Frictionless ticks all the boxes
Why all consumer facing organizations should try to be Frictionless – because it is better for customers and cheaper Summary: This paper explains the strategic benefits of being frictionless and why it is a whole of business problem. It gives examples of businesses that are like this and how they work and also explains why it is hard. Our next paper will explore techniques that can be used to pursue this strategy.
What is a Frictionless Organization?
Our definition of a Frictionless Organization is one that has made its products and services so effective that customers never have to make contact for the wrong reasons. Everything in Frictionless Organizations works for customers and is easy for them. By definition it is low effort and at times “no effort”. In contrast, many of the interactions customers have with companies today are signs of friction. For example, they make contact because:
products and services aren’t working,
information is confusing,
the self-service doesn’t work the way they expect or doesn’t exist where they want it
services are late
orders are late
products or services aren’t meeting their expectation.
Getting rid of these issues and problems is a win for everyone. It saves money for shareholders and makes customers happy by reducing their effort. We believe that tackling friction should be a strategic priority in most organizations including government because it is a win-win. It frees up time for valuable interactions and makes customers more willing to repurchase or buy other products. Reducing friction also cuts costs in a sustainable way.
The strategic imperative and innovator’s advantage
We recognise that no organization will ever be totally frictionless. It is an aspiration but getting as close as possible is a major strategic advantage. Organizations with less friction have the strategic advantage of lower costs and happier customers. Trying to remove friction is becoming a greater strategic priority as innovative new businesses enter certain markets with lower friction business models. These “innovators” often disrupt the business models of incumbents in those industries and undermine their pricing models. Jeff Bezos famously said, “Your margin is my opportunity”. Examples of these lower friction disruptors include Uber disrupting the taxi industry, Aldi in retail, Dyson in electronics and Carsales.com in second hand vehicles. These businesses have all tried to create frictionless experiences and work on them continuously through product or service design.
For example, Uber aspires to have no contact other than digital self-service for bookings. It analysed the reasons customers were having to make contact and tackled specific issues such as customers missing items on Uber eat orders or use of old cards on payments in rides. Amazon has worked on reducing friction continuously. It has been so successful that it has reduced key friction measure, contacts per order, to a level one tenth of some competitors. This lower friction model enabled them to reduce prices further and win further market share. These frictionless strategies can create a virtuous circle that Amazon called “the flywheel” (see picture).
Harder Than It Sounds – a team sport
Of course, becoming frictionless is harder than it sounds because it needs good data on what friction exists (see our paper on Understanding Friction) and then collaboration and prioritisation on what to tackle and how. It is also complicated because often these issues span the whole business.
As we describe in our recent paper “Fixing supply with demand”, ownership of problems that demonstrate friction usually span right across a business. That is a problem and an opportunity at the same time.
It’s a problem because of the need to involve and incentivise different areas of the business. This usually needs sponsorship and alignment of metrics at senior levels. However, it is also an opportunity to get the whole business focused on customer issues and provide insights on what needs to be fixed. For example, making it clear which problems cause the highest rates and costs of customer contact provides greater clarity than asking all departments to contribute to a broad revenue or satisfaction measure. It can provide clear goals and targets such as “halving the rate of assisted contacts for customers”. For example, one UK insurance business set the goal of reducing assisted contact by over 40% and achieved that but only through collaboration of all major business units and product heads. They knew that this was a great reduction in points of customer friction, reduced costs by an even greater amount (as these frictions were also sources of complaints and regulatory penalties) and raised NPS.
Why doesn’t everyone do it?
If it is such a good strategy, why doesn’t every organization do it? We’ve already highlighted the barrier of the need for sponsorship and collective focus. Other barriers include a lack of data and often competing or contradictory measures and goals. For example, sales teams may be measured on sales conversion and revenue, not on explaining the products and services well or helping customers understand how to use self-service. Another barrier may be complacency from organisations who have experienced success and don’t see the need for removing friction. Short termism is another barrier we have observed as markets and market analysts measure quarterly returns at the expense of longer-term customer investments.
Internally, continuous improvement teams (if they exist at all) are regularly underfunded, diverted to go-to-market changes or don’t really have a clear model to use - just wading through laundry lists of opportunities. Galvanising this team around a clear methodology is a great place to start.
In summary, removing friction for customers is a great strategy. It cuts costs, brings an organisation together around customer issues and creates more satisfied and loyal customers. Our recent white papers explain some of these ideas in more detail and in our next papers we will cover actions that can be used to pursue the strategy. If you’d like to discuss this further, please feel free to get in touch at email@example.com or call 03 9499 3550 or 0438 652 396