Five Lessons Learnt from Customer Leaders at the Chief Customer Officer Forum
The real value of connecting properly with customers
The theme of the 34th meeting of the Chief Customer Officer Forum in October was Differentiated Customer Experiences and some great lessons emerged from some of Australia's most experienced business leaders. The group meets twice a year to hear from CEOs, board members and to discuss detailed case studies. In this paper we’ll summarise some of the lessons that were shared (but we will not name or reference them to specific companies because the meeting runs under Chatham House rules). The three keynote speakers, Anne Sherry, Mark Fitzgibbon and Stephen Scheeler have led or steered some of the most successful businesses in Australia and between them share over 50 years of CEO and board room experience. Their track record of success includes:
Leading a business to seven years of 20% per annum growth
Growing a business from nothing to $1b in revenue in seven years
Growing a business at three times faster than market growth for over a decade.
This paper shares five themes that were discussed:
It is critical for business leaders to stay in touch with what customers are really experiencing and they need to supplement voice of customer mechanisms with direct observation
It’s important to make the right people accountable for customer issues across a business
Speed of change and flexibility are now critical drivers of strategic success, so experimental approaches and flexible business models are needed
Organisations have to be obsessed with customers to hold off the threat of new competitors
Product innovation can drive growth but only if the products are anchored in customer needs
For each theme we’ll explain the idea and share examples of how organizations have used this idea and then we’ll add some of our own commentary to these themes.
1. Mechanisms to stay in touch with customers – nothing beats observation
The speakers shared the difficulty of senior executives and board members getting insights on what customers were really experiencing because they are wary of the customer experience measures that they receive. Board members recognised that
there are issues of sample bias and loaded scores in some voice of customer data that reaches executive levels. One speaker described it as “wall-paper”. They commented that the score-keeping systems and small sample sizes didn’t seem to flag issues and insights on what customers were really experiencing. Speakers recommended using more direct forms of observation such as call centre or branch visits to hear and see the reality of the customer experience. They warned of not “stage managing” these visits too much if they are to be effective. They also tapped into detailed analysis of the causes of complaints and wanted to understand how they link to repeat contact rates and other customer effort data. This helped them understand the breadth of issues and opportunities and allowed them to see the challenges facing staff.
The speakers recognised that nothing beats the insights obtained from direct, unbiased observation of customer experiences. One speaker talked of the lessons they had learned in a day of front-line observations on issues they knew would never otherwise reach the board. They endorsed sampling calls, chats or branch visits as mechanisms to better understand what customers go through, as this sampling includes the whole range of experiences and isn’t filtered. Direct observation also shows the obstacles that staff face. They didn’t support heavily staged managed visits by a whole group of executives because these visits rarely get to see the day-to-day reality.
These types of observation studies can be even more effective if you have tools and benchmark data to makes sense of what is being observed. It helps to know what to look for and how to assess a range of contacts in rapid time. Short sharp studies of 4-5 weeks can really get under the covers of the customer experience. These observation samples can then be linked to complaints, repeat contacts and contact drivers to provide rich continuous data to drive improvement.
2. Make the right people accountable
Several speakers talked about the need to make the right areas accountable for customer problems and solutions. In some organisations other measures and goals took precedence over customer issues. For example, product owners were often more interested in creating new products or product growth but were not held accountable for the problems and issues that “rushed” product development created. This problem was compounded in organisations with frequent changes in structure and role which led to further short-termism. In contrast some innovative businesses place customer goals and measures high on everyone’s score cards and make this a more critical part of all rewards and recognition.
Speakers talked about accountability needing to go beyond getting an area to fix an instance of a complaint (e.g., with some kind of repair or make good strategy). It was harder to work out who was accountable for the root cause of the complaint category and harder still to hold someone accountable to fix the root cause. That needed far deeper analysis and often the involvement of more areas of the busines as well as strong sponsorship to hold the right areas to account and make this a priority.
Many organisations we work with are busy dealing with demand such as complaints and contact drivers. Few have systematic processes to get to the causes and as a result it is rare that the right areas are held to account. Given that everyone is always busy, it often requires specialised analysis of these issues to understand them and dedicated resources and root causes analysis techniques. It’s even harder to get departments to own the causes of contact that they don’t recognise they create.
3. The speed of change and need for flexibility
All the speakers recognised that change drivers in business are more dynamic now than at any time in
history. Previous CCO Forum speakers have also flagged that the number of simultaneous major change drivers, is at an all-time high e.g., Artificial Intelligence, data analytics to name two. One speaker summarised the problem as “the status quo is death” and saw continuous change as essential. A range of business models were described to address this speed problem including small and specialised team structures that enable change at a faster pace (described as two-pizza teams as they can share two pizzas) and a portfolio approach to strategy (see example).
One company uses a portfolio approach to change investments recognising that the world is so unpredictable that not all investments will pay off. They realise that this portfolio must include some investments with high risks and likelihood of failure in order to challenge complacency in the business. This theme of not only being prepared to fail but expecting to, was common to all speakers as they tried to mimic how their challengers and markets behave. For example, venture capital backs ten companies in the hope that perhaps two will produce amazing returns and the rest will fail. The plethora of challenger businesses mean that staff are dedicated to high risks investments and markets re-allocate resources rapidly to investments showing promise. It was recognised that this is far harder for large, incumbent businesses to do.
Small, specialised teams with appropriate methods and tools seem to work best to enable rapid change. We advocate project teams of 4-6 rather than 40-60. Small dynamic groups of experts can design, build and execute change faster than large bureaucratic projects. The hard part is how to scale and leverage these kinds of experts into a large business without restricting their dynamism. It’s also important to recognise the skills needed in these teams and for sponsors to remove roadblocks to these fast-moving teams.
4. Obsess about customers
The speakers from the highest growth businesses seemed to share an “obsession” with customers which contrasted with the perspective of those from larger more established business. The latter admitted that they had to reconnect with customers at times as they had almost lost sight of the end customer. Some larger businesses talked about non-customer distractions such as dealing with regulators and trying to understand new competitors. This was less an issue in smaller challenger businesses where growth in customer numbers was seen as all important and smaller scale meant everyone was closer to the customer.
Growth in one business had come about because they had researched un-met customer needs among both current and prospective customers. This led to creation of new products and services that created new sales. Whole new classes of product and service were created that increased the size of the market. They then used feedback techniques that gave them responses from 90% of customers (rather than a 5-10% sample) which showed them how to fine tune the service and products. This feedback drove further revenue growth.
In contrast one speaker described how large incumbent financial companies had shown a tendency to create new products “as an end goal”. Product managers were incentivised to create new products and this led to product complexity and overlap. Sometimes this added products that didn’t have supporting processes and technology in a rush to market that created higher costs and customer pain. Rather than creating new ”market demand” these products led to manual processes, higher cost and failure demand.
Front line behaviours and language often reveal organisations who have lost sight of the customer. In these businesses, front line staff roll their eyes about customer requests or bad mouth customers to fellow staff members. In contrast, customer obsessed businesses relish the chance to support and help customers and tell stories about problems solved and ideas shared. Challenger businesses have a further advantage that it is easier for executives to connect with customers. In start-ups, everyone has to spend time closer to the customer.
To address this issue large incumbent organisations need ways to surface customer issues and new opportunities quickly. They need a variety of methods to connect management to what is happening at the front line. We’ve identified ten different techniques organizations can use to connect executives to customers. For example, at Amazon this process was known as “What Our Customers are Saying” or WOCAS which was a process used to flag new issues and opportunities for customers. This led to the development of many new services.
5. Product innovation and un-stated customer needs
The Forum speakers showcased success where products had been created around un-stated customer needs that, by definition, were new opportunities. In these instances, the organisations had understood their customers well enough to predict un-stated needs. They were prepared to invest in services that may have appeared high risk because customers had never made an explicit request. This process combined the capabilities of being able to listen to customers, customer obsession and a portfolio-based approach to change where risks were taken. These products and services were created without any certainty that they would succeed but on sufficient analysis of customers to think they might and that they would represent a type of competitive advantage.
One company created a product with more product choices and offered customers the ability to turn
services on and off to personalise the product. This was unique in the market where other providers were being more prescriptive with fixed bundles of services. No other product had this level of choice and flexibility. This has been a big success for the company who has grown market share dramatically in younger segments who wanted this level of control. The company trialled the product first and was prepared for it to fail but then drove national expansion once it was a success.
This type of innovation shows a mature understanding of customers and a willingness to invest for the long term. Some of the most valuable of today’s businesses (Netflix, Google, Amazon and Apple, Facebook) have all invested for long periods in the customer before they turned profitable. These long-term customer investments have all paid off but even in these major companies they have also had product misses such as Amazon’s phone (the Fire).
Many of the ideas shared at the Chief Customer Officer forum resonated with us because we had also recognised the flaws in some customer experience and Voice of customer systems. We had long advocated direct observation and analysis of complaints and contacts. We are passionate believers in direct observation of the customer experience and a rapid experimental approach to change. These themes further resonated with us because they were consistent to research we had completed recently about the differences between older style renovators and new innovators. If you want more detail on the Chief Customer officer Forum or our tools and techniques, please email us at firstname.lastname@example.org or call 03 9499 3550 or 0438652396.