Four ways to get customer experience on your CEO's agendaby
Jack Springman explains how to make the case for investing in the improvement of your customers’ experience, in a way that will appeal to senior managers.
15th Sep 2010
Delivering a superior experience to customers is a powerful – arguably the most powerful – differentiator that a business can deploy. Yet in many companies, customer experience management is treated as a tactical rather than strategic issue, to the great frustration of those responsible for it.
As my next article will highlight, much can still be achieved through low cost, tactical initiatives. And in companies where senior managers are likely to be sceptical about the benefits of ‘soft’ differentiators such as improving the emotional engagement with customers, tactical initiatives are probably the best place to start, with the results providing the ‘hard’ evidence that such executives demand.
But even when armed with such data, customer experience professionals will need to make their case in a compelling way if they seek recognition for the importance of the customer experience agenda, its elevation to the strategic level and the investment that typically requires. The following steps can help achieve this.
1. Seeing the CEO as an internal customer
It is understandable that customer experience professionals should see their domain as being the most powerful source of differentiation (I certainly do); and therefore the most effective way to generate organic growth and most deserving of management attention and corporate funding. The trouble is that other functional managers will believe the same about their own areas – R&D professionals may believe product development is key to growth; supply chain managers may see strengthening the procurement capability as critical for achieving cost competitiveness; and operations managers may argue that investments in new machinery to reduce defects will please both customers and reduce the costs of re-work. The internal competition for time and money is tough.
The advantage that customer experience managers have is that the necessary response – treating the CEO as a customer – should come naturally. As with any customer, it is important to see things from his or her perspective – seek to understand what he/she is trying to achieve, his/her pain points and the opportunities that are ‘hot buttons’. To win the CEO’s support, what is required is a compelling case for investment – both in absolute terms and relative to other initiatives competing for funding – and that requires really understanding the pay-offs that the CEO is seeking by walking in his/her shoes.
2. Making the CFO your coach
In any compelling case for investment, the predicated financial returns are critical; in particular, understanding the scale of return required for grabbing the CEO’s interest. The CFO can provide some coaching on this, firstly to outline what the CEO's priorities are (in terms of revenue growth versus cost reduction). But more importantly, the CFO can provide guidance on the size of profit uplift that will register with the CEO as being significant; also on the return on investment and other acceptance criteria that will be applied. (For example in one business we worked with recently, the CFO highlighted that if the profit impact was less than $1 million it would be of no interest to his boss but if it was over $5 million she would want him to be all over it.)
Determining the profit increase necessary to hold the CEO’s attention sets the financial target, but that is the easy part. The harder part is working out how that will be achieved in terms of acquisition of new customers, reduced customer churn, increased business with existing customers or increased profitability on the same level of business with existing customers.
Ultimately, to make customer experience a strategic initiative, customer experience managers will need to sign up to delivering a set of financial targets and convince senior managers of their credibility in how they plan to achieve it. And if through the coaching received they have gained the trust and support of the CFO, they will have an influential advocate in resource allocation decisions.
3. Aligning customer experience with how the CEO articulates strategy
Passing a financial threshold, either in terms of ROI or profit uplift, is a necessary but not sufficient condition for customer experience to be seen as strategic. In addition it needs to be seen as a key component of delivering the business’ strategy and reinforcing its sources of differentiation.
As Michael Porter has argued, the starting point for any strategy is the value proposition for customers. Peter Drucker made the point even more strongly, stating that the "purpose of a business is to create a customer". Businesses can generally differentiate themselves in how they create value for customers in one of three ways – through offering the best products (product leader), offering the lowest prices (cost leader) or delivering the best overall solution (often described as being most customer intimate).
In the case of the last one, customer experience is critical – it is the differentiator. Differentiating on superior customer intimacy is arguably the most powerful of all three. But it is also the most difficult, requiring a greater outside-in perspective than the others to ensure that the superior experience genuinely delivers value for customers. And it also requires high capability levels to ensure that the superior experience can be delivered consistently; (capability levels being a function of the processes in place, the system-enablement of those processes, organisation design, roles definition and performance management, competencies and culture).
But even with a strategy of cost or product leadership, the customer experience needs to be designed. Its strategic importance will be slightly less, but it still needs to align with how the business tries to create value for customers and capture value for itself. So for a cost leader, the customer experience strategy may focus on offering the best self-service experience. A product leader may choose to design its experience so as to provide industry-leading technical support. Customers still have an experience whether that has been consciously designed or is a random product of service evolution. So it is far better to manage it than not. And most important of all, it needs to be strategically aligned.
The three main sources of differentiation are primarily a means for categorisation and most CEOs are unlikely to articulate their strategy using such terms. Investing in customer experience needs to be mapped against the language the CEO uses, how he/she describes how the business will differentiate itself.
For example, if the CEO is stating that the business will increase its value addition to customers to differentiate against commodity offerings (e.g. imports from low cost countries), showing how investing in customer experience, for example by enabling greater service pro-activity and customisation, is supportive of this provides strategic justification for it. Equally it is necessary to show how a programme to improve customer experience will fit with existing initiatives – showing how it will enhance without delaying, derailing or devaluing them.
4. Committing to win the CEO’s head, then heart
Making customer experience an agenda item starts by winning the CEO’s head. But if the objective is for customer experience is to become a sustaining differentiator, the ultimate aim should be to win the CEO’s heart. The businesses that continually rank high in polls on customer experience are those that believe it is the right thing to do, the ones that have made customer-centricity a corporate value.
In Built to Last, Jim Collins and Jerry Porras defined a corporate value as being something that a business would continue to do, even if it became a competitive disadvantage. When that test is applied, a value – something that collectively the business believes in deeply – can be distinguished from an intended differentiator.
Perversely, the more a business believes in the importance of customer-centricity – the more senior managers genuinely follow Drucker’s philosophy of the purpose of a business – the more customer-centricity becomes a source of competitive advantage. (So long, of course, as pricing reflects a fair sharing of the additional value created between the business and its customers – services aren’t given away free in name of customer-centricity – and the costs of being customer-centric are monitored and managed.)
Such a bold target will not be right for every company. Some will be happy with more incremental advances, but all would benefit from thinking strategically about designing and managing the experience provided to customers. Convincing sceptics of that is the biggest organisational challenge that customer experience managers face. Evidence of the impact that improving customer experience has on financial results can help in this regard. And next week’s article will outline how tactical initiatives can be used to generate the evidence required to make customer experience a strategic agenda item.
Jack Springman is Head of the Corporate Advisory Group of consultancy Business & Decision.
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Spot on with your summary "all would benefit from thinking strategically about designing and managing the experience provided to customers".
One very powerful way to start this process is simply to video customers having a dire experience. Realising that the customer experience is all about the customer and not the supplier can be a massive wake-up call.
We're currently doing some research into the "recipe for succesful customer engagement" so if anyone wants to offer any examples, please drop a note to [email protected]. Our thinking will soon be freely available on our website if you want to read more http://www.ctrl-shift.co.uk
I recently saw some Forrester Research on customer experience programmes which cited a lack of senior management involvement as one of the main obstacles for improving the customer experience. I have written a few blog topics on CEO involvement in customer experience initiatives. These can be viewed on the SynGro blog if anyone is interested in reading more about the CEO and his/her involvement in customer feedback programmes. http://blog.syngro.com/post/2010/06/23/Customer-engagement-the-CEO-you-should-be!.aspx
The Customer Contact Council conducted a study about customer experience. It has been published in the Harvard Business Review, edition July/August. The article is called "Stop trying to delight your customers". It is interesting reading material. I wrote a series of blogs about it. This is one: http://customerprocessmanagement.blogspot.com/2010/09/customer-effort-score.html
Lately I read a lot of articles and blogs about a more strategical approach of customer service and customer experience. Most describe a top down approach. The CEO decides to allocate the money and resources to the customer service departments. But I wonder, could this model not be turned around? Is it not possible for a service department to allocate the resources differently? on an operational level, when given some autonomy? Customer Service Centers deal with customers every day. The employees involved should be able to address the biggest issues and the most effective way to solve them. It does not necessarily have to cost a lot of money.
Point #3 is critical, not only to gain CEO attention and support, but also to provide customers an experience consistent with the brand. In other words, your customer experience strategy shouldn't resemble a high-end boutique approach to customers if you happen to be a big box discount store (to put it into its simplest form). As Mr. Springman notes, your CEO won't support a strategy that is not aligned and supportive of your overall corporate strategy, but even if s/he does, you're likely destined for failure. You won't be meeting your customers' expectations of your brand, the experience will be incongruent with all other parts of your business, and the type and quality of your people won't match their new expectations.
Alignment with corporate strategy is just one of the critical items that any customer experience strategy needs to have, and it is an important part our customer experience strategy development methodology at Andrew Reise Consulting. Anyone wishing to discuss more can reach me at [email protected]