By Larry Girouard
Terms like strategic plan, business modeling, data collection, data generation, business “Outcome”, algorithms, and the like, are not words that are commonly used in today’s business meetings. (Note: Outcome is defined as all the goods, services and touch points that a customer encounters when dealing with your company. The company outcome is what the company delivers, and the customer experience is how the customer relates to this outcome.) I am reminded of presentations that I made in 2007 at a half dozen conventions around the country. I role-played with the audiences of CEOs and senior managers, asking them to pretend that I was the decision maker at a target account that they were trying to penetrate. If they had just 15 minutes to convince me to buy a product or service from their company versus their competition, what would they present to me?
I asked them to take 60 seconds to write down five items that they would discuss. At the end of the minute many had not completed this short list of five items. Surprised! Try it yourself … one minute and five key items. The fact that this was not an easy exercise for these senior managers is significant.
The second question I asked, with a show of hands, was, “How many of your company’s measure the performance on the five, or less, items listed on your sheet?” I would be exaggerating if I said that more than 1%-2% raised their hands.
The fact is that very few companies measure anything beyond financial performance. If I am the buying influence at a target account, I am inundated with sales people telling me how great their companies are, yet, almost no company presents the historical performance data to convince me that their value proposition has any punch behind it. As the buying influence, on what basis do I make my decision?
I had one attendee that listed “Our experienced people” as one of their five. To that point I responded as the buying influence, “So what, what does that mean to me?” I understand what “on time delivery” means to me, but I do not have a clue how “having experienced people” impacts my company. The measured quality of the work from these “experienced employees”, and how this quality impacts what I am buying from your company, will certainly play a part in my decision making.
When you think about it, the buying influence at a customer or target account only cares about the ”Outcome” from your company, and how it meets their needs. The buying influence could care less what happens inside your company. As the buying influence, I am only concerned about minimizing my risk and the validation of my decision through superior performance when I choose to buy your goods and services.
Experienced people mean little to me unless the ”Outcome” of their work is better, faster, and more accurate than that of your competition. How do you measure the “Outcome” of your experienced people that will convince me that it is worth the risk to use your company as a supplier? Dave Nash, President of Engage Marketing, a RI consulting firm, says it best when he states, “You must give me a real reason to believe!” Looking at your business from the customer’s perspective, and listing (modeling) the elements of the ”
“Outcome”, will help you to begin to identify the customer experience, the real product/service that you are delivering.
Five Required Elements for Designing the “Customer Experience”
“If you can’t measure it, you can’t manage it”, and “What gets measured gets done”, are both terms that we have all heard many times. Bringing measurement into the corporate culture is a challenge for any company. By focusing on the company ”Outcome”, management and employees can now concentrate on what the customer is receiving. In total, this represents a company’s product, product offering or value proposition. There are five fundamental elements that must be addressed by any management team before beginning to design a company’s ”Customer Experience”.
1) Management must accept the fact that quantifying the business “Outcome”, or “Customer Experience”, is the cornerstone for building and sustaining an effective market penetration program.
2) Management must passionately and unconditionally embrace the quantification of all elements of the “Outcome”.
3) Management teams must come to grips with the fact that measurement will be met with resistance from many people up and down the organization chart. Management must work through the acceptance process of measuring, and being measured, for both management and the employees.
4) Management must apply measurement evenly throughout the corporation. Rank does not have its privilege, especially for the CEO and senior managers.
5) Management must empower its employees to both help develop the measurement system, and to implement the resulting system. Employee involvement in this process is critical ensure “buy-in” throughout the organization.
The Importance of Employee Involvement
In general, most people resist being measured because its very mention recalls past memories where being measured had negative results for them. Perhaps low test scores in school, or unattained goals in the business community were the reasons. Whatever the cause, in most cases, measurements were used to punish, or take something away, rather than inspire or reward for performance excellence.
The value of the ”Outcome” from any company to its target market is directly proportional to the value added sum of its components. The employees add most of the “value added” components to the “Outcome” because they are the people that interact with your customers on a regular basis. Employees answer the phone, and they get back to customers with answers to most questions like order status and technical issues. They are on the production line running the machines that make our products, etc.
Employees make the “Customer Experience” happen. Most of the communication between a customer and the company is impacted by the performance of these employees. It’s their system to create and drive. It’s management’s role to motivate and empower their employees to do it, and provide them with all the tools and support they need to succeed.
To effectively improve the ”Customer Experience”, the employees must be an integral part of the process. The CEO and senior management add relatively little to the “Customer Experience”. Management just sets the stage for employee performance.
Where do you start? Customer “Touch Points”!
A business associate of mine, Tom Pesaturo, President of Exceeda Consulting, clearly states that, before you march too far along the thought process of establishing the vision for your company, it is important to define the “as is”. The “as is” defines the current performance level for the “Customer Experience”. It’s the “as is” that cements the starting point for a company’s journey to performance excellence. Easy to say, but because most companies measure very little, defining the “as is” in terms of concrete measurements offers up a challenging task.
I suggest that you look at the current state of the company from the standpoint of the customer as the starting point. Conversely, starting this process by defining the internal workings of your company in measurement terms would be a much more complex undertaking and likely to be met with high employee resistance. Looking at the ”Outcome” of the company is more approachable, and not as threatening to management or employees. The ”Outcome” is the summation of all the touch points that represent the totality of the “Customer Experience”. It begins with the initial contact between the customer and the company, usually starting with the first phone call, and is ongoing through every touch point that a customer experiences such as:
a) Initial call into the company
b) On Time Delivery
c) Product quality
d) Response time to questions of any nature … technical, order status, billing status, and the like.
e) In retail or hospitality, anything that impacts the customer’s senses are all considered part of the family of touch points.
f) The quality of all written or oral communication
g) Website and Collateral
(Note: This list could be 20 – 30 elements, or more).
Different types of companies will have varying families of touch points, but the approach is the same.
Once a company makes a comprehensive list of the key elements that make up their customer’s ”Customer Experience”, they can then begin to look at each element, one at a time, with respect to their corporate performance on each. This is the first step for a company to determine the “as is”. True to form, the results of this exercise are usually very revealing, and disappointed to most companies, especially if all these elements are looked at objectively.
Most companies must look at other means to differentiate their products. There are few options. Optimizing the ”Customer Experience” is a great way to do it. Few, if any, of a company’s competitors really focus on this aspect of their businesses in a formal and structured manner. This presents a real opportunity for your company to differentiate your product offering and value proposition in a quantifiable manner.
Once the ”Customer Experience” is outlined, and the appropriate measurements applied to each element, the “as is” will be well defined. This then begs the question … Is the “as is” good enough” to be used as a sales tool to penetrate the market? This is the moment of truth for most companies. Keeping it real, what comes next?
For the initial steps, I suggest you try the following:
1) Break the ”Outcome” down into all the elements that have been identified and look at each one as a stand alone entity. To develop a list, have a 60-minute brainstorming session with your managers and employees and generate a list of customer needs, wants and complaints. You might have 30, or more, items on this list but it will represent a good starting point and a very large percentage of the actual “Outcome”.
2) Rank each element in the order of importance with respect to the ones that you feel are the most important to your customer.
3) Pick one of the key elements, like “on time delivery”, and begin to track and measure the reasons why you are late for each order, or request, over a period of time … say 1-2 months. The important point here is that every order, or request, must be included in the analysis. (Note: You must first establish the criteria for when an order is late, and this criteria must be in line with your customer’s criteria)
Do the same for the other elements of the ”Outcome”. By the way, once you start measuring corporate performance levels, and listing the reason why something was not met, employees will automatically start paying more attention to their role in any specific element of the ”Outcome”. When you think about it, employees control well over 85% of the “Outcome” or “Customer Experience”. As a result, they must be 85% of the solution. It cannot be forced on them by management or push-back is guaranteed. Some elements of the ”Outcome” are more difficult to measure. For example, how does the receptionist answer the phone? One of my clients has given the receptionist the title, Director of First Impressions, and this person was trained in how to deliver “great phone”. It is not measured specifically, but it is addressed.
4) After a period of data collection you will begin to see patterns. For example, one company had issues with the length of time it took for them to get back to a customer with lead times for any order. It could take up to 2 weeks or more. They modeled the process of where the request went and the time that the request stayed in any one location. It was a very simple model. As they collected data they were able to define the key contributor(s) to the delay. Customer Service (CS) collected all the data because they owned the particular customer request.
It was initially explained to all employees the importance of getting back to customers quickly with answers to all their requests as part of the overall ”Customer Experience”. Engineering was the bottleneck in this case and it really stood out. Now responses to lead time requests are well under one week, except for unusual circumstances.
Because this particular example was only a part of an overall program to improve the ”Outcome”, there were many examples where other departments represented the bottle neck. Once a management team begins to model the elements of the “Outcome” in a very graphic manner, it is much easier for all the stakeholders to see the value of their role in optimizing the “Outcome”. Also, with historical measurements applied to each segment of the model, corporate performance and performance improvement becomes more visible.
There is a visual process called “Value Stream Mapping” that has been used very effectively in organizations that have the real passion for continuous improvement.
While some business elements are more complex to model than the example presented, the approach is the same. Eventually, as all the elements are integrated together, you begin to get a visual representation of your business ”Outcome” in real time, or close to real time. I call this the Everest of business modeling because few companies ever have the resolve to follow through on modeling the complete ”Outcome”, with all, or most, its elements. Changing business culture can be a herculean challenge. There are many reasons why it doesn’t get done, but if the CEO has the vision, commitment, humility and passion to see it though, the rewards are great.
The Optimized “Customer Experience”
Real Market Differentiation for market penetration
Step back for a moment and envision that the ”Outcome” for your company has been modeled, measured, and optimized. Your company employees are tuned in to the measurements that frame that “Outcome”, and are using these recorded measurements as one of the tools to help direct their day-to-day behavior. Your sales department is now utilizing the ”Outcome” data as an integral part of their sales presentation. Your company collateral refers to the “Outcome” (“Customer Experience”), using historical data to present your corporate commitment to performance excellence.
The image of your company in the market place is largely derived from the company’s ability to drive the “Customer Experience” to higher levels. Remember, it will be very rare for competition to utilize this same selling technique because few, if any, have brought measurement into their business culture as a vehicle to differentiate their product offering and value proposition. Your company would stand alone in the competitive field, taking the “top of the hill” because of your exceptional service level.
Based on your company’s historically measured performance, in time you will be able to make guarantees that will be the envy of your competition. Your sales team can sell with confidence because they know the performance data is real. They will resist the temptation to oversell because they will not need to.
Self-Sustaining Measurement Culture
As mentioned earlier, bringing measurement into the business culture is a difficult process. Initial resistance from all, or most, employees will be high. That being said, with the resolve of the CEO and senior management, and empowerment of the employees to implement their input, measurement will slowly be embraced by both management and the employees if there is a clear “win” outlined for all involved.
For example, one win for the employees may be a bonus based on the profit/employee number. As the ”Customer Experience” improves, corporate efficiency will also improve. The “Customer Experience” cannot improve without some proportional improvement in corporate efficiency. As sales from the improved “Customer Experience” increases, it will do so without a proportional increase in the number of employees and, by default, the profit/employee will increase. Again, this represents one win for the employees.
If you accept the fact that modeling and measuring the ”Customer Experience” (The “Outcome”) of your business is a common sense approach to start your corporate change process, congratulations! That is the first step, and you are on your way.
While measuring performance can be very intimidating, measuring the corporate “Outcome” is a much easier concept to embrace as the initial step because real teamwork between corporate functions will be required. The members of the cross-functional teams will work out the processes to optimize the “Outcome”. Solutions will come from the bottom up and, therefore, more sustainable. Also, with this level of employee involvement they feel much more like they are part of the team. This culture is one where their efforts are better recognized. Improved corporate efficiencies has a direct impact the lowering the stress levels among employees.
The CEO must encourage and allow this process to evolve through employee empowerment. You have heard the term “journey” used throughout articles and books written on the subject of change. The Malcolm Baldrige National Quality Award constantly describes the road to performance excellence as a journey. I have had the opportunity to be involved with many journeys and can attest to the fact that it is well worth the ride.
Differentiation, The Customer Experience, EBITDA, and Business Valuation
There are many factors that impact the overall value of a business that a buyer is willing to pay for. Consider the approach outlined above with respect to business valuation:
1) Optimizing the “Outcome” …. in order for this to happen there must be a corresponding improvement in company efficiency.
2) Market Penetration … a measured and improved “Outcome” provides the foundation for any Market penetration initiatives, and help establish a corporate brand.
3) Corporate Efficiency … As employees improve corporate overall efficiency and begin to penetrate the market, sales/employee and profit/employee will increase because the improved efficiency will enable employees to do “more with less”.
4) Impact on EBITDA …. improved efficiency, driven by the employees, will result in additional monies dropping the to bottom line. These monies can be allocated to EBITDA, bonuses for employees, and business reinvestment. Regardless of how you slice the pie, EBITDA will be positively impacted.
5) Business Valuation … A strong sustainable business culture, and solid EBITDA performance, will better position your company for a higher business valuation, regardless of the business segment served.
So few companies approach their business in the way described above that, in doing do, your competitive position will be greatly enhanced.
*** END ***
Larry Girouard is the CEO of The Business Avionix Company, established in 2002
Published as a 3 part series in the Woonsocket Call, a Northern Rhode Island newspaper … February, 2010
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