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Finance Effectiveness Benchmarking Report

A Dutch Telco taps the next generation of finance to focus conversations around the customer

KPN’s revamped financial philosophy has allowed it to reduce costs, shorten processes and invest in its customers.

The challenge: A leading Dutch telco overhauls its finance department to compete in its market

KPN is a leading telecommunications provider and market leader in the Netherlands, with revenue of €5.6 billion and over 13,000 employees. With fixed and mobile networks for telephony, data and television, KPN serves private customers and business users, both within the Netherlands and abroad.

In 2016, KPN embarked on a finance transformation project with a strong focus on digitization. Called “NextGen Finance,” the transformation encompassed digital upgrades, process simplification, organizational transformation and a change to the culture of the finance department.

The goal of NextGen was to transform the finance department and create more value for the entire company, while reducing the cost of the finance function overall. As explained by KPN’s Head of Finance Transformation, Bart Meussen, the ambition was to make finance both more effective and more efficient. According to Bart, finance aimed to move from a backward-looking role in the company, with reporting, compliance and status updates primary, to a more business-oriented, forward-looking organization.

Agility needs stability

As former Dutch Minister of Finance, KPN’s CFO Jan Kees de Jager has a very clear view on the role of finance in supporting business strategy and improving business decisions. He says that when he joined KPN in 2014, “80% to 90% of finance time was spent reporting the past, rather than comprehending the present and foreseeing the future. And comprehending the present and foreseeing the future allows finance to steer and navigate the business into better decisions.”

Jan recognizes that accurately reporting the past is a basic requirement for finance. In fact, it is essential as the foundation of agile businesses in the highly competitive telecoms market. “Agility needs stability,” he says. However, he stresses that reporting needs to be completed with maximal efficiency, so that finance can focus on being “the navigator of KPN’s business in creating sustainable value.”

Setting the right tone through culture

Jan recognized from the start that such a significant transformation involved not just the organization's design and its supporting systems, but required a significant cultural shift as well. And those involved in day-to-day running couldn’t make the change alone. They needed a dedicated transformation leader (Bart Meussen’s role) and a team including young talent with fresh ideas.

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When Jan joined the company, half of the employees in finance told him they thought they reported to the business, rather than to the CFO. It was important to help them understand that “reporting to finance, your first obligation is to do right for the value creation of the whole company and not for your own segment.”

As a result, it is important that finance representatives are “able to stand up against the business person, and say, ‘No, here I draw a line in the sand, and we have to do it this way.’”

Focusing the conversation on customer retention

The finance transformation also produced a significant shift in finance reporting and discussions around reports. Before NextGen, reports were hundreds of pages long and vital information would get lost in the sheer volume. Based on the work of the transformation group, KPN now works with interactive dashboards which report KPIs in real time and allow for more productive discussions, analyzing a rich mix of data.

Jan says, “We start with the outside-in view. How are our competitors doing? What do buy-side and sell-side analysts say about how we are performing? And how our competitors are performing? With our customers, what is the chatter on Twitter or other social media? What’s the chatter about our company and our competitors?” Then the focus turns inward, focusing first on financials and then on more forward-looking, non-financial KPIs.

Examples include Customer Lifetime Value and First Time Right (FTR). FTR measures the rate a process was done correctly the first time. It’s used for processes like the onboarding of new customers, customer migration to other systems or the activities the field engineers perform.

FTR has been linked to Net Promoter Scores and, ultimately, to customer churn. Jan explains that when FTR occurs “customers will be more satisfied and thus stay longer and be more likely to acquire more services. This then increases our average revenue per address.” 

Three years in, finance costs shrink by double digits

Three years in, NextGen Finance has resulted in significant positive impacts for KPN. The finance chain is shorter, all finance staff follow Lean training, transparency has increased and manual handling of transactions is substantially reduced. New IT tooling has been implemented and the monthly closing process has been shortened by more than 25%.

Success is assessed in both hard and soft measures. There has been a double-digit percentage decline in the cost of finance, driven by a substantial reduction of FTEs. Softer measures look at business impact. Finance is accomplishing much more, with greater impact to the business, which is reflected in increased satisfaction from internal business managers. Also, KPN attracts a lot of positive attention from the market on what is happening within this core function.

Eliminate, simplify, standardize and automate

In the next three years, Jan foresees an increasing impact of data analytics for several areas, including continuous forecasting, process-mining and machine learning. Data-driven insights will allow finance to be even better business navigators, with more significant impacts on the business.

Bart notes that productivity and efficiency will keep improving through further use of process streaming, automation and robotics. He outlined the ESSA methodology KPN is using: “First focus on the Elimination of activities within processes, then Simplify, then Standardize and ultimately Automate, when possible.”

In the future, they both see finance continuing on the path set by NextGen; an efficient and impactful finance function.

This profile is part of PwC’s 2019 Finance Effectiveness Benchmarking reporting. PwC would like to thank KPN’s Head of Finance Transformation, Bart Meussen, and KPN’s CFO Jan Kees de Jager for their insights.

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