Ronan Dunne: “We will know the customer better than they know themselves”

Sensemaking / Ronan Dunne: “We will know the customer better than they know themselves”

In an exclusive interview, the CEO of Telefónica O2 tells Martin Wright about a future where his company will use its intimate knowledge of its customers to make their daily lives more sustainable.

19 Mar 2012

In an exclusive interview, the CEO of Telefónica O2 tells Martin Wright about a future where his company will use its intimate knowledge of its customers to make their daily lives more sustainable.

Ask Ronan Dunne about the future, and he conjures up a world where his company knows your every need and desire – and then helps deliver them in the most sustainable way possible.

I can’t quite decide whether this is a benign image of corporate as concierge – a helpful, ever present butler – or something altogether more Big and Brothery.

As a vision of corporate sustainability, though, it sure beats endless tedious talk about CSR and carbon targets. But more of that later.

Photo of Ronan DunneDunne in person is chatty, unguarded – curious about sustainability without, it seems, wishing to appear obsessed by it. There’s none of that “When I was a child I used to notice the butterflies and think how incredibly fragile they looked, and I suppose that made me aware of nature’s fragility…” None of the whimsical spiel that I’ve heard from some business leaders, in other words – even though, with his soft Irish lilt, he could just about get away with it.

Instead, he repeatedly cites his background as a finance officer. An accountant by training, he rose through the ranks of various corporates before ending up at BT, and thence, O2, following its demerger from the UK’s former state-owned telecoms giant. And he admits that sustainability “hardly crossed the radar” until a few years ago. “I was aware of the debate, but there seemed to be a fair amount of intellectual masturbation going on, as opposed to real hard-edged business rationality.”

So what changed? “I ran into some business people who said, simply, ‘there’s an opportunity here.’” And his inner CFO woke up and smelt the money. “I thought, if we can save costs by saving resources, and find a way to engage our customers, our employees… well, that makes sense in any business model.”

Cue an array of targets on waste reduction, phone recycling, carbon cuts, etc. And some soul-searching about how best to engage customers. In this context, O2 has something of an advantage over many other less ‘visible’ companies: almost everyone owns a mobile.

But they also swap it for a new one with bewildering speed. This is an industry hooked on neophilia. Its whole business model, pretty much, is predicated on a scary degree of churn. Just how sustainable is that?

“We have to put our hands up to that one”, says Dunne. “If people want to change [their phones] more often than they should, we’re not going to stay in business by telling them they shouldn’t.” Making sure they recycle the old one helps, of course. That’s now common practice among all providers, but Dunne admits that when they first investigated just what happened to all the phones handed in, “whether they were being properly re-used, or just dumped, basically, we got some very uncomfortable answers. So we decided to audit the recycling market exactly as we do the supply chain.” They ended up with a partner, Redeem, who ensures that wherever possible phones are ‘repurposed’ for African and Asian markets, and where that’s not feasible, that “all the metals are extracted and dealt with properly”.

But this only takes you so far, he admits. “If you are going to change your phone regularly, what are the bits you don’t have to change? Can we take the charger from the old one? Can we take the battery from the old one? It’s all about [minimising] redundancy.” He’s pleased O2 helped lead the drive for a universal phone charger, although frustrated that it’s taking ages to come to market. “I would have hoped that by this stage no new mobile was being sold with a charger in the box. You should get one with your first phone that lasts a lifetime. I wish I could have knocked heads together more, and said, ‘Just do it!’.”

“As a sector”, he adds, “we’re slow when we have good ideas.” This isn’t just down to cautious corporation syndrome: the sacred cow of competition often plonks itself on the line. “When we as an industry try to get everyone in the room to agree, the project stops. Why? Because everyone brings their competitive agenda to the table. Even if I just sit down with someone from Vodafone or wherever to talk about a joint approach, there’s a very good chance someone else will stand up and say: ‘Oi, you can’t do that, it’s a cartel!’. We’ve got to find a way for people to be trailblazers and say: ‘Provided the model is open, and everyone can jump on board, it’s fine.’”

One area where O2 are undeniably trailblazing is their commitment to give every phone they sell its own ‘eco rating’, under a scheme devised with Forum for the Future [see 'Eco rating ranks mobiles' green credentials']. Research shows that around 4% of customers make this a key criterion in choosing one product over another (or at least, that’s what they say when asked). Dunne’s proud of the initiative and thinks that, in positioning terms, it produced “some good early wins”. But he’s also realistic: “In truth, is a customer really going to choose Product B over iconic Product A because of an eco rating?”

He’s more enthusiastic over O2’s potential to help decarbonise the wider economy, citing the ‘Smart 2020’ report which showed that ICT could enable dramatic emissions cuts – and cost savings, too. “Take health. We’re doing trials with the NHS where patients with long term conditions can be monitored remotely. It’s the medical equivalent of tele-presence.” Not only does it save the health service money (nearly half its work involves such conditions), but it also makes life sweeter for the patient, avoiding endless tiresome hospital visits.

It doesn’t stop there. Dunne reels off a host of other examples of cost- and carbon-crunching wheezes which O2 is exploring: super smart metering, to the point where domestic appliances are talking to each other to curb unnecessary power consumption; remote control of household electricity (“so if you can’t remember if you switched the lights off, you can check an app which will do it for you”); fine tuning truck drivers’ techniques to curb fuel consumption.

He’s a big fan of collaborative consumption and peer-to-peer trading – to which, of course, ICT is key. He even paints a picture of O2 as champion of the corner shops in their fight to survive against the retail Goliaths. Thanks to canny software, they can fine-tune their yield management, reach out to their communities via direct advertising, and even take part in local ‘swap and barter’ networks to cut waste and save money. “What was once only available to big enterprise [via expensive mainframe computers] can now be in the hands of just about everyone on smartphones and tablets.”

“When the internet took off, everyone thought the markets had all gone global, that there were no boundaries. But what we are seeing now is consumption becoming more personal, more local. Starbucks can do a national advertising campaign, but with O2 priority moments (which highlight exclusive offers to O2 subscribers nearby), your [independent] café owner can compete directly with Starbucks on his high street because he can do a locally targeted one.”

And for the trusting customer happy to share their inner lives with O2, the possibilities don’t end there. “Say you’re stuck in traffic on the M4; you were due at Heathrow to be on the 5.25. I know that, so I’ll book you on the next available flight and I can get in touch with BA and get you a refund because he will know that there’s no way you can get there so he can re-sell it. I offer you the products and services that I know you truly value on the best available deal, because I know as much about your consumption patterns as you do and in fact, probably more. So we will be the curator of our customer’s best experiences because we know them even better than they know themselves.”

Which is where it all starts to sound somewhat Big Brothery. But Dunne is confident that this needn’t be a cause for concern. The key, he says, is “transparent value exchange.” And that means? “It means I know that you know this information about me, but I also know that you are going to use it for our mutual benefit and there’s going to be some sort of ‘gain-share’ between us.”

Long term, he argues, this should enable people to make better choices – and greener ones, too. “We want our customers to trust us to be their mediator – their concierge, if you like.” That’s the business model of the coming decades, he concludes. “All the companies who survive will be knowledge companies. So that’s what we will be.”

Martin Wright is Editor in Chief, Green Futures

Forum for the Future is holding a webinar to hear more from O2 on their new ‘Think Big Blueprint’ plan, what they’ve learnt and how they’ve worked together in partnership over the last three years. The webinar is at 4pm on 28th March - register for it here.

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