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The story of a new consumer co operative for the 21st century
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Transcript of The story of a new consumer co operative for the 21st century
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The Phone Co-op
The Story of a New Consumer Co-operative for the 21st Century
Business as Mutual Conference
Cambridge, 12 September 2012
Vivian WoodellChief Executive, The Phone Co-op
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The Phone Co-op’s story
• One of the UK’s fastest-growing and most successful consumer co-operatives
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Why are we all here today?• Why do people become social entrepreneurs?
• “You didn’t like the world the way you found it so you built something different”
• Like it or not, every business changes the world, for better or for worse
• Yet people are still only learning to see business as a vehicle for change
• We can make a difference
Why a co-operative?
• Entirely stakeholder-focused
• Democratic (one member one vote)
• Spreads ownership widely
• Enables “crowd funding”
• Equitable – (i.e. fair) in the way that benefits are distributed
• National and global community of co-operatives– Wider support network
4
Why a co-operative?
• Co-operatives are quite simply the purest form of social enterprise
• No owner/beneficiary conflict
• Co-operatives are well recognised and trusted
• Model has been tried and tested for 166 years
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6
What is The Phone Co-op?
• A telecommunications and internet service provider
• We supply business customers and home users
• Fixed line, broadband, mobile, business services
• 23,000 customers, over 9400 members
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We are different
• A consumer co-operative
• Entirely owned and controlled by its customers
• Uses traditional UK consumer co-op model
• Returns a share of its profits to members through a dividend based on purchases
• Supports the development of other co-ops through an investment fund
8
And we’re different in other ways too…
• Operates on behalf of its customers to maximise buying power
• Aims to operate in an ethical and environmentally responsible way and to promote co-operative values
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Where did the idea come from?
• High phone charges working on international projects
• Looked for an alternative supplier• Realised that telephone calls bought and sold as a
commodity• Ideal opportunity for a consumer co-operative
10
The original concept evolved
• Original idea: Joint-purchasing by NGOs with high international bills
• Later widened to all types of customer• We only found out later that there are telecoms co-
operatives in many other countries
11
Getting started
• 2 year trial phase
• Built up traffic in spare time acting as an agent with two telecoms carriers in order to prove concept
• It was difficult to persuade a carrier to sell wholesale to us (nowadays they call us all the time trying to sell to us!)
• Started trading as a service provider in 1998
12
Turnover Growth
£0
£2,000,000
£4,000,000
£6,000,000
£8,000,000
£10,000,000
£12,000,000
Turnover
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Our industry is contracting
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Profit before Distributions
19981999
20002001
20022003
20042005
20062007
20082009
20102011
2012 (f/cast)
-£100,000
-£50,000
£0
£50,000
£100,000
£150,000
£200,000
£250,000
£300,000
£350,000
£400,000
Profit Before Distributions
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What we did with the profit (2007-8)
• Profit: £338,000
• Dividends to members: £58,000
• Co-operative loan fund: £58,000
• Share interest to members: £92,000
• Taxation: £50,000
• Allocation to reserves: £80,000
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Financially strong
• No borrowings
• Cashflow very strong
• Good trading record
• Financed by members not by external investors or banks
• Compares favourably with our competitors
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Net Assets
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011£0
£500,000
£1,000,000
£1,500,000
£2,000,000
£2,500,000
£3,000,000
£3,500,000
£4,000,000
Net Assets
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Who are our customers?
• 20,000 Home users–Joining because:
• they like our approach • through affinity schemes • through acquisitions
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Who are our customers?
• 3,000 business users including:–Other co-operatives–Charities–Social enterprises–Local authorities–Many other businesses–Political parties
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Living our co-operative values
• Starts with promoting our membership – Having an active and vibrant democracy draws on our
members’ energy and enthusiasm for us to do the best we can
– Member ownership and strong member-led governance are at the heart of what we are about
– Our members have encouraged us to have a stronger ethical approach
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Living our co-operative values
• We publish an ethical policy – Our members approved this at the AGM– We have an ethical policy committee to oversee it
• We do lots of things to show our support for other co-ops and the wider community
• Strong environmental policy
• We report on what we do using the Co-operativesUK framework
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Environment
• Policy is driven by members
• What gets measured gets managed!
• We report on business travel – 86% by public transport
• We provide free bikes for staff, and pay mileage for cycling and walking
• We also report on emissions from our buildings
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Environment (continued)
• We offset what we can’t reduce – includes supplier emissions
• We have launched a Sustainability Fund – each time a customer switches to electronic billing, we put some of the postage savings into this fund. – It is used to improve our environmental performance in
other ways
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Investment in renewables
• We have invested in several co-operatives that produce renewable electricity– Westmill Windfarm Co-operative (£20,000)– Torrs Hydro New Mills (£7,500)– Westmill Solar (£20,000)– Drumlin (£20,000)
• We invested in the Energy Prospects Co-operative– spreads the risks of getting local renewable electricity
projects off the ground.
Investment in renewables
• In the last year we’ve invested £450,000 in solar PV on 5 sites
• We’ve formed a joint venture (a co-op), called Co-operative Renewables Limited with two other organisations
• CRL installed 4 of the 5 sites for us and has also installed 4 sites for Midcounties Co-op.
• Now looking at other technologies as well
25
28
Employee stakeholding• We are a consumer co-op, but our employees are
recognised as partners and as a key stakeholder. We have:
• An employee council to act as a forum for employees
• A profit-sharing scheme which pays 11% of profits to employees based on hours worked.
• A sales-related bonus scheme operating across all staff
• 11% pension contribution – no employee contribution required (invested ethically).
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Ethical business
• Ethical purchasing where possible– Fairtrade products– Recycled and from other co-ops/social
enterprises – We don’t use high pressure techniques– Transparent pricing
• Marketing – where we spend money– Affinity partners make up the majority– We have contributed £600,000 to charities and
NGOs over the years in revenue-share
30
Community and co-operative investment• Co-operative and Social Economy Development
Fund– In most years the board has recommended the same
amount as dividend is allocated to this fund each year
– Total value now over £165,000 – Provides loan finance for new and developing co-ops– More recently we have invested in co-op share capital
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Why do customers join The Phone Co-op?• They like the fact that it’s a co-operative
• Ethical stance
• All about trust - not there to “rip them off”
• Like to support an alternative to privately owned businesses
• Good value
• Dividend
• Affinity schemes
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Acquisitions
• Main focus is on organic growth, but we have also made 10 acquisitions since we started
• Consolidation in our industry means we need to grow fairly quickly
• Issues:– Acquired customers are not people/organisations who
chose us– Potential for higher churn– Integration/cultural
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Acquisitions (continued)• In September 2010 – the telecoms business of
SAGA.
• Adds around 8,000 customers
• As part of this deal we have a marketing partnership with SAGA under which they promoted our services to their 6m customers over 2 years.
34
Mobile
• We are now an MVNO (Mobile Virtual Network Operator)
• “Phone Co-op” as network name
• Major area for expansion
• Currently over 2,000 handsets but growing fast
35
Major surveys conducted in 2 different years• 1500-2000 non-business customers received survey
forms with their bills
• 40% of them returned forms - a very high response rate
• Very high customer satisfaction rates
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Reasons customers choose The Phone Co-op
28.3%
24.0% 22.0%
9.7%
4.0% 2.3% 2.0%
0%
5%
10%
15%
20%
25%
30%
Per
cen
tag
es
more ethicalsupplier
prefer to buyfrom a co-op
low cost calls simple pricing 0845 number formy incoming
calls
receivingmembersdividend
other
The reasons
37
External Recognition
• Overall winner, Enterprising Solutions Award (Oct 08) for best Social Enterprise in the UK, 2008
• Winner, the Green England Award for Customer Service, December 2008
• Winner the Federation of Communications Services Green Award, 2009, 2010, 2011 and 2012
• Winner Co-operative Excellence Award, for reporting to members, June 2009
• Finalist, National Business Awards, November 2009
• Honourable mention, dotCoop Global Awards
38
External Recognition – most recent
• Finalist in Midlands Entrepreneur of the Year Award, 2012
• Winner, in 2011 of the FCS Reseller of the Year Award
39
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Future growth plans• The Phone Co-op’s Board wants to see co-
operative model make a real impact in telecommunications, and perhaps more widely
• Acquisitions – ready for more
• Growth of the mobile model – potentially through new channels
• We’ve looked at expansion in other European countries
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Challenges/issues we faced
• Started with very little money (£35k) made up of loans from members, retained revenue share and a loan from ICOF.– Had to keep costs low– Operated from a spare bedroom for 2 years (it got
crowded as we grew!)– Took time to develop in embryonic form before it
became a full-time job
42
Our financing model
• We are 100% owned by our members
• Members invest in withdrawable share capital
• We tell members if they invest 1-2 months’ phone bills we won’t require external finance
• This has been the case since very early on
Share capital growth
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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012£0
£500,000
£1,000,000
£1,500,000
£2,000,000
£2,500,000
£3,000,000
£3,500,000
£4,000,000
Share Capital Growth
44
Next steps• Our co-operative identity has helped us grow
• Customers trust us and we retain them
• We have better customers– Low bad debt ratio
• But we sometimes struggle to get recognised
• This led us to consider a new approach
45
Next steps• We have watched how the Co-operative brand has
transformed perception of the “traditional” Co-op
• This brand isn’t just used for food, pharmacy, travel and funerals
• We now have:– The Co-operative Legal Services – The Co-operative Childcare– The Co-operative Energy
46
The Co-operative brand – the way ahead for us?• We carried out extensive research using focus
groups
• We found:– People hate their telecoms providers– They trust The Co-operative brand– They have a pretty good idea what a co-op is and stands
for, and they identify with that– They haven’t heard of The Phone Co-op and when they are
prompted with the name they aren’t sure what we do– They understood what “The Co-operative Phone and
Broadband” would be all about and liked it.
49
A difficult decision
• There were many reasons to adopt the brand
• But we also had to consider some risks– Would it be hard to communicate that we are an
independent co-op people could join?– Would it undermine our governance in the long-term?– Would people think we had been taken over?– Would people see us as another non-core offering from a
supermarket?– Would we be lose our operational independence by
through over-tight controls we couldn’t live with?
In the end we went for it
• The brand has a very high level of trust
• A great deal has been invested in it (remember the Bob Dylan adverts?)
• Cross-selling opportunities via retail co-op societies
• Size perception will help us to sell to larger organisations such as local authorities and larger charities
50
At the heart of the Co-op Movement
• In less than a month, we will be moving our Manchester office into Holyoake House, Co-operativesUK’s HQ
• Puts us at the heart of the Co-op Complex in Manchester
• Combined with the new brand, this places us in a good position at the core of the Movement, from which we can grow
51
Getting even
• Since before The Phone Co-op started, I was an active board member in the co-op movement
• A lot of co-op managers at the time saw the co-operative identity as a hindrance and had no vision for how it could support growth
• I wanted to prove them wrong
• Now with the adoption of the brand and the move into the heart of the movement, it feels like “closure” on that particular battle!
52
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Conclusion
• The success of The Phone Co-op shows how a new consumer co-operative can start up in a highly competitive area of the economy and can build mass membership
• Consumers are looking for a different model of business at a time when trust in established plcs is at a very low ebb
• “We’re doing it ourselves”
54
Be part of the story!
• We hope you will join The Phone Co-op and help us grow
• You can be part of it!
55
How to contact The Phone Co-op
• Contact details:
• www.thephone.coop
• Tel 0845 458 9000
• Fax 0845 458 9001
• [email protected] (general)
• [email protected] (Vivian Woodell)