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Is “Customer Experience” the Only Business Value Measure That Matters?

If you attended the recent SAP Customer Experience Workshop or were following the tweets from #SAPcx, you might get the impression that this is what Lior Arussy of Strativity Group was asserting.

Focusing on customer experience sounds nice, you say, but is it really the most important? Lior points out that one of the biggest problems any company faces is the commoditization of its offerings. It’s a matter of time before some competitor comes along that can provide a similar or substitute product or service at a lower cost, eroding your company’s margins. In the end, a superior customer experience is the only long term way to differentiate your brand from your customers.

Indeed, focusing only on enhancing customer experience is a transformative way of thinking: if an initiative or activity by the company or an employee is not directly contributing to improving the experience of customers, then why are we doing it?

To hammer this point home, Lior posed the following question and answer:

In other words, as companies hit success and strive to continue their own growth, they are in fact driving commoditization of their own products and services when they:

  • Provide only incremental improvements of their products
  • Fight for increasing market share
  • Scale to increase volume
  • Focus on reducing costs to maintain margins when moving down market,

     

This is due to the fact that you start acquiring more unprofitable customers while neglecting to improve the experiences of your most profitable customers.

The actions above are a standard evolution for companies that hit ultimate success of their product or service and strive to continue growth beyond that point.  Without doubt, there is some business school calculation that can determine the optimal point at which companies should focus again on blue water innovation and disrupt your own business, as opposed to incremental improvement. But perhaps we can stave off this point longer by striving to continually improve the experiences of our best customers.

One of the reasons our companies lose focus on customer experience when they are focused on scaling is the fact that we tend to organize departments around competencies rather than customers. The managers of these departments are then measured by statistics such as “average time spent per customer call” in the call center, which incentivizes cost efficiency, but not necessarily a more enjoyable customer experience. Or, maybe managers follow the idea that each customer contact is a revenue opportunity, and agents are now asked to hawk “special offers” for which customers are “eligible” when in fact the customers were calling in to fix a problem with the company’s service. It’s for this reason that I now dread calling my credit card company.

So, maybe you are willing to agree that a relentless focus on improving the customer experience is a most important goal. Measuring  customer experience is not an easy thing. First, there is a significant disconnect between how good employees think they are doing and, and how good of an experience customers actually had.

Lior points out that, in the end, all a person has is their memory. If a customer gets lousy service, then they have a bad memory, which they remember for a long time. If a customer gets the service they expect, they retain no memory of the experience, which doesn’t help your brand either. To create a good memory, you have to exceed the customers expectations.  It is these good memories that define better customer experience, which means your company has to strive to continually exceed your customers’ expectations.

One of the ways Lior measures customer sentiment is through their behavior towards the company: are they neutral, a detractor, or a promoter.  Lior mentions that often focusing on experiences that create more promoters in the population of customers is the best investment, and that means finding more ways to exceed the expectations of more of your customers and thus create more good memories.

The slide above is worthy of 5 different blogs. In truth, while I found the entire workshop to be transformative, but my excuse for spending two whole days at the workshop was because I was looking for the CIO perspective in improving customer experience.  In the end, its clear that the CIO is a key figure in a few ways.

First, do your customer oriented business processes and supporting systems include listening for cues to the customers emotions.  Do they provide capacity for personalizing the customer’s experience? This can be as simple as understanding the emotional reasons why customer come in contact with your company in the first place, and for capturing information such as birthdays, and names of children.

Second, your employees that work with your customers all need access to the same information about the customer – that 360 degree view that us marketers are always tweeting about.  Its this common base of information that also provides the ability to break through departmental silos – something IT should be good at.  And once they have this view, your employees need sufficiently flexible processes that allow them to solve customer needs and delight your customers by exceeding their expectations.

Third, the company IT department and the CIO are in the unique position of being able to look at the whole of the company from the customer’s perspective. While CEO engagement is typically required to get all sides of the business to properly focus on enhancing customer experience, the CIO often has channels such as the company website where they can develop a single integrated experience for the customer. The IT world is evolving such that CIO’s need to spend less time managing technology, and can instead focus on business transformation and innovation. CIO’s can add competencies such as design centered thinking to their teams. Combining customer-centered design into the companies business processes can go a long way to helping the entirety of the company to focus on enhancing customers’ experiences.

If you wished you had been able to attend this workshop, fear not. You can read the Tweet proceedings on Storify to get an idea of what the speakers shared. In addition, we recorded a special session of SAP Radio with a panel that included Dr. Henry Chesbrough, Ray Wang, Michael Krigsman, and Reza Soudagar.

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8 Comments

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  1. Paul Hardy
    In my company – which makes concrete in Australia  – we cannot compete on price – we connot compete on product – so ALL we can compete on is customer service. We used IT – SAP – to do this, and we won. In ERP by the way, CRM is a waste of money.
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    1. Greg Chase Post author
      Paul – thanks for the real world testimony.

      Now, I can promise you that everyone who has read your comment now wants to know more about what your company does, and how you are supporting it with IT.

      Can you share some more detail about major approaches, and the IT strategy / implementation underlying it?

      Regards,

      -Greg

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    2. Greg Chase Post author
      Hi Paul,
      Thanks for commenting on my bog.

      I know everyone reading your comment would love to read some more detail about how your company is employing IT to improve customer service.

      Is there anything you can share?

      Regards,

      -Greg

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    3. Greg Chase Post author
      Hi Paul,
      Thanks for commenting on my blog!

      I know everyone reading your comment would love to hear more from you about how your company is employing IT to create a competitive advantage in customer service.

      Are you able to share more detail?

      Regards,

      -Greg

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      1. Paul Hardy
        To recap, in some industries they have new products all the time, but concrete has been made the same way since the days of the Roman Empire. Price is fialry constant in the industry so how do we try to get a jump on the competition? We have a call centre in Brisbane, and we have a constant stream of visitors which we are more than happy to demonstrate our solution to. We get the guests to sit next to one of the call centre agents and put on a pair of headphones so they can hear the conversation with the customer. We in IT are encouraged to do this every year also, to see if we can think of any way to make things better. In every industry things are different and you have to think – what is it the customer really wants? In the case of construction what the customer wants is to get off the phone as fast as possible, within two minutes preferably, and that includes joke telling which is a vital part of every business communication in Australia. So, we have the “every second counts” situation – an hourglass going round for three minutes would be the end of the world. So, what happens is that the computer system recognises the incoming phone number, routes the call to the agent that has dealt with the customer the most, and then pops up a list of open contracts / orders for that customer just at the exact second the customer is saying hello. If the order is for an existing delivery location all well and good, otherwise the customer says the delivery address and a map pops up where the agent can geo-code the co-ordinates. We have a custom front end for sales order entry with the primary purpose of getting the order details entered as fast as humanly possible. This all works like a dream and it is breathtaking how many orders an agent can take every hour, and as I said the customers are laughing and joking. We track where our trucks are via GPS and if a customer wants he can be notified by SMS if the truck is going to be late or not. We have a system external to SAP that does the truck optimisation, rather like APO, except that the optimisation happens every 30 seconds. This is important because we get round about 50% of our orders cancelled on any given day, to be replaced by new ones. Also, once an order is taken the customer usually phones up and changes the details several times. All this was in place in the year 2000, and has just got better ever since. How can we be sure this has made a difference? Because we keep really detailed metrics of, for example, on-time deliveries and truck utilisation (which are contradictory aims) as if you don’t measure something how can you know if all this investment in IT was really worth it? In our case at least, it is.
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      1. Paul Hardy
        Saying that CRM is a waste of money is a fairly emotional statement, I have a horrible habit of saying things like that on SDN and getting lambasted, but here is my logic, such as it is, firstly the specific case of my company and then some general waffling.
        Back in the year 1999 when we were installing SAP what we wanted most in the world was telephony integration i.e. the CIC0 function. You could have that within the ERP system itself and despite SAP’s pledge never to enhance this except in the CRM system it was good enough for us, certainly cheaper than the cost of running a totally separate system for one specific function. That of course is something based purely on our needs and obviously not applicable to the world in general. HOWEVER.
        The original idea of SAP was to move away from having many different computer systems all doing one function of the business in isolation to having one single integrated system. This worked fine, until the day dawned when most big companies had installed a central ERP system. Then SAP suddenly came out with the “new dimension” idea, which was in essence that you needed a separate computer system for each function in your business, thus the “need” for SEM / SRM / CRM etc.
        The SEM product became somewhat superfluous with SAP’s acquisition of Outlooksoft and about three other software companies, and the SEM functionality was moved back into SAP R3, which is why when you look at the list of components in a SAP ECC6.0 system you see “SEM-BW: Strategic Enterprise Management” and SEM is also mentioned in the list of new features in assorted SAP blurb explaining why the latest version of R3 is good.

        As we know, SAP bought Business Objects and BW suddenly was not the primary focus for reporting any more. SAP’s long term plan is to have an in-memory database within R3 itself, and then you could say a separate BW system would become totally redundant.

        If you were to look at the list of presentations on the American SAP User Group website for last month you will see one where title goes something like “hear how SAP are moving lots of the SRM functionality into the core MM module”. Well, well. I knew that would happen. I predicted just this exact thing happening about three months ago on the SDN website in response to a post someone had made saying “what is the future of SRM”. SAP are also planning to give customers running PI a big bunch of B2B/EDI adapters for free in an upcoming support package. Previously companies had to buy and licence these separately from a 3rd Party company called Seeburger who must now be REALLY upset with SAP.

        Anyway, this mass migration of functionality back into the core ERP system, will leave just CRM as the last man standing as a system external to SAP. I wonder how long it can survive before SAP cracks under pressure here also?

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        1. Stephen Johannes
          Very true if you look at CRM as pure “IT investment” then normally it doesn’t make sense regardless of whether you go with the SAP product or another product.  CRM has always needed to be a business led/business run project in order to get a true ROI. 

          In terms of how that fits with software the orginal idea of having separate systems was to evolve those independently and communicate along a common semantic layer as needed.  Unfortuantely someone has made the decision that building the semantic layer was too hard and decided we need to keep versions numbers equal instead of allowing each solution evolve as needed.  In fact we basically if you look at the solutions and “sync up” of enhancement pack levels we have rejected ESA completely for any communication that is inside of the “suite”.

          I have sometimes wanted to write a blog on this concept, but haven’t either due to time, or just the topic being too mean/honest.  Honestly though your concerns about returning to the monolith form of ERP are valid and why do I need this extra stuff anyway.  However I think we all been focused too much on the “edges” to realize that the core is getting dusty and could use some extra TLC.

          Take care,

          Stephen

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