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The Effortless Experience: Sensational Headlines, Misleading Conclusion?

In this post I complete my take on the key assertion and the 4 findings put forth in the book The Effortless Experience.  Before I launch into this post let’s recap the following points from the first post.

Recap of the essential points from the earlier post

The four major findings put forth by the authors:

  1. A strategy of delight doesn’t pay
  2. Satisfaction is not a predictor of loyalty
  3. Customer service interaction tend to drive disloyalty, not loyalty
  4. The key to mitigating disloyalty is reducing customer effort

Let’s also get clear on the scope of the research that gave rise to these findings. The primary mechanism was post (contact centre) call surveys completed by customers. And the scope did not included the end 2 end customer experience:

An important disclosure before we reveal the results and their implications: we intentionally limited this study to service transactions and their impact on customer loyalty.

And my position?  I shared in the first post that these findings show up for me as a statement of the bleeding obvious. And it occurs to me that the headline grabbing finding “Satisfaction is not a predictor of loyalty” is misleading if not flawed.  Now I fulfil on my promise to share my rationale.

Dealing with findings 2, 3, and 4

How many studies do we need to get that satisfaction is not a predictor of loyalty?  Just look into your experience!  I can be satisfied, even delighted, with a physiotherapist and switch to a chiropractor. Why? Because by switching I reduce my travel time from 45-60 minutes (each way) to  15-20 minutes each way.  I can be satisfied with a particular restaurant and try out new restaurants that show up on my radar – usually as result of some recommendation.  I can be satisfied with a particular mobile telco and switch because of some promotion heavily promoted by a competitor …

Who does the customer turn to when s/he has a pressing issue which needs to be dealt with?  Customer Services and the folks sitting in some distant contact centre.  What does it take for a customer to make the call to these contact-centres?  My experience that many of us only call the contact centre if and only if we cannot address the issue through other means: internet, self-service channels, friends….. Why? Because, on the whole the experience of dealing with contact centres is effortful and painful.

It occurs to me that customers increasingly turn to Customer Services as a last resort and usually with the more complex issues/problems.  And on the whole the Customer Services function is not designed to help customers with these complex issues/problems;  contact-centres are staffed and run to minimise the cost of operations not to deliver a good customer experience.  As a result of the mismatch between the needs of the Customer and the design-operation of the contact-centre customers often have to force a solution out from the contact-centre.  That is to say that at best the interaction shows up as effortful. And there are many instances where the contact centre is unhelpful: quoting policy or making promises and not delivering on them as Customer Services has little power in the rest of the organisation.  Given this is it any surprising that “Customer service interaction tend to drive disloyalty, not loyalty” and “The key to mitigating disloyalty is reducing customer effort”.  Don’t take my word for it, read this post for my British Gas experience.

Dealing with the profound finding: “A strategy of delight doesn’t pay”

Take a look at delight.  What shows up?  For me, taken a phenomenological approach, the following shows up:

  1. I rarely find myself delighted in the course of interacting with companies of which I am a customer.

  2. When I do find myself delighted it is because someone who is a representative of the company , or the company itself, has ‘given’ me something that shows up for me as valuable and which I did not expect.

  3. Delight is contextual – the  content which shows up as delightful in one context does not necessarily show up as delightful in another context. For example, being upgraded from an economy seat to a business seat, in Virgin Atlantic, for a transatlantic flight showed up a delightful.  If I had been upgraded in the case of an hour flight the hassle would have probably outweighed the ‘delight’. Friendly-chatty service show up as delightful when I am relaxed and have plenty of time to spare; the same friendly-chatty service shows up as annoying-intruding-unprofessional when I am in a hurry and simply want the job done, the outcome delivered. If getting the job done turned out to be easier than I imagined, involved less effort on my part, then I tend to be delighted at how easy-effortless the experience was – whether conducting research, making a purchase, or contacting the customer services team and getting help with an issue.

  4. In service transactions there is something like a recipe for generating delight in customers. The recipe involves: solving the customer’s problem; doing so quickly not leaving the customer hanging and most likely worried; minimising the effort that the customer has to make; and last but not least the human element – how you treat the customer as a flesh and blood human being with or without respect, with warmth or with coldness/indifference, as a unique fellow human being or just another call to be handled asap to meet the call time metrics….

How do the authors of the Effortless Experience see, define and measure delight? They see it very differently to me.  They do not see delight in phenomenological terms: that which shows up in the customer’s lived experience – body and mind.  No, they have defined a strategy of delight as consisting of a number of tactics falling under the category Moments of “Wow”:

“Moments of “Wow”

- Willingness of service to go above and beyond

- Applying knowledge about customers

- Exceeding customer expectations

- Teaching the customer

- Offering alternatives

- Perceived value of alternatives”

So what the author’s research is testing, if it is testing anything, is the effectiveness of these tactics in generating delight and thus loyalty.  What if these tactics annoy customers rather than delight customers?  Just this week, I rang my broadband supplier as my patience had run out. The contact-centre agent was helpful. In between conducting the tests, and understanding the size of my home, she was telling me about a special offer (wireless range extender) that the company had on, encouraging me to take advantage of this offer, and telling me she would be happy to guide me through the online process.  Did this land as delightful for me? No! Why not? Because I just wanted her to fix my broadband so I could get my work done!  I didn’t ring to get advice. I didn’t ring to get a free wireless range extender. I range because the broadband was slow, had been slow intermittently over weeks, and that day I desperately needed the broadband to work because I had pressing work to get done and for that I needed a fast (enough) internet connection!

Now take a look at what the authors have placed under the category of Customer Effort:

“Customer Effort

- Number of transfers

- Repeating information

- First contact resolution

- Number of contacts to resolve

- Perceived additional effort to resolve

- Ease of contacting service

- Channel switching

- Time to resolve”

It occurs to me that many of the factors that are likely to lead to delight showing up in customers, as a lived bodily experience, in-around-after a customer service interaction have been placed in the Customer Effort category.

If I am correct, this exhaustive research, the millions of data points, and the subsequent profound finding “Strategy of delight doesn’t pay” is:

  • misleading at best;
  • has been misinterpreted and misreported by many in the media (including bloggers) who failed to dive into the fundamental grounds of this research;
  • does not prove that leaving customers feeling delighted does not generate an economic return.

I get that I make mistakes. If you see mistakes in the analysis that I have shared with you then please point them out to me by commenting.

The Effortless Experience: Is There Anything of Value Behind The Hype?

The Effortless Experience Promises the Roadmap to El Dorado

Over the course of 2013 I noticed a certain buzz about ‘customer effort’ and its associated metric, the ‘Customer Effort Score’.  So when I was invited to review The Effortless Experience (the book behind the buzz around customer effort) I took up the offer.

The central assertion of the book can be summed up by the following paragraph (page 3):

“Whilst most companies have been pouring time, energy, and resources into the singular pursuit of creating and replicating the delightful experience for their customers, they’ve ironically missed the very thing that customers are actually looking for – a closer in, more attainable, replicable, and affordable goal that’s been sitting right in front of them all this time: the effortless experience….”

That paragraph got my attention. Why?

First, because my experience contradicts the first half of the paragraph. It occurs to me that most companies have NOT been pouring time, energy, and resources into the singular pursuit of creating and replicating delightful experiences for their customers!

Second, the authors make a bold claim. Is there anything of substance to support this claim or is it as ungrounded as the first half of the paragraph?

The Effortless Experience: Four Core Findings

The authors claim that they surveyed over 97,000 customers and conducted a whole bunch of research through which they “ended up with a few million data points..” which they boiled down to four simple yet profound findings.  What are these findings?

1. A strategy of delight doesn’t pay

“…. there is virtually no difference between the loyalty of those customers whose expectations are exceeded and those whose expectations are simply met… loyalty actually plateaus once customer expectations are met.

2. Satisfaction is not a predictor of loyalty

“… we found virtually no statistical relationship between how a customer rates a company on a satisfaction survey and their future customer loyalty..

3. Customer service interactions tend to drive disloyalty, not loyalty

“.. according to our research, any customer service interaction is four times more likely to drive disloyalty than loyalty…”

4. The key to mitigating disloyalty is reducing customer effort

” … four out of the five drivers of disloyalty are about additional effort customers must put forth…..”

What showed up upon a closer-questioning look at these ‘profound’ findings?

If one reads the book carefully it becomes clear that one has to be very careful about these findings.  Why?  Because the scope of the findings is limited to only one domain, one piece, of the end-2-end Customer Experience:

“We wanted to know ….. exactly which elements of the customer interaction with customer service have the biggest effect on making people more (or less) loyal….

In the first of these surveys, over 97,000 customers – all of whom had a recent service interaction over the web or through calling a contact centre….. – were asked a series of questions about their recent service interactions….

An important disclosure before we reveal the results and their implications: we intentionally limited this study to service transactions and their impact on customer loyalty.”

Now you understand the scope of this “exhaustive study” is limited to interactions between the customer and the contact-centre. And you understand that the data was collected through post call surveys.

Take a look at the four findings again. And think back to your telephone interactions with contact centres.  Get present to the situation that led you to call the contact centre. Get present to the state that you were in just before you made the call.  Get present to your experience of being on the phone to the contact centre.  Now ask yourself if these four profound findings are not a statement of the obvious?

Looking into my own experience, the four findings showed up for me as being true to my lived experience. And yet nothing new. These so called profound findings show up for me as a statement of the bleeding obvious. In the next post (in this series) I will share my rational with you. I will also set out and explain my assertion that reducing customer effort in customer interactions with the contact-centre is a ‘strategy of delight’ and does generate delight in customers.  Until then, I wish you the very best and invite you to share your perspective by commenting.

Skeptical musings on ‘treating different customers differently’ and the expertise of business gurus

You may know that I value skepticism in the sense of questioning the taken for granted.  In this post I question the  central tenet of the customer business.  And I question the insight and expertise of customer gurus and management consultants. Let’s start with the central tenet.

What is the right basis for treating different customers differently?

If there is a central tenet of the whole customer business (CRM, CXM, customer retention & loyalty) then it is this: treat different customers differently.  How does that work in practice?  There are two options: you can treat different customers differently based on their needs or based on their financial value.  Which should take priority?

Imagine that you are in pain doubled up in the waiting room of a hospital emergency room. It is late at night during the new year holidays and there is a shortage of doctors.  So there are some ten people there with you in the waiting room – each of whom is keen to get seen to quickly.  What basis should be used to decide who gets access to the scarce/valuable ‘resource’ (the doctor) next?  Should the basis be first come first served?  Should it be the person who is in most need of urgent attention because his/her life is at risk?  Should it be the person who is willing to pay the highest price – the one that represents the most financial value?  What do you say?

What would the ‘customer guru’ say if he was to act consistently with his business philosophy?  He would say that if the hospital is a business then the people in the waiting room should be divided up (segmented) first by their financial value (to the hospital) and then by their medical needs.  Which means that the person who is going to make the most money for the hospital and who is most in need of urgent attention should be the next one to get to see the doctor.

What actually happened?  I was that person in the waiting room doubled up with pain.  And the lady next to me was in a lot of pain as well.  We were talking and complaining about the shortage of doctors, how slow the process was, how long we had been waiting – over an hour. We both hoped that we would get seen to quickly – ideally next.  Then a mother came in with a young child who was clearly in a lot of pain.   What was our reaction?  Both of us were adamant that the young child had to be seen next and seen immediately; we forgot our pain, we no longer thought about ourselves, our humanity reached out to that young child who was suffering so much!  And I noticed that all the other adults in the waiting room forgot themselves and collectively we gave one big sigh of relief when that young child was taken to see the doctor after a couple of minutes. Clearly, the hospital got this because they were seeing us on the basis of our need – how serious our condition was.  And that  is what allowed us all to bear our pain and go with the system: the system occurred as fair, as just – as one that does justice to human dignity.

I hope that you get what I am getting at here.  If you do not then let me spell it out for you.  What the ‘customer gurus’ espouse contradicts certain ingrained values that go with being human.  Most of us have a sense of ‘right’ and ‘wrong’ including that which contributes to our human dignity and that which takes away from our human dignity.  Visibly treating different customer differently is a minefield because it brings out into the open the question of human dignity.  It occurs to me that only people who are not called to by these values are economists, MBAs, business gurus and management consultants.

Why you should be skeptical about business gurus and management consultants

First and foremost, I say, you should be skeptical of any business guru and every management consultant.  Why?  Because business gurus and management consultancies are in the business of passing of philosophy as science, as scientific management, as truth, even if they are not aware that this is what they are doing.  Put differently, when you take a thorough skeptical look then you find that the business gurus and management consultancies are like the king who was not wearing any clothes – it just took a child to see it and call it.

At his point, I wish to introduce you to Colin Shaw because has written a post that has generated high emotion.  Colin is the CEO of Beyond Philosophy – a customer experience consultancy which  makes a big point about the importance of tapping into the irrational side of customers and says it has a scientific proven method for doing so.  On LinkedIn Colin describes himself as “Author 4 Customer Experience books | Consultant | Customer Retention & Customer Loyalty | Keynote Speaker” 

His latest post hasn’t got the kind of reaction (comments) that he was expecting. I think it is fair to say he shows up as being totally surprised by the reaction as expressed through numerous comments many of which are not supportive of him and his point of view.  Which occurs to me as interesting given that the heart of  all things customer is a good grasp of the human condition.  Colin starts off his latest post (Missed opportunities to identify high value Customers – Virgin Atlantic Case Study)  with the following:

“I fly a lot. I have Diamond status on the Delta airlines loyalty scheme, the highest you can get. I really fly a lot! On my briefcase and all my bags I have the Delta Diamond tags. This is like wearing a beacon that says ‘this guy flies a lot’!

My question is, “When I fly with other airlines, do they ignore this display that says I am a high value Customer and could be one of your best customers?” It seems that my badge has the cloak of invisibility as everyone ignores it. Why?

Back in my past career, when I used to run call centers, I remember saying, “Wouldn’t it be great if we knew how much potential revenue the caller could spend with us”. The reality was if I knew someone could spend $1m dollars I would treat them differently to someone that could only spend $10. Airlines seem to ignore this in the choices they make when designing their Customer Experience. This is a lost opportunity. 

Let me give you five examples from a recent experience with Virgin Atlantic on how they are missing these opportunities:”

What kind of reception did this post receive?  An emotional one!  A human one, that discloses reality as experienced by the ordinary airline customers: the lived experience rather than theory. Allow me to share some of the comments that showed up as particularly interesting:

1. “Welcome to the real world Mr. Shaw!”

2. “is this dude serious?”

3. “Colin…here is part of the issue that people are having with your rant. I also fly quite a bit, but simply not enough to get this kind of status. When I go to the airport, I have to wait in a security line while people with “status” have their own priority line, and the airport decides that having the two lines converge on the same TSA agent is a good idea. This means that people without status feel that they are being held up because you have your fancy Delta tags. Then the boarding begins and they do the same thing…..put lines converging on a door where people with status move to the front and cause others to wait. Then there is me – a frequent flier who is in the airport enough to hate travel, and not enough flights to get the airlines to recognize how unpleasant it is to travel…..A significant part of that unpleasantness is the fact that I have to be put aside by a wave of people like yourself who have that level of status. Think about every other industry where status matters. Credit cards offer status to high value customers, but recipients of the cards do not inconvenience other card holders when they make a purchase, so no resentment exists. The backlash you are feeling is from people who have to witness and be inconvenienced by what we all know you deserve. Virgin should take care of you, but not at the expense of other travelers.

4. “Wait, it gets better. So now (in your clarification) you’re saying that Virgin could buy your loyalty back by putting you in a shorter check-in queue, and giving you a $48 rebate on your excess baggage, and accepting responsibility because you had lost your headphones? So, not only are you arrogant and self-important, you have no brand loyalty – Delta should value their relationship with you so highly that they treat you like a king, but you value YOUR relationship with Delta so little that after years of good service, upgrades, priority check-in, etc. you’d defect to Virgin for $48 and a check-in queue that is 3 minutes shorter. In other words, for you brand loyalty is a one-way street. As one of the previous comments asked, who exactly do you consult for? I bet they’d be interested to know your new views on asymmetric brand loyalty, and on exactly what can be bought for $48 and 3 minutes…… Then, in your next follow-up, you suggest that you should be treated better than other economy class passengers because you travel more often! So now you’re expecting Club Class treatment while flying economy! Amazing! I drive far more than average, should I have a booklet of “get off with speeding fines” vouchers, or my own special lane as a reward for being a frequent driver? With each post your position sounds more and more ridiculous. Please, stop digging, it’s becoming embarrassing.

5.  “Over 700 million a year fly a year. What makes you any different? Are you military flying back and forth from deployments? No I didn’t think so. Those are the only people that deserve to be treated like royalty when flying. Though I’m sure you’ve given up your first class seat multiple times for a military member haven’t you. No, I didn’t think so. Should people that ride the bus to work on a daily basis be treated better than a person who only rides it occasionally? Did you once think why they have to limit carry on size? Maybe they have calculated the capacity of the overhead storage and this allows all customers to be able to store the same amount of carry on luggage. Its ok cause you fly so much everyone else should have to suffer so you can carry your oversize bags. I bet that $48 dollars will make you think twice before trying to carry on a small suit case next time. Then again if your so high value, I’m sure $48 is pennies to you People try to do this all the time, carry on large bags to avoid waiting at the luggage belts. I fly with Virgin anytime I fly home to the UK with no complaints. Then again I don’t expect to have my A#$ kissed everytime I fly. If thats what your looking for, maybe you should be looking at different services. 2 christmas ago I got stuck in London due to blizzard that hit the east coast of the U.S. While other airlines had their customers sleeping on air port floors, Virgin paid in advance for hotel for 3 nights and even paid 75% of my expenses. Its funny you pick Virgin to bash on when customer service is so terrible and a lot worse in so many other services. Have you tried to call your cable recently or tried making a large purchase at Best Buy during the holiday season? Try bashing them for not bowing down before you go after airlines.”

6. “”Try replacing the word airline with wife/husband/partner. I used to take her out to nice restaurants, go on romantic holidays, buy her presents. Then I left her for someone closer to work. The other week I thought I’d pop round to see her. With my new kids. Showed her pictures of us on holiday. And then (and this makes me really angry), she says she’s moved on!!”

7. “You seem to be a very important man. How disconnected from real life you must be…”

And finally

I say that if you want to excel at the game of Customer then cultivate the human. My experience is that to excel at the Customer game one has to have an intuitive feel for the human in the human being.  How do you do that?  By putting yourself into real, commonplace, human situations and being present to what shows up for you.  By reading the right kind of literature – that means avoiding business and management books!

I say be skeptical about any advice coming from Tops, business gurus, management consultants, MBAs and economists. Why? They are disconnected from real life – the real world experienced by most of humanity, most of your customers.  And, like all philosophers they fall so in love with their philosophy that he forget that it is just philosophy – at best a partial view of reality. I really do believe that Colin Shaw thinks that he is not doing philosophy and that is why he has called his business Beyond Philosophy.

Please note, I have only used Colin Shaw and Beyond Philosophy as an example to illustrate a point simply because this landed on my lap at the right time.  Recently, there was the much publicised demise of The Monitor Group a strategic consultancy established by the king of strategy (Michael Porter).  Which is my way of saying that I am talking about academics, consultants, gurus and not any one single person or organisation.

What do you say?

Customer-Centricity: what does it take to make the transition to a customer-centric business?

What is our defining feature, our magnificence?

We are awesome.  We, individually as an organism and collectively as a species, are best signified as “that whose defining characteristic is the capacity to imagine possibilities and convert these possibilities to reality‘.  Yes, we are an organism that excels in listening to and telling Story.  Yes, we are an automatic meaning making machine.  And for me the distinguishing feature, the crowning glory, the magnificence of us is our ability / our deftness at converting a vision, a dream, a possibility in our mind into what is so in the world.

Allow me to give you specific examples of what I am talking about.  Think about the American Declaration of Independence and what resulted when this is put into the world.   Would there be a USA without this declaration?  Think about Martin Luther King’s “I have a dream” speech, vision, declaration, stand.  Think about Gandhi and his declaration that India will be free. Think about JFK’s “Man on the Moon” bold vision, challenge and address to congress.

Why doesn’t the ‘world work’?

Why doesn’t the ‘world work’ such that no-one is excluded?  Is that too abstract, too philosophical?  OK, let me make it simpler by asking the question:  why is it so that many of our fellow human beings live in hunger and die of hunger?  Do we lack the know how? No.  Do we lack the capacity, the resources, to feed our hungry fellow human beings?  No.  So why are our fellow human beings dying?  Look into this and you might come to the conclusion, that whilst many of us are inspired at the thought of a world in which every one of us has enough to eat (none of us starve), one or both of the following is present:

  • We simply cannot conceive of possibility of an Earth where all of us are well fed – this simply occurs as ridiculous to us; and/or
  • It is OK by us for our fellow human beings to starve as long as we do not have to ‘see’ it, face it, experience it.

I take no credit for this insight.  It rightly belong to an unacknowledged American genius (now living in exile) called Werner Erhard.  He got and articulated this position over 30+ years ago.  You might be wondering what this has to do with organisations and customer-centricity in particular.  Let’s deal with that – the foundation is in place to have that conversation.

Why is it that only a handful of big businesses have made the transition to being customer-centric?

What are the obstacles to making the transition to customer-centricity?  Is it lack of know how?  Is it the lack of capacity / resources?  Before you come to a conclusion, consider the following:

  • A ‘handful’ of poorly armed, poorly trained (militarily), yet powerfully motivated colonists defeated the military might and political power of the worlds’ greatest empire (the British empire);
  • A man (Gandhi) in a loincloth took on the world greatest empire and after many years of sacrifice / struggle he won, the empire capitulated;
  • One man’s speech (“I have a dream”) dramatically changed the social landscape of many millions of Americans despite the entrenched legacy of slavery;
  • One man (JFK) rallied a nation and put a man on the moon.

I assert that only a handful of companies have made the transition to being customer-centric because of one or both of the following:

  • Tops do not believe that if they look after their customers, their customers, will in return, look after them; and/or
  • It is perfectly OK for the business to continue as is (product/sales centric) because the business is doing just fine as it is.

Lets listen to what the CEO of O2 shares about their transition to customer-centricity

One of the few big companies, that I know of in the UK, that has made that transition is O2 (telco).  So it might just be worth taking a look at Ronan Dunne, the CEO, says:

Our philosophy was: create an enduring relationship.  How do you do that? You build trust. You take away the scams, the small print that people think is unfair.  You make your tariffing more transparent and simpler so that all the weasel is gone, so what you see is what you get…..To build a trust relationship with your customers you have to be really clear in your communication.  You have to be bold to change the rules of the game. You have to take risks.

By introducing Simplicity and Fair Deal, we were essentially writing a £500 million cheque against our P&L.

The thing that got us through those early days was…we had a very tough and open and honest debate as a board.  We finished the conversation by saying we may not be able to fully analyse this as a business case on a few PowerPoint slides, but we all believe that it is the right thing to do……

We looked each other in the eye as a team – finance, marketing, sales, the operation side – and said, ‘Do we, or do we not, believe this?‘  And as a team we absolutely signed up.  As a result every tough conversation we had subsequently was in the context of ‘If we believe doing the right thing for the customers is ultimately the most profitable business model, have we solved this particular issue?’ 

If each time we had a problem we had argued about it without the benefit of that context then it would have all fallen apart.  That basic premise of the long term sustainable profitability of the business being underpinned by creating a differentiating customer experience was the rock on which we built the brand.”

I draw your attention to the following

The O2 Tops created the possibility of being customer-centric AND believed that this was the right thing to do.  Why?  Because there was no statistical evidence, in the real world, that this was the right thing to do.  The outcome of their actions was uncertain, undetermined – that is the only time we need beliefs, else beliefs are superfluous.

The access to starting the customer-centric journey was boldness, the willingness to take risks. The O2 Board (the Tops) took a risk – a potential hit of £500m against their P&L.

The entire O2 Board discussed the matter at hand and each Board member signed up voluntarily.

Keeping the context (‘If we believe doing the right thing for customers is ultimately the most profitable business model…’) alive allowed the O2 Tops to make the difficult decisions without rupturing their relational bonds (without destroying their working relationship with one another)

And finally

The source of the material on O2 is the book BOLD by Shaun Smith and Andy Milligan.

Do you know the difference between good strategy and bad strategy? (Part III – failing to face the problem)

Hallmark of a bad strategy: failing to face the problem

This post follows on from the previous two posts.  In the first post (of this series) I listed the 4 hallmarks of a bad strategy.  In the second post I expanded out one of these hallmarks – fluff.  This third post deals with the second hall mark of bad strategy: failure to face the core problem/s – what I call the ‘elephant in the room’.

What does Richard Rumelt say about strategy?

In his book Good Strategy Bad Strategy, Richard Rumelt (“RR”) writes:

“A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge.  If the challenge is not defined, it is difficult or impossible to assess the quality of the strategy.  And if you cannot assess a strategy’s quality, you cannot reject a bad strategy or improve a good one.”

International Harvester: a great example of bad strategy

According to RR, International Harvester was once the 4th largest corporation in the USA.  In 1977 the board brought in a new CEO (Archie McCardell) to turn around the sleepy company.  With the help of his team of financial and strategic planners (including consulting companies), by 1979,  Archie had put together a “Corporate Strategic Plan”.

This plan was simply a lumping together of 5 separate strategic plans – one for each of the operating divisions (agricultural equipment, truck making, industrial equipment, gas turbines, components).   The “strategy” was to increase market share in each market and cut costs in each of the divisions thus grow revenues and profits.

The Corporate Strategic Plan was full of detail.  RR says “Looking within the agricultural equipment group, for example, there was information and discussion about each segment.  The overall intent was to strengthen the dealer/distributor network, and to reduce manufacturing costs…”  Despite this detail, this thinking, the plan was classic bad strategy.   Why?

RR writes, “The problem with all this was that it ignored the elephant in the elevator.”  What was that elephant? The elephant was Harvester’s “grossly inefficient work organisation”.   And this was not a problem that was going to be fixed by pushing managers to grow market share nor by buying equipment.  Why?  Because the inefficiency lay in the ‘work rules’ – how work was organised and done.  Furthermore, Harvester had the worst labour relations in American history.

What do you have if you fail to identify and address the key business problem/s?

According to RR, “If you fail to identify and analyse the obstacles, you don’t have a strategy.  Instead, you have either a stretch goal, a budget, or a list of thing you wish would happen.”

So how did thing turn out at Harvester?  Profits improved for a year or two simply through cutting admin overhead.  Then the company went through a six month strike.  After the strike ended Harvester began to collapse.  According to RR, “During the whole 1979 – 85 period, it lost more than $3 billion, closed 35 of its 42 plants, and shed 85,000 workers…….The company sold off its various businesses…..It is, today, a leading maker of heavy trucks and engines.”

What does this have to do with customer-centricity, customer experience, customer loyalty?

Everything.   Let’s just talk a look at one big challenge.

Imagine that you are major bank, or mobile operator or gas/electricity supplier what is one of your biggest challenges in making the transition to being customer-centric?  What if I said, the biggest challenge is there is really nothing to differentiate the players (from one another) in these industries and so they rely on “Bad Profits” to hit their revenue and profit numbers.

Frederick Reichheld (“the loyalty guru”) coined the terms “Good Profits” and “Bad Profits”.  If you take a look at any business you can break down the profits into “Good Profits” and “Bad Profit”.  When you create genuine value for a customer (through the eyes of the customer) then your reward is in the form of Good Profits and you do not have to devise loyalty programs and worry about customer retention and loyalty.  An outstanding example is Apple.  Other examples include SouthWest Airlines, Starbucks, USAA, Zane’s Cycles and Zappos.  In the UK, John Lewis, Waitrose and Richer Sounds spring to my mind.

When you make profits at the expense of your customers these profits are called Bad Profits.  How do you make Bad Profits? Generally, you have access to information, expertise and resources that the customer does not have and you use those to ‘manipulate’ the customer to benefit you at his/her expense.   Specific practices associated with “Bad Profits” include but are not limited to: deliberately difficult for customers to pick the right product; websites adding in extra items that the customer has not selected and forcing the customer to delete these from the shopping basket; disguising the true cost (to the customer) through underhand charges that are not visible to the customer; making it hard for the customer to know and manage his plan so that she is hit with unexpected charges; selling worthless products eg. PPI;  making it hard for the customer to cancel – make them go through lots of hoops etc.

The point to get is that banks, telecoms operators and utilities have collectively spent a fortune on CRM systems and other Customer initiatives over the last ten years and they really have little to show for it.  How has the customer service needle moved?  What about customer loyalty – genuine customer loyalty?     I’d assert that, looking at the situation through the customer’s eyes, very little has changed which makes customers love the players in these industries more than they used to.  Why?  Because the core business challenge of overhauling the business model (and associated practices) has not been addressed.  Does that sound like the Harvester example?  Buy in new equipment (CRM systems), extend the distribution network (website, mobile, social media..), reduce costs (call-centre outsourcing / offshoring, replace humans with self-service, hide contact numbers…).  Please note that I am only using banks, telcos and utilities as examples – they are not the only ones that engage in practices that deliver Bad Profits and get in the way of authentic customer-centricity.

Another big challenge: the whole field of CRM, customer service, customer experience, customer-centricity, data driven marketing is blind to the difference that makes a difference.  As such this key challenge is not even recognised and it is then the psychological mechanisms of denial, suppression and repression make sure that there is no permission to point out this elephant in the room.  What is this elephant that I am talking about?  I invite you to have a go at figuring it out.  For my part, I will share this with you in a follow up post.   I thank you for listening to my speaking.

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