Tag Archives: Strategy

We Need To Talk About Metrics


Cart-before-horseThe cult of metrics can get in the way of delivering value.

A little while ago – 1988, according to the OED –  people started using the word ‘metrics’ in the way we use it today.  Businesses took up the term, motivated by a belief that they needed to measure things if they were to manage business performance.

Of course, businesses have always measured what they do. But the advent of lean thinking, global competition and, most of all, the growing adoption of computers and spreadsheets all about this time meant that an organisation that lacked firm control of their business would be (and were) killed off by competitors who had learned to run tighter ships.

So, metrics.

And since then? On the back of Kaplan and Norton’s balanced scorecard (a good thing), Key Performance Indicators (KPIs*) (via Mack Hanan in 1970), Statistical Process Control (SPC) (also a good thing), Six Sigma (a good thing in the right place), Management Information Systems (MIS), Business Intelligence (BI), data analytics, dashboards and now, Big Data, metrics have become an industry. Many businesses employ phalanxes of analysts and banks of computers to ‘crunch the numbers’.

Now in many organisations, the first response to a proposal to do something new or better is “…how will you measure it?” (And not, you’ll notice, “…why do we want to do this?”)

This is a shame.

In business, the things we do, we do because they are important and will make a difference: to our organisation, to our customers, to our people. What we want to achieve, the value we are aiming to get, is much more important than how we choose to measure it.

Yet too many organisations put the metrics cart before the value horse.

Important things get slowed down – or stopped – because we can’t agree on what metrics to use, or we need to wait to set up a reporting mechanism, or we are waiting for our technical people to “…set up the system” so it can measure and report.

The effect is that important things get lost, or are delayed, and the cost of doing business goes up.

Worse, we end up delivering projects that meet their metrics but miss their goal.

In extreme cases, metrics can become a madness that infects almost every business conversation. I once found myself working in an organisation that had 43,000 metrics in place.

Yes, they had the madness so badly that they had measured their metrics.

*Sigh*

Yet here’s the thing.  The purpose of metrics isn’t to measure something. Their purpose is to give decision-makers a way to pay attention to something important in our business, over time.

But people can only pay attention to about seven things at a time. Any organisation has a core of a few things to which it needs to pay attention just to keep things going. Money, for example, or customers, or the amount of work we need to do, or quality, or risk.

If we can only pay attention to seven things, we have only a little room to pay attention to anything else: the things we need to change or make better. We need to pick these things to which we want to pay attention very carefully if we want them to succeed.  They need to be important.

And if we have to pick our way through hundreds or thousands of metrics, then we can’t focus on these one or two important things.  Or if, by some monumental effort of concentration, we can focus on these one or two things, we can only do so for a moment, before we are distracted by something else.

This is one reason why so many important initiatives hit the sand; why ‘Top Management attention’ is so transitory; why we lose sight of our goals in the middle of projects – because too many things are competing for corporate attention.

This is not to say that we don’t need metrics. On the contrary, having the right metrics against good standards with effective, practical and timely mechanisms for reporting them, is more of an imperative than ever.  The argument for keeping tight control of business essentials is much stronger now than it ever was in 1988.

We have to begin the conversation about metrics differently. Perhaps we should start by asking what do we need to pay attention to, and why do we need to do so? If we can only play attention to seven things, what are the seven in which we want to invest our time and attention?

The dirty little secret of metrics is this: if they don’t help us to pay attention to the things that are important, then they are a distraction, and are stopping us from running our business properly.

For the key to getting things done in business isn’t to measure things – it is to pay attention to them.

 

*(For those of you interested in this kind of thing, the first recorded use of the term “Key Performance Indicator” (KPI) that Google can find is in a book called Wholesaling Management: Text and Cases, edited by Richard Marvin Hill in 1963 – then nothing until 1974…  (Google Ngram Viewer: cool or what?))

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Why our customer experience is damned

Hellfire and Damnation

You can please some customers all of the time.
You can please all customers some of the time.
But you can’t please all of your customers all of the time.

(With apologies to Abraham Lincoln and John Lydgate)

Here’s the thing: I hate to be helped in shops. I don’t like it when an assistant approaches and asks “Can I help you?”  That’s just me. Maybe it’s because I live in England.  I want to make up my own mind and seek help from an assistant when I want it.

My friend, on the other hand, likes an assistant to help him. He resents it when he sees staff standing around, not offering to help. He wants them to come up and ask.

What’s a shop to do? The customer experience they offer is damned if they do and damned if they don’t.

Many companies try to please everyone. They try to cover all the bases. They attempt to offer an experience that handles their main set of target customers and the others, the exceptions. Result? The experience they offer is confusing. They serve neither set of customers well and both groups of customers become unhappy and leave.

In our businesses we want to avoid this. We must analyse customer data to get insight into what matters to our target customers. We must combine this insight with our own understanding of what we are good at, to think about the experience we want to offer.

Then we must choose to provide the experience that works best for the customers we want to get and keep.

When we do, we know that such an experience won’t work for all customers. But we accept this because we will be confident that it will work for the majority of those we want to serve.

The customers we lose are the price we pay to enable us to offer a great experience for our target market. Why is it worth paying?

Because if we can truly offer a great experience for their target market, then we have a real edge over the competition. We will secure a greater market share. And we can seek higher margins as our customers accept that higher value justifies higher prices.

Even better, we save money. We won’t waste time, resources and attention on exceptions and variations for customers whom we are not targeting and from whom we will get little return.

Of course, the bright reader (and all my readers are bright) will have spotted what has happened here. The quality of customer experience we offer corresponds directly with the quality of our business strategy.

If we have made clear strategic choices about the customers we want to serve, we can confidently provide an experience that they will value.

If our strategy is unclear? Then we can only offer a confused or ambiguous customer experience.

So yes, our customer experience is damned. But it can happen in two ways. It can be damned because we choose to serve our target customers brilliantly and with confidence because we know who they are. By doing so, we are willing to accept that some current customers won’t value the experience we offer and may leave. And we accept this cost, because the payoff for our core customers – and for us – is so great.

In this case, our customer experience is a clear expression of our organisation’s strategic intent.

But the second path to damnation is far, far worse. It happens when we try to please everyone, because we don’t know (or are unwilling to choose) which customers we want to serve. Then we can’t offer a winning customer experience because we have to compromise to try to keep everyone happy.

In this case, the customer experience we offer is equally an expression of our organisation’s strategic intent. But what it expresses is ambiguity and confusion.

Keeping everyone happy may be a good intention, but it is also the road to Hell.

So maybe we have to accept that our customer experience is damned. But let’s choose how we want it to happen. For when we do, we give ourselves a chance to give our customers an experience that will make a real difference to them and to us.

(Image credit: Hellfire and Damnation by Jocelyn under Creative Commons License)

Ryanair: kings of the customer experience.

Image of Michael O'Leary 2/06/2011Silver tongued charmer

“You’re not getting a refund, so **** off. We don’t want to hear your sob stories. What part of ‘no refund’ don’t you understand?”

“People say the customer is always right, but you know what – they’re not. Sometimes they are wrong and they need to be told so.”

“Mother pays £200 for being an idiot and failing to comply with her agreement at the time of booking. We think Mrs. McLeod should pay €60 [just] for being so stupid… Thank you, Mrs. McLeod, but it was your ****-up. We’re not changing our policy.”

“We already bombard you with as many in-flight announcements and trolleys as we can. Anyone who looks like sleeping, we wake them up to sell them things.”

Michael O’Leary is the CEO of Ryanair, a European budget airline headquartered in Ireland. The quotes above are some of the things he has said at press conferences and results announcements over the years; this thinking is reflected in the uncompromising ways in which the company operates. In many ways, he is the antichrist of orthodox customer experience thinking.

The Ryanair Customer Experience Paradox

According to much customer experience orthodoxy, Ryanair should be in serious trouble. Poor customer experience should result in customer dissatisfaction, disloyalty, social media backlash and poor brand reputation.

And it does.

In spades.

But here’s the thing.  The customer experience Ryanair offers does not  affect the bottom line. In fact, one might argue that it is a major reason for Ryanair’s consistent, spectacular bottom line growth.

Ryanair has just announced yet another set of stellar annual profits. To March 2013, the airline made  operating profits of €718m ($924m) on revenues of €4.88bn ($6.28bn), up 11% from last year.  And this is no flash in the pan: Ryanair consistently grows revenues and profits every year. Ryanair is a company that likes recessions.

Something is amiss.  And on the basis of the company’s sustained growth and returns, it doesn’t look like it’s Ryanair. So is received customer experience wisdom mistaken?

And if so, does this mean that we should abandon our efforts to improve the customer experience?

Just the opposite.  Ryanair succeeds (and its CEO is noteworthy) precisely because it is one of the few companies to have understood exactly the customer experience that it needs to compete strategically – and then makes sure this is what it delivers.

Ryanair proves the strategic case for customer experience

Ryanair is a lean, low cost airline.  It sets expectations for customers about how it works and what it will and (and particularly) won’t do.

It does not burden itself with the very high costs associated with exceptional customer service, because it offers very little by way of customer service.  This is why O’Leary is so uncompromising about refunds – because if Ryanair compromise on this once, they will have to do it again.  And then they will need to employ people to manage refunds. And they will get more complaints, because customers will think that they might get something by complaining.

So Ryanair will have to staff a complaints department.  And this will lead to escalations, and reporting, and budgets, and bureaucracy, and management’s attention will get distracted by customer issues, and this will take their eye off the ball of running things very cheaply and efficiently.

And at that point, their cost base will have ballooned and they will no longer be competing on cost.  (And then their competitors will kill them by competing on service).

Instead, Ryanair are very explicit about the customer experience they offer.  They are low-cost. They will get you there, on time. With your bags.  That’s it.  No other promises. They deliberately limit the customer experience and manage it tightly because doing so is essential to their strategic success.

And against these things – the things which, because they really understand their customers, they know are most important to them – Ryanair are among the best in Europe.

And this is the lesson Ryanair teaches all of us about the customer experience.

Customer experience is not about being nice,
it’s about meeting strategic goals

We must not fall into the trap of blindly accepting that our goal is to make things a great as we can for customers. This is not the purpose of customer experience transformation.

Our purpose is instead to specify, build and deliver the customer experience we need in order to meet our organisations’ strategic goals.  And then we must drive this experience as ruthlessly and singlemindedly as Michael O’Leary drives Ryanair to succeed.

Ryanair and Michael O’Leary are, in effect, posing each of us a very challenging question:  what is the customer experience our companies need to offer so that we can best meet our strategic goals?

PS I hate flying by Ryanair, but I do so when I have to. 

(Image credit: ilovemyirishculture.com under a Free Art License)

The customer experience is about more than fixing things.

Perusing books at Selfridges 1942It’s about employees

At the start of the year, Forrester Research‘s Kerry Bodine and colleagues made some predictions about the areas which will grab attention in the customer experience space this year.  One prediction was that employee engagement will be “…white-hot…” in 2013.

They may be right.  The good folks at HCL have been making this point for some time and attribute their startling growth to an “Employee First, Customer Second…” approach.  In 2010, their CEO, Vineet Nayar, even wrote a book about it in 2010.

Unusually for a CEO these days, at the time of writing some three years later, Mr Nayar is still in post and the HCL stock price appears to be doing very well. Perhaps there is something in what he says.

The core idea, I think, is this: employees are the company.  They make the difference for customers.  If they are happy, motivated and enabled to succeed, then a good customer experience may be possible.  If employees are unhappy, unmotivated or not equipped to succeed, then nothing we try for the customer will really make much difference.

It is in our control

For those of us interested in customer experience transformation, this perspective offers another potential bonus: while we cannot manage our customers, we can and should manage our people. The challenge of working with our people to make things better for customers is in our hands, no-one else’s.

I believe that how company drives its people to make things better for customers indicates whether a company regards the customer experience as an overlay on their “core business’ of selling, shipping and service – or if their approach to customers reflects serious strategic intent.

As Jeff Bezos, CEO of Amazon, said in his letter to stockholders a couple of months ago:

“One advantage – perhaps a somewhat subtle one – of a customer-driven focus is that it aids a certain type of proactivity. When we’re at our best, we don’t wait for external pressures. We are internally driven to improve our services, adding benefits and features, before we have to.”

Proactive customer experience is a strategic choice

This idea of proactivity is the whole game, right there.  Organisations which are serious about the customer experience proactively drive their people to seek to make things better before customers see reasons to complain.

Sure, there are companies which are doing good things by listening to customers and putting in improvements to fix things which customers don’t like.  This work is valuable, and good, but it does not address the real challenge.  If we simply fix things about which customers complain, then we are  playing catch-up. We are saying, in effect: “we aspire not to make customers unhappy.”

The difference is in the bottom line. Jeff Bezos again:

“Proactively delighting customers earns trust, which earns more business from those customers, even in new business arenas. Take a long-term view, and the interests of customers and shareholders align.”

Customer experience is much more than fixing things for customers. It is about making a strategic choice to be proactive in making things better for customers, it is about reflecting this choice in the ways we guide and enable our people to make things better for customers – and it is about doing so because it is the most effective way to grow and sustain the bottom line.

How do our companies measure up?

(Image credit: Ministry of Information Photo Division Photographer [Public domain or Public domain], via Wikimedia Commons)

How to tell if an organisation is serious about the customer experience

Richard Branson serving customers on a Virgin flightThe best way to improve the end-to-end customer experience is to pay attention to it.  This is much less trivial than it sounds. The more senior this attention, the more chance we have of success.

A lot of blather has been written about companies offering a good “end-to-end” customer experience. Most of us can agree that it is something to which companies can, and probably should, aspire. Yet for most companies, it is something which remains resolutely beyond the horizon.  This is not for want of trying.

Most companies begin their thinking about end-to-end customer experience by “mapping the customer journey”,   identifying the things which make it go wrong and putting in things to fix these. This is relatively easy and results in some improvements – for a while.

Some companies (often those infected by consultants) try to redesign such processes to create a coherent whole. They back these changes up with a painful project, like corporate root canal, where they implement new systems (consultants again), have lots of workshops (consultants once more) and (probably) put some posters on the wall exhorting staff to Think Like A Customer, or some such.

Thousands of hours and millions of pounds spent – with, usually, very little long-term difference, because, most of the time, such efforts fix the symptoms, not the real cause, of poor customer experience.

Why do organisations grow up, develop, and operate without putting the customer at the heart of the business? For one reason only: they have being paying attention to other things.  The drivers of the business, the things on which organisations focus day-to-day (and the things which, more often than not, have been the basis of the organisation’s success) have been things other than the customer.

In other words, the organisation, especially at the top, pays attention to things other than the customer and its metrics, numbers, activities and reward systems show this.

Customer initiatives have the best chance of success when the CEO and her top team pay attention to customer performance in the same way, and with the same regularity, as they pay attention to revenue or EBIT. We know they are serious when they accept, for example, a hard customer metric in their bonus package. When they pay attention to the customer as routinely as they do to the production numbers, the rest of the organisation does too.

Inevitably, this means that customer experience improves.

As do revenues.

As do costs.

As do profits.

If we want to fix things for the customer, end-to-end, we need to make sure that the people in our organisation who have overall responsibility for our business, end-to-end, are paying attention to the customer, with the same priority, as the other aspects of the business to which they pay attention.

Otherwise, we are going to find life very hard. Because, when push comes to shove, hard numbers drive out soft.

People have only so much bandwidth and they will focus on those things which organisational behaviour reveals as the most important – those things which get senior attention. And while most organisations claim to want to put the customer at the heart of their business, the things to which the business truly pays attention – the hard numbers, if you like –  push other priorities to the side.

Customer experience is rarely in this top list of priorities unless it has been baked from the start as part of the core ethos of the company. So, if we want our organisation to make things better for the customer properly, the first step is to make sure that the top team really pays attention to the customer.

Get this right, and everything else becomes much, much easier.

 

How do you know your strategy is working? You say no.

124833a
The Separation of the Sheep and Goats,
Basilica of Sant’Apollinare Nuovo, Ravenna, c540AD

A good strategy sets out our priorities. Priorities, however, are only valid when we know what we won’t do.

In my experience, organisations are full of managers willing to claim that “…X is our top priority.”

It is much harder to find managers willing to say  “…X is our top priority, so we won’t do Y.”  Which is funny, because this is what top priority means: other things won’t get done. And this is OK, because we are putting our resources and attention into the things that matter most instead..

What tells us what matters most?  Our strategy. If our strategy is clear, we know which markets, customer, products, services and capabilities are most important to us. By implication, we also know which are not.

For those of us interested in customers (and I assume that is pretty much all of us), then if our strategy is any good, we have to make some tough calls.

For example: Are all our customers equally important?

For most organisations, the answer is probably no.   So the next question follows. What are we doing to make sure that our most important customers get the service they need and expect?  And what are doing to make sure that lower priority customers do not get service or resources at the expense of our top priorities?

This is often a tough call. But organisations which genuinely answer these questions can be very successful. Apple, as one example, do not seem interested in mobile phone customers on tight budgets, and they are doing all right. Low cost airline Ryanair, as another, are interested only in the budget customer – and they are one of the most profitable airlines in Europe.

Setting strategy is easy. Doing it is hard. And our willingness (or otherwise) to use strategy to set high and low priorities is one of the one of the reasons why.