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March 7, 2019

The best and worst of customer and employee satisfaction (Part two in a two-part series)

Maurice FitzGerald / Blog, Customer Satisfaction, Employee Satisfaction / ACSI, Customer Satisfaction, employee satisfaction, Glassdoor /

And here is today’s Fake News (though the quotes are real):

“Our core values: … Put the customer first…” – Frontier Communications website

“We take pride in knowing how to take care of you.” – Message to potential employees on the State Farm website

“Our team members are the key to our success. Whether they work behind the scenes or are out there delivering great service to our guests.” – Frontier Airlines website

This is the second article about the results of my third annual study of the relationship between employee and customer satisfaction. The first article is here. This time I will cover love and hate, stars and goats. (What a program!)

Love-hate relationships

Here are the companies whose employees love them while their customers hate them. From a data perspective, this means they are in the top 10% of the Glassdoor scores while being in the bottom 10% of the 398 ACSI scores. There are just four companies in this category:

Should we be surprised by the positions of the three social media businesses here? Great employment conditions and the fact that the customers seem to hate them is not really a major source of concern. We could debate whether the US consumers answering the ACSI feedback requests are actually the customers. After all, the companies’ main source of income is from advertisers, who were not asked. As for United Airlines, I think the few high-profile nasty incidents they had with passengers last year and in 2017 made a difference to perceptions. They had the biggest drop of any airline. My prediction is that it will all be forgotten in 2019 and they will have the biggest improvement.

And there is just a single company in the opposite category. Kraft Heinz employees give them an appalling Glassdoor score of 2.9, while customers give them an ACSI score of 82. I think it is safe to say that Kraft Heinz employees have a lot to deal with these days and never come into contact with end consumers.

Companies that seem to get everything right – The heroes

Yes, they exist. Here are the companies that are in the top 10% on both the ASCI and Glassdoor lists:

Note that the list is in the order of the Glassdoor rankings. Hilton topped the ACSI list for hotels for the fourth year in a row, and their employees love them too. Do you see anything surprising here? I don’t.

Companies that seem to get everything wrong – The goats

Personally, I think goats are cute and I am not sure why various BCG-style business models cast them as the villains. Anyway, here are the companies that managed the difficult task of being in the bottom ten percent for both their customers and their employees:

Should we be surprised to see the lower table almost exclusively populated by ISPs and TV service providers? I think not. Telecommunications companies have a reputation for disdain of both customers and employees.

Are these comparisons fair?

No, the comparisons are not fair, at least as far as customer satisfaction is concerned.

Customer satisfaction varies strongly by industry. There are industries, such as telcos, cable TV companies, and Internet Service Providers, that have little or no opportunities to ‘delight’ us. If they do their jobs perfectly, we simply don’t notice them. We only notice them when things go wrong. So it is to be expected that they would do relatively poorly in customer satisfaction comparisons that cross industry lines. However, that is no reason for them to treat their employees badly.

Conclusion

We should not find the lack of a strong relationship between employee and customer happiness very surprising, for two main reasons. First, a company’s products and services are generally far more important to customers than the employees. The main exception to this rule is where the employees are the product. Second, employee happiness and employee engagement are two quite different concepts. Employees can be happy with their pay, the food in the company restaurant, and their commute to work. None of these do anything for customers.

Employee engagement is a more sophisticated concept that lacks a standard definition. When I worked at HP the Employee Engagement Index was an aggregate of nine questions. Other companies use different standards, as does every study I have read on the subject. (For the experimental scientists among you, this smells of ‘p-hacking’. Ask a lot of questions in your employee survey. Determine after the fact which set of ten have the best correlation with revenue growth. Combine them in some way and call that your ’employee engagement index’. That’s cheating!)

Data

I have put an Excel sheet with the data here. There are four tabs. It is not very pretty. I have inspected it in various ways but may still have made some sort of error. If you find one, please let me know.

If you enjoy this sort of thing, there is lots more on this topic and many others in our book Customer Experience Strategy – Design and Implementation. All of our books are available in paperback and Kindle formats from Amazon stores worldwide.

March 6, 2019

Do happy employees bring you happy customers? (Answer: In general – No!)

Maurice FitzGerald / Blog, Customer Satisfaction, Employee Satisfaction / ACSI, Customer Satisfaction, employee satisfaction, Glassdoor /

“Everybody knows that happy employees make happy customers.”

“Satisfied employees are the single most important driver of customer satisfaction.”

In reality, I don’t believe employee satisfaction even makes the top three for most businesses. And I think I can prove it.

This is the third year in a row that I have studied the relationship between customer and employee satisfaction for large companies that sell to US consumers. The results have been consistent: There is almost no relationship between employee and customer satisfaction across the 398 business covered this year. Employee satisfaction explains just 6% of the variation in customer satisfaction across these companies. Mind you, “Almost no relationship” is better than my findings in 2017, which were simply that there was, on average, no relationship.

Within the overall results there are exceptions and surprises. There are industries and entire sectors where employee satisfaction matters a lot more. There are also striking examples of companies whose employees hate them while their customers love them. The opposite is also true. And these are big names.

Let’s begin

Back in 2017 I asked myself whether there was any actual evidence for the many statements that I could find that were similar to those at the top of this article. What I found was highly disappointing, to say the least. I found low-volume studies. I found attractive anecdotal studies based on single companies. I found low-volume and single-company studies about employee engagement, which is a different subject. More on employee engagement later. In short, the whole subject had not been studied scientifically. Repeating my searches before writing this article gave the same result. Nothing useful.

It is not surprising that the subject is tricky to study. Companies do not disclose the results of their own internal employee surveys. High-volume public benchmark data about customer satisfaction is also rare. However, it does exist, as does a single high-volume source of employee satisfaction data. I use Glassdoor data for employee satisfaction and the American Customer Satisfaction Index data for customer satisfaction. This year I was able to match the two for 398 businesses. Here are the highlights:

Overall results

At the top level and across all businesses, variations in employee satisfaction explain 6.2% of the variations in customer satisfaction. However, I somewhat arbitrarily decided that 129 of these businesses, such as hotels, retail stores and airlines, are ‘high-touch’. By this I mean that employees have regular face-to-face contact with customers, where their smiles and empathy may make a difference. The remaining 269 are ‘low-touch’. I have used quadratic regression for the graphs below and think they are interesting.

High-touch businesses

For the high-touch businesses, variations in employee satisfaction explain 16.8% of the variations in customer satisfaction. Among well-represented industries, the nine hotel chains top the list at 61.8%, followed by 17 supermarket chains at 49.1%.

Low-touch businesses

At the other end of the scale, low-touch industries have an average of 8% interdependency between employee and customer satisfaction. The energy utilities industry is represented by 23 companies and shows no relationship at all. I don’t find this surprising. When was the last time you spoke face-to-face with an energy company employee? In my own case, they don’t even need to come out to read our meters anymore.

Performance by industry sector

ACSI data is provided by company and by industry, and the industries are grouped into sectors. Some sectors do better than others as you can see in this table:

Retail does rather worse than last year. While it might be tempting to say that this is because Internet Retail is now included in Retail, that’s not the problem. Health and Personal Care stores now have no relationship between employee and customer satisfaction.

Performance by Industry

I removed all industries represented by less than five businesses from the table below. This may not be entirely fair. After all, if there are only three large businesses in a particular industry in the USA, the ‘Normal distribution’ rules of statistics don’t apply. If there are only three and you cover them all, you have a good sample. Similarly, there simply aren’t 30 major hotel businesses in the USA, so any preconception you may have that you need a minimum of 30 for a valid sample is simply wrong. In any case, you will be able to make your own judgments when you download the data.

It should not surprise you to see hotels, supermarkets and restaurants at the top of this list. For hotels, employee satisfaction variation explains 61.8% of the variation in customer satisfaction. Employees are an integral part of the experience in these industries. For many of the industries close to the bottom, we never come into face-to-face contact with the employees, so the lack of a relationship between employee and customer satisfaction should not be a surprise either.

This is part one. What’s next?

This is the first instalment. Here is a link to the data so you can download it and do your own analysis. Note that the Excel sheet has four tabs. In the next article I will cover the companies that employees love while customers hate them, and vice-versa. I believe these lists will be quite enlightening and will make it seem more logical that employee and customer satisfaction do not necessarily go together. I will also provide details of the companies that are at the top of both lists, and of course the opposite. I also go on to suggest why these results should not be a surprise.

February 10, 2019

Valentine’s Day classic blog – How to stay married – to your customers of course!

Maurice FitzGerald / Blog, NPS / customer culture, Customer Experience, Net Promoter System, NPS, Relationships, strategy /

It was Valentine’s Day a few years ago, and I was puzzled by the results of some HP customer experience research. The data source and volume were impeccable. However, the results seemed to prove something that differed from everything that I had learned about customer improvement work. Putting the data and the date together caused a flash of inspiration. I discovered something unexpected about how to keep your customers. I used to think it applied only to B2B situations, and now understand that it applies to any business that depends on contracts that need to be renewed annually.

We were trying to determine whether NPS worked for us

We were about a year into the implementation of the Net Promoter System under Meg Whitman’s leadership as CEO of HP. The time had come to work out the relationship between our Net Promoter Scores® relative to our competitors, and our revenue growth or decline. We had eight years of double-blind benchmark NPS® data for HP and about a hundred competitors, and were able to match it against corresponding revenue data for most businesses. We found that NPS was a great leading indicator of revenue. One HP business decided to investigate it in more detail. That business mainly had multi-year service contracts with its customers. The question they wanted to answer was “Which customers actually leave us?” They used their own relationship survey to understand the different behaviors of the NPS Promoters, Passives, and Detractors. What they found surprised us. I believe the findings apply to all businesses that have ongoing contractual relationships with customers.

From surprise to human relationships

Remember Valentine’s Day had come around when I was dealing with the surprise. Here is how I rationalized it in terms of human relationships:

The happy-happy couples

We all know couples who seem to be made for each other. I call them the happy-happy ones. They agree on everything. They have been together for years. We admire and envy them. In Net Promoter System terms, they are the Promoters. They are like the customers for whom everything is going well. All major project milestones are being achieved early. The customers are getting more than the financial benefits they expected. They have been working with the same account team for years. Life is wonderful. The customers talk positively about us to people they know, and bring us new business.

The couples who seem to fight a lot

Most of us also know couples who bicker constantly, needle each other, and occasionally provoke major arguments. In many cases, we are surprised to note that they have been together for years and show no signs of separating. Why? Because they are communicating! They stay together because they have invested a lot in the relationship and changing seems too scary. In Net Promoter System terms they are the Detractors. They escalate to the CEO. They get lots of attention. They get price rebates because they are angry. And, in the words of HP’s former head of Global Account sales (Jan Zadak) “I love escalations! The customers always wind up buying more stuff.”

When there are ongoing service relationships or investments in technology, the cost of change can be high. Imagine you have built all of your business processes around the way that SAP software works, but you now have a dispute with SAP. You will probably try to work it out. One of Meg Whitman’s catchphrases as CEO of HP has been “Run to the fire. Fix it in 24 hours or escalate it in 48.” I suppose it is also a guy thing that comes to the forefront in male-dominated industries. Men want to solve problems, and are willing to devote all their time to fixing a customer escalation, no matter what else is happening in the relationship.

The couples in the deadly zone of mutual indifference

Have you ever been in one of these relationships? I have, in the distant past. You get home. You think to yourself, “She is not saying anything… everything must be fine.” If you had that sort of relationship, how did it work out for you? Communication is the lifeblood of couples and of businesses with contractual relationships. Think of it this way at the very least; if you are not communicating, your competition may well be doing so. In the absence of communication, someone else smiles at your partner or customer and offers them flowers. They leave you, and you are surprised. Why didn’t they complain about something? What happened? In NPS terms, these are the Passives. Across most industries, they are 35 to 40 percent of all your customers.

What did the HP data show?

This particular multi-billion-dollar HP division had about a 15-point NPS decline over three years. Their revenue declined with the expected time lag. However the surprise was where it declined. Revenue with Promoters rose slightly. Revenue with Detractors stayed flat. Revenue with Passives declined close to 20%. Someone else was smiling at our Passives and sending them flowers. For the sake of completeness, I have to add that the particular business has since more than recovered the decline. I believe this data, these conclusions, and this couples metaphor are representative of all businesses that depend on renewable single-year or multi-year contracts. They are not helpful for pure product businesses.

The message

It is simple. Communication matters. Customers want to be remembered. If the only times your customers have contact with you are when you want to sell them something or when something is wrong, they will leave you. This insight could help your personal life too.

Your customer experience listening and improvement system is a crucial part of maintaining ongoing communication with the customers who are not escalating, and who are not active references for you. Just as you would never consider delegating communicating with your partner to someone else, you should manage your listening and improvement process on your own. Don’t delegate it to a third party. That would communicate something you don’t want: “I am too busy to listen to you. Talk to this person instead. That is a good use of your time, but not of mine.”

Piotr Sadowski has posted a Polish version of this article on LinkedIn here. And you can still find a slightly different version of the article in French that I posted a couple of years ago, also on LinkedIn here.

This is an edited version of a chapter in our book Customer Experience Strategy – Design and Implementation, available in paperback and Kindle formats from Amazon stores worldwide.

In the meantime, please feel free to comment below and sign up for our newsletter here to stay up to date. The artwork is by Peter FitzGerald, and you can reach me at mfg@customerstrategy.net.

February 6, 2019

What skills do you and your customer experience team need to be successful? (5-minute read)

Maurice FitzGerald / Behavioral economics, Blog, Psychology, Strategic initiatives / Customer Experience, CX, Metrics, Natural Language Processing, NPS, program management, skills, strategy, Surveys, training /

While pure luck was a major factor, my use of Microsoft Project version 1.0 on my personal Mac certainly had a major positive influence on my promotion to the European HQ of Digital Equipment Corporation. I printed out multi-page GANTT and dependency charts for a major project and used them to present to my future manager. It made me look like I knew what I was talking about. That was what I felt too: seriously competent.

Ten years in Geneva and many projects later, I had a new manager. Don Gordon invited me into his office in Munich to review a major program I was managing. After about ten minutes he said, “Maurice, you know almost nothing about program management.” I did my best to stay polite while disagreeing strongly. He said, “OK, just answer this question: What is a deliverable?” I have to say that I struggled to answer. And I quickly understood that it was a critical and fundamental concept in program management. A deliverable is the thing you can observe so that you can tell that a piece of work has been completed. For example, if you have completed some customer research, the deliverable will probably be a report or a presentation.

Program management skills are critical

The single most important skill set needed for customer experience improvement is program management. You and the people in your team have to be able to get things done in a professional and predictable manner. The easy way to learn the basics is to attend formal training such as that given by the Project Management Institute (PMI) or PRINCE2 training. Courses are available in many languages. Learning the basics from a colleague who has already attended formal training is an acceptable minimum.

Some program management concepts are quite important when you are presenting a new initiative for approval. The single most important thing you have to avoid is called ‘scope drift’. This usually happens when the program completion criteria are not well-defined. Imagine a situation where your improvement initiative is the implementation of a Chatbot as an option for customer support. When is the implementation complete? Is it when you have completed a proof of concept? How about a pilot covering three countries? Or have you completed your part of the work when it has been implemented in 87 countries and 20 languages? I strongly suggest you define this type of thing before starting.

Success criteria are also important and should be agreed before starting. Let’s suppose your Chatbot project is complete when you have implemented a pilot in three countries. Has the pilot been successful? How do you know? Is success defined by a number of cases closed, a customer satisfaction metric, a cost metric, or what? To avoid scope drift, you have to agree these points before starting.

Interpreting data

I will try to avoid using the term Data Scientist. (Oops, I just used it.) Correct interpretation of structured and unstructured customer data is the second of the two core customer experience skills. Within that broad area, the most important knowledge areas are statistics and at least some basics of Natural Language Processing.

I feel strongly that statistics do not belong in any executive-level presentation. By this I mean you should avoid presenting things like confidence intervals. If you happen to get someone who loves statistics in your audience, everyone else will go to sleep while you answer his or her questions. You should simply invite anyone who wants the technical details to see you after the presentation. However, you still need to be confident that the numerical part of your work has been done competently. Any basic statistics course should do, and I don’t have any particular recommendations, though I suggest that you need to get beyond the Normal distribution. (Net Promoter Scores, for example, are not Normally distributed.)

Unstructured data too

If you use the Net Promoter System, and indeed most other customer feedback systems, you will get a lot of unstructured data too. This means the text answers to the open questions you ask, such as “What could we do better?” Software to analyze lots of text in lots of language is in constant evolution. At the time I write this, most software that is available on the market works extraordinarily badly.
The most common defect is the requirement for lots of human intervention, mainly to ‘tag’ answers, assigning them to an existing list of categories. As soon as more than one person is doing the work, the results are inconsistent at best, incomprehensible at worst. The second-most common defect is that a lot of the software returns single-word categories. For example, the most common word found in a survey about a restaurant might be ‘food’. But what about the food? Was it good or bad? Who knows? Great Natural Language Processing software groups unstructured data into themes; multi-word concepts, each of which groups answers that may use different words that have similar meanings.

Presentation skills

The final skill you need is the ability to present compellingly. While I suggest a formal course on such skills, I don’t believe it is enough. I believe you have to be a storyteller. That will be the subject of another blog.

While the above is new content, I make related points in some our other books. All books are available in paperback and Kindle formats from Amazon stores worldwide.

January 24, 2019

The nature of customer-centric strategy and why your team needs one (Intense 3-minute read)

Maurice FitzGerald / Behavioral economics, Blog, Psychology, Strategic initiatives / CSAT, Customer Experience, CX, Metrics, NPS, strategy, Surveys /

I have been broadening my writing horizons somewhat over the last few weeks. Among others, I have contributed thoughts on customer strategy to discussion on LinkedIn, Quora and the members-only forum of the Customer Experience Professionals Association. I suppose I should not be surprised by what I read online, but I was.

99% of all customer experience discussion seems to be about metrics. This is just wrong!

Data is easy, information is difficult

The reality is that it does not matter all that much whether you use CSAT, NPS, Customer Effort Score, the Wallet Allocation Rule, or whatever. The critical question you have to answer is what you are going to do to improve. The metric itself and even its trend does not give you that information. The most important data gathering question is how you can determine the top few actions you can take to improve customers’ lives and thereby your business. (This applies equally well to government agencies with no financial objectives.)

Strategy is all about how you deploy your scarce resources

You can’t do much. By this I mean that effective strategy is about winning. Nobody wins a military battle or a sports competition by deploying all resources equally over the entire field of battle. You have to decide on one or two things, try them, then adjust. Then start again. You don’t have unlimited people and money. Whether at the level of an individual business or function, or at the level of an entire company, you have to concentrate resources on just a few initiatives that will let you crush your competition.

Having lots of metrics can prevent you developing an effective strategy.

What do you need to know about your customers?

From a customer experience perspective, you want to know just three things:

How much do your customers like you, ideally compared to your competitors?
Why do they like or dislike you?
What do they want you to improve?

There is nothing else worth knowing from their point of view. This does not seem to be the point of view of hundreds of business professionals online, all of whom seem to want to know many many things about their customers. There is a fundamental truth about customer research: you have to provide more value to customers than you extract. Unless they have told you it is critical, it does not provide value to customers to get their view on how pretty the shipping carton was, or how much they like the color of your new logo.

If there is some consistency in what customers want you to improve, you pick the most important items, set up a team to drive each improvement, tell the customers you are doing so, and execute. You should only have about three such initiatives at any given time. That will make them easy to communicate and understand internally and externally.

What do you not need to know about your customers?

To pick a semi-random example, you don’t need to know anything about the perceptions of the professionalism of your service agents unless customers have said it is a major problem. So, don’t ask about it. I believe the only things worth researching beyond the three questions mentioned above are additional levels of detail you may need to define your improvement initiative correctly. There are too many surveys out there. Adding more, particularly ones that will not contribute to any major improvement initiative in any way, is insulting to your customers and to your own teams.

I make similar points in a lot more detail in our book Customer Experience Strategy – Design and Implementation. All of our books are available in paperback and Kindle formats from Amazon stores worldwide.

January 7, 2019

Nudging customers to do what they should (2-minute read)

Maurice FitzGerald / Behavioral economics, Blog, Psychology, Strategic initiatives / Cass Sunstein, Customer Experience, CX, Nudge, Richard Thaler, strategy /

In their book Nudge, Richard Thaler and Cass Sunstein explain that people are poor at choosing among options, and can quite easily be ‘nudged’ or pushed gently to make a specific choice. They promote the concept of ‘Libertarian Paternalism’, encouraging leaders to nudge all of us in directions that give us the greatest long-term benefit. There is a single important principle that permeates their work: humans need well-chosen default options for their major and minor choices in life and as consumers. They also need to be able to change the default choice.

Libertarian Paternalism

The authors give an example of what they mean using the experience of employees at the University of Chicago. They have a subsidized health plan that comes up for renewal each year. They receive paper and email information about the available plans well before the renewal deadline. The question is what should happen when the employee forgets to renew. Should the default be, for example, to continue the prior year’s plan, or to reset them to having no health plan. Except for the economically desperate, it seems unlikely that anyone would reasonably want to cancel their (say) $1,000 per month family health plan that is matched by equal funding from their employer. Libertarian paternalism suggests that the default choice, preselected in the online form, should be to continue the current plan.

Relevance

All companies and government institutions present their customers with choices. The companies providing the choices have a much deeper understanding of the consequences of the choices than the customers do. This is where companies can and must actively suggest the choices customers should make, rather than leaving them with a list to choose from. Assuming the statement is true, a way of handling the issue would be to say, “most customers like you choose this option.” I suggest being more active.

Retail bank example

Consider the example of hardware maintenance for a retail bank’s infrastructure. Let’s suppose we are only talking about what they need to run the front office while the physical bank is open, from Monday to Friday. I remember an example from when I worked at Digital Equipment Corporation (DEC). A UK bank had contracted to have a one-hour on-site support service, Monday to Friday, in working hours. That seemed quite logical until a disk failed in a RAID array. These are massively redundant, and failed disks do not need immediate replacement. One of our people was at their office within 30 minutes. The customer said they could not deal with this during working hours, and asked them to come back the following day, a Saturday. They did not have a contract for this. With a bit more thought, our default option for retail banks could and should have been 24×7 service. We wrongly thought we should just give them a set of choices, and they chose the one that cost the least. We should have used our experience with other banks to nudge them to a better default, even though it would cost them more.

So, and with a totally out of context Monty Python reference: Nudge nudge, wink wink, I will say no more.

The above is a slightly-edited version of a chapter in our book Customer Experience Strategy – Design and Implementation. All of our books are available in paperback and Kindle formats from Amazon stores worldwide.

December 22, 2018

The plural of ‘anecdote’ is ’emotion’ – You can use this for good or for evil

Maurice FitzGerald / Behavioral economics, Blog, Cognition, Strategic initiatives, Strategy / Behavioral economics, behavioural economics, Cognition, Cognitive bias, Customer Experience, CX, Daniel Kahneman, Sponsorship, strategy /

Some time ago I wrote a short article suggesting that The plural of the word ‘anecdote’ is not ‘science’. My point was that just because a lot of people have their own personal stories about a subject does not make what they are saying true. Take the example of nutrition advice that follows a common formula, “I have been taking ten times the daily recommended amount of Vitamin D and have not had a cold for over five years. My sister and her best friend have found the same thing. Vitamin D is ‘the sunshine vitamin’. Everyone knows that we get far fewer colds in the summer than in the winter. Vitamin D is the reason why. Click here to buy my Vitamin D supplements with added iron and jubjub berries, which are essential anti-oxidants.”

I am sure you have seen lots of anecdote-based advertising like this. If twenty people all say vitamin D supplements prevent colds, does that make it into science? I hope you will agree the answer is no.

This happens in business settings too

The same phenomenon arises frequently when businesses are developing their long-term strategies, and indeed when they are deciding how to deploy resources in the short term. Your CEO goes to see a customer who has a particular problem with your product or service. The CEO only sees a couple of customers a month and comes back believing that because one customer told him/her that this was an issue, it is indeed a critical issue. The CEO may also have committed to the customer that the issue will be fixed as soon as possible. Major projects must be stopped and resources reallocated until the problem goes away. I wish I were fantasizing, but I have seen it first-hand a number of times.

It would be nice to think that your customer experience leader or another executive could approach the CEO and provide a list of the top five customer issues that you have learned about through research. You may even be able to list the three strategic initiatives that you have under way to address the problems. For some reason that won’t matter. The anecdote has become science in the CEO’s mind.

Daniel Kahneman’s work

While I say that your efforts to provide data won’t matter ‘for some reason’, what I mean is that they won’t matter for a specific well-understood reason. That reason has been documented by the Nobel-winning behavioral economist Daniel Kahneman in his book Thinking, Fast and Slow. He describes two ways our brains function in terms of two systems:

System 1 is intuitive, emotional, and quick to act.
System 2 is rational, scientific, and relatively slow to act.
And… if System 1 has jumped to a conclusion, System 2 will not engage at all.

French study on organic food as an example

If you Google “French study shows that eating organic reduces cancer risk by 25%” you should find a lot of links to articles on the topic. Indeed, you will find so many links that you might think that it is true. You would be absolutely certain that this is what the French study said.

What the study (which I have read) actually says is that a group of almost 70,000 people who lived particularly healthy lifestyles and also ate organic food had a cancer incidence that was 25% lower than that of the general population over the four-year period of the study. For example, the study group had 15.7% of ‘current smokers’, compared to an average of 31.8% in France as a whole. They also drank less alcohol and exercised more than average. I don’t find it at all surprising that they had far fewer cases of cancer. How much of this was due to organic food? The authors suggest that it had no effect for most of the observed cancers, and may have had an effect for two types of cancer. They also acknowledge that a much larger and randomized UK study of a million people did not show any positive effect of organic food consumption on the incidence of cancer.

The plural of ‘anecdote’ is ’emotion’

None of the facts make any difference. The 25% anecdote has passed into the folklore of the organic food and nutrition communities. In two of the three Swiss cases where the 25% cancer reduction story has been published, my attempts to provide the actual data have been rebuffed. The answer given is “So many sources are saying the 25% story is true that you must be wrong.”

The point here is that the many anecdotes have grouped together to create an emotion about a particular topic. System 1 has reached its conclusion. System 2 is not welcome.

Use this for good in your business

So, you can now use this information for good or for evil. If you have science-based facts that you want to promote, come up with some human stories that will help. If you work at a security software company and want to ask for funding for a particular project, make sure you have your data and add a human-interest story like this:

Or you can use it for evil

On the other hand, if one of your colleagues, or perhaps a political opponent, has science-based facts that are inconvenient to you, don’t push back on the science. Simply come up with a human-interest anecdote that supports a different direction. This is easy in politics.

Let’s take the example of immigration. In most countries the immigrant population commits far few crimes than the native population. If you are in one of these countries and want to promote anti-immigration legislation you simply come up with a story about your neighbour who was attacked by an immigrant. The story does not even have to be true. You simply imply that all immigrants from your target country are dangerous. “A woman down the road was attacked by a teenager from Outer Slobavia last week. The Outer Slobavians are all dangerous criminals and we need to keep them out of our country.” It does not matter what the data says. Evil, eh? [You can’t hear me practicing my evil laugh here.] And yes, I am sure you can work out how to use this general principle in a business setting.

Conclusion

I have to work on an email to the producers of a Swiss TV program that has been announced for January 8th. As far as I can tell from the trailer, the anti-GMO journalist is going to show a documentary about cotton production in India. I think the information will be based on an entirely false story that the Indian anti-GMO activist Vandana Shiva started to spread about 15 years ago. She says that GMO cotton, specifically a variety that is resistant to bollworm attacks, has been responsible for a large part of the 270,000 suicides there have been among Indian farmers since 1995.

Yes, it is tragic that farmer suicides represent 10% of the total suicides in India since 1995, but there are many holes in the story. For example, the GMO cotton in question was introduced in 2002, requires far less pesticide use, and has a much better ROI than non-GMO cotton in India. My challenge is that her argument can be summarized in three System 1 words, “GMO Suicide Seeds”, and I only have a System 2 rebuttal. Ideas on how to condense it into a System 1 summary are welcome. Contact me by email if you have any ideas.

Remember that our books still make great holiday and New Year’s Day presents! All of our books are available in paperback and Kindle formats from Amazon stores worldwide.

Situation analysis internal realities and insights

December 10, 2018

Strategy: Ask new questions to get new answers – Part6 of 6: Internal realities, and conclusion

Maurice FitzGerald / Blog, Strategic initiatives, Strategy / Chief Customer Officer, competition, Customer Experience, CX, Sponsorship, strategy /

So far, the situation analysis has allowed you to dream about what you can do for customers and partners, how you will crush your competitors and how you will lead your industry. This time we move on to the internal realities in your own organization. It’s a tricky subject and can be the hardest of the six areas we have been studying. Let’s be positive: to get new answers, you have to ask new questions.

This is the fifth in a series of articles about what I consider to be the most important aspect of strategy development: an accurate analysis of the current situation and what should be done to improve it. The first article was about customers and is here. The second was about partners and is here. The third was about competitors and is here. The fourth was about industry dynamics and external factors and is here.

Questions about internal realities

While the first five areas are all about what is happening outside your company, you are unlikely to be able to sell and implement every conceivable idea within your company. These questions may help establish what you can achieve:

What is the state of executive sponsorship for your current efforts?
How likely are you to be to get any additional funding and people you may need to implement?
What can you do to prove the value of your work?
How can you secure enduring sponsorship for your work; sponsorship that will survive leadership changes?
What current work can you stop in your own area to provide resources for new work?
Do you have a formal talent management program in your company that you could use to staff improvement work on a part-time basis?
What measurement and improvement systems and processes have your CEO and other key leaders used in their previous companies?
Look at the intranet pages of your business and function leaders. Which ones mention customers as a priority and which seem to have no interest in the topic? Which ones have announced and staffed formal customer-centric initiatives?
Have you grown by mergers and acquisitions? If so, are many different improvement systems and processes in place? Which ones seem to have the best reputations and produce superior results?

These are just suggestions

Each company is different. You need to come up with your own list of questions. Try to find at least some that you believe nobody has ever asked. My draft list is a reasonable starting place. I have tried to include questions that are about people and organizations as well as about sources of funding. The second question on the list is critical, nevertheless; if you have no hope of getting the people and other resources you need to implement a new strategy, well… you should probably change companies.

The answers lead to insights

The result of the situation analysis in each area should be a short list of insights. Each team should aim to have one to three insights and potential initiatives ready to explain and propose at the end of the analysis cycle. If a team has more than three ‘top priorities’, they have probably not put enough thought into it. As French philosopher Rene Descartes said when writing a letter to a friend (and this is often mis-attributed to Mark Twain), “Please excuse me for writing such a long letter. If I had had more time, I would have written a shorter one.”

Useful insights often take the form of “so therefore…” statements. “We looked at the industry benchmark data from Temkin Group and saw that Acme is outperforming us in this area. We believe we are stronger than Acme here, so therefore here is what we need to do…” The point is that the action proposals need to be based on data and analysis, and not on ideas that have come from thin air, with no factual basis for believing they will improve customer or partner experience. Each team’s insights and proposals will be competing with those from other teams for funding. The better supported the proposals are by fact, the easier they will be to explain and support.

Conclusion

We have now covered all six dimensions of a situation analysis and outlined how to turn the questions and answers into insights. The word ‘insight’ is a deep and meaningful word. It is not superficial. The process I have outlined should give you the depth required to decide what areas you should concentrate on and how.

Good luck!

As is often the case, the above is a substantial rewrite of part of a chapter in one of our books; in this case Customer Experience Strategy – Design and Implementation. All of our books are available in paperback and Kindle formats from Amazon stores worldwide.

Situation analysis industry and environment

December 2, 2018

Strategy: Ask new questions to get new answers – Parts 4 and 5: CX industry and external trends

Maurice FitzGerald / Blog, Strategic initiatives, Strategy / Chief Customer Officer, competition, Customer Experience, CX, strategy /

This time the situation analysis process moves on to relevant trends in your industry and in the external environment. Accurate observations about these areas can give you a competitive advantage, even if you have little influence over the trends. Remember: to get new answers, you have to ask new questions.

This is the fourth in a series of articles about what I consider to be the most important aspect of strategy development: an accurate analysis of the current situation and what should be done to improve it. The first article was about customers and is here. The second was about partners and is here. The third was about competitors and is here.

Industry and external trends

These areas require a different approach to others in that it may be harder to find objective data. Please don’t ‘trust your gut’. Whether it be for climate change or business strategy, science will give far superior insights to those your stomach and intestines may provide. These are areas where having someone on your team who has a formal business school education may help. I remember learning something I found surprising in one of my INSEAD courses, for example: American companies that decide to expand into Europe by placing their European HQ in London tend to be far less successful than those that are forced to make language adjustments by placing their HQ somewhere in continental Europe. So, if you are competing in a relatively new industry where everyone seems to be expanding from the USA to Europe, let or even encourage your competitors to go to London while you move to Brussels or Geneva, for example.

Questions about industry trends

Here are some questions that should be relevant for most industries. I have concentrated on things that affect customers only. You may like to add questions about industry trends that affect employees, for example trends like outsourcing and offshoring. There may be some overlap between these questions and those about competitors.

What are the most important customer experience trends in your industry? What ways of listening to customers are most popular? What new improvement processes and technologies are emerging?
What is the impact of social media on customer perception of your products and services? Do you know what is being said about you on social media, and does it matter?
Which measurement systems best predict revenue and market share?
How do the latest developments compare with what you are currently using?
What customer experience competitive benchmark data is available and relevant to your industry?

Questions about external trends

These questions are about the environment in which your company, your competitors and your customers live. It includes government regulation and general concerns and hopes of the people in countries where you operate. These questions come from an exercise that was specifically about customer experience strategy. You should edit and adjust for your needs.

How does government regulation affect the way you want to go about measuring and improving customer experience?
What current and emerging rules about data privacy affect your current and potential survey processes?
How are you required to maintain customer survey opt-out lists?
Do you know what surveys are being run in your company and whether they respect relevant laws?
Are you allowed to transmit customer lists to subcontractors such as survey providers?
Do some governments and countries where you operate have an unusually high focus on the environment, gender equality, fighting corruption or other formal initiatives that you may find useful in building your brand image?

Government regulation trends are quite hard to predict in our increasingly polarized world. Trends can take opposite directions when a different political party comes into power. I worked for a company whose factories were confiscated in one country that had a military takeover, which is an extreme example. And I have to say that the Wrangler HQ reaction to François Mitterrand’s socialist / communist coalition government in France was… well… interesting, to say the least.

The answers lead to insights

If you have asked new questions, the result will be new answers. When most companies work on a new strategy they don’t cover these two areas at all. Cover them well and you will win.

Conclusion

We have now covered five of the six dimensions of a situation analysis. Next time we will talk about your internal realities and how to put it all together.

November 27, 2018

Strategy: Ask new questions to get new answers – Part 3: Competitors

Maurice FitzGerald / Blog, Strategic initiatives, Strategy / Chief Customer Officer, competition, Customer Experience, CX, strategy /

There are two main categories of competitors: traditional and emerging. The emerging category includes companies you do not know about yet, but who may be about to take over your market. There are industries such as steel manufacturing where barriers to entry are high, and you are unlikely to be surprised. There are also low-barrier industries such as software and pure import-export businesses. The focus of this article is a set of questions that may help you to gain new insights about your competitors and what you should do to crush them. Above all, remember: to get new answers, you have to ask new questions.

This is the third in a series of articles about what I consider to be the most important aspect of strategy development: an accurate analysis of the current situation and what should be done to improve it. The first article was about customers and is here. The second was about partners and is here.

Emerging competitors

As Willie Pietersen said during the Columbia course I mentioned in the first article in the series, “Somewhere in the world someone has just had a great idea that is going to kill your company.” I won’t bore you with the extensive list of companies that did not notice new threats or did not take them seriously. I suppose those leaders may have been victims of short-termism. By that I mean they felt that they did not need to worry about the new threat during the current quarter as it would not affect short-term financial results. Think of it as similar to the way some political leaders talk about climate change. Nothing they have to worry about or invest in as the worst will happen after they leave office.

Getting started

As mentioned in prior articles, you should use a cross-functional team to agree the list of competition-related questions and then answer them. In a large company, it takes six weeks to do the situation analysis well. You should have a short progress check with your team members each week. What follows below is a suggested set of questions about current and emerging competitors. Please be clear that the list is just there to get you started. This list was developed for the creation of a customer experience strategy and most questions will apply to any type of strategy. Some will of course not be relevant to your business. And you will certainly be able to come up with additional and better questions.

Remember: Ask new questions to get new answers.

The questions

Do you have competitive benchmark survey data that lets you understand where your competitors provide a superior experience and the situations or touchpoints where you lead. If so, how do you compare with traditional competitors and are new competitors emerging with differentiated customer experience?
How have competitors’ customer experience strategy and results changed over time? What investments have they been making in people and systems? (Going to their website to look at their list of job openings may help with this.)
What do your critical competitors say about customer focus and customer experience in their quarterly and annual reports? Is customer experience mentioned on their website as a formal part of their business strategy? How have they set up their customer experience teams and others that support critical touchpoints?
What customer experience software and consulting companies use your competitors as references on their websites?
Do you have competitors that have no short-term profit objective and so can outspend you in critical customer experience areas?
If another company is the customer experience star in your industry, what are the two or three most important reasons for the leadership? Are you able to do those two or three things better than the competitor, or should you be concentrating on doing things differently? (Both work.)
What customer-experience-related investments have your competitors stopped or radically decreased?
Do you see competitors whose customer experience [Insert your own strategic focus area if needed] approach differs by country?

Your people who manage customer experience may have some relevant data. The most difficult thing to get is an accurate comparative view of customer perceptions of your company and your competitors. Double-blind competitive research is best, if you can afford it.

The answers lead to insights

If you have asked new questions, the result will be new answers. Just a small subset of these will lead to true insights and actions about the trends in the experience you and your competitors are providing customers. The concept of new or emerging competitors is an important one and deserves special attention.

Conclusion

We have now covered three of the six dimensions of a situation analysis. Next time we will talk about industry trends and the external environment.

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