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Interview: Spark Digital sets itself a three-year turnaround target, but that is just the beginning

Interview: Spark Digital sets itself a three-year turnaround target, but that is just the beginning

Change to Spark reflective of deep internal changes

Tim Miles, CEO of Spark Digital (formerly Gen-I)

Tim Miles, CEO of Spark Digital (formerly Gen-I)

Spark is not just about a name change to a 27-year old company that has become synonymous with connectivity in NZ, or the slightly confouding primetime TV ads that have been airing since Friday last week. According to Tim Miles, CEO of Spark Digital (formerly Gen-I) the brand change is reflective of deep internal changes that the firm has invested in to take its customers on a digital journey, and to ensure that it is ready for future challenges.

Q: Can you briefly explain the reasons behind the re-branding of Telecom and Gen-I?

Tim Miles: I am the CEO of Spark Digital (formerly Gen-I), but I also sit on the board of the Telecom group. The reason for that is that the things that we have been doing are related and tied up with what we do across the board at Telecom.

We believed that we had an opportunity to be quite a different organisation, and around the time that I joined, we took two key decisions. The first one is that we stand for NZ. That might sound trite, but it is not. Telecom has a number of assets and interests in NZ and overseas, and what you have seen us do in the past year or two, is exit a number of those.

The most prominent of those was selling off AAPT. That is not because we are exiting Australia - we are actually offering more services for our customers there, but we are looking to partner for these. We did exit AAPT, a well performing business that was sold, and we repatriated to NZ the best part of $500 million.

That was the first decision. That we were all about NZ. And we think that is quite different to our competitors in the telco space. If you look at our largest competitor here, which has a huge global portfolio, NZ is one of many places in which it operates and the country’s operations have to compete for capital and other resources in relation to some other growth market.

And if you look at the IT side of the NZ marketplace, you have one or two reasonably strong local players but most of the IT industry in NZ is actually – that is many of the larger players - are owned by overseas interests. Attracting capital to NZ and investment into the country from some of those very large organisations is not an easy thing to do.

We have concentrated all our resources in this market – that is a very powerful thing and a good thing for NZ.

The second thing that we decided to take a stand on is to help our customers take advantage of a digital world. All of our clients, in their own ways, were wrestling with how to take advantage of it. For some of them that meant using digital technologies to more quickly innovate, be flexible and get to market quickly. For some that might mean that they do things more cost effectively; for others digital is an opportunity to engage with customer groups that only really deal in that world.

If you are the government you are thinking about how you deliver services digitally to citizens. If you are in healthcare you are thinking about how you take healthcare out of expensive places such as hospitals and medical centres, and how do you move healthcare into the community, or into patients homes, because it is a more efficient place to provide care.

Every organisation we speak to – whether public or private –is wrestling with how to take advantage of digital. It just means different things to different people. So we decided that we were going to stand for providing the best of digital platforms for NZ businesses and NZers, for them to conduct business with each other, and to communicate around the world.

Tim Miles, CEO of Spark Digital (formerly Gen-I)
Tim Miles, CEO of Spark Digital (formerly Gen-I)

Over the past 18 months, we have set out to do exactly that. And we have invested somewhere around $1.25 billion dollars, which I think would be pretty close to all of the rest of the industry combined, in laying the best digital platforms.

We built the most extensive optical transport network across NZ, which is the high speed data backbone needed to support a digital economy. We have rolled out more fibre. We have invested more than $150 million in the 700MHz mobile spectrum, because mobility is a very important part of the digital world. We have invested in more than 1000 Wifi hotspots for the same reason.

We acquired Revera for $96 million, which is NZ’s leading Cloud platform and, more recently, you saw us acquire Appserve, which is the leading Cloud platform for SMEs. We see Cloud as a very important part of the digital world.

We have invested or committed nearly $200 million to greenfield datacentres in Auckland, two in Wellington, one in Christchurch and an upgraded on in Dunedin. That is because datacentres are a big part of that digital world.

You can see – and I have given you only a few of the highlights – that we have indeed already laid a lot of investment in building infrastructure that is required.

Internally we have made a huge number of changes, both within the group and within Spark Digital. We have radically changed a whole lot of processes in our business, looked to speed things up.

We had parts of our business that six months ago did nothing on a digital platform. We have got one part has gone from zero six months ago to 60 per cent of all transactions being now digital over about a four month period. We have done a lot of things that may not be finished yet, but have seen a huge amount of improvement in terms of speeding up our business, reducing our cost structure and getting ourselves to a position where we not only have the infrastructure to support a digital world, but we are able to operate in a way that supports a digital world.

All of these changes are centred around our customers. With August 8, and the change to Spark Digital, there might not be any monumental difference to our clients. But we will be able to say that over the last 12 to 18 months we have already done multiple things that underpins what we aspire to do for NZ and how we hope to help NZ businesses and organisations, and then here are things we are able to do in the future.

August 8 wasn’t the start of the journey. The journey started sometime ago. August 8 was really the date at which we say that we are far enough through it that there is a lot of credibility to what we are saying. There are a whole lot of changes that we have implemented, and will continue to implement, that NZ could benefit from.

We are on an evolutionary path and this isn’t the beginning of the journey. We actually started this change at least 18 months ago and we are already a long way into it.

Q: Why did you feel the need to change the name of the company?

TM: That is simple. The name Telecom was created 27 years ago. At that time the world was about landlines. The name Telecom means landlines. In the minds of many NZers Telecom is landlines. Way back – 27 years ago – it was not just about landline, it was just voice. There was very little data. So while we still do that today and it is an important part of the business, that does not represent all of our business today.

With all the capabilities that we have invested in, Telecom does not reflect who we are today and what we can do and it certainly does not reflect our aspirations for the future. That is why we took the decision to change the name from Telecom to something more forward-thinking with Spark.

We were independently thinking of changing the meaning of Gen-I’s name to reflect the Cloud aspects that we required and the datacentres that we have been creating. When we started talking about changing Telecom’s name to Spark, we thought about changing Gen-I’s to reflect that as well. Our customers like that we are part of the Telecom group, the size of the firm and the fact that Telecom knows how to build and run mission critical infrastructure. They like the financial muscle we have.

However, we are also different because we don’t do just telco. At Gen-I about half of our business is telecom and the other half I IT. We are probably one of the top two IT companies in NZ by size. Roughly, our turnover is around $1.2 to $1.3 billion, and half of that is IT. We are a very substantial IT company.

It became clear that if we were to change the name of Telecom, it makes sense to change Gen-I to reflect Spark as well. Spark Digital reflects our association with the lager group, as well as the fact that we do more than telco.

That is how the name change came about.

Q: How has your people base changed with all the internal processes that you have modified?

Read more: Vodafone beats Telecom in delivering 700MHz 4G

TM: Over the past 18 months we have changed our people base. And without giving exact numbers, it has reduced substantially. If you were to look at the numbers of peole our overall headcount is down probably more than 3 per cent. One of the things that our customers would have said about us 18 months ago or so, is that there was a whole lot of us and a lot of layers.

Those layers were there because when Telecom had Chorus it was a much larger entity. It did more things. When Chorus was taken out, there was an opportunity to do things a different way.

So yes, we do have fewer people and we are doing the same volume of business. This wasn’t a getting-rid-of-people exercise. This is about taking a look at the business processes, identifying the opportunities to streamline them and make them better.

We have invested large sums of money over the past 15 months in to put new systems in and change processes. The objective was to create a much better customer experience.

One good example would be how we automated some of the processes of our procurement group. As such around 60 per cent of transactions are delivered through a portal now. That is one example. The actual scale of what we are doing is so big I couldn’t possibly take you through all of them. It has been a massive piece of work and continues to be a major piece of work. It is ongoing.

We have completed year one of three years in a turnaround programme. We set ourselves a three-year target. We have achieved more than 70 per cent of the three-year target by the end of the first year. If we achieve what we are after this year, we will achieve the entire three-year target in the inside of two years. There are different projects underway; there are so many different ways in which we are streamlining our business.

Our three-year target is a combination of transformation and revenue targets. Some of the initiatives we have are revenue related, because when we do something better we will win more business. And some of the things that we are doing are more related to efficiency. If we automate here, then we can provide a better service and we might not need as many people. So it is a combination of both.

Q: Even as you streamlined your people strength, have you also been involved in selective hiring to add particular skill sets?

TM: Yes we have changed our skill sets over the last 18 months.

One of the things we did, as part of deciding on what we are going to stand for, is we also looked at the things we did in the market and asked what are we not going to do anymore? It is important to be able to put a line in the sand, because deciding on the things that we are not doing is just as important as focusing on the things that we are doing.

Read more: Telecom rebadged Spark New Zealand

So we exited some businesses. We sold Davanti, a business consulting company. We had a successful training business called Auldhouse, and we sold that. They were good businesses but we didn’t think they were ones that we wanted to be in on the long term.

On the other hand, you saw us invest in the areas of Cloud, Revera and Appserve. We took around 200 people onto the payroll as part of that who are experts in cloud. We have invested in the area of data centres and operations there. You have seen us invest in areas that are around managed infrastructure and you will see us invest in operational excellence and delivery. Those are the areas that you will really see us focus on. They are the areas that we intend to step up in and invest in and there are some other areas we have exited out of.

There have been a whole lots of ins and outs but the net result has been reduction.

Q: Will there be any new service offerings from Spark Digital with the change?

TM: I don’t feel, at the moment, that we will be adding to the things that we do. The scope of what we do is pretty broad and we have just gone through an exercise to be clear about what we want to do and what we are not going to do. I don’t see that changing materially.

I can see us making further investments in the areas that we have already committed to. I can see making further investments to port our Cloud business, support mobility and support high speed digital networks. The scope of what we are doing is right, but I could see us making more investments against the existing scope.

These will not be broader investments but harder into the areas that we have already identified.

Q: What would be the final cost tally by the time you reach the three-year target?

TM: I couldn’t tell you the cost since it is market sensitive. But it is very substantial number. When the results come out, there will be some talk around the turnaround program that the whole company has been on as a group. And you will see it is substantial.

The other part is, there is no end. We set ourselves a three year target, which we thought was aggressive. I think we have the opportunity to complete it in two years and we are a fairway towards that already. That’s good.

But you are never at the end.

I am sure, even when we complete our three-year target, our people will come up with additional things that we could do to improve our business. It is about who has got great ideas for changing and transforming the business and are we prepared to back those ideas and people.

I am confident even if we hit our original target at the end of this year, then for the next year there will be another target and another. It is an ongoing thing. In a digital world things are moving so quickly we always have to be changing and adjusting.

If we get to a static place that is a very dangerous thing. Change is a constant in the world that we are in. We will keep asking how we can be more efficient; it will be an ongoing process.

Q: What shape will global ambitions take for Spark Digital?

TM: At Spark Digital we have got many customers that do business trans-Tasman and beyond. In the past, we set up our own business in Australia to deliver over there. We largely resold AAPTs services, which were largely fixed voice and data. That is the sort of services that customers were looking to us for.

But now they look for lot more than that. They look for voice and data, but also mobility solutions and Cloud, and they want these delivered in NZ, Australia and further afield. They want consistency in the delivery as well.

We then decided that instead of doing it on our own, the best way would be to serve them through a partner. Our partnership with Telstra says that we have a set of capabilities to deliver to NZ clients, and we can deliver those same set of services in Australia through Telstra.

The message is rather than us go and set up our businesses around the world we are going to concentrate Spark Digital resources in NZ and partner with leaders in other markets to deliver a consistent set of services for NZ businesses around the world. Telstra relationship is a good example of that.

Beyond Australia, the obvious place to start would be to talk to Telstra. They have a global presence. If you do a map of where NZ businesses are likely to have operations and you map that with what we and Telstra have, you will find a very close match.

I am not saying that we wouldn’t partner with other companies. We may well do. But with the Telstra relationship you can see how we can not only cover Australia, but also how we can branch out globally. They have a massive footprint and the opportunity is there for us to talk to them about delivering services outside of Australia also.

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