of CEOs surveyed recently claimed that their organizations delivered an exceptional customer experience.
of customers of the said organizations agreed.
This chasm between what
service providers think and what their customers think has a new name – the experience gap.
Mature customer experience
programs have five principal objectives:
Improve customer retention and loyalty.
Increase customer share of wallet and lifetime
Optimize customer acquisition.
Reduce cost to serve.
Improve brand awareness and equity.
CUSTOMER RETENTION AND LOYALTY
Why do customers desert and
How many organizations can
you think of that have high retention rates rooted in great customer experiences?
The fact remains that no
matter what, some customers will defect. Any organization that claims to have
zero or near-zero defections is living in a
The best organizations are happy to have single-digit defection rates.
According to the TEMKIN Group:
Apostles have 6 – 12x more customer lifetime value
than defectors, hostages, and mercenaries.
A Bain and Company study shows that 86% of customers are willing
to pay more for a better customer experience.
What is holding back
organizations from providing the “better customer experience”?
appears that the tools we use to measure customer satisfaction are flawed.
Consider a typical Likert
Scale of 1 – 5 where one is “very
dissatisfied” and 5 is “very satisfied.”
Most organizations would
consider a score of 4 to be good and acceptable.
And they would be wrong.
A Forrester Study shows that customers who rate their experience at 5
are 6x times more likely to recommend the product or service to others compared
to those who rate their experience at 4.
Further, customers who rate
their experience at 5 are 4.5x times more willing to pay a higher price than
customers who rate their experience at 4.
The problem is that customer satisfaction surveys are lagging
indicators. The more the interval between the experience and the feedback,
the more distorted is the result.
What is the solution?
scales that force customers to take a position and avoid ambivalence
(neither satisfied nor dissatisfied).
One change that I see in the
great organizations is the speed with which they gather feedback. For example,
all the Ivy League institutions
implore you to provide feedback the moment
a Webinar is over. And consciously
work to avoid the pitfalls that you may point out.
To quote the Wallet Allocation Rule:
“Customers may be satisfied
with your brand and happily recommend it to others – but if they like your
competitors just as much (or more), you
are losing sales.”
In fact, recent studies show that Customer Effort Score (CES) is a better predictor of the propensity to repurchase as well as increased spending than either Net Promoter Score (NPS) or Customer Satisfaction Score (CSAT).
Swiss Re, a leading global re insurer made the painful decision to jettison unprofitablesegments (it is still true that 80% of revenues emanate from 20% of customers), measured the cost of customer acquisition (both visible and invisible costs), captured instant feedback, adjusted strategic initiatives and improved its market share by 3% in just six months in a highly competitive market.
COST TO SERVE
industries and markets, the difference between the winners and the also-rans is
often the cost to serve. Creative organizations incentivize performance that
matters (customer loyalty and higher spend) and are quite ruthless in punishing
underperformers. It is vital to track costs in real time. Since accounting
tends to be historical in nature, organizations may find themselves out of
their depths by the time they realize something is amiss. The key drivers of
marketing efficiency and the corresponding costs are best measured synchronously so as to derive the best ROI on every
research by the Temkin
Group shows that happy customers are:
5x times as likely to
6x times as likely to
8x times as likely to try the
organization’s other offerings.
3x times as likely to spread
BRAND AWARENESS AND EQUITY
Customer experience programs
seek to change brand detractors to promoters and promoters to evangelists or
apostles. Mature CX companies combine analytics and comparative assessments to
understand customer behavior and brand performance in the context of competing
options (Source: QUALTRICS).
Customer centricity is not a
Customer focus is not a
Placing the customer at the
focal point at every level in the organization is critical to success. In the
words of Chris Fisher of Allianz, “True customer-centricity is a culture and a way of doing business that
will help us grow and be successful for decades.”
According to Forrester Research:
of firms aspire to be a CX leader.
1 in 5 ultimately succeed.
are you on this journey?
For an extensive discussion of CX Maturity Levels, please read the White Paper by QUALTRICS.
Gallup‘s employee engagement survey for 2018 highlights the following:
A mere 34% of employees said they were “engaged” at work (engagement has remained flat since 2000).
A majority of employees (53%) were “not engaged.”
Another 13% were “actively disengaged.”
In reporting these figures the Gallup organization notes:
employees are involved in, enthusiastic about, and committed to work.
Employee engagement is strongly connected to business outcomes. Engaged
employees support the innovation, growth, and revenue that their
companies need. Yet, most U.S. workers continue to fall into the not
engaged category. These employees are not hostile or disruptive. They
show up and kill time, doing the minimum required with little extra
effort to go out of their way for customers. They are less vigilant,
more likely to miss work and change jobs when new opportunities arise.”
Aon Hewitt defines engagement as the psychological state and behavioral outcomes that lead to better performance. The Aon Hewitt engagement model examines engagement outcomes as Say, Stay, and Strive.
Say – speak positively about the organization.
Stay – have an intense sense of belonging to the organization.
Strive – are motivated and exert effort toward success.
Michael Porter, Jan Rivkin, Mihir Desai, and Manjari Raman of HarvardBusiness School, in their report on the State of U.S. Competitiveness 2016 (September 2016) provide a dismal state of the U.S. economy:
“U.S. competitiveness has been eroding since well before the Great Recession. America’s economic challenges are structural, not cyclical. It is imperative that Americans understand why U.S. performance is weaker than in recent generations and how solving our real problems will require us to make compromises. The fundamental manifestation of competitiveness is productivity. Only through productive citizens and a highly productive environment for business can a nation’s firms pay high and rising wages while still being able to compete successfully in the national and global economy.”
systematic underinvestment in key elements of the commons, along with
an inability to mount real solutions, has undermined both overall
productivity and shared prosperity.”
writing on the wall is clear. U.S. competitiveness has steadily been
declining for nearly two decades. Productivity is at an all-time low.
Real investments in growth sectors have declined while entitlement
investments have risen. Businesses are happy to invest in efficiency
innovations that churn out more and more cash but are
employment-negative. Both income and wealth inequalities are increasing.
The existing management models are broken. It is time for a new
(for an enlightening view of the consequences of zero interest rates, please read: Christensen, Clayton and Derek van Bever: The Capitalist’s Dilemma, Harvard Business Review, June 2014)
Throughout recorded history, breakthroughs in civilization have occurred at different times. Many scholars, notably Jenny Wade and Ken Wilber,
have tried to explain evolution as well-defined constructs. One of the
vivid forms of understanding evolution is through colors – from
infra-red to blue. Frederic Laloux has portrayed the stages in terms of organizational design and outcomes in his fascinating book, Reinventing Organizations, Nelson Parker, 2016.
we invent a more powerful, more soulful, more meaningful way to work
together, if only we change our belief system?” – Frederic Laloux
Evolution from Red to Teal:
The Red (impulsive) paradigm is 10,000 years old. A strong leader has absolute power
over members of the group. Power structures can change when incumbents
are challenged by stronger personalities. In today’s context, the red
organization is exemplified by street gangs, mafias, and brutally authoritarian regimes. The key breakthroughs are top-down authority and division of labor.
The Amber (conformist) paradigm is illustrated by a tall hierarchy with well-defined lines of authority and control.
Job titles and job descriptions describe people. Command and control is
the dominant leadership style. Those lower down in the hierarchy simply
follow orders. Typical Amber organizations are many government entities, the Catholic Church, the military, and public schools. The key breakthroughs are a stable organization chart and repeatable processes.
The Orange (achievement) paradigm is defined by the pursuit of innovation and profits. Project groups, cross-functional teams, virtual collaboration, and staff functions become the norm. Orange is the dominant world-view today. The dominant metaphor is organizations as machines
– with inputs and outputs, efficiency and effectiveness, information
flows, performance measurement. Large organizations – from BMW to Exxon
to Coca Cola – typify the Orange stage. Breakthroughs at this stage are
through innovation, meritocracy, and accountability. The positive aspect of the Orange paradigm is that it has lifted hundreds of millions out of poverty. The flip side it is an absolutely materialistic model that cannot provide a sense of meaning to life.
The Green (pluralistic) paradigm tries to overcome the limitations of Orange by looking at organizations as families.
Green leaders insist that people are not cogs in the organizational
machine. People are supposed to look after each other, in the nature of a
community. Every member’s “happiness” is considered to be important for organizational success. The breakthroughs are in the form of stakeholder value, a values-driven culture, and empowerment.
Examples of Green organizations include iconic companies such as
Southwest Airlines, Ikea, and The Container Store. The problem with
Green is the muddy disconnect between precept and practice, between espoused values and reality. Green has aspirations towards egalitarianism but falls short due to the inherent conflict between stakeholders, and the failure to get rid of hierarchies.
Since even Green has failed to achieve the notion of a welfare state or happy people who find meaning in life, it is time to think of a new model – Teal. Teal is an inward journey toward self-discovery, and simultaneously reaching the Maslowian level of Transcendence where the larger good defines our thoughts, words, and deeds. Teal requires a conscious abandoning of the ego, a sense of inner right as a compass, and a yearning for wholeness and meaning, a deep realization of our inter-connectedness. Teal organizations have no structure (and thus are similar to Holacracy) and are like cybernetic systems with complete feedback and open discussion opportunities (and thus are similar to Sociocracy).
Examples of successful Teal implementations include Buurtzorg
(Netherlands), RHD (US), Heiligenfeld (Germany), Morning Star (US), Favi
(France), and Patagonia (US).
It is important to note that the different stages are not mutually exclusive. There can be an overlap. As an example, in a crisis situation, the Orange or even Amber paradigm might be a good option. Once the crisis is over, the system can return to its stable state.
Here are 7 ways you can reduce stress. These are based on scientific studies and the advice of experts.
1. Live the moment – one task at a time.
Look around you. Everyone seems to be in a hurry. Multi-tasking (even while driving) is the norm.
Slow down. Breathe deeply. Prioritize. Stick to one task at a time. Take a 7-minute break every hour.
Remember: Results are more important than the time it takes to achieve them.
2. Accept what you cannot control.
“Grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.” – Reinhold Niebuhr
An earthquake hits some part of the world. A tsunami strikes another part. War rages in yet another. Do you have control over these? Probably not.
You do have control over how you use your time. You do have control over how you treat your loved ones. You do have control over your food habits, exercise, and trying to be helpful.
Most important, with each experience, understand what you can control and what you cannot.
3. Accept people just the way they are and smile.
Face it. We live in an imperfect world. Every time we point a finger at someone, remember that at least three fingers are pointed at ourselves. Learn from history. In 10000 years of recorded history, you cannot come up with one instance when blaming someone has solved a problem.
4. Take a Walk.
A 10-minute walk can do wonders to your body and to your mind. Further, it gives you something new to look at and will stimulate the production of positive chemicals. Your body is the greatest instrument you own. Use it in ways that your creator (or nature) meant it to be and see the stress running away from you.
5. Track what is going well and be grateful.
Very often, we feel miserable thinking of what might be. Instead, try being grateful for what is. Watch the difference.
6. Purge untrue thoughts.
Learn a new way to think before you can master a new way to be. Behind every stressful feeling is an untrue thought. Get rid of it. Before the thought, you were not suffering. After the thought, suffering began. The moment you realize the thought isn’t true, the stress just disappears.
7. Live your life.
Stop comparing yourself with anyone. Although 98% of our genes may be the same, the 2% makes each of us unique. That is true even of twins.
Be yourself. Don’t try to live someone else’s life.
May you be blessed with happiness and peace.
Caution: These are not meant to be substitutes for obtaining appropriate counseling if you are experiencing severe symptoms of stress.
We are living in a kind of time-warp. If the International Monetary Fund is to be believed, the world has never been more prosperous than it is today. A World Bank policy paper of 2012 claims that billions have moved out of extreme poverty. Really? The paper admits that 1.2 billion people still (in 2012) live on less than $1.25 per day and yet tries to argue that extreme poverty is on the decline. Here’s the grim reality: About 10% (600 million) of the world’s population lives on less than $1 per day. Nearly 50% live on less than $2 per day. And yet, we are expected to believe that billions have moved out of extreme poverty.
Next, look at the turmoil going on in different parts of the world. Nationalist tendencies are being exhibited in various forms. It appears as if the gains of global economic integration that have evolved over the last three decades may be lost. I consciously avoid using the term “globalization” because even at its zenith (as reflected in Thomas Friedman‘s book The World is Flat) real indicators of the free movement of all factors of value creation were nothing to rave about (for an excellent dissection of the illusion of the flat world, please read Pankaj Ghemawat‘s Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter).
To understand the possible causes for the apparent paradox – so much anxiety and unrest at a time ofunprecedented prosperity (?), it might be useful to recount two scenarios enunciated more than a decade ago and which are even more relevant today:
Sufiya Begum is a maker of bamboo stools in a developing country. She needs twenty-two cents to buy the raw materials for making the stools. Since she does not have the money, and does not have access to institutional finance, she has to borrow it from middlemen, and is forced to sell the completed stool back to them as repayment of the loan. What does she have to show for all the effort? Two cents. How can she break away from this vicious cycle of extreme poverty? How will she send her children to school? What do the world’s largest financial institutions have to say to this sad and eminently avoidable calamity?
In another part of the world, Kevin Taweel is about to graduate from an Ivy League business school. Although he can get an attractive job at a fancy salary, he wants to be his own boss. Along with another like-minded fellow graduate Jim Ellis, he sets up a Search Fund and raises $250,000. It takes 18 months for the pair to identify a target – Road Rescue, an emergency road services company. The owner wants $8.5 Million to sell out. Kevin and Jim are able to raise the money from institutions and the original investors of the Search Fund in just 24 hours. Kevin and Jim manage the company very well. Within six years, revenues sky-rocket from $6 million to $200 million. Kevin and Jim buy back the shares from the original investors at $115 per share on an investment of $3 per share. Everyone is happy).
[Excerpted from Saving Capitalism from Capitalists: Rajan Raghuram R and Luigi Zingales (2003)]
It is clear that we neither want to learn from history nor do we want to find solutions to problems. Japan continues to be in a tailspin and you are left wondering what happened to the innovations that were being churned out with clock-like precision. As Professor Clayton Christensen has noted, the only innovation that has come out of Japan in the last twenty years is the Nintendo Wii. No one is sure what the consequences of Brexit are and nationalist forces are raising their head across Europe and across the Atlantic as well.
The reality is that in an era that is marked by rapid technological change, where new jobs are not being created and existing jobs are being partially or fully automated, and increased pressures on cost mean that it is very difficult to have appropriate increases in real income, we continue to measure growth with clearly outdated concepts such as GDP. The real wealth of a country today is no longerconfined to goods and services. Value creation is often in tacit knowledge, imagination, and the ability to make meaning out of extremely large amounts of what appear to be chaotic data streams. How do we factor these into our economic measurements?
Let’s face it. Inequalities have increased – between urban and rural communities, young and old, educated and otherwise, and any other measure of your choice – globally, 1% of people control 55% of the world’s assets (Global Wealth Report, Credit Suisse Research 2018).
Rich Lesser, Martin Reeves and Johann Hamoss of the Boston Consulting Group (BCG) argue in their excellent analysis (Saving Globalization and Technology fromThemselves, July 2016) that it is up to corporations and leaders to change track and set a new agenda to shape the future.
They offer a seven-pronged approach to shrink the inequalities and to usher in a new global order.
Among these, I find the arguments for a “Social Business Mindset” and “Investment in Human Capital” particularly compelling. Of course, the call for an emphasis on pro-social goals is not new.
Professors Julian Birkinshaw, Nicolai Foss and Siegwart Lindenberg have shown in their paper Combining Purpose With Profits (MIT Sloan Management Review Spring 2014) how firms with pro-social goals can have superior performance and also happy stakeholders (customers, employees, suppliers, shareholders, and society).
Unfortunately, there is not much evidence that leaders are listening.