A first meeting with a chief executive normally starts with the same question, ‘we want to make a change but we simply don’t know where to start, any ideas?’
Let’s think about the problem logically, you’d want to make sure that you get the best return on your actions wouldn’t you? So you’d probably start in your most broken and highest volume areas.
But how do you get the right combination between volume and urgency, I hear you ask. Well I’ve created a 2×2 to help you with the dilemma.
The horizontal axis measures the degree to which a service or business unit is failing and the vertical measures volume of customer transactions going through the area. (see figure 1 below)
The graph then gives four quadrants. Low volume low failure, high volume low failure, high failure low volume and high volume high failure. All you then have to do is to place a symbol that represents the service or process in the appropriate quadrant to prioritise which area needs the greatest attention.
Of-course you could do this intuitively, which I think is often good enough, or you could do it scientifically.
To use the empirical model simply measure the volume at each point of customer transaction for each service (phone, fax, e-mail, walk-in or letter). This will give you your number for the vertical axis.
Next measure the degree of failure demand (using the same scale) for each service. For example if you had four different service areas and area one took ten thousand calls per month turn the percentage failure into a number (50% being 5000 failure calls).
Then simply plot it on your graph. This gives you a simple method of plotting which service goes first.
This graph is known as the Corrigan volume/failure matrix (I’ve just named it), I hope you like it.
As per usual comments and questions always welcomed.
Q:I work in a large and complex life insurance and investment business and we have been changing huge areas of our business using the Systems Thinking method for over 18 months now.
My question is really about how a Systems Thinking approach fits with other perceived business drivers; particularly our declared objective to cross sell more of our products to existing customers, up sell more of the same and crucially retain more of our existing customers for longer.
I hope it is not an over simplification but the Systems Thinking argument I think goes something like this - Our purpose is to design our work to fulfil the “nominal” demand of our customers (eg provide a retirement income). If we do this well we will deliver a level of service that our customers expect, we won’t make mistakes, we will keep our promises and waste and failure will have as little impact as possible on both us (in terms of costs) and our customers (in terms of frustration and disappointment).
Customer satisfaction is a by-product of the way the work works. Like staff engagement it comes for free as we redesign our system against the value demands of our customers.
Because we are delivering what we promise (within our control) it is a natural consequence that customers stay with us and buy more from us. Our brand promise and the actual real experiences of our customers are aligned. There is no need to “Push” additional products or up sell at every contact opportunity - fundamentally this is not responding to customer demand (e.g. please change my address) but is part of our own agenda and will cost us money, might not work and could undermine our newly designed business.
If this argument is correct we would be far better redesigning our service and getting the basics right before embarking on a major up-sell / retention / cross-sell programme across our operational business. Especially when over 1/2 the work we do is waste / failure.
As you might guess the logic above does not resonate with some key players in our business. In fact I’m not even sure that I have captured what an experienced “Systems Thinker” would propose.
What do you think - does pro active multi-channel CRM type retention and cross-selling have a place in a Systems Thinking service organisation?
Stuart’s A: Many thanks for your question. This is a really important subject because I don’t think that there’s an obvious enough link between Systems Thinking and growing your business. But I will do my best to give you my philosophy on the subject.
As you say it’s a given that in order to enable people to buy from you, they have to have a good experience and it has to be easy to buy. Additionally when they make a service request it should be fulfilled quickly, with high quality and in such a way that it’s efficient for the organisation. So the customer has a great experience, they tell others and you most likely get some organic growth.
Additionally because the customer has had a good experience I think it’s logical to suggest that they are more open to hearing from you, but that doesn’t necessarily mean that they will buy more. This is when you have to think about Systems Thinking from a slightly different perspective. Let me try to lay it out as a series of principles.
Pull not push
Having done what matters to the customer (or met their nominal value), you have won their trust. Now you have to ask permission to talk them on a regular basis. So once you have done what they asked, you ask a question “Can we talk to you once per week/month/year with highly relevant information to your circumstances. Also you need to make sure that the offer is designed from the customer’s point of view. It talks in terms of what they want to hear, not what you want to tell them.
But you must make sure they have a good experience first! I tried to get a quote during a famous insurance company’s ‘quote me happy campaign’, it was a terrible experience.
Create even more value for the customer
Assuming that you know what matters to the group of customers with which you want to converse, you have to now add value. You do this by providing content that is associated with your product, even though it will not necessarily lead to a short term sale for you. For example let’s say you provide annuities for retirement. And you know what matters to your customers is income maximisation, tax avoidance and providing for a spouse after death. You put together information booklets/CDs/DVDs etc that are easy to understand and have useful content that can help customers meet their goals. In other words you become a reliable source of expert information, a trusted adviser.
Then every so often you put an offer in communication that a client may want to buy.
But there’s no point doing this if when they’ve asked you for something and you messed up.
You also need to plan the whole process so that it’s slick and easy for the customer to get something if you offer it.
Reduce waste to free up capacity
It need not be the case that designing and administering the whole sales funnel should cost money, because if you have freed up staff from the improvement of flow then you can use them in the new marketing processes.
Also you should gather data on the lifetime value of a client so that you know how much you can afford to spend on each client.
But yes before you go working on outbound processes make sure that you’re making the most of the inbound stuff.
Gather capability data, then test rigorously and maximise
Before you go designing new outbound processes first gather data on what works now, then start to tweak these to optimise their performance. For example change headlines, pictures, copy, offers, testimonials, check the frequency of mailings, check your database and see how much failure demand a campaign attracts.
Make sure that everyone who wants to spend money with you actually does spend money with you. Last week I saw a car I liked on a website, I filled in the details and then waited, I thought my phone would ring within minutes. Four days later they called and it was too late.
Dump the processes that perform poorly and put more money behind those that perform well.
Make sure you know exactly how each process drives traffic and converts.
Keep learning
Once maximised, look at others to see how they have leveraged their operational capability. The most obvious thing to do (but UK businesses don’t) is to use your improved capability to make a guarantee. Can you think of how you can leverage your new and improved service to give clients more confidence so that they try you out?
I think that a company that has previously worked on push CAN move to a different model, especially as it’s cheaper and much more aligned to growth and profitability. The challenge is that it takes time and patience to improve the operational capability such that you win over the confidence of a client. And that depends on whether management are willing to do the work to build relationships with clients before they ask them to buy more.
Finally, I’m thankful that you took the time to write, as using Systems Thinking as a means to an end is a subject close to my heart. Too often I’ve looked at how well I’ve done Systems Thinking rather than asking how I can leverage the operational and measurement capability to create more demand in the market.
(A story of cold sausages, a string quartet and climate change protestors)
I was in London last week with some friends. On Friday morning we were sitting in a restaurant having breakfast. Then my blackberry went ballistic; message after message telling me that the link to the free guide on presenting data wasn’t working. And to make matters worse the team in the office didn’t have the PDF of the guide, so they couldn’t help.
Big problem, you see we use a web hosting company in the US and their system was down. So the first thing I did was to drop my fork and knife and ping a note back to everyone to let them know we were trying to resolve the situation.
Eventually I tracked down one of the team (who was on holiday) who had a copy of the guide (for who didn’t manage to pick it up click here) and we got it sent again as an attachment. And I as I chewed my way through my, now freezing cold, bacon and eggs I pondered the messages.
Trust is fleeting. It doesn’t really matter how much good you think you’ve done it can all go pear shaped in a moment.
Reliability is king. I continually hear people moaning that things are tough in the current climate. So you have to make the most of every opportunity. This is the same in the public sector, if you don’t keep your promises you get hit with failure demand, the cost to me was a cold breakfast, what would it be for you? So make sure every process delivers.
Knowledge will save the day. Stuff happens, things go wrong, I get that. But the key is to know the predictable nature of the failure. Is it a one off or is it predictable? The problem is that most managers don’t know, as a result they react to special causes as if they are every day occurrences and make a storm in a team into a hurricane. So you need measures that help you understand and improve performance, do you have that?
I was now firmly in the bad books with everyone. Denise, for spending two hours on my phone (I hope you appreciate what I do for you), Sean for bugging him on his holiday and you for a missing link. But there was light at the end of the tunnel and another message.
We left Covent Garden to the sound of music, not the Julie Andrews musical, but a string quartet. We stood and watched for a while, they were brilliant. Then they upped the ante, they started dancing with their violins! The crowd went wild and started throwing money at them.
And yes there’s a message here, if you want to do well, even during tough times, you need more than just reliability…
Be unique. This can come in the form of a product, a service, or how about a guarantee. Most people can’t offer a guarantee because they are too scared that they will mess up. Though that problem soon disappears when you have knowledge about how the work works.
And if you’re in the public sector and you’re reading this and wondering how it applies? My thoughts are that what would make you unique would be the delivery of consistently high service at low cost, do you agree?
Having seen the quartet I now had a warm feeling, everything was all right with the world. Or was the warm feeling something else. Was it climate change? The protestors in London that day certainly believe it’s the latter. And don’t get me wrong I’m all for a good rant and saving the planet, but…
We wanted to cross the road and the protestors were shouting at everyone as they crossed the line; time for another lesson. In some sectors your message might not be to everyone’s taste, so don’t make it worse by being difficult to deal with (one pedestrian got so infuriated he even burst a protestor’s balloon; that could have gone nasty). Here’s the lesson:
When you want people to comply with your message or process, don’t infuriate them by being difficult.
We ended our weekend by a visit to a Japanese restaurant chain in terminal 5 called Wagamama, it was brilliant. And it had a number of amazing characteristics:
They told us when what was going to happen and when we would get our food. Then they delivered on their promises.
They had a simple method to keep track of who was getting what and who still had to get their meals. They wrote the number of the dish on the menu. That way if a customer didn’t get the right food, the waiter knew before the customer.
They were unique. The food was unusual but very tasty.
It was easy and flawless.
Isn’t it funny how things go full circle?
P.S. This week I have an e-book of some questions I’ve answered over the past few months. The questions range from how to improve support for drug users, how systems thinking works in businesses that need to grow and get new clients, whether Kanban is appropriate to service organisations, and a few more. You can get the short book by clicking here (and yes I’m praying that it works).
Once you’ve got your free MP3, check out what I have for you at the end of this blog.
You’ll be pleased to hear that I’ve managed to twist the arm of a business guru so you can get some top tips on building a strategy. Robin Field, ex Chairman and CEO of Filofax, was for many years, the business partner of Richard Koch. Richard wrote two best selling strategy books, ‘Smart Strategy, and The Financial Times Guide to Strategy’.
Robin worked alongside Richard, to turn around failing businesses. In 1998 Robin took charge of Filofax. At the time it was a dying business and its shares were trading at 30p per share. Within one year he turned the business around and during its floatation the shares changed hands for £2.10 per share with a return on investment of 27%
In this short interview Robin explains:
Why CEO’s should work on only the vital issues in a business
How to build your strategy from the customer backwards
The 3 most important activities when taking over as a new manager
The exact strategy he used to turn around Filofax (you’ll kick yourself when you hear it, it’s so simple)
What goes wrong in the handover of a business that involves family members
How being lazy is a great attribute for running a business and running your life. Yep, less work with more success!
I believe that this is an interview you’ll want to keep and play at your next team meeting. To download it just go to this page, right click on the link then select ’save target as’.
I truly hope that you get value from the recording. I also have an interview lined up with Jim Mather, the Scottish Minister for Enterprise. If you have a question you’d like me to put to him please mail me directly at stuart@vanguardscotland.co.uk with ‘minister’s question’ in the subject line.
Now listen up, I have something truly unique for you
Over the past 11 years that I have been using the Vanguard method I have kept detailed notes of how to apply it within service organisations. Every time the method was upgraded either by myself or another member of the Vanguard team I made a note.
Eighteen months ago I started to document in sequential detail exactly how to use our method to turn around a failing organisation, or make an already good organisation great.
The book was ready to launch in July but having read it, John Seddon, Vanguard’s chairman, asked me not to release the book. In his view it simply gave away too many of our secrets.
Since July I’ve literally begged (on your behalf) to be allowed to give you a copy. John agreed on the condition that I customise the book. So I had Ron Skea, our call centre expert, make the examples in the book specific to service centres.
But the good news is that book applies to any service organisation (except of course project environments).
So don’t let me down. I’ve promised John that those who bought the entire system would not pass it around or steal our ideas. Though you are free to use the information to dramatically improve service, slash your costs, boost morale and for those in the private sector, vastly improve your competitive advantage.
The system actually comes with three e-books that show you how to complete the check, plan and implementation stages of a change programme. There are templates for gathering demand, and process mapping. You also get the whole thing in MP3. And there are bonuses!
It’s available from Monday. If you register before the launch you get a 50% discount, just
