Fast Talk: The State of the Customer Economy

Adopt customer-relationship management. Be customer-centric. Organize around the customer. The customer is king. By now, these customer mantras should sound familiar. But are they the new hype or the new habit?

Lightning Round #1: Your Take on the Customer Economy

Alan Webber (founding editor, Fast Company): Here's a simple exercise to get us started -- think of it as a lightning round. Tell us what's really happening today in the relationship between companies and customers. Pick three words that you think best describe what you see when you look at the customer economy. What's the actual truth of the situation?

Kelly Mahoney (chief marketing officer, Staples.com): Dynamic. Shifting rapidly. And a whole lot more complex. There's a reinvention process going on right now with customers: They are more empowered, and companies have not yet caught up to that empowerment.

Patricia Seybold (founder and CEO, the Patricia Seybold Group): Customer experience matters, and it's really hard to deliver.

Steve Elterich (president, eBusiness; operating committee member, Fidelity Investments): We're only in the second inning. The good news is that the game is just getting going. The bad news is that we're already playing catch-up.

George F. Colony (chairman and CEO, Forrester Research Inc.): I'll go one better than Steve. The game hasn't even started yet. It's still totally undeveloped. We're still sitting at campfires, dressed in loincloths, chewing on bones. It's very primitive stuff.

Angel Martinez (executive VP and chief marketing officer, Reebok International): This is my take on the customer experience: underwhelmed, overpromised, underdelivered, excessively high expectations.

Paul Cole (global director, CRM Practice, Cap Gemini Ernst & Young LLC): I'm usually the guy who says that the glass is half empty, but in this crowd, I'll have to play the optimist. I agree that we're in the first or second inning. And we have hit a lot of foul balls. But I think that the customer economy is a highly promising area, and I think that its promise is irrefutable.

Kathy Biro (cofounder and vice chairman, Digitas Inc.): It's been overhyped, and we've underdelivered. The idea was that we would reduce the costs of providing customer service through the Web. But in fact, we've simultaneously added costs and raised customer expectations -- which is the worst possible combination. Customers are expecting more and getting less, and it's costing companies more and more to deliver.

Jeet Singh (founder and CEO, Art Technology Group Inc.): If I look at the customer economy through the companies' eyes, I'd say that right now they have to deal with the point of maximum pain. The customer economy will generate much pain to the companies, but at this point, pain isn't the companies' biggest issue. The biggest issue is that they are disorganized. And, in turn, that disorganization is what turns into customer problems -- whether it's bad service or bad tires.

How Big Is the Gap?

Alan Webber: You all seem to agree that there's a gap between the promise of the customer economy and the performance. How big is that gap? How do you size it up?

Kathy Biro: The gap is huge. Just look at the email messages that pass between customers and companies. Most companies have been caught like a deer in headlights. They create Web sites and offer their customers a direct way to communicate with them. And now, when the emails appear, they're shocked! It's as if they thought that no one would actually write to them. Companies are giving customers more ways to complain and more ways to get frustrated. Here's the problem: If companies are going to deliver on the promise of a customer-centric view, then they have to disorganize by customer. And that's very painful.

Paul Cole: It's the people, stupid. You can take any management discipline from the past few years: total quality, reengineering, enterprise-resource planning, and now CRM. In every one of those instances, the failure has been addressing behavioral issues. The only way that CRM can add value is if the organization is reconsidered. Since the Industrial Age, we have been building a business model that was designed to help people create, produce, and deliver a product to the market. But that business model wasn't designed to deliver an enhanced customer experience. Until we get marketing, sales, and customer service converging in a way that adds value, we're going to keep disappointing the ultimate customer.

George F. Colony: There have been a great many stupidities in the past five years during this Web period. But one of the biggest was the idea that there was such a thing as a pure Web play. It's absolute nonsense to think that customers only want to interact through the Web. We have face-to-face contact, the telephone, mail, TV, and then the Internet. Customers want these channels to be woven together. They don't want one instead of all of the others.

Steve Elterich: We've made some progress. Take a look at the financial-services industry. People can decide how they want to do business with us -- through phone reps, a branch, or the Web. Today, 89% of our customers choose to do their trades through the Web. There's a reason for that: They can get services and capabilities that they were never able to get before, things that we couldn't deliver without the Web. That tells me that we're making progress, but the potential is still much larger.

Patricia Seybold: One of the biggest gaps is the product-line centricity of our organizations and the gaps between functional areas: distribution, fulfillment, and inventory management. We have to reorganize -- or disorganize -- our companies around the end-to-end customer experience. This doesn't just need to happen within one company. It should happen all the way through the value chain. And when you start to think about taking the system apart and putting it back together again across those boundaries -- well, that's when it really gets exciting, right?

Angel Martinez: There's an interesting dilemma that pops up in the business that we're in and also in the business of fashion. The shopping experience isn't simply an intellectual exercise designed to fulfill whatever shopping jones you have at the moment. People like to shop. Now, if I had my entire catalog of products on the Web for anyone to buy at any time, people would go right to what they've always worn, order a new one, end of story. But part of how my industry works is that people walk into a store and try on multiple pairs of shoes. Then, at the last minute, they get inspired to buy something that they never expected to buy. Often, the Web causes people to think about brands and product lines along very narrow terms of service, product, and assortment, rather than considering the emotional aspect of shopping.

Kelly Mahoney: It's absolutely true that customers want to shop how they want to shop. At Staples, one of our mottoes is 1+1=5. That means that if you have more than 1,200 retail stores, a catalog business, kiosks, and a Web site, then when you migrate a customer from shopping through a single channel to shopping through two channels, that person will actually spend two-and-a-half times as much as a single-channel shopper would spend. When he shops three channels or more, he spends four-and-a-half times as much. At Staples, we've gone from being a zero-dollar company to being an $11 billion company by being very customer focused. We add incremental value and explanations for why customers should migrate to different channels. For instance, a shopper who goes into one of our retail stores can buy 7,000 products, but if those products are out of stock, they can go to a kiosk, place an order for the item, and have it delivered the next day. Ultimately, no matter what channel you're talking about or working through, the challenge for the company is to focus on its customers' specific individual needs.

Jeet Singh: For some of the companies that we work with, the issue isn't the customer relationship, it's the customer life cycle. Honda might wonder if a customer will move to an Acura next. A financial-services company might decide to acquire an insurance company, because its customers will need that service next. And for some companies, the customer issue has only recently begun to migrate from end-to-end integration to a new kind of adjacency. It used to be that a company would say that if it builds toasters, the next product to increase its market would be ovens. But if you're customer-centric today, an adjacent product may not be something that you build. If you're General Motors, and you offer your customers OnStar, maybe your next move is to partner with Fidelity to offer online stock quotes.

Which Is It: Techno-solution or Techno-screw up?

Alan Webber: One of the key premises of the past few years was, The Web changes everything. When it came to the customer relationship, technology was supposed to be the tool to revolutionize how companies identified, reached, marketed to, and sold to their customers. We were going to see a two-way conversation replace a one-way monologue. Customers were going to cocreate products. The promise was enormous. Has it happened? Has technology lived up to that promise?

George F. Colony: It is very difficult to build experience into the Web. Remember, the Web is made up of grad-school software that Tim Berners-Lee and Marc Andreessen whipped up in their university laboratories. The main reason that the dotcoms died was because the technology sucked.

Paul Cole: The technology is part of the problem. The notion that we could automate the whole customer relationship has been oversold by the software industry. The whole CRM thing is a convenient acronym that was created by the software industry to sell applications -- which, for the most part, had no C in them. It wasn't about customers. It was about automating and improving the efficiency of internal employees.

Patricia Seybold: It's not perfect, but technology isn't the problem. All of us around this table have been in the technology game for 20 years or so. We've seen this coming. It's not really revolutionary -- it's evolutionary. In fact, we're getting to the point where a customer can actually design something, have it built to order, and then have it turn up. And a company can actually be fairly seamless across its touch points. If you look at best practice today, it's possible to do business online, in stores, and through kiosks.

Steve Elterich: I think that we became enamored with the technology, and we did a lot of stuff that didn't provide value to people. The idea was, Streaming video is cool! But there really isn't much value in sitting in front of your PC, watching a three-inch-wide screen send you stale data. The assumption was that if we built the technology, the customers would come. But why did we make that assumption? The only reason was that the discussion was dominated by technologists.

Kathy Biro: I think that this is completely the wrong point. Technology defines the art of the possible, but that's all that it does. Look, we just went through this regrettable era. It's like a really bad love affair, and there were drugs involved, and you don't want to talk about it. I used to have to read the Wall Street Journal first thing in the morning, because I knew that there would be a story -- or 3 stories or 10 stories -- about two boys and a dog who had just started another company that does some winking, blinking, Java-based thing, and by 9 AM, some Fortune 500 CEO would be on the phone screaming at me, "Get me one of those!" But the fact is, you can't be held hostage by two boys and a dog!

Jeet Singh: As a technology vendor, I need to make two points. First, technology has serendipitous benefits that people don't recognize until later. You think the technology is going to enable one thing, and so you employ it. In fact, once you start to use it, the benefits show up in a completely different place. So the law of unintended consequences is at work. Second, for the first time in my career, my industry is in a position where our customers are begging us -- and, in some cases, hammering us -- to come up with more technological features. In the past, we would come up with a neat piece of technology, and then we'd have to try to figure out if there was a customer who wanted to buy it. Now the pressure is coming from the outside. We're being told by our customers, "Just give it to us, because we already know what we want to do with it!"

Kelly Mahoney: At Staples, we're involving our customers before we purchase enabling technology. For example, before we develop tools on the Web site, we talk with our customers through a variety of channels. We send the sales force out on the street to get a sense of our customers' needs. We talk to 2,500 customers a month, just to find out which tools they want. In fact, our customers are the codevelopers of our Web site.

Steve Elterich: We've been in the electronic-information business for years, and our customers are well prepared for that. We have a lot of capability; our problem is figuring out how to make sense of that capability. We offer 4,100 mutual funds from us and from all of our competitors. How do you take all of that information and make it sensible for an individual so that he can make important decisions about his house, his kids' education, his retirement?

Angel Martinez: The problem that I see is that we're so enamored with providing what we need to fulfill the transaction, we forget to provide what we need to have in order to build a relationship. Ultimately, customers want a relationship with a brand that reflects their attitudes -- whether that brand is Fidelity, because it gives them peace of mind, or it's Reebok, because it makes them feel cool. Consumers want to invest in that relationship.

Kathy Biro: The Web is still like a bubble-gum machine. You go up to it. It doesn't know if you've been there 50 times before or if this is the first time. If nothing comes out of the machine, you send a note to an address. It's one transaction at a time. Usually, there isn't even a data-driven understanding of the customer. And there's no relationship.

Inside the Company: Obstacles and Initiatives

Alan Webber: Let's shift from the technology to the organization. If the goal for a company today is to become customer-centric, what are the obstacles? And acknowledging the obstacles, what are the first steps to getting started?

Paul Cole: In most companies, the chief obstacle to becoming customer-centric is political friction -- political friction between different entities within the organization. Knowledge is power. Measurement drives behavior. And when you say one thing and measure another, you don't get internal cooperation. As a step toward remedying that situation, you have to bring those elements together in a collaborative way, starting with the customer by asking him to help you define the experience. And you need someone to own it internally: a chief customer-officer position, for example. Just as the chief information-officer position was created to act as the steward of the information assets, we need a chief customer officer to be the steward of the customer asset.

Jeet Singh: To me, the chief information officer is that person today. In fact, the C in CIO is starting to mean "customer." The CIO is in a unique position inside the company. In many organizations, the CIO is the only person who sees the connection between the call center, the Web site, and the supply-chain management system -- the one who sees how well all of these areas are working together.

George F. Colony: I don't think that most CIOs know very much about customers at all. In fact, one of the biggest mistakes that large companies are making right now is giving the CIO more power. It's Return of the Jedi -- it's an extremely bad move. The CIO is a big player in all of this, but typically the CIO screws up the customer.

Patricia Seybold: The title is less important than the measure. Forward-thinking companies always base their measurements on customer outcomes. Are you lining up your reward and compensation structure around customer outcomes? That's what matters in the end.

Kelly Mahoney: We have a series of 30 to 50 customer-specific metrics that we track every day -- in some cases every hour. Things like the average speed of answer in the call center, the number of people using live chat -- things that matter to customers. The goal is to have a customer-centric focus permeate every level of the organization. Because if you have a great Web site, and you're doing great branding and great marketing, but at the end of the day, the package doesn't get delivered because the truck driver had a great big disconnect, the customer still hasn't had a great experience.

Steve Elterich: The only way to succeed at this is to drive the customer-centric mentality down into the organization. I'll give you an example of what we do. We have a usability lab. Any capability that goes onto our Web site goes into the usability lab. We bring in real customers to view it and use it. The developers are behind a one-way mirror -- they get to see the raw reality of what they just delivered to the customer, and they get immediate feedback. That way, the developers come into contact with the customers. They're talking to the customer face-to-face.

George F. Colony: The lesson there, I think, is the importance of relentless adjustment. Steve Ballmer always does the same thing: He says, "You're never going to get it right." At Microsoft, they never get it right, but they're constantly, relentlessly adjusting. And somehow, through constant readjustment practiced over time, they gradually weave their way to the right place.

Paul Cole: One point on the voice of the customer: We're putting too much pressure on the customer to tell us how to build our businesses. They can't tell us. The minivan didn't come from the customer, the Walkman didn't come from the customer. But customers can tell you whether they like something when you show it to them. The fact is, too many people tend to go to one extreme or the other. They either don't listen to the customer at all, or they think that the customer will create their product for them.

Kelly Mahoney: Another key to success: You have to reinvent yourself every day. You anticipate where your customers are going, and then you get there first. We added 60 services for our customers, even though online adoption was very early. How big is the market today? Not as big as it will be in five years. But you have to have the confidence to take that next step. You may not get it right the first time, but eventually you'll get there.

Lightning Round #2: Getting Started

Alan Webber: We've heard about the state of customer service, the role of technology, and the importance of the customer. Now, what do I do on Monday morning? How do I go from thinking about being customer-centric to being customer-centric?

Jeet Singh: Change the nature of your conversation with your customers. Find the biggest pain point, and then go to work to reduce it.

Kathy Biro: Companies get what they measure. And they're either measuring the wrong things or just half of the things that they should be measuring. So here's an old tool that's been talked about for years: the balanced scorecard. You look at efficiency, effectiveness, and customer satisfaction. You draw the link between customer satisfaction and profitability. It's the fastest way to remind companies that they are in business to serve customers.

Paul Cole: Clarity, consensus, and commitment. The first step is to bring people inside the company together around the question, How do we want this company to deal with customers? Create the principles for how you're going to run your business. It sounds simple, but in most companies, it just doesn't happen.

Angel Martinez: I'd say move away from purely transactional thinking. Move from the transactional to the experiential. Emphasize imagery to support your brand, build customer participation into your brand, and make the relationship one that's based on experiences.

George F. Colony: I'm going to be really tactical, because I think that we're about to see a consumer recession emerge to join the technology recession. So first, I'd say that if you have 50 e-business initiatives queued up, and if your customers are not in the 7% club -- that is, they're not in the 7% of North Americans who want to do everything online -- then simply don't act on those initiatives. Second, if your customers are young online consumers, you have to brand them now. Then you have to continue forward. And third, remember that the recession will end. We hope that it will happen soon, but we know that it will end eventually. With that in mind, you have to undertake several e-business initiatives now. That will help you five or six quarters from now. Take a few risks. Continue onward, even though budgets are very tight.

Steve Elterich: Make the customer experience effortless and fun. When it comes to the Web, make it fast and easy to use, with the kinds of services that customers expect to have on the site. And delight them with innovation. Provide them with new capabilities that they didn't even expect, that they didn't even know were possible.

Patricia Seybold: Focus on your key customer segments by role. Use a tool called "Customer Scenario Mapping," where you actually pick three to six scenarios for each segment in which customers are having problems doing business with you and then map out how customers would rather do things. That process tells you what matters most to people and where you should put your metrics. It's very simple, it's very tactical, and you can start doing it on Monday.

Kelly Mahoney: Let your customers shop the way that they want to shop. Whether it's going into a retail store, buying from a kiosk in a store, using a catalog, or visiting a Web site, look at how your customers want to interact with you, and then create a customer-service model that gives them the right tools and the right enabling technologies to deliver on the promise. Learn to communicate with your customers, and market to them based on their preferences.

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