Wednesday, 14 March 2007

Simpler Processes Equals Happy Customers

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With all the hype around Business Process it is easy to get lost in a mire of acronyms. There was BPR and TQM then BPI, CPI and BPM, before BPM and now BPMS*. With so many meaningless buzzwords around is understandable why many executives just don't "get it." It is not their fault; it is simply that as usual the technology folks are mangling the English language and confusing the rest of us.

What the executives "don't get" is simply "how" these many acronyms are supposed to help them achieve their goals? They, are very firmly focussed on delivering a return for shareholders and usually this means focussing on cost cutting. This in turn tends to lead to focussing on items on the P&L and balance sheet.

For their part the IT folks get frustrated because they don't understand why the business is always asking them to deliver more for less and can't understand why the executives don't buy into the latest and greatest technology.

So we can see that it is an issue of communication, not just an issue of communication inside the company but with the customers! For in all of this it is the customer who always seems to bear the brunt of any internal struggles within an organisation. To date very few of the initiatives undertaken have started from the perspective of the customer.

There are many organisations that pride themselves on getting feedback from customers and indeed using their high satisfaction ratings as part of their marketing strategy. These surveys though tend to focus on telling the organisation what it wants to hear and not on what the customer wants to say.

For most businesses the customer attrition rate runs between 7% and 10% per annum. This translates to losing all the customers you currently have during the next 7 years! The reasons they leave are varied, but unless you happen to operate in a market with unlimited potential this means that somewhere along the line you are going to run out of people to sell to.

It is in this area that serious work around the area of process will pay handsome dividends. If by re-examining your processes you could halve that attrition rate you would most certainly increase profitability immensely. You could reduce spend on sales and marketing, would certainly save on the cost of dealing with customer complaints and would probably reduce recruitment costs through increased staff retention.

So if it is so obvious then why are more people not doing it already? Well as with so many things in life the obvious is not the easiest or the cheapest path to go down. To be willing to refocus an organisation entirely around the customer and using process as the guiding principle takes a very brave CEO indeed.

Jack Welsh is now revered among executives the world over for the work he did at General Electric, however, if one were to have talked to his peers around the time that he started their process initiatives you can be sure that half will have though him mad! They would not have contemplated investing so much in training their people in process and change, yet how those people most wonder what might have been the story for their organisations had they embraced such ideas quickly.

In the finance sector it is interesting to note that it is the relative newcomers who are embracing such ideas and then using them as weapons against the established players. Companies such as Egg and Capital One lead the way in terms of customer focus and process.

The bad news for their competitors though is that they also recognise that it is not a "one shot" operation and instead needs to be embedded into the culture of an organisation in order to ensure they can stay ahead of the pack.

A recent initiative at Capital One was focussed on streamlining just one of their customer focussed processes. The effort of process simplification led to higher levels of real customer satisfaction. The only objective the company had in mind was to streamline that process, but in doing so, they reduced the number of staff required, increased staff satisfaction and reduced the costs associated with running the process significantly.

The results of this exercise proved to Capital one that "Simpler Process" equated to "Happy Customers" and that happy customers in turn stay with the supplier longer. It also served to illustrate that by focussing on the customer the P&L and balance sheet cost that were the focus before will largely take care of themselves.

Outside the financial sector if one takes a look at Easyjet we can find another great example of someone that does not play by the same rules as other companies in their field and where everything they do is geared around keeping the seat price for the customer down to as low a price as possible.

Companies such as Capital One, Egg and Easy jet are among a select few that can be seen as embracing what is now becoming known as "Next Practice" – focussing their business around the customer and then applying and modifying the best ideas from anywhere they can find them – competitors, other industries or even on occasion mother nature.

They all share a common purpose – make it easy for the customer to do business with you and they will stay your customer for longer, thus giving you a greater chance of increasing revenues while reducing costs – that holy grail for all companies.

As we have seen though the quest for simple processes is not easy and requires corporate stamina (an ingredient sadly lacking in many organisations today). However by seeking inspiration outside of the traditional markets and culture there are many alternate solutions to the everyday problems we face.

This quest for alternate solutions should always focus on the best of the best from any industry. In this regard the trend by banks and finance companies to embrace managers from the retail sector is surely a positive step for us the customer. We now also see that in order to bring a greater understanding of process into finance some of those same organisations are turning to the manufacturing sector. An industry sector that has for a long time invested in process and the quest for never ending improvement.

The ability of organisations to imitate or improve upon these leading examples discussed here will depend on their ability to embrace the four "C" s - Change, Customer, Communication and Commitment. They must accept the need for radical change, they must be driven by the needs their customer, they need to embark upon a continual program of meaningful two way communication with staff and customers and they will need a great deal of commitment to see it through.

And finally from the technologists, we need less buzzwords and more relating of how the technologies are able to support and deliver upon this vision. Better still we would love to hear how our existing technologies and investment may simply be reapplied to help us find our way.


* BPR = Business Process Reengineering

TQM = Total Quality Management

BPI = Business Process Improvement

CPI = Continuous Process Improvement

BPM = Business Process Modelling and

BPM = Business Process Management

BPMS = Busiess Process Management System