Today we hear from Agile Australia 2016 invited speaker David Joyce. David will also be co-hosting an Agile Australia Leadership Masterclass with Vanguard Australia’s Tim Banner on ‘The Vanguard Method in Service Organisations’.
Operationalising Customer Centricity
It is now common to hear leaders in the private, public and third sector espouse “we must put the customer first” and “focus on customers’ needs”, the strategy being “A totally customer centric approach”. All nice words. How do you operationalise them?
Leaders think that if employees just follow the “be customer centric” logic, the organisation will reap the benefits. Pleasant dreams¹. Despite the rhetoric, as customers, we see little evidence of service improving; the results are not matching the intent. The problem is one of perspective and design.
A Consequence of Perspective and Design
Organisations are typically broken into separate functions and channels. Each have a different leader, who in turn, have their own functional goals, objectives and budgets. The assumption is that if each function does their bit, the whole will work. A flawed assumption.
There are some leaders who recognise the flaw in this design, and overlay owners of end-to end horizontal processes. Other leaders spin-off an organisation, or create innovation labs, which are set apart from the main organisation and are freed up to work more innovatively.
The flaw is; from what perspective are people taking? From what perspective are they determining the real problems to solve?
Customers do not think of organisational functions, budgets, end-to-end processes, innovation labs, or channels. They think of an organisation from the outside-in, holistically. They just want an organisation to understand what matters to them and deliver it.
Typically, leaders do not understand customer demand nor design from this perspective. The relationship norm is purely transactional through multiple front doors. Customers ar sometimes forced to transact in a standard way, or need ‘educating’ to transact in a way that is convenient for the organisation. This design leads to failure demand entering their organisation (demand caused by a failure to do something, or do something right for a customer²).
You might be surprised to learn that failure demand can account for as much as 80% of all demand entering into an organisation³. Poor capability of delivering against what matters to customers is also a consequence of this design, leading to more failure demand.
Organisations become exemplars in repair. Imagine the economics.
Understand, Redesign, Operationalise
The above may sound like interesting theory. What can you do differently on Monday?
The starting point for real change is finding out what matters to customers, then building a common and shared understanding of how, and how well, the organisation delivers what matters to customers today, and why it is that way.
This approach is unusual, in that it helps leaders study their organisations as a prelude to improvement. Seeing an organisation, as a customer sees it, shifts their starting-place from thinking they know what their problems are, to one where leaders discover they have quite different problems to solve from a customers’ perspective. As a consequence, it enables leaders to make informed, empirical, decisions on what and where to take action for the greatest betterment for customers. Where to invest and innovate becomes illuminated.
This new perspective leads to redesigning a customer shaped service, enabling better ways for attracting, acquiring, growing and retaining customers today and tomorrow. Customer centricity is reconceived and operationalised.
Profound Improvements in Performance
Jaw dropping increases in service and efficiency are the result. For example, after redesign, organisations see huge positive swings in Net Promoter Score4. Swathes of work, that add no value to customers, are removed from the operation. There are large reductions in call volumes coming into the Contact Centre. Complaints go down, compliments and advocacy go up. Digital customers use services to search and fulfil, rather than progress chase (“where is my…?”) or to complain on Social Media.
As a consequence of the redesign, as evidenced by staff engagement scores, staff morale rockets, and improved financial results follow; using these methods organisations have taken up to 20% of costs out of their operation, and have seen their sales revenue increased by up to 40%. Organisations see customer churn fall dramatically, as customers receiving better service become loathe to move to competitors.
Theory Into Application
These numbers may seem appealing. Here is a recent example of how they are obtained.
Moving house when contracted to a large Australasian utility company was renowned within the community as a difficult and painful process. The company itself understood this and had established a specialist group to improve performance.
For over 18 months the group designed and operationalised conventional approaches for improvement, which resulted in no discernible benefit to the moving experience.
The executive wanted to test if a different method could be used to transform this major, negative, customer experience. The aim was to learn how to ‘move customers perfectly’.
When demand was studied from a customers’ perspective, the real nature of what customers wanted became much more apparent. Customer demands placed on the organisation determined how things should be stitched together. This knowledge enabled the executive to see important and counterintuitive phenomena for the first time, and revealed how the way conventional measures had kept the phenomena hidden.
Once executives understood the problems generated by the current work design, and had a view of what needed to be challenged to improve performance, they agreed to redesign to see if a perfect move experience could be operationalised.
As a result of the redesign, after just a few months, the previous Net Promoter Score5 of -40 leapt to +80, a 120 point increase. Failure demand generated by the organisation reduced from an astonishing 54% to 5%. Staff absenteeism declined from 12% to 4%. Happier customers became loyal to the company, and consequently, purchased more products and services.
Designing from a customer perspective, against knowledge of what matters to your customers, and removing what gets in the way, will unlock similar profound improvements in performance for you too.
This article originally appeared in AgileTODAY Magazine (Edition 11).
David Joyce is an invited speaker at Agile Australia 2016, and will be speaking on the Vanguard Method. You can find out more about his session here – and if you haven’t already, you can also register for the Conference and David’s workshop.
1. W. Edwards Deming, 1982, Out of the Crisis, MIT Press, p.134.
2. John Seddon, 2014, The Whitehall Effect: How Whitehall Became the Enemy of Great Public Services.
3. John Seddon, 2003, Freedom from Command and Control, Vanguard Education, p.26.
4. John Seddon, 1996, Systems thinking – management by doing the right thing, Vanguard Education.
5. Net Promoter Score is a customer loyalty metric developed by (and a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix.