Monday 27 February 2017

Amongst the commonly cited motivations for digital transformation, improving the customer experience has the highest unrealized potential.


Amongst the commonly cited motivations for digital transformation, improving the customer experience has the highest unrealized potential. The promise of transformative results may be a powerful motivator, but so far, those hoped-for results have proven elusive for the majorities of companies. It doesn't have to be that way. A more systematic approach to building customer experience data into the digital strategy puts the focus on better customer outcomes, not just technologies. Richard Owen, CEO of Satmetrix, offers his insight on how to improve customer management.
 
When we launched the Net Promoter Score (or NPS®) over 15 years ago, we demonstrated financial linkage for investments in customer experience with this innovative metric. The goal was to break through the reticence of corporate leaders to invest hard dollars in uncertain, hard-to-measure future returns from their customers. The immediate visibility of operational streamlining, or cost reduction, would be at least considered in the context of the impact on customers and their lifetime value. In that regard, the adoption of the Net Promoter Score® as an ideal measure of the loyalty of customers was a success. Thousands of companies now measure NPS as a critical operating metric and held their leadership accountable for NPS improvement.
 
However, if our measure of success is improvement, the results have to be considered less than satisfactory. According to our benchmarks, the average company has only increased their NPS performance by 2%. More alarming, frequently cited NPS results by companies themselves (often in earnings releases) rarely bear scrutiny, often due to the lack of quality and process behind their metrics.

So if the first wave of customer-centric enthusiasm has gained us executive attention, but not necessarily business results. Will digital transformation represent a second opportunity for success?

Digital Transformation vs. Disruption

Many established enterprises identify the risk of massive disruption through new entrants as at least one of their motivations for transformation. Disruptors do seem to provide a better experience to customers, as demonstrated by higher NPS than incumbents, so that battle could easily be imagined as a conflict over superior ways to delight the customer. Uber vs Taxis, Amazon vs retail are often cited examples.
 
However, it's a mistake to attribute the sky high NPS of these businesses to a process of digital enablement or transformation. Rather, it is a product of their radically different business model. They are digital natives - "not digital transformists" - taking innovative approaches to exceeding existing customer expectations. Established large businesses cannot typically follow that path.
 
What they can do is combine a willingness to innovate within the realities of their own business with a focus on the creation of better customer experiences (higher NPS) through those innovations. If this has eluded most businesses over the past decade, what have we learnt and what can we do better?

Management, Know Thyself

Perhaps unsurprisingly, meaningful improvements in the Net Promoter Score are more likely if a business significantly lags behind peers in basic customer management. In that eventuality, the introduction of the NPS metric into the management framework for the company, together with leadership focus on the customer experience, may well be sufficient to get results. Getting from very poor to average in your industry is less about science, more about attitudes.
 
For the majority of companies, improvements require focus of resources and a broad strategy to engage the entire organization in a transformative effort. Put differently, companies need a sophisticated, data-driven view of how they can improve their NPS and at what cost, together with an ability to influence the culture of the entire organization so such changes are feasible. Neither task is trivial, but both are achievable when firms acknowledge the nature of the opportunity and go about it in a methodical fashion.

It's the Journey, Not the Destination

Customers do not consider their interactions with a company as tied to the organizational structure of the company. They have tasks to complete, such as purchase, renewal or service, but most of the time those tasks cut across modes (retail, online etc.) and departments (sales, manufacturing and so on). To understand how to delight those customers as they engage in their journey, firms must measure their performance along all aspects of that journey, weigh the relative importance of different interactions on the customer, then focus resources on those areas where improvement yields the greatest benefit. 
"One size does not fit all (...) so firms need to focus on high potential or high profit segments
"
Companies face several surmountable challenges in this undertaking. First, different customer segments have different expectations and needs around the customer journey. One size does not fit all, and more to the point, few companies are capable of creating promoters out of all segments of their customers. So firms need to focus on high potential or high profit segments; map out the ideal journey for those customers and optimize the journey for that group - potentially at the cost of other segments. That also means accepting that a high aggregate NPS might mean nothing compared to the performance of individual segments.
 
That view of the customer requires an organization of customer feedback and KPIs in an integrated design - one that reflects and accurately documents the customer journey. More often, companies survey their customers for feedback in an ad-hoc fashion, with different departments working to optimize their own needs often in ways that conflict with others. Re-structuring the data view of the customer around the journey is not technically herculean, but it runs across organizational and ownership boundaries and requires a unified design. Politics can easily go against logic.
 
There is an art to data design around the customer journey. Different types of survey feedback, operational key performance indicators and customer financial data need to align around this new viewpoint, or the connections between the customer perspective and the firms' execution won't be optimal, or even sensible.

Let's Get Engaged

The best data is of limited value if it can't be put to work in the organization. Once upon a time, researchers did an annual presentation of customer experience feedback and NPS to the board of the company. Today, the notion of annual data seems absurdly slow, the idea that experts are needed to "translate the findings" feels like job protection. Instead, data democracy - the idea that every employee should be able to act on information - is an expectation of any analytic system.
 
Leaders will leap ahead to social models of information sharing - an expectation that goes beyond millennials wedded to Facebook or Twitter - but at the very least employees need timely data around their impact on the customer experience, how they compare with peer groups and what to do to improve. Sales teams need complete and current views on their customers' experience; everyone needs information that shapes their participation in building a great customer experience.

Take the Plunge

Customer journey thinking, employee engagement driven. The digital transformation of the firm is tied to NPS improvements directly through this strategy. Leaders will think less of digital transformation as the driver of customer experience, rather prioritize the customer view of the journey and employee data needs as the driver of the digital investments.


Net promoter score
Net Promoter Score, Net Promoter, and NPS are trademarks of Satmetrix Systems, Inc., Bain and Company, Inc., and Fred Reichheld.

 

Richard Owen is President and CEO of Satmetrix, responsible for all aspects of strategy and day-to-day operations. Previously, he was Chairman and CEO of NASDAQ-traded AvantGo, Inc., the leading provider of Enterprise Mobility Solutions to Fortune 1000 companies. Before AvantGo, Richard spent eight years at Dell Computer Corporation in various executive positions.
Richard Owen – President and CEO of Satmetrix
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