Customer S. taken beyond CRM
In the HBR of December 2004, Jeffrey F. Rayport and Bernard J. Jaworski write that the task of managing customer interfaces and managing interface systems is an underestimated strategic imperative. Those who deal with this in their customer S. cracking the code of interface systems will have a competitive advantage.
Advances in service technology have opened up new possibilities for how companies can create value not only through improvements in productivity but through better interactions with their customers. Businesses must change fast to embrace these new realities. Reengineering the front office will eliminate and displace many jobs, but it will also inevitably create new opportunities for human labor. Getting the balance right will require Corporate leaders to develop a subtle understanding of how to manage the intelligent division of labor between people and machines. A company's interface system works best when it combines the best of what people and machines can do.
Every customer interface must deliver high levels of customer-perceived value relative to the competition. This is possible along the four dimensions of a customer interface:
After years of cost cutting, it may well be that Customer S. will become more interesting now as a source of creating competitive advantage with so many new technology options to choose from.
Advances in service technology have opened up new possibilities for how companies can create value not only through improvements in productivity but through better interactions with their customers. Businesses must change fast to embrace these new realities. Reengineering the front office will eliminate and displace many jobs, but it will also inevitably create new opportunities for human labor. Getting the balance right will require Corporate leaders to develop a subtle understanding of how to manage the intelligent division of labor between people and machines. A company's interface system works best when it combines the best of what people and machines can do.
Every customer interface must deliver high levels of customer-perceived value relative to the competition. This is possible along the four dimensions of a customer interface:
- physical presence and appearance
- cognition (recognize customers, draw intelligent conclusions and act upon that)
- emotion or attitude (right sense of humor, repect, etc, calibrated with the customer)
- connectedness (Amazon generates recommendations based on buying patterns of people with similar interests)
After years of cost cutting, it may well be that Customer S. will become more interesting now as a source of creating competitive advantage with so many new technology options to choose from.
Industry Change
A new article on strategic industry change can be found in the Harvard BR of October 2004. As we all know, industries change. Some industries change fast, some change slowly over time, but all of them do change eventually. Anita McGahan explains industries actually change in one of 4 ways: radical, progressive, creative or intermediating.
She argues that if your company's innovation S. is not aligned with your industry's change trajectory, your plan for achieving returns on invested capital is less likely to succeed, "Moreover, a firm's S. - its plan for achieving a return on invested capital - cannot succeed unless it is aligned with the industry's change trajectory". If you understand which path your industry is on, you can determine which strategies will make your company succeed and which ones may backfire on your company.
A further description of McGahan's innovative industry change model can be found here.
It's interesting to note that while McGahan seems to focus only on aligning your business strategy to industry changes, Chan Kim and Renée Mauborgne in another article in this same HBR issue advise to try to create a new uncontested market space yourself, which they call a blue ocean strategy.
She argues that if your company's innovation S. is not aligned with your industry's change trajectory, your plan for achieving returns on invested capital is less likely to succeed, "Moreover, a firm's S. - its plan for achieving a return on invested capital - cannot succeed unless it is aligned with the industry's change trajectory". If you understand which path your industry is on, you can determine which strategies will make your company succeed and which ones may backfire on your company.
A further description of McGahan's innovative industry change model can be found here.
It's interesting to note that while McGahan seems to focus only on aligning your business strategy to industry changes, Chan Kim and Renée Mauborgne in another article in this same HBR issue advise to try to create a new uncontested market space yourself, which they call a blue ocean strategy.
Competitive Advantage and Workforce Agility
In the search for competitive advantage, workforce agility - a well-trained and flexible workforce that can adapt quickly and easily to new opportunities and market circumstances - could make the difference. Working within a structure that is continuously aligned with BS, companies can drive revenues up, keep costs down, and clearly differentiate themselves in the marketplace.
Unfortunately, large corporations are not effectively using their workforces, and they are losing revenue and market share potential as a result. Even though the U.S. Labor Department reports that the productivity of American workers rose at an annual rate of 2.9 percent last spring, a study by Convergys, Saratoga and the University of Michigan has found a whopping 84 percent of executives surveyed admitted they were unable to take advantage of their workforce's full potential.
The study called "Workforce Agility" outlines some common obstacles companies face in maximizing their return on human investment:
- poor alignment between workforce S. and BS,
- disability to mobilize workforce to meet B. demands with adequate speed, precision, and agility,
- lack of financial awareness at top HRM executives.
The full study can be obtained via Convergys Public Relations, Email: news@convergys.com
Unfortunately, large corporations are not effectively using their workforces, and they are losing revenue and market share potential as a result. Even though the U.S. Labor Department reports that the productivity of American workers rose at an annual rate of 2.9 percent last spring, a study by Convergys, Saratoga and the University of Michigan has found a whopping 84 percent of executives surveyed admitted they were unable to take advantage of their workforce's full potential.
The study called "Workforce Agility" outlines some common obstacles companies face in maximizing their return on human investment:
- poor alignment between workforce S. and BS,
- disability to mobilize workforce to meet B. demands with adequate speed, precision, and agility,
- lack of financial awareness at top HRM executives.
The full study can be obtained via Convergys Public Relations, Email: news@convergys.com
Boards spend 3 hours a month discussing S.
Top management spends less than three hours a month discussing S. issues (and that includes mergers and acquisitions) or making strategic decisions. Michael C. Mankins, managing partner of Marakon Associates, in the September 2004 HBR issue, once more measured what everybody already knows: typical company’s senior executives spend less than three days each month working together as a team, and in that time they devote less than three hours to strategic issues. Moreover, these three hours are seldom well spent. S. discussions tend to be diffuse and unstructured, only rarely designed to reach good decisions quickly.
One global firm spent more time each year selecting the company’s holiday card than debating its vital Africa S.
However at a number of Marakon clients — ABN AMRO, Alcan, Barclays, Boeing, Cadbury Schweppes, Cardinal Health, Gillette, Lloyds TSB, and Roche — executives have found ways to improve teamwork at the top. Leaders spend their time together addressing the issues that have the greatest impact on the company’s long-term value creation.
Based on the experiences at these companies, Mankins provides 7 techniques for exploiting valuable time of executive boards:
- Deal with operations separately from S.
- Focus on decisions, not on discussions
- Measure the real value of every item on the agenda
- Get issues off the agenda as quickly as possible
- Put real choices on the table
- Adopt common decision-making processes and standards
- Make decisions stick
Mankins' article ("Stop Wasting Valuable Time") fits well in the Value Based Management tradition of Marakon Associates. My time reading this article was certainly not a waste of time and I recommend reading it to any topmanager and MBA student.
BS for SMEs
In a new book 'The Keystone Advantage: What the New Dynamics of B. Ecosystems Mean for S., Innovation, and Sustainability' - Marco Iansiti and Roy Levien argue niche players should think of their B. environment as a series of ecosystems.
These ecosystems feature "keystone" companies such as Microsoft and WalMart, providing for the health of all who do B. with them.
Iansiti and Levien recommend small companies in such ecosystems should follow a specialization BS by taking explicit advantage of the opportunities provided by the ecosystem, while avoiding the traps that challenge firms in such environments.
Amongst the many tips the writers have for small companies in these ecosystems around leaders such as Microsoft or Walmart are:
These ecosystems feature "keystone" companies such as Microsoft and WalMart, providing for the health of all who do B. with them.
Iansiti and Levien recommend small companies in such ecosystems should follow a specialization BS by taking explicit advantage of the opportunities provided by the ecosystem, while avoiding the traps that challenge firms in such environments.
Amongst the many tips the writers have for small companies in these ecosystems around leaders such as Microsoft or Walmart are:
- Specialize in unique capabilities.
- Leverage other capabilities from keystones
- Sustain innovation
- Tight coupling: Manage risk and dependencies
- Loose coupling: Embrace mobility and flexibility
- Niche leverage: Power over keystones
Creating Customer Value
Much has been written about customer orientation, customer relationship management (CRM), Customer Lifetime Value (CLV) metrics, Customer Centric organization models, customer retention, customer care…add any high sounding word with ‘customer’ preceding or succeeding that word and you have a new model, a new theory. Headline hitting books, celebrity author seminars and training till another theory comes along.
And we see the poor customer is still the most dissatisfied lot (that includes all of us specialists too, as customers).
What a manufacturer or service provider often thinks as a market or value proposition, customers respond in a diametrically different fashion. Why does this happen?
While business thinks in terms of products and derived values, customer is looking at satisfaction. The key question is whether all the strategy, product features, add-ons and value creation lead to ultimate customer satisfaction.
Continue
And we see the poor customer is still the most dissatisfied lot (that includes all of us specialists too, as customers).
What a manufacturer or service provider often thinks as a market or value proposition, customers respond in a diametrically different fashion. Why does this happen?
While business thinks in terms of products and derived values, customer is looking at satisfaction. The key question is whether all the strategy, product features, add-ons and value creation lead to ultimate customer satisfaction.
Continue
Services Industry facing Industrial Revolution
According to Uday Karmarkar in the HBR of June 2004, the services industry is facing a change process resembling the industrial revolution. The industrialization of services is here, and outsourcing and offshoring are only part of this revolution. Automation, customer self-service, and global competition have been added to the mix, presenting a threat and a significant opportunity for all service companies. The churn, restructuring, and transformation of services will continue—and even accelerate—for the foreseeable future. This will mean a different landscape for companies, managers, and workers. In the end, the survivors of the service revolution will be those who understand the opportunities and rework their strategies and reorganize their processes, and people for the challenge ahead. The alternative is disaster, as was proven by industrial companies not acting in a timely way upon the industrial revolution.
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