Customer Experience, Systems Thinking, Analytical Thinking & Organisational Design.


To be customer-centric requires business capability to design and to consistently deliver a unique and distinctive customer experience to a selected set of customers in order to acquire, retain and to develop them efficiently.

I was privileged to be taught by the late Dr Russell Ackoff at The Wharton School and he re-enforced my long held belief that one of the major challenges organisations face when trying to transform their business models to become more customer-centric is a lack of systems thinking. Dr Ackoff produced extensive research, insights and knowledge into how systems thinking is the only way to approach organisational development. He explained that many of the challenges we face in trying to understand our organisations such that we can transform them, come from using analytical thinking.

Systems thinking is an approach that views the organisation as a whole (end-to-end) comprised of many parts (functions/silos), yet, at the same time, it is more than the sum of the individual parts. (To deliver a unique and consistent experience requires the organisation to be joined-up – to operate as a single seamless entity.)

Dr Ackoff added that a system is also defined by the function it fulfils in the wider system – this speaks to our organisational role in society and community and embraces the stakeholder universe including, in addition to society,  partners, employees, customers and investors.

Dr Ackoff regularly likened the idea of a system to the human body or to a motor-car. He explained  the 3 principles of the system being defined by the function it fulfils in the wider system (universe) as follows:-

  1. Each part affects the behaviour of the whole. (If the heart and lungs are not functioning correctly then this will affect the well-being of the entire body) – think Leadership Team?
  2. No part has an independent effect on the overall system ( The ability for the muscles to get someone to walk in a straight line will depend on the balance maintained by the inner ear)
  3. The system itself has properties which none of the parts have (If a hand were cut off, the hand would be unable to write. It is the whole system, the whole body, that enables the hand to write)

These principles highlight the challenge many organisations face as they aspire to develop the capability to deliver unique and distinctive experiences. Trying to understand the organisation capability by analysing and restructuring various operating entities in isolation (e.g. let’s optimise the contact centre and make it really efficient.) doesn’t lead to the transformation required. Sadly, in the above-mentioned contact centre example, ‘efficiency’ measures such as average handling time and  # calls answered per day by agent, are the antithesis of customer-centric capability – a customer may want information or may want a problem solved – he/she is not interested in the fact that the agent may have an average handling time target of 2min, 30 seconds, for example.

Taking the analogy further the parts (functions) of the organisation need to mesh together, to be joined up in such a way that they operate seamlessly – to be designed in such a way that they’re supportive of the strategic outcome of the business. The linkages between and across areas of specialisation need to be refined and appropriate for the intended experience. It’s the view and understanding of the whole organisational system as well as an understanding of the universe that allows the organisation to determine where it wants to create it’s ‘high contrast signature experience’ – where it wants to stand head and shoulders above the competition, where it is going to be unique. No business can be the best at absolutely everything.

As per Dr Ackoff, this is akin to taking apart each and every motor car in an attempt, through analysis, to find the best engine, best transmission, best steering, best braking system, best suspension……..best everything. Trying to put all of these ‘best’ parts together would result in an absolute mess as nothing would fit. Trying to scrutinise every part of the system and aggregate an understanding of the parts, doesn’t allow an understanding of the whole. Applying the principles of systems thinking allows an understanding of how the pieces/parts fit together.

Your thoughts?

CMO’s Investment Priorities 2014 – I’m shocked


I downloaded an infographic  http://bit.ly/1jtr5l3 this morning from Customer Management Exchange Group that shows the Top 5 Areas of Investment for Marketing  Leaders  and how investment priorities have changed for strategic marketers over the last 12 months

Marketing_Top 5 Investment Priorities 2014

Basically – I’m shocked!

Allow me to qualify by acknowledging that I don’t have the formal definitions of each of the abovementioned investment  areas (e.g. What makes up Marketing Effectiveness) and, aside from the infographic I haven’t seen any of the underlying research. I am only reacting to the infographic.

As somebody who evangelises a customer-centric business model as one of the only ways of building meaningful competitive advantage for most organisations today, my assessment is that these priorities are a ‘step backwards.’ My comments on a couple of these 2014 investment priorities

Let’s begin at Investment Priority #5 for 2014 – Customer Acquisition. World markets remain under pressure in most geographies. The majority of organisations still generate the bulk of their profits through a product-centric mindset  and we know there are cracks in the product-centri c mindset. Amongst others, commodisation is increasingly common due to technology enablement, product/service life cycles are shorter, customers are smarter, products are available anywhere and everywhere due to globalisation and de-regulation of industries. Customer trust in government and corporate remains low. We all know that it costs more to ‘Acquire’ than it does to ‘Retain.’ Why would investment priorities only highlight 1 of the drivers (Customer Acquisition) of customer value management, the others being Retention, Efficiency (cost-to serve understanding) and Penetration (customer development, x-sell & up-sell)

Maybe, just maybe, Investment Priority #4 for 2014 – Marketing Effectiveness addresses the balance across these 4 drivers of customer value management. Maybe, Marketing Effectiveness implies a focus on Retention, Customer Development and Cost to Serve Efficiency in addition to Customer Acquisition.

I’m astounded that Investment Priority#4 for 2013  – Customer Experience, has dropped off the priority schedule. Is this because organisations are finding it too difficult to enable cross functional capability to design and to deliver a unique, distinctive and consistent customer experience? Is this because executive teams are once again becoming increasingly short term focussed?  There will always be tension between the need to deliver profits ‘tomorrow’ and the need to develop sustainability for 6 months, 1 year, 5 years, 10 years, 20 years ahead. Maybe organisations are feeling that Customer Experience is too complicated and that it’s easier to talk about than to operationalise. Customer Experience requires cross-functional working. It requires the breakdown of silos and a change in the operating model. A customer-centric business model doesn’t change the importance of organisational performance measurement but it does change what, when and how business performance is measured.  Maybe this is why Investment Priority#2 for 2013 –  Marketing Measurement, Accountability & ROI, has also fallen of the 2014 Priority list.

The other notable difference is that Investment Priority#1 for 2013 – Future Thinking, Trend watching and Forecasting appears nowhere in 2014. My concern is that the 2014 Priorities are therefore not indicating any real commitment to business model innovation.

What are your thoughts and observations?

What leads to un-economic Customer Experience investments?


It’s extraordinarily easy to make uneconomic investments in customer experience – much of the time and money ‘invested’ is wasted because organisations fail to understand the criticality of systems thinking and the need for ‘silo-busting.’ They also focus on how they ‘deliver’ experiences rather than understanding how people ‘have’ experiences. It is how people ‘have’ an experience that influences the choices they make in the pursuit of what they really want. The culprits that lead to uneconomic investments in customer experience include the following:-

o Reliance on customer satisfaction measures – customer experience investments only pay off when behaviour changes – satisfaction is not an emotional state that drives behaviour
o Voice of the Customer – Henry Ford said “If I had asked customers what they wanted, all we’d have is faster horses’
o Touchpoint Mapping – The highest impact insights and opportunities exist at non-touchpoints – companies ‘deliver’ an experience at touchpoints e.g. dropping car off for service at service desk, getting lift to work, getting a call indicating status of service……………….etc etc etc. People have experiences at non-touchpoints………e.g. frame of mind based upon past service experience BEFORE car is dropped off for service, having to wait for a driver to deliver them to work, having to arrange their day without access to mobility because car is in for service, having to arrange collection of vehicle…………etc etc etc. It’s important to consider and recognise behavioural pathways – what do these events make customers think, feel and what does this influence them to do?
o Service Level Improvement – Incremental improvements in service quality generally do not get customers’ attention or influence behaviour
o ‘Fixing’ the front line – The experience customers have is a product of deeply entrenched organisational behaviour. Training and motivating front line employees does not address this

Source: Frank Capek – Customer Innovations

Customer-Centricity! Oh, I’m Doing that Already!


Yeah right! I had a really interesting discussion with a prospective client recently. He is the MD of a multi franchise vehicle business. Successful? – no doubt. Customer-Centric? – I don’t think so. Yet he was adamant he had ‘customer-centricity’ under control. They were busy hiring someone who was going to drive this initiative. This is a classic example of a refusal to admit to the current reality. A refusal to fully understand what’s wrong with the current way they’re running the operations. A refusal to really understand what customer-centricity is all about.
Will these refusals lead to business failure? I certainly don’t believe so. But I do know that they will lead to lost opportunity. And what really agitates me is a verbal commitment made to developing themselves as an internationally recognised exemplar of customer experience. How, I ask with tears in my eyes? How are they going to enable disruptive change by doing more of what they’ve always been doing? Time will tell. I only wish that people would stop making bold statements that they’re never going to deliver upon, unless they develop a REAL understanding of their current reality, a REAL understanding of the reality to which they aspire, and REAL capacity for change.

Customer Centricity = Sustainability = Customer Centricity = Superior Business Performance


In a recently published article (MIT Sloan Management Review – How to Become a Sustainable Company)the authors point to a study that supports the view that ‘high sustainability’ companies significantly outperformed their counterparts over an 18 year period in terms of both stock market and accounting criteria, such as return on assets and return on equity. Also, stock market performance was higher and there was lower performance volatility. We can therefore conclude that sustainability makes good business sense.
The term ‘sustainable company’ is spoken about and referred to fairly frequently these days. At the core of this trend is the fact that consumers and the general public are not satisfied with businesses that focus solely on short-term profit maximisation. People want businesses to be far more considerate of broad based human needs.
In this context ‘sustainability’ refers to a business philosophy based on balancing financial, social and environmental considerations.
I am a firm believer and supporter of ‘sustainable enterprise’ – I also have this expectation that if a business can balance financial, social and environmental issues then surely they should add ‘customer experience’ to the list? After all, why waste the energy and effort to address social and environmental considerations (which ‘speak’ to us and can therefore be used to create greater levels of loyalty and advocacy) if they don’t design and deliver a differentiated customer experience.
Sadly, I’m a customer of a couple of ‘sustainable’ companies that deliver a customer experience that is mediocre at best and downright unacceptable at worst. This got me thinking from two perspectives – firstly, building organisational capability for sustainability is similar to building organisational capability to deliver differentiated experiences. Secondly, if an organisation is committed to ‘sustainability’ yet doesn’t focus on customer experience, should we be more accepting of mediocrity in delivery of those customer experiences? I say NO! NO! NO! In fact, Customer Experience and Sustainability should go hand in hand – one without the other is indicative of opposing forces.
Your thoughts?

A blended set of measures are critical for customer-centric operationalization


What company doesn’t want to be customer-centric? It’s highly unlikely that any executive wakes up in the morning and makes a statement along the lines of – “Customer-Centricity is not important to us and we shouldn’t consider it!”

That said, to move beyond the lip-service that is so evident around this topic/set of capabilities requires both courage and a commitment to a transformational journey.  Surely everybody with some understanding of change management principles recognises that transformation requires an amended set of measures and/or the addition of some added measures to ensure focus and accountability? Financial metrics and the achievement of profitability targets are, of course, non negotiables.  Today, however, organisations have to balance profitability with social conscience and need to focus much more on stakeholder relationships. The most important stakeholder in almost all cases is the customer.

I’m regularly asked what metric should be used to measure customer-centric capability. The reality is ‘a measure’ is not sufficient. Trying to craft a customer strategy, develop customer-centric capabilities and operationalise those capabilities isn’t going to be supported by ‘a measure.’

The purpose of this article/discussion isn’t to wax lyrical about the strengths and weaknesses of individual metrics. It is to share a suggested ‘blend’ of measures that are needed if an organisation is serious about a customer-centric transformational journey.

These are illustrated below. Most will be familiar with Customer Satisfaction, Employee Satisfaction, Voice of the Customer and Net Promoter Score. The 2 measures that have less of an understanding are SCHEMA® and Customer Effort Score.

Customer Measures Matrix

 

 

 

 

 

 

Very briefly, SCHEMA® is a leading indicator and measures the customer-centric capability of an organisation. It measures how well a business is optimising customer profitability and compares against global benchmarks. It’s a leading metric because, from this level of understanding, an organisation is able to quantify and identify where it needs to build capability to enable it to be customer-centric – in other words what capability is needed to design and deliver a unique and distinctive customer experience in order to acquire, retain and develop targeted customers efficiently.

The Customer Effort Score is another metric that I am hugely supportive of as ‘effort to engage’ is becoming an increasingly important indicator of ‘willingness to do business with’ as well as loyalty. Quite frankly, it’s astounding how difficult it is to do business with many organisations (after all – why should we care about or be expected to adhere to processes that make absolutely no sense to us – why should we have to put up with broken, inefficient engagement capability that wastes out time and requires effort from us?)  Who has any loyalty and wants to support a business that is difficult to do business with.

I chair a senior learning forum called The Customer Council (TCC) and at the end of 2012 we invited Dr Nicola Millard from BT to address TCC. BT have become somewhat of a ‘poster child’ when it comes to Customer Effort Score in action. Have a look at this video, by Dr Nicola Millard, on the topic of Customer Effort: Help or Hype?

http://www.youtube.com/watch?v=U5iBs_Kac3U

Customer-Centricity = Blue Ocean Strategy


I’ve long been a supporter of ‘Blue Ocean Strategy’ thinking. I’m also a firm believer that the greatest opportunities for business today lie with business model innovation – i.e. finding new ways to create, deliver and capture value. This enables the creation of uncontested market space – ripe for growth.

Blue Ocean Strategy

Blue Ocean strategy, created by Professors W. Chan Kim and Renee Mauborgne, deals with the reality of companies long engaging in head-to-head competition in search of profitable growth. These companies have fought for competitive advantage, battled over market share and struggled for differentiation. This head-on competition often results in nothing but a bloody ‘read-ocean’ of rivals fighting over a shrinking profit pool and failing to build any meaningful and sustained strategy to create profitable growth in the future.

It is suggested that the business universe consists of 2 distinct kinds of space, viz red oceans and blue oceans. Red oceans represent all the industries in existence today – the known market space. In red oceans, industry boundaries are defined and accepted and the competitive rules of the game are well understood. Here, companies try to outperform their rivals in order to grab a greater share of existing demand. As the space gets more and more crowded, prospects for profit and growth are reduced. Products become commodities and increasing competition turns the water bloody.

Blue oceans, on the other hand, denote all industries not in existence today – the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. There are primarily two ways to create blue oceans. In limited instances companies can give rise to completely new industries. In most cases however, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry.

One of the most effective ways to create blue oceans – to create meaningful competitive advantage, is to develop organisational capabilities that enable the enterprise to design and to deliver unique and distinctive customer experiences, and through this capability, to create value that is distinctive in the market. This is about satisfying a real customer/client need that deals not only with an appropriate, relevant and unique product or service, but also addresses the experiential and emotional elements that the customer/client needs.

The Challenge of Growth – Value Innovation

Profitable, organic growth is a tremendous challenge facing many companies today.  As organisations get larger the organic growth challenges become bigger. Very often the value differentiator that led to the initial growth is lost or diminished as more nimble and agile competitors step in to disrupt.

Most companies share an implicit set of beliefs about ‘how we compete in our industry or in our strategic group.’ They share a conventional wisdom about who their customers are and what they value and what products and services their industry should be offering. Their strategy is dominated by the idea of staying ahead of the competition. They view business opportunities through the lens of their existing assets and capabilities – they ask, given what we have, what is the best we can do? This leads to competitive convergence – they end up competing solely on the basis of incremental improvements in cost or quality or both.

Differentiated, winning organisations with enlightened leadership pay little attention to matching or beating their rivals – instead they seek to make competitors irrelevant through a strategic logic called value innovation.

Value innovators do not accept their industry conditions as given. They do not set strategy accordingly. They do not let competitors set the parameters of their strategic thinking – they do not focus on comparing strengths and weaknesses with those of their competitors in order to build an advantage. They are not interested in competing at the margin for incremental share.

Value innovation logic starts with the ambition to dominate the market by offering a tremendous leap in value. Value innovators do not let what we can do today condition their view of what is required to ‘win’ tomorrow.

An analysis of major innovations within existing corporations in the past decade shows that precious few have been business model related and an American Management Association study a few years back determined that no more than 10% of innovation investment at global companies is focussed on developing new business models.

Shareholders today want to understand that companies are able to grow organically. Customers are a finite resource. Companies need to prove to shareholders that they are capable of acquiring more of this limited resource, need to prove they are capable of retaining those customers that they have, particularly the valuable ones, need to allocate resource efficiently and manage the cost-to-serve those customers based upon what they’re worth today and what they will be worth tomorrow and need to have a sufficiently compelling customer value proposition that ensures they can develop their current customers through appropriate and relevant up-sell and cross-sell initiatives.

This is about developing leaps in value for both the organisation and the buyers, creating all new profitable demand.

The creation of blue oceans is reliant on innovation across products, services and delivery (experience). Those companies most successful at repeating value innovation are those who take advantage of all 3 of these platforms. Sadly, too many organisations limit their strategic options by focussing on only 1 dimension of strategy.

Competing in overcrowded industries is no way to sustain high performance. Developing and operationalising a customer-centric business model will enable an organisation to stand out.

For more insight into customer-centric business model innovation, please see my book “The Customer-Centric Blueprint’ – http://amzn.to/ZILg4y

(Much of this content is attributed to various Harvard Business Review articles – Blue Ocean Strategy by W.Chan Kim and Renee Mauborgne, Value Innovation: The Strategic Logic of High Growth by W.Chan Kim and Renee Mauborgne, Creating New Market Space by W, Chan Kin and Renee Mauborgne and Insead MBA Mini Elective – Blue Ocean Strategy Simulation Course)