The story of a new consumer co operative for the 21st century

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The presentation was from the Business as Mutual conference held at Anglia Ruskin University on 12th September 2012. To find out more visit www.businessasmutual.co.uk

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The story of a new consumer co operative for the 21st century

  1. 1. The Phone Co-opThe Story of a New Consumer Co-operative for the21st CenturyBusiness as Mutual ConferenceCambridge, 12 September 2012Vivian WoodellChief Executive, The Phone Co-op 1
  2. 2. The Phone Co-op’s story• One of the UK’s fastest-growing and most successful consumer co-operatives 2
  3. 3. 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 3
  4. 4. 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
  5. 5. 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 5
  6. 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 6
  7. 7. 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 7
  8. 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 8
  9. 9. 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 9
  10. 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 10
  11. 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 11
  12. 12. Turnover Growth Turnover£12,000,000£10,000,000 £8,000,000 £6,000,000 £4,000,000 £2,000,000 £0 12
  13. 13. Our industry is contracting 13
  14. 14. Profit before Distributions Profit Before Distributions£400,000£350,000£300,000£250,000£200,000£150,000£100,000 £50,000 £0 -£50,000-£100,000 14
  15. 15. 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 15
  16. 16. Financially strong• No borrowings• Cashflow very strong• Good trading record• Financed by members not by external investors or banks• Compares favourably with our competitors 16
  17. 17. Net Assets Net Assets £4,000,000 £3,500,000 £3,000,000 £2,500,000 £2,000,000 £1,500,000 £1,000,000 £500,000 £0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 17
  18. 18. Who are our customers?• 20,000 Home users – Joining because: • they like our approach • through affinity schemes • through acquisitions 18
  19. 19. Who are our customers?• 3,000 business users including: – Other co-operatives – Charities – Social enterprises – Local authorities – Many other businesses – Political parties 19
  20. 20. 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 20
  21. 21. 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 21
  22. 22. 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 22
  23. 23. 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 23
  24. 24. 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. 24
  25. 25. 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
  26. 26. 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). 28
  27. 27. 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 29
  28. 28. Community and co-operativeinvestment• 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 30
  29. 29. Why do customers join The PhoneCo-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 31
  30. 30. 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 32
  31. 31. 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. 33
  32. 32. 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 34
  33. 33. Major surveys conducted in 2different 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 35
  34. 34. Reasons customers choose ThePhone Co-op 28.3% 24.0% 22.0% 30% 25% Percentages 20% 9.7% 15% 4.0% 2.3% 2.0% 10% 5% 0% more ethical prefer to buy low cost calls simple pricing 0845 number for receiving other supplier from a co-op my incoming members calls dividend The reasons 36
  35. 35. 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 37
  36. 36. External Recognition – most recent• Finalist in Midlands Entrepreneur of the Year Award, 2012• Winner, in 2011 of the FCS Reseller of the Year Award 38
  37. 37. 39
  38. 38. 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 40
  39. 39. 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 41
  40. 40. 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 42
  41. 41. Share capital growth Share Capital Growth£4,000,000£3,500,000£3,000,000£2,500,000£2,000,000£1,500,000£1,000,000 £500,000 £0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 43
  42. 42. 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 44
  43. 43. 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 45
  44. 44. The Co-operative brand – the wayahead 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. 46
  45. 45. 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? 49
  46. 46. 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
  47. 47. 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
  48. 48. 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
  49. 49. 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” 53
  50. 50. Be part of the story!• We hope you will join The Phone Co-op and help us grow• You can be part of it! 54
  51. 51. How to contact The Phone Co-op• Contact details:• www.thephone.coop• Tel 0845 458 9000• Fax 0845 458 9001• enquiries@thephone.coop (general)• Vivian@thephone.coop (Vivian Woodell) 55

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