IBM’s CEO 2012 study: is technology really the number1 priority of CEOs?

In the second half of 2012, IBM issued its fifth biennial Global CEO Study titled Leading Through Connection.  IBM says this study is based on face-to-face conversations with more than 1,700 CEOs in 64 countries.  I have been reading it and want to share with you what I make of it.

Social – concerned, fearful, skeptical, uncertain?

It appears that CEOs are increasingly accustomed to volatility and expect unpredictability.   The same cannot be said for social. 

My reading of the study suggests that CEOs are concerned and fearful about social, in particular, its role in enabling customers to exercise power over organisations.  Second, most of them are skeptical of the value of social media – I suspect in driving revenues and profits. Even those who do see value in getting into social, are uncertain as to how to go about it.  Given that so few of them have dived into social media this does not surprise me.  How does one get comfortable with riding a bike?  By riding a bike – you get on the bike, you ride, you fall off, you pick yourself up, you get back on the bike and soon you are riding the bike.  Is social any different?

Are CEO’s customer obsessed and what is their take on customer analytics?

According to the study, CEO’s told IBM that three leadership traits, in particular, are the most critical for navigating through this disruptive era:  ‘customer obsession’, ‘inspirational leadership’ and ‘leadership teaming across the C-suite’.  I’ll come back to the latter two, let’s take a look at ‘customer obsession’.

When the world is unpredictable and the power continues to shift to customers it makes sense that ‘customer obsession’ is seen as the critical leadership trait.  Yet I wonder what this means?   Does this mean that CEOs will get out of their offices and get deeply involved with customers?  Spending time with them face to face like Lou Gerstner did when he took charge of IBM.  Or undertaking the kind of experience showcased in Undercover Boss.

According to the study, CEOs are investing in analytical capabilities that promise to yield customer insights.  More than 70% of CEOs say that they are looking to get a better grasp of customer needs and generate improved organisational responsiveness to customer insights. So, I suspect that ‘customer obsession’ entails spending money on technology in the hope that this will yield insights into customers that enable the enterprise to stay one step ahead of customers.  This is great news for the organisations selling analytics technologies (SAS, IBM….).  Whilst I see the value of analytics I remain doubtful of the impact this will make until and unless the CEO gets out and actually walks in the shoes of the customer and experiences the experience of the front line workers.

What does IBM advise?  IBM recommends that CEOs orient their organisations to get insight into and engage customers as individuals rather than aggregates (segments, markets).  The earlier IBM CMO study suggested that marketers are stuck on traditional research methods that look at and provide insight into these aggregates and not individual customers.  Where can organisations get insight at the level of the individual customer?  Through harvesting and mining ‘Big Data’ according to IBM.

What are the roadblocks on this ‘data based, insight driven nirvana’?

In its study IBM refers to come organisations as ‘outperformers’ (they are doing better financially than their peers) and ‘underperformers’ (doing financially worse than their peers).  What are the three key differences between these ‘outperfomers’ and ‘underperformers’ according to IBM?

  • ‘translate insights into action’ – 84% better than industry peers;
  • ‘excel at managing change’ – 73% better than peers;
  • moving into adjacent industries – 48% better.

So here we see the two major obstacles in the way of ‘data enabled, insight driven nirvana of business performance’.   Ability to act on insight.  And, in particular, act in such a way as to effect organisational change with efficacy: to make changes in the business (based on the insight) and to get the people in the organisation to go along with and internalise these changes.  And to do so quickly before the window of opportunity closes.  Clearly some organisations are better at this than others – those that excel at this are in the minority.  Interestingly, this issue of taking action/effecting change based on insight has been surfaced by VoC vendors like Mindshare.

Are CEO’s aware of the scale of the challenge?

It appears that CEO’s are aware of the scale of the challenge that is facing them.  How do I come to this conclusion? Leadership traits that are of importance to CEOs and what traits CEO’s are looking for in employees.  Let’s consider the leadership traits first and what they can tell us.

When it comes to critical leadership traits, ‘customer obsession’, ‘inspirational leadership’ and ‘leadership teaming across C-suite’ were almost equal in importance.  Statistically speaking, I suspect there is no significant difference between the three of them.   It kind of suggests, to me, that these are inter-related.  Let’s take a look at the latter two and what they can tell us.

‘Leadership teaming across C-suite’ suggests that CEO’s get that the default state of organisation – the silo structure and silo metrics – is that of optimisation of the parts and suboptimisation of the whole.  It also indicates that CEOs are aware that genuine collaboration and teamwork starts at the very top – if the C-suite does not work well together then it is highly unlikely that the lower ranks will work well together.  I also read into this an implicit acknowledgement that many C-suites do not work well as one team – personal interests and functional agendas compete against the well being of the whole.  This explains why ‘inspirational leadership’ is seen as a critical leadership trait: CEOs get that they have to inspire (to bring forth) the best of their people (starting with the C-suite) including working as one team for the collective benefit.  Is it possible I am concocting a story that appeals to me and is not in the study?  I leave you to decide for yourself.

IBM claims that CEOs are creating more open and collaborative cultures.  That does not strike me as being an accurate description of what is so based on my travels.  And I get that I have only experienced a small number or organisations.  What is more interesting is the claim that collaboration is the primary trait that CEOs are looking for in employees: 75% of CEOs label this trait as critical.  Why?  According to IBM, CEO’s see technology as an enabler of collaboration and relationships and are focussed on changes in how people engage with the organisation and with one another in order to fuel responsiveness, creativity and innovation.

And finally

It is interesting to note that CEO’s put ‘human capital’ as the most important source of economic value closely followed by ‘customer relationships’, with ‘product/services innovation’ being in third place.  If ‘human capital’ is that important then the value placed on collaboration and open-cultures is understandable.  If ‘customer relationships’ and ‘product/services innovation’ are this important then the investments in analytics and collaboration technologies make sense.  What does not make sense, to me, is the attitude around social: customer can be a great source of innovation.

Only 33% of CEOs consider business model innovation as key source of economic value.  This puzzles me given that one of the key issues that organisations have to grapple with is that of coming up with fresh business models that make the most of the opportunities and deal effectively with the disruptions caused by ‘social’ technologies and customer behaviour.   Perhaps many CEOs have not fully awakened to the scale of the challenge/disruption/opportunity facing them.  What do you think?

I doubt that technology is the no1 priority of CEOs.  Why?  Because ‘technology’ got 71% of the votes, closely followed by ‘people skills’ at 69% and ‘market factor’ at 68%.  It occurs to me that there is nothing in it – that all three of these factors are as important as each other.

Book review: Extreme Trust by Don Peppers and Martha Rogers

Let’s get up to date

If you have been reading the recent posts you will know that I have been diving into, exploring and sharing what I have learned as I have been reading Extreme Trust the latest book by Don Peppers & Martha Rogers.  This weekend I finished reading the entire book and so this post is my, personal and biassed, review of the book.  If you have not read these first 2 – 3 posts then here are the links:

Extreme Trust: can honesty be a means of competitive advantage (part 1)

Extreme Trust: can honesty be a means of competitive advantage (part 2)

What kind of a book is Extreme Trust?  Think back to The One to One Future

How best to describe Extreme Trust the latest book by Don Peppers & Martha Rogers?  Perhaps the best place to start is to compare it with the other books Don and Martha have written.  Which is the book that is the closest to Extreme Trust in its flavour?  The One to One Future.   That book, The One to One Future,  was a delight to read and it said what needed to be said about the state of marketing and spelled out the future.  Extreme Trust has a similar flavour and had provided me with a similar experience.   What did I like about it?  What spoke to me?  In Extreme Trust, Don and Martha do the following effectively:

  • Inject human beings and in particular the social/co-operative/empathic being of human beings back into the whole Customer conversation – yes, look closely and you are likely to find that for all the talks about relationships the focus of the Customer movement has been on processes, data and technology (that is as true for Don and Martha as any other authors);
  • Address the ‘elephant in the room’, the greed based, short term focussed, deceitful/manipulative context of ‘business as usual’ which is oriented towards/focussed on extracting revenues and profits from customers usually by taking advantage of the ignorance/vulnerability/helplessness of customers;
  • Explore the theme of trust – why it matters, how it operates, what difference it makes, what benefits it delivers to social life and business/organisational life; and
  • Spell out the why/how organisations will have to become ‘trustable’ whether they want to or not – social technologies, smartphones and the fundamentally social/moral wiring of human beings make it inevitable

Extreme Trust is not a book about marketing, it is not a book about customer service, it is not a book about social media.  Extreme Trust, if read/viewed through a wide angle lens, is essentially about a new paradigm in business which involves and impacts everyone – the Tops, the Middles, the Bottoms, the Customer, the Community.  Essentially, Extreme Trust sets out a new philosophy of doing business based on an understanding of the social being of  human beings and how social media has given real weight to the hollow sounding expression “The Customer is King”.   If that is the background of the book than the customer and the relationship with the customer sits in the foreground and can best be encapsulated in the following diagram:

Let’s take a brief look at the chapters

The chapter headings are meaningful and so I want to share them with you and provide my brief take on each one.

“Trust: not just a good idea. Inevitable.”  Don and Martha make a persuasive argument for the importance of doing the right thing by customers proactively and they spell out the benefits of being trustable (USAA) and the downside of taking advantage of your customers (AOL).

“Serving the interests of customers, profitably”.  Here Don and Martha describe and point out the ‘flaws’ of ‘business as usual’ and argue that the central challenge for Tops is to come up with an appropriate business model for the time – a business model that allows the company to generate “good profits” and rule out “bad profits” by aligning the interests of the customer and the company.

“Trustability: capitalist tool”.  In this chapter Don and Martha ‘get real’ – they get that the lever for effecting change in business is through the profit motive as opposed to being good or doing good.  So Don and Martha strive to show you doing right by the customer, being a trustable company, leads to superior long term performance.  In short, trustability is an asset like ‘brand’ is or at least used to be.

“Sharing: not just for Sunday school”.  The social nature of human beings as evidenced by co-operation, sharing, reciprocity, sense of injustice and punishment of cheaters is explored here.  The key point is that we do not have to be encouraged to share, to cooperate, to reciprocate, to punish those that do not share/cooperate/reciprocate – to be human is to be/do this stuff effortless, it is the default.  Social production and the radical implications it has for business is touched upon here.

“Trust and the e-social ethos”.  In this chapter Don and Martha take the social being of human beings and look at/describe how this shows up in the e-social world of social networks.  The implications are explored through real life examples of companies that got it right and those that did not. This chapter is heavily linked with the previous one.

“Control is not an option”.  Business as usual can be characterised by “command-control-secrecy-spin”.  Well this used to work great and is now well past it’s sell by date.  The world is much more interdependent, fluid, unpredictable – just look at what has been happening since the financial crisis of 2008.  And anyone who has studied ‘systems and systems thinking’ will get that control is an illusion.  Yet as Kahneman has shown in his latest book (Thinking Fast and Slow) we human beings are wired to strive for control, think we can control more than we can control, and look for/find order when none exists.  Don and Martha share these features of our existence and spell out some approaches that Tops can take to deal with the new reality.

“Build your trustability in advance”.  In this chapter Don and Martha spell out the advantage of being a trustable company through examples of real companies that encountered hard times and where reputation for trustability (with core customer base) made all the difference.  In short, if you look after your customers in the good times they look after you during your bad times.

“Honest competence”.  It is not enough to be honest, it is not enough to be competent, your organisation has to show up as being honest and competent.   Don and Martha divide competence into product competence and customer competence  and explore each one.  Turns out that organisations really struggle with customer competence.  The key issue – inability/failure to empathise with customers, to see the world through their eyes.  Don and Martha share the instructive story around Domino’s pizza.

“Trustable information”.  Information is data that makes a difference – it sheds light on a situation, it enables action, it helps attain desired outcomes. One way companies can contribute to customers and the wider community and thus build trustability is through sharing data and/or information that is held by the company.   What is often just data within a company, if released to a wide community in a usable format can be turned into information.  That is the key point of this chapter, Don and Martha gives some examples.

“Designing trustability into a business”.  This chapter completes the conversation, the story and Don/Martha do so by exploring what trustability would involve in various industries – mobile operators, financial services, automotive, airlines, enterprise computing…..

Why I have gone to all this effort to write this review?

Extreme Trust deserves to be read.  It opens up a new domain, a new conversation, a conversation that needs to happen.  Why?  Until this conversation happens, this domain is addressed, pretty much all the money spent on Customer initiatives is wasted.  Why?  Because the ‘elephant in the room’ is not being addressed and addressing that ‘elephant in the room’ is the key to cultivating genuine affection and customer loyalty.   I want to leave you with the parting words of Don and Martha in Extreme Trust:

“In the final analysis, it is almost certain to be the new companies and the start-ups that employ these tactics to overturn the old way.  They have less invested in the current paradigm, and less to lose by destroying it.  Gradually, they will use trustability to transform our entire economic system, in the same way that interactivity itself has so dramatically transformed our lives already.  They will deploy honesty as brutally efficient competitive weapon against the old guard. 

As standards for trustability continue to rise, the companies, the brands, and organisations shown to lack trustability will be punished more and more severely…..

For my part, I am keen for this future to turn up sooner rather than later – the thought occurs to me that this is a future worth operating from and living into.  How about you?

How to cultivate strong customer relationships: focus on the “sliding door” moments and ATTUNE

Don and Martha say practice the Golden Rule

In their latest post – “Empathy, Self-Interest and Economics” – Don Peppers and Martha Rogers spell out the importance of the Golden rule.  They point out that at a behavioural level only psychopaths conform to the view of human nature taken by neo-classical economics.  To business leaders they say:

“Companies that want to earn their customers’ trust have to be willing to act in their customers’ interest—sometimes even when the customers’ interest conflicts with their own (at least in the short term). This is why i-Tunes will remind you that you already own a song you are about to purchase, for instance. And it’s why USAA won’t sell you more insurance than you really need, even if you mistakenly ask to do so.”

“The point is that having empathy for others is a critical part of human nature, and if you want your business to succeed, then you have to show empathy for customers, also. That means treating a customer the way you’d want to be treated yourself, if you were that customer.”

Is the UK utility industry listening to Don and Martha?

It doesn’t look like the Tops in utilities industry in the UK are listening to Don and Martha.  Npower has been slapped with a £2m fine by the regulator Ofgem.  Why? According to Marketing Week:

“Ofgem says Npower failed to record all details of the complaints it received and did not put in adequate processes to deal with complaints. It was also accused of not giving dissatisfied customers enough information about the Energy Ombudman’s redress service.”

Now you might be tempted to think that this is a one-off, an aberration.   Well British Gas (the major player) was fined £2.5m back in July.  Why?  Well in the words of Marketing Week:

“Ofgem’s investigation found that British Gas had failed to re-open complaints when the customer reported and unsatisfactory resolution; failed to provide customers with key details about the service provided by the Energy Ombudsman and failed to put in place adequate processes and practices for dealing with complaints from small businesses.”

And Marketing Week goes on to write EDF Energy is also currently under investigation from Ofgem over the way it handles its complaints.”

So where are we at?  Two of the six big players that dominate the gas and electricity market have been fined for mishandling customer complaints and a third player (EDF) is under investigation for the same offence.  What does Npower have to say:

“A small number of processes were not correctly adhered to. Ofgem is now satisfied that all problems have been rectified and we are fully compliant with our obligations to our customers. We have zero tolerance for this type of issue and we’ll continue to work hard to make sure our customers are put first.”

I don’t know about you but to me that sounds like a load of bull: if Npower really did have a zero tolerance for this type of issue then it would have made sure that an effective complaints management process, team, system was in place.   When you lookmore deeply at the industry you see that the structure has been designed to extract profits at the expense of customers: complex pricing, too many confusing tariffs, bills that are difficult to understand……

Making the customer relationship work: what we can learn from John Gottman

I you do operate in a competitive industry then you might be able to learn from the research of John Gottman – he is been studying what makes marriages work (or not) for over 40 years.  In a recent article he sets out the key things that he has learnt:

“What I found was that the number one most important issue that came up to these couples was trust and betrayal. I started to see their conflicts like a fan opening up, and every region of the fan was a different area of trust. Can I trust you to be there and listen to me when I’m upset? Can I trust you to choose me over your mother, over your friends? Can I trust you to work for our family? To not take drugs? Can I trust you to not cheat on me and be sexually faithful? Can I trust you to respect me? To help with things in the house? To really be involved with our children?”

“.zero-sum game.” You’ve probably all heard of the concept. It’s the idea that in an interaction, there’s a winner and a loser. And by looking at ratings like this, I came to define a “betrayal metric”: It’s the extent to which an interaction is a zero-sum game, where your partner’s gain is your loss.”

“But how do you build trust? What I’ve found through research is that trust is built in very small moments, which I call “sliding door” moments, after the movie Sliding Doors. In any interaction, there is a possibility of connecting with your partner or turning away from your partner.

In his article John provides a good illustration of such a sliding door moment when he saw the sadness on his wife’s face.  Here is what he says about that:

“I had a choice. I could sneak out of the bathroom and think, “I don’t want to deal with her sadness tonight, I want to read my novel.” But instead, because I’m a sensitive researcher of relationships, I decided to go into the bathroom. I took the brush from her hair and asked, “What’s the matter, baby?” And she told me why she was sad.  Now, at that moment, I was building trust; I was there for her. I was connecting with her rather than choosing to think only about what I wanted. These are the moments, we’ve discovered, that build trust.”

ATTUNE: how you cultivate trust and build strong relationships

John Gottman’s graduate student has taken their work on trust and broken it down into the idea of being in attuenment and has come up with an acronym (ATTUNE).  If I replace “partner” with “customer” we have:

  • Awareness of your customers’s emotion;
  • Turning toward the emotion;
  • Tolerance of two different viewpoints – yours and your customer’s;
  • trying to Understanding your customer – to look at the situation through his/her eyes;
  • Non-defensive responses to your customer;
  • and responding with Empathy.

My take on this

How you handle a complaint from a customer is a “sliding door” moment.  It is also a great opportunity to practice ATTUNE as complaints are high emotion events that you can use to build or rupture emotional connection.  Given that is so I continue to be surprised at how few companies do well in the complaints process.  If Npower and British Gas had taken such an approach (call it a customer friendly approach) to the complaints made by their customers then they could have: gotten insights into customer needs; learned where their business practices were failing customers; built a better relationship with customers; and avoided a fine.

The four schools of customer experience

I hear a lot of talk and see a lot of confusion around ‘customer experience’.   Having taken a closer look I have distinguished four schools of ‘customer experience’.

The school of service

People that belong in this school tend to come from a customer service background or have something to sell to the customer service community.   This school collapses customer service into ‘customer experience’ and that is like collapsing ‘apples’ into ‘oranges’; all manner of things are carried out in the name of ‘customer experience’ which do not build lasting emotional bonds which I argue is the point of any investments in ‘customer experience’.

Yet, lets first look at the bright side.  There is a profound grain of truth in the service school.  Research (and my experience) shows that the strongest emotional bonds are created by your customer facing staff.  The key is for your customers to genuinely care for you customers and their well-being leaving these customers thinking/feeling:

  • “I felt like she understood what I wanted”
  • “They treated me like an individual”
  • “He cared about me”
  • “They did everything they could to help”
  • “They made me feel I was the most important person in the world”

What are the big issues?

One of the biggest issues is to confuse ‘service’ with ‘customer services’.  Imagine that you turn up to your local car dealership to have your car serviced and there is nowhere to park your car.  Now that is likely to be an upleasant experience and yet it has absolutely nothing to do with folks working in customer service. ‘Service’ includes everything that you do including the marketing, the selling, the delivery, the returns, credit and billing, customer services etc……Yet, in practice it is often made to mean the customer services function.  And despite the hype the reality is that the majority of organisations are busy cutting out/dumbing down this human contact and replacing it with technology.

Second, there is huge domain of ‘customer experience’ around the product itself. Apple has revolutionised the smartphone market through the iphone.  How?  By completely altering the ‘customer experience’ in owning and using the mobile phone.  Before Apple, the phones were difficult to use: most of the functionality was not used because it was hard to use.

Third, customer service as commonly practiced and measured (in terms of call wait times and first call resolution) is primarily a hygiene factor.  What do I mean?  If you get this wrong then your customer is likely to be upset.  If you get it right it is highly unlikely that it will create an emotional bond between you and your customer.

Fourth, you can be deliver great customer service and perhaps even ‘customer experience’ in your horse drawn buggy and then Henry Ford comes along and makes the car available to your customers and and you are toast.  Or think how Nokia is struggling now.

The school of interaction management

This school assumes that if you make it easier for a customer to interact with your organisation across multiple channels throughout the customer journey then you have improved the ‘customer experience’.  Hence,  a lot of effort goes into listing, mapping and evaluating the various touchpoints, interactions, processes and supporting data and IT systems.  The thinking is that if you streamline and integrate these interactions then you will have improved the ‘customer experience’, have happier customers and probably saved some money by cutting out unnecessary and error prone interactions.

There is grain of truth in this school as well.  I, the customer, prefer to do business with organisations that make it easy for me to do business with them.

Yet this school  ignores the fact that poor interaction design is a hygiene factor.  If your website is hard to navigate then I will get annoyed and probably shop elsewhere.  If you make it fit for purpose then that helps me out.   If you glue up your marketing so that I get less irrelevant direct mail then it is likely that I will appreciate that.  I may even take up your offers which are relevent to me.  That is called a transaction: you make me an offer, I buy.  If you glue up your interaction channels e.g. web and retail then you do make life easier for me and will benefit.  None of these actions necessarily mean that you have built a strong emotional bond with me!

The best that this school can do is to take out the hurdles and frustrations that I have in dealing with your organisation.  And thus you are not actively driving me into the arms of your competitors.  There is nothing here to say that you are actually doing anything to build emotional bonds between me and you. I love the way that everything works with Amazon yet my emotional bonds are with BetterWorldBooks because this is an organisation that provides great service (which Amazon does) and stands for a cause that speaks to me.

The school of brand

This school is favoured by those that work in marketing and the organisations that cater to the needs of the marketing folks.   The assumption here is that you take the brand values and make these come alive at the various touchpoints.  The idea is to make the brand come alive and manifest itself in the ‘customer experience’.

Again there is a grain of truth in this provided that your brand values are a reflection of your deep understanding of your customer needs.

Who says that your brand values are customer-centred?  How do you know that if you design the ‘customer experience’ to manifest your brand values then this will deliver the kind of experience that your customers are looking for? And what does ‘innovation’ look like/feel like when I, the customer, turn up at the store and want to buy one of your products?  Are you front line staff given the mandate to be innovative?  Perhaps they will pay me to take your product?  That is certainly innovative.

The key issue, as I see it,  is that the brand was cooked up to serve the interests of the organisation – not the customer.  The brand agenda is usually about  how you can project certain persona to differentiate your organisation and charge higher prices despite the fact that you produce and sell ‘me-too’ products/services.  Please remember that ‘per’ is the latin for ‘mask’ that actors wore on stage and ‘sona’ is the latin for the ‘sound’ coming from the mask.  The problem I have found is that some organisations have been acting for so long that they have forgotten that they are acting.

The triad school: genuine customer insight-attractive value propositions-memorable customer experiences

As far as I am aware this school is not that well known and probably does not have that many members.  In fact, it might simply be a figment of my imagination.  The central tenants of this school are as follows:

  • The purpose of ‘customer experience’ is to build mutually profitable lifetime relationships with customers;
  • Actively cultivating emotional bonds between you and your customers is central to building these lifetime relationships;
  • To build those emotional bonds you have to create value propositions that address the unmet needs of your customers;
  • And design and consistently deliver a ‘customer experience’ that supports and complement the value proposition;
  • The ‘customer experience’ done right enhances the value proposition;
  • Customer insight is the key to crafting the right propositions and designing the right ‘customer experience;
  • You need bucket loads of empathy combined with analytical rigor to make this approach work.

What do you think?  What have I missed?  What have I got wrong?

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