Strategic initiatives

NPS is dead - Long live NPS

Is the Net Promoter Score (NPS) dead?

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The Net Promoter Score is dead! Or are the reports on NPS simply fake news? Well, the image at the top of the article shows what I found with a simple Google search. So… is the Net Promoter Score dead? Here are the views of two important people:

Mark Twain quoteAnd of course this well-known quote:

 

Cervantes internetFor reasons I won’t go into at the moment I have had to research what those who do not support NPS have been writing over the years. Here are some of the objections I know about and what I think of each. If you have others in mind, let me know and I will provide my perspective.

‘Compound metrics’ are better predictors of revenue and market share trends than NPS’

Yes, this is true in many cases. It is possible to design and implement more sophisticated measurements that are better predictors and a number of them exist. Reichheld and Markey have never claimed otherwise. Reichheld’s original contention was simply that the recommendation question was the best single-question predictor among those studied, for the majority of industries. The issue with compound metrics and the reason none have ever caught on is that they are extraordinarily difficult to explain. And because they are not common, every single communication about the results has to start with an explanation of how the metric works. Too boring. Audiences go to sleep, no matter what the value of the sophisticated metric is.

The recommendation question is not always the best or most predictive single question to ask

Yes, that is true and Reichheld says so in his 2003 HBR paper. Indeed, he refers extensively to Enterprise Rent-A-Car in his paper and the question they ultimately used and that turned out to be a great predictor for them was ‘Please rate your overall satisfaction with your rental’. When eBay implemented NPS their target customers were people making their living selling things on eBay. The found that when they asked the recommendation question they got answers like “No, I am never going to recommend to a friend that they should compete with me on eBay.” So they implemented “How likely are you to continue selling on eBay?’ and continue to use that question to this day.

Lots of other things affect growth more than NPS

That is certainly true in some industries. Overall, Bain and my own research suggest that NPS scores predict between 20% and 60% of revenue / market share trends, depending on the company. There are clearly industries where external factors drive 100% of the revenue and customer satisfaction will drive market share only. Take gold sales. Revenue depends on the price of gold. Market share will partly depend on how customers feel about you compared to your competitors. Where there are monopoly providers of essential resources like electricity, customer sat has no effect on revenue, as should be obvious. You can the relevant information from Reichheld and Markey here.

NPS is easy to game

Yes, that is true, and the same is true of every other metric like CSAT or Customer Effort Score. Here is a blog I wrote about how to cheat a couple of years ago. https://customerstrategy.net/gaming-survey-results/

Companies publish fantasy numbers as their NPS numbers in their annual reports

I wish that were not true, but it is. The only number they should publish is a double-blind competitive NPS benchmark score. Some companies choose to publish numbers that correspond to some positively-perceived subset of their business such as a support desk that only a minor proportion of their customers actually use. Again, the same self-measurement phenomenon could happen with CSAT or other metrics.

NPS is not a good predictor of revenue

While I will go into specific papers about the topic below, I want to make a few general points first. Not all NPS numbers are equal. The only scores that are consistent and reliable predictors of revenue and market share trends are double-blind competitive NPS benchmark trends. Double-blind means that the people answering the feedback requests do not know who is funding it. Ideally the people analyzing the feedback don’t know either, though this second ‘blinding’ may be tricky to achieve. If, for example, the only NPS numbers you have are feedback from a support desk survey, you should not expect it to predict revenue or market share at all unless yours is simply a support desk business. And of course if your numbers improve but your main competitor’s numbers trend is even better, you will lose market share. I emphasize share rather than revenue because some industries are in decline. If your score is better than your competitors’ scores you may simply decline more slowly in that industry.

We did deep research on this while I was at HP and I have posted the top-level results of the relationships we found between relative NPS trends and revenue in various places. Since then, Dr. James Borderick of Micro Focus has done even deeper research on the subject across more than 30 global software vendors and once again proven the strong relationship between NPS and market share trends. I don’t know exactly what level of detail he has been allowed to publish as his work does of course include some confidential company data.

An often-cited quote from Fred Reichheld about his own research

There is an often-cited quote from Fred Reichheld stating “A number of perspicacious readers have noted that the statistical evidence provided in my book The Ultimate Question is imperfect. It does not provide proof of a causal connection between NPS and growth. Nor are some of the timeframes ideal.”: This quote comes from one of his own blog posts (here) and has been used by a number of people to ‘prove’ that Fred felt his own research was defective. The quote is horribly out of context. Here is what he says immediately afterwards and which proves he believes his research was entirely legitimate. “When the manuscript was completed in mid-2005, that data, imperfect as it was, represented the best available information: 8 quarters of NPS and annual organic revenue growth rates for competitors in a dozen or so industries. Today, this database has grown enormously. Bain has conducted additional research in scores of industries around the world, gathering NPS data and apples-to-apples revenue-growth statistics for individual competitors. Bain teams consistently find that NPS explains the majority of variation in organic growth rates across an industry over many time periods. More importantly, we have found that individual customer responses to the ultimate question predict those customers’ subsequent behaviors across the multiple drivers of profitable growth: repurchase rates, margins, cross-sell, retention, referrals, etc. Many companies, including GE, Intuit, eBay, American Express, and others have seen similar results.”

Proof of the relationship between NPS trends and revenue / market share trends has never been published in a peer-reviewed journal

Not true at all. For example, here is one that Andrew Stephenson, Jana Fiserova, Geoff Pugh, and Chris Dimos had accepted for the British Academy of Management annual conference proceedings. It actually won best paper at their 2018 event. The data is from the UK-based multinational furniture retailer that has over $1B in annual revenue. It is quite a ‘deep’ read. To me, the essential point is their choice of using feedback gathered six months after purchase. This seems like a great way of getting a pure brand-level NPS number. I would like to invite you to take the time it takes to read it, if you are at all interested in the subject. You will see that the relationship between NPS and revenue is established in a quite compelling way. The paper is here. (This should open with a completed search for the name Stephenson, and you can download the paper directly from the search result.)

Keiningham et al. paper ‘A Longitudinal Examination of Net Promoter and Firm Revenue Growth’ – Journal of Marketing vol 71, July 2007

Let me try to be polite about this. It is a disgraceful failure of the peer review system that this article could have been published in the form it was published. Here is a link. While there are a number of issues, the main thing that should have disqualified it from publication is on page 43. During the second of the three years studied the price of a barrel of oil dropped 30%. This is a great example of an industry where you would not expect any customer experience metric to have predictive value for revenue. The only factor that matters is the price of oil. This is so blindingly obvious that I can only believe that it was included in a deliberate attempt to deceive readers. The other half of the same page proves the opposite, meaning a strong positive relationship between NPS trends and revenue / market share for banking. Without the gas station example, the overall conclusion of the paper does not stand up.

However, that was not enough for the authors. They added to the what I feel is the deception with an extensive comparison between NPS and ACSI as revenue predictors, proudly showing that ACSI was at least as good a predictor and thereby ‘proving’ that the recommendation question is not the best single-question revenue predictor. However, they knew that ACSI is not the response to a single question. It is a weighted average of the answers to three different questions so is a compound metric (see above). Keiningham knows about my objection and rejects it as it has not been published in a peer-reviewed journal. He does not deny the facts I set out.

Morgan and Rego paper ‘The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance’ – Marketing Science Sep-Oct 2006

In the abstract and full paper the authors write things like “metrics based on recommendation intentions (net promoters) and behavior (average number of recommendations) have little or no predictive value.” Unfortunately, this is another, perhaps even more disgraceful, failure of the peer-review process. Morgan and Rego did not study the recommendation question at all!  The paper should never have been published as written. They used the answers to two other questions and then state that they are equivalent to the recommendation question. Here is what is on page 429 of the article: “We utilize ACSI data concerning consumer responses to the questions “Have you discussed your experiences with [brand or company x] with anyone?” and “Have you formally or informally complained about your experiences with [brand or company x]?” I suppose they felt compelled to write something about NPS, had no data at all, and so invented something deliberately deceptive that supported the conclusion they wanted to make.

There are a number of other papers published in various magazines and journals that pick on particular aspects of NPS or specific industries. I have one that covers just two industries, one of which is PC manufacturing. Reichheld said they had found no relationship between IT manufacturing and the recommendation question in his HBR paper, so the ‘finding’ is hardly surprising. Note that for the HBR paper end users of IT were asked, rather than the corporate purchasing decision-makers, so it is really not a surprise that there was no relationship with revenue trends.

I suppose you can tell I feel strongly about some of these objections while considering others to be valid. If you have more that you would like me to examine, please feel free.

 

More of this sort of thinking in our books. They are all available in paperback and Kindle formats from Amazon stores worldwide.

 

 

What do I do now?

Answers to two questions from new Customer Experience leaders: Where do I start, and to whom should I report?

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I attended and spoke at the CustomerGauge Monetize! event in central Amsterdam last week. It was fabulous event, held in a theatre that has been created in an old church building. I was able to socialize extensively with the attendees, the speakers, and various people from the CustomerGauge team. I found my interactions with their software developers particularly stimulating.

Two questions came up most

I have not attended this type of conference in a while and did my best to learn what was on customer experience leaders’ minds. The most common questions I was asked were, “Where should I start?” and “Where should I report?” These are simple questions, though the answers are not simple. Or at least the answers are not simple if you exclude “It depends.” as an acceptable answer.

Where do I start?

The best way to ensure that you have the support of the leadership team from the start is to go and ask each of them what you should do. This is a tactic works best at two points, one of which may surprise you. I believe the best possible way you can start is to try to talk to other members of the management team you are trying to join while you are still in the interview process. I did this once, for my biggest promotion. I had already met two of them and made it my business to meet several others before I interviewed with the head of HP EMEA. When he asked me the inevitable question, “What do you think should be your priorities?” I was able to answer, “Well, here is what various people on your team suggest. I agree with these three suggestions and want to add a fourth of my own. What do you think?” I suppose this also addressed a more general interview technique which is that the person who shows they want the job the most usually gets it.

My second suggestion for where to start is almost the same as the first. It consists of going through the same process with your new teammates, just after your appointment. In both cases you should be trying to get their suggestions for work that crosses organizational boundaries. I don’t think there is any point in asking (for example) the support leader what the support team should do.

Just the first steps

The above are my suggestions for the very first things you should do. They are designed to achieve consensus about the priorities. That consensus should make it easier to take the subsequent steps, which are mainly around ensuring you have the people and funding you need to implement what has been agreed. Once you are in motion you can take the time to work more deeply on your mid-term strategy.

If you have already been appointed some time ago and are still asking where you should start… well… you probably have a different problem. And I am going to try to answer it in a different way, by talking about where you should report, or at least the teams with which you need to have your closest relationships.

To whom should I report?

In a perfect world you would report directly to the head of the organization for which you are the Customer Experience leader. While I had that privilege, it is rarely the case. I have quite strong views on the next-best options, and they may not be what you expect.

The best reporting line is to the Chief of Staff, if your organization has such a position. That person usually sets the agenda for and runs all leadership team meetings. They always know everything that is going on. This ensures that CX will be on the leadership team agenda and will be well-connected to whatever is going on.

The second-best reporting line is to the sales leader, at least in B2B companies. The reason for this is quite simple. If your work is successful, win rates will improve. Reporting this way can also remove one of the major obstacles CX leaders face: resistance by sales people to customer interviews. Sales people commonly say “I already know everything that is going on with my customer so we don’t need to do any more research.” I have never found this to be true. Face-to-face interviews with the top customers always bring new surprises. Once you are seen to be addressing any negative surprises you will find it easy to get the support of the sales team.

Reporting lines best avoided?

There are two common places that CX leaders report and which I believe are best avoided. The first is Marketing. Indeed, this may be the most popular reporting line. The reason I don’t like it is simple: CX work is too far from the Marketing mission. Marketing exists to do demand generation and sales support, primarily for current-quarter business. Marketers refer to the necessary resources as ‘People and Programs’ and need funding for both. If there is insufficient funding for this core work, lower-priority work such as CX gets cut. The second place CX sometimes reports is to a support organization. I see two disadvantages here. First, that normally moves you a management level further from the top as the support leader rarely reports to the CEO. Second, it moves you to a team whose role is primarily a reactive one of ‘putting out fires’. I find this far less motivating than improving sales win rates, for example.

Conclusion

It was great to be in Amsterdam with such a large group of enthusiastic people. I learned a lot and can only hope that I contributed something useful to the audience. As you might expect, the organizers ran an NPS-type survey after the event and I am looking forward to seeing the results. The views expressed above are representative of how I tried to answer questions on these two topics during breaks in the conference. I hope you find them helpful.

 

More of this sort of thinking in our books. They are all available in paperback and Kindle formats from Amazon stores worldwide.

 

 

Customer Experience Skills

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

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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.

 

 

Raining surveys

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

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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:

  1. How much do your customers like you, ideally compared to your competitors?
  2. Why do they like or dislike you?
  3. 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.

 

 

Nudge

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

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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.

 

 

Great Marie anecdotes

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

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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:

We lost his data

 

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

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

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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

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

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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.

 

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 competition

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

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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.

 

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 partners

Strategy: Ask new questions to get new answers – Part 2: Partners

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The majority of companies have partners for at least some of their business. The three main categories of partners available to most businesses are resellers, implementation partners, and subcontractors. The purpose of any and all business strategies is to crush your competitors and win. Your partners can help you do that. But how? And what can they do to help you win that they are not already doing? Frankly, I don’t know, but I do know how to find out. In short, to get new answers, you have to ask new questions.

This is the second 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.

Some thoughts about partners

While you may have some partners that don’t work with anyone else, it is more likely that you compete for their attention. It is critical to think about partners in an ‘outside-in’ way, meaning from their perspective rather than yours. Assume they have choices. Assume that your decisions have consequences. Assume, for example, that if you pay your partners 60 days after they deliver a product or service and your competitors pay after 30 days, well, your competitors will get better service. Is the improvement in your cash flow (and deterioration in the partners’) worth it? And what happens if your procurement people go around asking all suppliers to cut prices by 15% and your competitors do not do the same thing? Think about it from the partners’ perspective. There is no single right answer. You just need to ask the right questions.

Note that if you manage a business that uses franchisees to reach end customers, you should consider franchisees to be your customers rather than your partners.

Getting started

As mentioned last time, you should use a cross-functional team to agree the list of partner-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 that concern partners. 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

  • What are the critical touchpoints between you and your resellers, implementation partners and subcontractors? How have these been changing over time? Are these three categories useful, or is there a better way to segment your partners from a partner experience perspective?
  • Should the top few partners, in terms of revenue generation, be treated differently from the rest?
  • How does your partners’ experience with your company compare to their experience with your traditional and emerging competitors?
  • Who are your potential new partners, and why?
  • Which partnerships are not producing anything useful and should be fixed or stopped?
  • How do your partner marketing incentives compare to those of your competitors?
  • How do your partner payment terms compare to those offered by your competitors?
  • How quickly are resellers able to access any special pricing agreements you may have in place for very large customers?
  • Do you compete directly with your partners?
  • If you have a formal partner feedback process, what has it taught you?

Your people who manage customer or partner experience may have some relevant data. If not, you may need to set up some simple new research. If you do so, I suggest just asking partners these questions:

  1. How likely are they to continue to work with you? (On a zero to ten scale.)
  2. Why?
  3. What should you improve?
  4. What do they like or dislike compared to other companies with which they work?

Ideally you would ask these questions to your largest partners face-to-face, with video conferencing / Skype a close second choice. Phone calls are better than asking by email.

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 are providing customers. The concept of new or emerging partners is an important one and deserves special attention.

Conclusion

We have now covered two of the six dimensions of a situation analysis. Next time we will talk about competitors.

 

As is often the case, the above is a substantial rewrite 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.

 

 

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