Here are the things I’d love to see come true for each of you this year:
1. Adopt a customer-driven resource allocation model
2. Instill a culture of customer innovation
3. Shift to customer-centric rewards and measurements
4. Improve the quality of customer-critical information
5. Accelerate your migration to, and your ability to reap the benefits from, an open, adaptive services-based IT architecture
Adopt a Customer-Driven Resource Allocation Model
Everyone wants more time, money, headcount, and resources for their projects. But the overall budget doesn’t change much from year to year. Sure, we may decide we need to invest more in certain areas than in others—that’s resource allocation. It doesn’t mean the overall money pot from which we’re drawing those funds has gotten bigger. It hasn’t. That’s why corporate profits are up. We’re all doing more with less, or doing it more effectively.
The current way in which most organizations allocate resources is not customer centric. Typically, budgets are set by business unit, functional unit, and by programs, initiatives, and projects. It’s difficult to set priorities for customer-critical and/or customer-impacting initiatives that cut across these organizational structures.
Even when an organization’s business units are aligned by customer segments—consumer/retail vs. small business vs. medium business vs. large accounts, or by vertical market segments—telecoms, financial services, healthcare, etc., it’s difficult to prioritize resource allocation for customer-critical initiatives that can be leveraged by more than one customer segment.
If your top executives are particularly enlightened and insightful, they understand where their bread is buttered (by their customers), and they’ll invest wisely in both short-term and longer-term initiatives that will: a) improve the quality of the customer experience being delivered, and b) empower customers to self serve, to learn from one another, and to co-create new value for themselves, for their businesses, and for your business.
However, in order to help your execs make the right resource allocation choices, they need help. They need all of the heads of the business and/or functional units to come forward with a combined customer-centric resource allocation plan—one that has been hammered out before the budget allocation process begins. The top-down resource allocation process is deciding how much money to spend on capital and operating expenses. The bottoms-up resource allocation process involves agreeing ahead of time on the relative priorities for customer-impacting initiatives across business unit and/or product lines.
Here are some promising examples. In the past year, we’ve seen product development and customer support executives agree to prioritize product installability. We’ve seen consumer and wholesale line of business executives agree to prioritize single sign-on, authentication and pre-authorization for both retail and business customers, despite the different requirements for the two customer sets. We’ve seen IT, product marketing, and e-business execs agree to prioritize the simplification of product classification and categorization. We’ve seen finance, operations, and sales executives agree to radically simplify licensing models, based on customer co-design.
So, the good news is that we’re beginning to see this cross-organizational customer-driven prioritization take place in a few of the companies we’ve been working with. We’re hopeful that in 2006, customers’ priorities will become your executives’ priorities.
Instill a Culture of Customer Innovation
Over the past decade, the Holy Grail for many business leaders has been to transform their organizations from being product centric and/or inward focused to being customer centric and/or aligned around customers’ goals and needs. That’s not good enough. What we’ve learned in working with many of these businesses—both organizations that have deeply rooted customer-centric cultures and those that are still struggling to get there—is that having a customer-centric view of the world isn’t enough to keep you competitive. Customer centricity has become table stakes. It keeps you in the game. But it doesn’t guarantee that you’ll win.
Now that customers are in the driver’s seat in virtually every industry, the winning formula is to jump in the seat with them and to help them achieve breakthrough results. True innovation is a focused, disciplined undertaking. It certainly involves trial and error. It definitely includes improvisation and risk taking. But innovation—and the creative process itself—takes place when you have a clear vision of what you want to accomplish: your desired outcome and a clear vision of what your current reality is. You use the structural tension between your current state and your ideal state to create the outcome you want—just like shooting an arrow propelled by the tension in the bowstring. Customer innovation occurs when your outcomes are aligned with your customers’ ideal outcomes. Your reality includes your customers’ constraints and your business’s constraints. Together you co-design a structure that unleashes that creativity and yields breakthrough results for both of you.
Shift to Customer-Centric Rewards and Measurements
We’ve seen a little progress in 2005 as many organizations have refined their balanced scorecards and their Key Performance Indicators (KPIs) to include customer experience metrics. However, many of the customer experience metrics that we’ve seen are rear-view metrics. They tell you how you’ve done in improving customer satisfaction or increasing customer loyalty. They don’t tell you how you’re doing. Often customer experience metrics aren’t connected to customer profitability metrics—how profitable can this group of customers become for us?
The next challenge, and it’s one that a few organization are taking, is to align their metrics and rewards with their customers’ outcomes and KPIs. If your customers are focused on reducing time-to-market, your entire organization should be aligned around helping them achieve that goal. If your customers care the most about generating the highest rate of return on their investments and you’re in the investment business, obviously you should be measuring your success on your ability to deliver on that goal. Of course, it’s not just about customers’ outcomes. Customers have other conditions of satisfaction along the way—the most critical of these are the ones you should be monitoring as well. In the product design arena, time-to-market includes requirements for product safety, regulatory compliance, and product quality. In the investment field, high rates of return include requirements to not lose capital, to comply with legal requirements, and to take ethics and moral values into account.
The bottom line: Make customers’ outcomes your outcomes. Link customers’ KPIs to your KPIs for a win/win operational business model.
Improve the Quality of Customer-Critical Information
What do we mean by customer-critical information? 1) The information that customers need in order to make decisions—planning decisions, buying decisions, upgrade decisions, investment decisions, training decisions, enhancement decisions, etc. 2) The information that customers need to know about their accounts, their entitlements, their past dealings with your firm or its partners, their products, their service histories, the answers you’ve already given to them or to others in the same situation or in the same account. 3) The information they need to solve a problem or to design something new, or to use your products/services to the fullest.
Improving the quality of customer-critical information requires MUCH more than “content management.” It involves rethinking how customers use information, what criteria they care about, what they need to be able to find, what and how they need to be able to compare and contrast, how they’d like to sort, filter, categorize, tag and organize information. It requires tools: what tools they need to be able to contribute information in useful ways, what tools they need to make information actionable; what tools you need to use to make the right information easy to find and to navigate.
This remains a daunting task, but again, the good news is that many of you have made great strides in tackling at least pieces of this puzzle. We remain focused on helping you tackle and master the competencies you’ll need in order to improve the quality of customer-critical information in 2006.
This week, in her report entitled, “Search Goals for 2006”, Sue Aldrich offers some challenges and some ideas about Internet Search that will stimulate your thinking. In thinking about Internet search in 2006, she focuses on all the information that’s not yet findable, as well as on improving the navigation and findability of the information that has been digitized and spidered. An important take-away is this: if there’s information that customers or your organization needs that isn’t yet digitized and categorized, it’s time to invest in defining the metadata and providing the tools for interested parties to harvest that information.
Accelerate Your Migration to, and Your Ability to Reap the Benefits from, an Open, Adaptive Services-Based IT Architecture
We’ve also seen some good progress made in 2005 by many organizations that are in the throes of migrating their IT infrastructures to take advantage of services-oriented architectures and other technologies (see Brenda Michelson’s reports, Creating a Blended Architecture Portfolio, and Designing a Fluid Enterprise Using an Adaptive, Customer-Centric IT Architecture) that enable your business to be more adaptive to changing customer requirements and competitive pressures. The biggest critical success factor we’ve seen in this arena is the degree of commitment an organization makes to its IT architecture. We can often assess that level of commitment by looking for the presence or absence of IT architects in the organization, and by assessing how good they are and how highly valued and respected they are. Do you have top notch architects? Do they have clout? Do you have them for both enterprise infrastructure, and for product design and development? Do they work together? Does your organization design its IT infrastructure for adaptability? Can you move quickly? Are you leveraging and reusing services—both internally-developed services and externally-sourced services? If not, make hiring and empowering good enterprise IT architects a priority for 2006.
Happy New Year!
RSS 2.0 Feeds
Comments