategies to promote growth in the telecommunication market and BT Group whole heartedly accepted and agreed to provide space to many new entrants and shared its infrastructure with them on the basis of neutrality.

Access to Global Market:

In the period of just six months up to February 2006 they had mergers with cable companies ntl and Telewest. BT group acquired Energis by Cable & Wireless plus they also had acquired Bulldog. Many other competitors like BskyB and Telefonica also acquired Easy Net and O₂ respectively.  In 1994 BT inspired a US based firm to make an entry in the US market and acquired 20% shares in MCI Communication Corporation and this company was known as the second largest carrier of long distance telecommunication in US. This alliance then emerged as leading supplier of global communication services to 3000 multinational companies with US $ 1.5 billion revenue under contract. Through Mergers and Acquisition formulating strategic alliances with leading global firm BT group made its entry in US market and improved its arsenal to be able to lead as a renowned service provider, their constant search for innovation and alliances at intellectual level has made them able to stay competitive even in tough times.

The amount of strategic alliances might range from a meek licensing contract, to joint marketing effort, to creating consortium, to uniting resources for joint ventures, to the eventual form of mergers and acquisitions. Corporations might be attracted in alliances to capitalize on diverse expertise, shape strategic collaborations, relieve risks stress, speed up a venture with mutual resources, and cultivate economies on greater perspective.

2.2 Part “B”

2.2.1 Global Venture Of BT Group and AT&T

BT group in order to pursue it integration strategy formulated an alliance with a US telecommunication giant AT&T. With this joint venture the avenue opened for outstanding range and scale of global services. The services were of far greater scale than either AT&T or BT could ever provide while working alone or with their current alliances.

“On 26 July 1998, BT and US telecommunications giant AT&T announced they are to form a global venture”. (BTPLC, 1998)

The Venture was on equal contribution as the ratio was 50:50. The venture was to combine trans border assets and operations of each company including the existing international networks and their international traffic.  The venture was term “concert” in January 2000. Concert had 270 multinational customers and through its global distributors, concert served an additional 29000 customers worldwide.

Low Cost Service Provider:

 “The value of Concert in BT’s balance sheet as at 30 June 2001 was £1,349 million”. (BT GROUP, 2001)

The venture was cost effective since both giants joined hands to provide services to the customer with their extensive network and channel effectiveness enabled them to reduce their unit cost and launch of new high speed IP backbone network spanning 21 cites in 17 countries gave them a breakthrough required for the convergence of services like audio, video and message on a single platform, simultaneously the joint venture enable the BT Group to encompass experience and expertise to perform correction analysis at home market.  AT&T runs the world’s most extensive long-distance network and also one of the extensive digital wireless networks in North America, and is a major Internet service provider to US customers.

This joint venture concert was an intelligently managed Internet Protocol (IP) based global network that supported services such as global electronic commerce, global call centers and new Internet-based solutions.

3.0 Organizational Structures and Strategy

3.1 Process of Innovation

Problem Statement:

The BT management Looked in to the expansion of the employees in the Scouting team but is not entirely convinced as increasing number of employees does not guarantee that quality ideas will be generated. The Management is more concerned with quality of ideas than the quantity being produced.

Disruptive innovation, the innovation that would be generated by this process is risky and the management is not willing to take any risks it has already invested a lot of money in procuring 3G licenses and is not in a position to invest in the prospects that would take time until they will produce results. The telecommunication market is very dynamic and it keeps on innovating. Now the customer demands are ever changing so the company need to respond to the need of its consumers proactively.

In order to respond to customers proactively increasing the number of scouts is not a viable option, as it would lead to generation of too many ideas without proper alignment is a suicide.

The management has to play along with the specialised team of scouts and might increase its geographical scope rather than increasing personnel in already existing teams.

Figure: 1, Key Identification By the scouting team:

Figure: 2 Organizational Structure “BT’s External Innovation Area”

Learning form others:

BT Group has employed many scouting teams across the globe for the purpose to keep tab on attractive services that people are voting for from their wallets meaning the services that are innovative and are being used by customers all around the world. These services are identified by the scouting team and if they are in accordance with the BT’s Strategy then are implemented as they are already proven to be productive as others companies are already utilizing it to make progress.

Articulating Is as Inventing:

Communicate with others for brainstorming session and hold session where people from different organizations share ideas and add some thing to the process.

Demo Worth a thousand slides:

A demo clearly demonstrates the purpose and prototyping adds to the confirmation and viability of the options being discussed.

Organizational Restructuring:

 In 2005 the BT group was reorganized into following departments

BT Global Services

This department delivers IT and telecoms services to multinationals

BT Retail

This department delivers retail telecoms services to businesses and customers

BT Wholesale

This Department manages BT’s networks.

Open Reach

This department fenced off wholesale division, accountable for the “last mile” of BT’s access network in the UK and tasked with guaranteeing that rival operators have parity of access to BT’s local network

3.2 BT Group Management towards Innovation:

The management of BT group has major focus on the customer has they are vital to success of any business focusing on them would reap direct benefits as we have studied in the case that majority of customers have a special link to BT Group that serves as a strong loyalty linkage investing on them would prove fruitful. Next generation networks are also a viable option since the speed maters a lot in defining the customer experience in utilizing the services. VOIP is a strong prospect for innovation.  

3.2.1   21^st Century Customer Experience

Customer experience is essential to the purpose of BT’s products and services. Customers want and expect control, speed, ease, affordable costs, superior quality and majorly great experience.

BT is spending £ 10 billion in its Internet protocol (IP)-based 21st Century Network (21CN) that places the customer at the center of all innovative services, empowering them with control, choice and flexibility. BT involves two key measurements of achievement for designing explanations to enhance customer experience. Getting it ‘right first time’; and supplying in the shortest ‘cycle time’. Innovation, dexterity and cooperative working are critical to accomplishing these goals

“Since the New Ideas Scheme was launched in October 2005, over 10,000 ideas have been collected from all over the corporation. Of the ideas chosen for implementation the resulting cost savings and new revenue generated is in excess of £100 million. Rewards for successfully implemented ideas, including the top prize of £30,000, have already been paid out to BT employees” (BT Group , 2010)

3.2.2 New Generation Networks:

The new generation network innovation is much need for the BT group to sustain its competitive advantage as it supports to increase the customer experience converging the service in to one application and provide high end Internet speed using the Internet protocol system. This can be achieved through the scouts who have been gathering all sorts of data to propagate innovation. The innovation is also strengthened with the experience of Joint ventures.

3.2.3 Mobility:

Voice over internet protocol innovation has a prospective sustainability for BT as the existing network supports the convergence of VOIP in the mobility identified by the scouts as it has been applied all around the world having positive response from the customers.

 4.0 Conclusion

The BT Group through its open innovation and integrated efforts has the ability to respond to the customer needs and wants in a proactive manner, Mergers and Acquisition has added a lot to the arsenal of BT Group that enables them to battle the downfall in conventional market as return earned through this are diminishing, while a more converged market of infotainment is arising due to rapid innovation. The BT group has a strong desire to bring innovation to its home market and has paved path for new entrants and competitors to use its infrastructure so the customers could experience the best services.

Bibliography

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BT Group . (2006, 08 14). BT Global Innovation . From Global scouts go “beyond prepared”: http://btplcqa.btested.com/Innovation/Strategy/scouts/index.htm

BT Group. (n.d.). Bright Idea .

BT GROUP. (2001, Sept). btplc. From BT group PLC listing particulars : http://www.btplc.com/sharesandperformance/financialandotherinformation/listinginformation/demergerlisting.pdf

BTPLC. (1998). BTPLC. From The New Global venture. : http://www.btplc.com/report/1997-98/globalventurenoflash.html

Richard, C. (2012 ). Competition Policy. From Invention, Innovation and Diffusion of Local Loop Unbundling in the UK : http://competitionpolicy.ac.uk/documents/107435/107587/ccp12-8.pdf/725f4cd4-26b5-456d-ba00-15a00d489371

Sylvia Chan-Olmsted. (2001, jan). warrington. From Rivalry Through Alliances: Competitive Strategy In the Global Telecommunications Market: http://warrington.ufl.edu/centers/purc/purcdocs/papers/0117_Jamison_Rivalry_Through_Alliances.pdf