Mastering digital marketing – McKinsey’s David Edelman shares his thoughts

McKinsey are pushing out their interpretation of Outside-In.

Pretty much on point there is still however a legacy thought or two in there; on the other hand we know the senior executive team listen to these guys so get ahead of the game with this 10 minute video.

The customer can’t be king at the expense of your business

Goutam Das       Last Updated: February 15, 2013  | 15:37 IST
Steve Towers
Steve Towers

Steve Towers is a business process and customer satisfaction expert and the author of “Outside In – The Secret of the 21st Century Leading Companies”. In India, he advises the Tata group, Wipro and other BPOs on ways to organise their processes and people better to deliver customer outcomes successfully. Towers, a keynote speaker at the Nasscom India Leadership Forum , took time off for a conversation with Goutam Das.
Edited excerpts:

Q. Have organisations started to worry more about customer centricity these days?
A
. It is top of the pile in terms of themes. Customer centricity, however, is not always understood. We tend to talk about it from a technology-centric point of view – we tend to think of information technology and front-end systems. We talk about CRM (customer relationship management) systems and things like that. Organisations need to move beyond what we refer to as ‘inside out’ thinking. One of the reasons to move forward is that customers themselves has changed. They have become promiscuous – they are not as loyal as they used to be. They have also become very rebellious – highly choosy in terms of who they want a product from. This causes them to move very quickly versus the longer-term relationships of the past. All our organisations are collections of customers and their expectations have risen with the availability of technology, which gives them access to a lot more information. Those organisations that understand that have been able to look at customer centricity in a different way. We refer to that way as “outside in”.

Q. Explain your philosophy of ‘outside in’ and how companies have benefited from this.
A.
It means identifying what customer needs are and then working backwards to organise the company accordingly. Those organisations that are struggling – the Kodaks, the Nokias, RIM – they are still looking at the world inside out. Those who have been successful have seen the world outside in. They are aligning their business to deliver against customer needs, which can be created. Emirates Airlines creates that need by talking about the experience that they are going to give you once you arrive at the destination. Disney tells a very good story on the difference between wants and needs. They often say the customer does not know what they want. When you arrive at a Disney park, the first question a customer may ask is: “Where’s the toilet?”

The second most asked question is “What time is the Three O’clock Parade?” Customers are articulating a need within that question and the answer is in the context of that question. A woman with two small kids is not asking what time the parade is – she already knows the time – what she really needs to know is a place where she can go and stand with the kids, where there is a water fountain, an ice-cream vendor. She wants to be away from the hot sun. She hasn’t articulated that but the organization understands that need. Disney works on the basis of needs, not wants. Similarly, Nokia was very successful 10 years back and went on building devices that customers wanted. Other organizations thought differently. Apple made an observation on how many interactions one needs to pull up a telephone number. In an inside out phone, that will be seven-eight key presses. Everyone of those key presses is a moment of truth. And you have to build functionality to support that moment of truth. More functionality means a more complex system. Apple redesigned the interface and there are three moments of truth instead of seven-eight. It is less expensive to do that and offers a better customer experience. That is a principle Nokia has missed.

Q. Do Indian companies have an outside in perspective?
A.
There are two kinds of organisations. One: those who are carrying on building efficiencies and effectiveness and use things like Lean (a methodology of eliminating waste in a company) and Six Sigma to remove waste. Eventually, you get to a point where you optimise processes and can’t go any further. Other organisations say Lean and Six Sigma are fine but we want to challenge if a process actually deserves to exist. In India, there is a clear distinction between those organisations that are getting it and those that don’t.

Q. How do you measure who is getting it right?
A.
It is winning the triple crown, which is simultaneously growing revenues, reducing costs and enhancing service. The triple crown can be directly linked to customer success. Instead of starting with resources a company has, then going to market strategy and then finding customers, you start with customers and their needs and then align everything in the organisation to deliver that. In India, IndiGo (Airlines) is a prime example of looking at the world in a different way. Contrast IndiGo with Kingfisher – they talk about the customer being the king but the customer can’t be king at the expense of your business. The reason customer is king is that we can grow shareholder value, can create profits and deliver service. Other examples of companies looking outside in are Tata Motors and the transformation of Jaguar.

Part 4 of 4: There are four distinctly Outside-In ways that you can rethink process and in doing so achieve Triple Crown benefits.

The previous three articles in this four part theme we reviewed ‘Understand and applying Process diagnostics‘, the ‘Successful Customer Outcome‘ and ‘Reframing Process for an Outside-In world‘. Now finally we move our attention to the fourth way we can rethink process forever.

Rethinking the Business you are in.

In the Southwest airlines example reviewed earlier we referred to the different viewpoints of the ‘business’ you are in. The two views – one the organisations, regarded as inside-out reflect the activities and functions undertaken. So British Airways see themselves in the business of flying airplanes and approach the customer with that product/service in mind. They set about marketing and selling the flights and hope to pull the customers to the product through pricing, availability and placement. In a slowly changing world where customers have little choice this strategy can provide a route to success.

As we have already seen the tables have turned and the enlightened customer demands so much more.
Southwest and other Outside-In companies understand this challenge and take a customer viewpoint.
What business would you say these six companies are in: Hallmark Cards, Disney, Zara, AOL, OTIS elevators, China Mobile?  Try it from the customers perspective and you’ll arrive at a very different answer – try these, expression, joy, style and comfort, community, moving people, connectivity. Yes they are very different and will reframe the way you think of the service and products you provide. Go further and look inside your existing company.

Are you still separated into functional specialist areas providing specific outputs to other departments in the so called ‘value chain’? Do you have internal ‘service level agreements’ that specify what you’ll deliver and when? How much of our internal interaction adds ultimate value for the customer? This way of organising work imposes limitations on our ability to truly deliver successful customer outcomes. The Inside-out viewpoint is inefficient, prone to red tape, is extremely risk adverse (checkers checking checkers) and slow in delivering product and service.

Many inside-out organisations actually regard customers as an inconvenience rather than the reason why they exist.

What business are you in? Past, present, future?

Join us on LinkedIn www.linkedin.com/groups?mostPopular=&gid=1062077
Visit additional resources www.oibpm.com
Become a Certified Process Professional www.certifiedprocessprofessional.com 

Evolving Support for Outside-In

Ranjay Gulati presents a great case for moving Outside-In. His website http://ranjaygulati.com/rg/ provides access to several very useful and tested resources for those tasked with helping their organizations break out of their inside-out straightjackets.  Here’s a preview video:

Highly recommended.

Join us on LinkedIn www.linkedin.com/groups?mostPopular=&gid=1062077

Visit additional resources www.oibpm.com
Become a Certified Process Professional www.certifiedprocessprofessional.com 

How do you start the journey to Advanced BPM/Outside-In?

If I scan the fifteen or so new OI initiatives in large corporations I have worked closely with (in the last three years) I would say 80% of that work is through what you can think of is a 1-2-3 project cycle.

1. Start where you are – deploy, for instance the CEMMethod 21 techniques, especially the Moments of Truth, Breakpoints and Business Rules, in whatever is your remit. Just get going.

2. On the back of that success move upstream and downstream in the particular process. You will have internal advocates at this stage who understand how to do this stuff. At this point the fun and the wildfire starts 🙂

3. Take the ‘boil the ocean’ proposition to the top team. Ask for the biggest current organisation wide challenge and relate the internal benefits (Project 1&2, the external case studies, the videos of the CEO’s, the HBR articles, the Business week case studies blah blah) They will love the talk of results – reducing costs, improving revenue, enhancing service. Whenever have you talked to a top team and somebody has turned round and said those elements were not part of this years agenda eh?

Bingo – six months in and you’re on the organisation wide Outside-In transformation. 

There is an active thread started by Dick Lee on this theme at http://bit.ly/aY8a4H  

Get the latest book from www.outsideinthesecret.com

 

Part 2 of 4: There are four distinctly Outside-In ways that you can rethink process and in doing so achieve Triple Crown benefits.

In the first article in this four part theme we reviewed ‘Understand and applying Process diagnostics’. We now move our attention to the second  way we can rethink process forever –
Identify and aligning to Successful Customer Outcomes

“Businesses can be very sloppy about deciding which customers to seek out and acquire” Frederick F. Reichheld

The six questions we ask ourselves in this iterative process are:
I.    Who is the customer?
At first glance should be an easy answer however it is not as obvious as it seems. The ultimate customer for any profit making enterprise is the person, or company who provides the revenue by purchasing the products or services we produce. It is a matter of fact that in our inside-out legacy world we have created multiple customer-supplier relationships which include internal ‘service’ providers such as Information Services, Human Resources and so on. In mature Outside-In organisations the internal customer ceases to exist as we progressively partner to align to Successful Customer Outcomes and artefacts such as Service Level Agreements become a thing of the past.


II.    What is the Customers current expectation?
The 2006 book “Customer Expectation Management “ Schurter/Towers reviewed in detail the of creating and managing customer expectations and how through clear articulation companies such as Virgin Mobile in the US redefine their market place. In the context of the SCO map we need to understand the customers (as identified in the answer to question 1) current expectation. This often reveals both a challenge and opportunity. Customers will tell it as it is, for instance in an insurance claim process “I expect it is going to take weeks, with lots of paperwork and many phone calls”. That should tell you the current service is most likely poor and fraught with problems, delays and expensive to manage however this presents the opportunity. If that is a market condition (all insurance claims are like this) then moving to a new service proposition will be a potential competitive differentiator.  


III.     What process does the customer think they are involved with?
In the inside-out world we see process in a functional context. Therefore insurance claims are dealt with by an insurance claims department. Customer Retention is the baby of you guessed it, the Customer retention department and marketing is done by the marketing people. This split of responsibility is a legacy of functional specialisation created by relating to business as a production line. Adam Smith wrote in ‘The Wealth of Nations’ (1776) of an English pin factory.  He described the production of a pin in the following way: ”One man draws out the wire, another straightens it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head: to make the head requires two or three distinct operations: to put it on is a particular business, to whiten the pins is another … and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which in some manufactories are all performed by distinct hands, though in others the same man will sometime perform two or three of them”. The result of labor division in Smith’s example resulted in productivity increasing by 240 fold. i.e. that the same number of workers made 240 times as many pins as they had been producing before the introduction of labor division. The insights form Smith underpinned the industrial revolution however using this principle to organise ourselves in the 21st century is to a very large part the wrong approach. That is precisely what the answer to the question will tell us – “sorry sir you are talking to the wrong department, let me transfer you”. Or even getting stuck in automated response system hell “press 1 for this, 2 for that, 3 for the other and 4 if you have missed the first three options.” These are features of the labor division mindset. Ask a customer what process they think they are and you will frequently be surprised by the answer.


IV.    What do we do that Impacts customer success?
Often we ask customers to do numerous many activities which appear sensible  to receive service or indeed buy products. Relating back to the insurance claim we can see rules and procedure around how to make claims, the correct way to complete forms, the process of collating the information, the timeframes within which to claim, the way we can reimburse you and more.  Often times these restrictions that we impose made sense at some time in the past however they may no longer be relevant.

The situation is compounded by the way internal functional specialism focus on project objectives. Richard Prebble, a respected New Zealand politician writes in his 1996 book “I’ve been thinking” of the inability of organisations to think clearly of the amount of work they create and in fact “they spend a million to save a thousand every time”.
His story of the challenge within large organisations is typical “The Post Office told me they were having terrible problems tracking telephone lines … They found an excellent program in Sweden which the Swedes were prepared to sell them for $2m …. So the managers decided to budget $1m for translating into English and another $1m for contingencies. But, as the general manager explained, it had turned out to be more expensive than the contingency budget allowed and they needed another $7m. “How much”, I asked, “have you spent on it so far?” “Thirty-seven million dollars” was the reply. “Why don’t we cancel the programme?” I asked “How can we cancel a programme that has cost $37m?” they asked   “Do you believe the programme will ever work?” I asked “No, not properly” “Then write me a letter recommending its cancellation and I will sign it” The relief was visible. I signed the letter, but I knew I needed new managers.”

This type of inside-out thinking causes companies to create apparently sensible checks and controls within processes that actually manifest as customer inconvenience, cost and delay. Are you making the customers lives easier, simpler and more successful?


V.    The Successful Customer Outcome – what does the customer really need from us?
At this point we should have enough information to objectively create several statements that articulate the SCO. These statements should be specific, measureable, attainable, relevant and time-bound (SMART). Usually there will 6-10 such statements which become the actual key performance measures as move the process Outside-In. For example a North American business school completed the SCO map and created these statements from the customer perspective for an ‘Education loan application’ process:
a.    I need to receive my financial assistance
b.    I need to receive aid  before the semester starts
c.    I need to attend the classes I have chosen
d.    I do not want to call to chase progress
e.    I need to receive the correct amount
f.    I do not want to have to fix your mistakes

There is no ambiguity here and we avoid a common mistake of using management weasel words such as ‘efficient, effective, timely’ which may mean things internally but to a customer are of little help. Creating SCO statements that may be used as measures for process success is a key aid on the journey to Outside-In.


VI.    And now we reach the core of the onion. What is the one line statement that best articulates our Successful Customer Outcome? This one-liner embodies the very nature of the process and sometimes the business we are in. In ‘Thrive- how to succeed in the Age of the Customer’ McGregor/Towers (2005), Easyjet (Europe’s second largest airline) is used as an example in this quest. Their simple “Bums on Seats” SCO sentence works both from a company perspective (we must maximise utilisation, offer inexpensive seats, get people comfortably and safely to their destinations) and the customers needs  “I need a cheap safe seat to get me to the sunshine quickly without a fuss”.  

The company one liner will become part of a series which are measureable through the SCO statements and can be tested and revised depending on evolving customer expectations and needs. It may in fact ultimately replace the inside-out strategic process and provide the organisation with its Raison d’être.

Of course when we start the journey it is often sufficient to create SCO maps to help grow understanding and even if the actual SCO Map is subsequently replaced (as we take a broader view) the improvement in understanding around the customer is invaluable.

In the third part of this four part series we will review “Reframe where the process starts and ends”

Global Business Processes: the means to succeed in the 21st century.

What is a global process and what business benefit does it provide?

Companies with a worldwide presence face many challenges such as globalization, regional trading agreements and the uncertainty of the economic markets. These challenges require a coordinated approach which maximizes the benefits of a world-wide presence and at the same time provide a local focus. Global processes are the way to achieve this balance and include front end activities like customer acquisition or new business processing, support processes like information systems right the way through to back end customer retention and financial management.

How does a company create, implement, and manage global processes?

Co-ordination. Teams need to develop a common process approach which regardless of culture speaks the same language i.e. what is the successful customer outcome (SCO)? Figuring out how work gets done and achieves the SCO is key to global process success. Implementation needs a pragmatic approach which acknowledges cultural perspectives. Bringing a strategic multi disciplinary team together led by qualified process leaders familiar with cultural and economic challenge is a starting point. Rolling out that discipline and process approach through geographic teams provides a means to learn and exchange and grow key processes to maturity.

What are the most common challenges associated with global processes?

Getting everyone on the same page. Even the way we think and speak of processes is different and so developing a common way of looking at work is critical to a successful operation. For instance the ‘collecting the money process’ has a very specific objective however each location may have different custom and practice – how do you ensure a uniform and yet different approach? The underpinning technology that supports a global process can be common, however the business rules that we operate to make sure our endeavour is successful often need to be different.


What is the relationship between global processes and performance improvement?
The relationship is absolute. In the 20th century we may have talked about standardization and conformity. Performance is now much more driven by the capability to act in the moment e.g. a US insurance company has the slogan ‘think global, act local’ which provides both a degree of uniformity and empowers the people locally to act in the best interests of the business – there and then.


Why should the average employee care about global processes?

It is the understanding that there is a framework and common structure to running the business successfully that provides assurance that senior management knows what they are doing and are operating as a team. Process is the way we get work done. It is the way we deliver value to our customers. It’s the way we create profits for our shareholders. This can then be encapsulated in our rewards systems and provide a framework for success, both in process, people, systems and global strategy.

Where in BPM is the Customer?

This is something scribed three years ago just after the launch of the book ‘Customer Expectation Management – Success without Exception’.
Has anything changed? Well yes and no – however you be the judge.

The application of Business Process Management (BPM) is known to have multiple benefits that produce a hard return on investment (ROI). Automation, quality, compliance, management, and optimization of activities represented by business processes are the areas most often cited in this regard. Yet generally the focus of BPM started – and remains – as an “inside-out” perspective, placing hard limits on the benefits BPM can achieve.

At a time where customer satisfaction and loyalty have reached historic lows, and competition has reached its historical peak, the question must be asked, “where in BPM is the customer?” Yes, the customer is a missing piece in the vast majority of BPM practices and products. Management principles have traditionally approached business success from the inside-out perspective, concentrating on margin-based improvements. That made a lot of since during the time when internal activities suffered from substantial bloat and competition was limited by geography and time to market.

Yet over the years we have dipped into that well many times, and the well is about to run dry. Some statistics suggest as we continue to try to achieve the same percentage of gain through each improvement cycle, each iteration produces significantly less tangible value to the organization. It’s a funnel affect that just gets narrower and narrower through every cycle, leaving less and less real benefit for the business.

Meanwhile what is really driving business success? The answer, of course, is the customer. In the 21st Century Value Chain. It is the number of customers and the lifecycle of the business-customer relationship that determines business success.

Known as Customer Expectation Management, the setting of customer expectations and the delivery of those expectations without exception is the “secret sauce” behind the success of market-leading companies such as Virgin, Fedex, Zara, Best Buy, and Southwest Airlines, to name a few.

Many of these market leaders are not competing on price. Sure, their prices are competitive but that is not where their success lies. In many cases they are even able to charge a premium for their products because they are setting and managing customer expectations with a vengeance. They are telling customers what to expect, making their customers’ lives simpler and easier while delivering on these expectations with consistency.

Meanwhile, price competitors are stuck in a no-holds barred dogfight for the worst customer any business can have, the customer who buys predominately by price. There is no place where customers are less loyal and more demanding than in the arena of lowest-price decision buying.

Taking Customers to Heart
Yet BPM by-in-large doesn’t include the customer except as an adjunct to inside-out activities. Improving quality and streamlining processes can help reduce really poor customer experiences or align a business with the market expectation a competitor has set. But these are only secondary effects to the goals of reducing internal costs, increasing worker productivity and so on.

In an age verging on unlimited choice, global competition, and customers often livid with dissatisfaction, the only way to be a market leader is to be a customer leader. We all know that our businesses must have customers and we have all had our share of unsatisfactory customer experiences. In spite of this, why is it so difficult for us to quit viewing our business from the inside-out? Habit and tradition is all that is holding us back. Will we allow our history to determine our future? It’s our choice.

Is there a way to know if the customer is really part of the BPM practice?
Absolutely. Take a look at your business processes. All business processes have an outcome, right? So how many of your business processes have a customer outcome? What about the concept of a successful customer outcome (SCO)?

To fulfill its destiny of being the Next-Generation Business Enabler that its proponents want it to be, BPM must realign its focus to the customer. Business processes must focus on the customer, minimize potential points of failure (such as Moments of Truth, which yield either Moments of Magic or Moments of Misery), and produce successful customer outcomes at all points where the customer touches the business.

That’s the essence behind Customer Expectation Management. It is the critical element in the drive to increase growth and profitability. Traditional inside-out process improvement leverages customer success by maximizing the net positive effect to the organization’s bottom line but it won’t create success by itself.

The only reason we are here is to serve our customers and by serving our customers, making their lives simpler and easier, and helping them be successful we will make our businesses successful. It’s simple and straightforward. Focusing on the customer from the customer’s point of view is our opportunity to achieve the success we all want. It’s the experience we all want when we are in the role of the customer. It should be at the heart of everything we do and should be woven into the fabric of every application and system we use.

Will BPM be a cornerstone in the creation of success for your business?
It could be, but the question you should be asking yourself is far simpler:
Is the customer at the heart of your BPM plan?

The principles above are derived from direct experience and research within world leading companies. Prospective Certified Process Professionals gain full exposure to the techniques, tools and CEMMethod(tm) in the Business Professional programme