|Participants at a roundtable held in partnership with Cap Gemini Ernst & Young at The Metropolitan Club in New York.|
What do Apple’s iPod, Southwest Airlines’ flight reservation system and 3M’s Post-It notes have in common? All three are shining examples of that most elusive of customer-oriented goals: delivering not just a satisfactory experience, but actual delight.
That’s no easy feat, particularly in an economy that couples ruthlessly exacting customers with intensifying pressure to reduce costs, according to CEOs at a roundtable cosponsored by Cap Gemini Ernst & Young and Chief Executive. “The bar continues to increase,” says Hank Bonde, chief operating officer of J.D. Edwards. “I recently read a book about customers that said they want it free, they want it perfect and they want it now. If that’s the definition of delighting a customer, that’s a really difficult hurdle.”
Increasingly, companies are looking to technology to delight customers with better service, lower costs or even a better product, as well as to help gauge the success of their efforts. “The first thing we have to do is get the measurements in place to find out who’s satisfied and, if they’re not, why,” says Michael Tryon, COO of Metal Management. “Then we can try to go to the next step and put in some kind of metric to help us with that.”
But while runaway successes-such as Post-Its or the iPod-are easy to spot, incremental improvements, particularly intangibles such as customer experience, can be much harder to gauge. In the absence of clear metrics, several CEOs still struggling to assess the value of investments in business automation and technology suggested an inward focus.
“In the long run, the best thing you can do to delight customers is to delight your own employees,” argues James Goodnight, CEO of SAS Institute. “And that’s much more measurable, because if you have really happy, dedicated employees who love their jobs and love to come to work every day, they will take care of your customers.”
Setting the scene
John Jordan (Cap Gemini Ernst & Young): What is customer delight in a given market? Disney delights their customers and Southwest delights their customers, but Disney’s model is very different from Southwest’s. Do they have much to learn from each other? On the surface, maybe not; underneath, maybe so.
|Cap Gemini Ernst & Young’s Brad Callahan|
But it’s not a simple notion. Whatever market you’re in, can customers tell you what delights them before they experience it? Did people know how a Post-It note would delight them before the Post-It showed up? What is the feedback loop of customer experience back into the business? Do we hear only if something is horrible or only if something is wonderful?
The fact is, delighting customers can be really expensive, and it can be really bad business. If you don’t have the internal controls, if you don’t know how much it’s costing you to delight a customer, then do you really want to delight them? What are the costs of failing to delight customers? Maybe they defect-and maybe that’s good news and maybe it’s bad news. How do we know the difference?
Where has technology impeded a business’s ability to delight customers? Hershey’s couldn’t ship chocolates for Halloween a couple of years ago. And five years ago, American Airlines was a success story because they used a lot of complex technologies and heavyweight algorithms to do scheduling, profitability and pricing. Now Southwest is making American’s life really miserable with a very simplified model and pricing schedule. All of that application of IT to American Airlines’ business model may not be delighting many people now.
And how do we set expectations? There’s an external phase to customer delight. To be delighted, you have to know what to expect in the first place. If I expect a Ritz-Carlton and there are no flowers in the room, I’m disappointed, whereas at Holiday Inn if I don’t get flowers, I’m fine.
Then there’s the internal operations piece. Once we’ve promised flowers in the room, what does it take to get flowers in the room? How do you use technology to change how people do their job, whether that job is making decisions, servicing customers or moving metal around?
Peter Nauert (Ceres Group): About a year ago two sales guys told me how easy it is to order a ticket on Southwest. They said that it takes them a nanosecond compared to what it takes to go to American’s, Delta’s or anyone else’s Web site. I think the most important thing for a technology is: How did it make it easier for your customer to do business with you? It’s the CEO’s responsibility to make sure technology is being deployed in a way that allows his or her customers to better access the company’s service. You can call that marketing or technology-or you can just call it good business.
Michael Tryon (Metal Management): I don’t think you have to be the CTO and on the forefront technologically and have all of the answers, but you’ve got to bring the organization together to find out evolution-wise where you are and what you need to do to drive costs down, bring customers in closer and provide the data we need consistently across the organization.
|LEFT TO RIGHT: Cap Gemini Ernst & Young’s John Jordan and Metal Management’s Michael Tryon|
Nauert: Your customers are the company. Obviously, if you can’t regurgitate the data that they give you in a meaningful fashion to show where they are at any one time, you’re not servicing their needs. You have to use the best technology you can get. To me that’s a given, just like erasers on pencils.
Tryon: We’re in a roll-up environment. Our company rolled up the scrap industry starting in late ’96, pulling 45 to 50 different entrepreneurial family-owned businesses together. So the first thing we had to do was get a technology infrastructure that would get them all operating on the same page, and standardize and integrate that organization to give us timely information.
We had a lot of mountains to climb. Everybody wanted to operate the way they had always operated, so we had to go through an aggressive, accelerated process of getting everybody on the same script and with the same systems technologically. A lot of people were saying, “We’ve always done it this way,” so getting people to buy into it was not easy.
Brad Callahan (Cap Gemini Ernst & Young): Did you feel compelled to delight your inside customers in that case?
Tryon: Rather than coming up with the idea and having our IT department say, “This is the way we’re going to do it,” and go out and sell it, we had to bring the organization together. It had to be their design, otherwise it wouldn’t have worked. Initially, people were very threatened. We had to break those walls down, bring the organization together and create the right climate and environment to get the solution we needed.
Jim Simmons (SunGard Availability Services): The CEO’s job is to make sure that the technology mirrors the business strategy as opposed to dictating it. If operational excellence on a day-to-day basis is your strategy, make sure your technology matches that. If it is customer service, make sure you are delighting the customer. And the CEO’s role is also to validate the executive leadership within IT-not to be a technologist or a brainiac, but to make sure that he’s got the correct leadership. There’s an old saying that you get the IT that you deserve.
|J.D. Edwards’ Hank Bonde|
John Charters (Northwestern Communications Group): Given that I’m in the services business, that’s all we do. If we’re not delighting our customers, we don’t keep customers. And if we don’t keep customers, it’s a slow death spiral. We tie executive compensation all the way down through the business to customer satisfaction, which is our measurement of customer delight. To do that you need to make sure your IT infrastructure is capable of delivering measurable results that can’t be manipulated or managed by the field.
We have more than a half million customers who talk to us thousands of times a day through different call centers. That’s our opportunity to delight the customer as quickly as possible. Did we fix it the first time? Did you have to call us back if we didn’t fix it? Then we ask how we did, measure ourselves, make sure we have the systems capable of doing that and then tie compensation to those results. That’s how you build the complete loop throughout the entire organization.
James Goodnight (SAS Institute): Can you really get valid enough feedback?
Charters: Your information systems can give you the data that says, “I answered the call within 20 seconds and I cleared the call remotely. In other words, I didn’t have to roll a truck.” There are ways that you can support the data that says either they’re satisfied or extremely satisfied, with the statistical information that comes from the process of satisfying the customer.
We actually send an independent third party to check. That’s not to say the technician won’t say, “You’ll get the call in five days, give me high marks.” But the idea is to get as close as possible. I don’t think you will ever get 100 percent perfect data.
Ed Kopko (Butler International): One of the jobs of a CEO is to develop a system of metrics. We’ve all put in our P&L systems, but in many cases they have nothing whatsoever to do with actually delighting the customer. Just saying, “Well, they bought from me again” is not a good enough metric.
|LEFT TO RIGHT: SunGard Availability Services’ Jim Simmons, Osram Sylvania’s Charles Jerabek and SAS Institute’s James Goodnight|
Charles Jerabek (Osram Sylvania): I’m with you. Seventeen percent of what we sell goes to the automotive industry, where you get fantastic feedback. We get a monthly scorecard on our quality level-whether we shipped within a four-hour time frame, how quickly we resolved the issue if there was a problem, and so forth. When you have that feedback, it’s easy to maintain a spirit of continuous improvement, because you can argue and discuss, but the reality is the customer’s perception is what it is and you’ve got to manage your business around that.
Jordan: Customer satisfaction feedback tends to go to a sales and marketing type of group. Customer profitability tends to live far away someplace else. The operational piece of what it would actually take to get this customer to that state of delight is someplace else again. Do you find it’s hard for the feedback to actually influence the behavior? Because we’ve found these information silos tend to be the norm rather than the exception.
Jerabek: In our automotive business, we hold a meeting each month where each of those disciplines and silos are present. We review what Toyota said, what Ford said, and so on. And everybody ends up taking ownership of the numbers. It’s so much easier to resolve any cross functional or cross discipline issues because it’s not the sales guy coming back saying, “Well, engineering is a problem” or “IT is a problem.” It’s so clean. It’s a pleasure to be able to run that side of our business.
Whereas all of you, as consumers of light bulbs, do you know whether we made a quality light bulb that lasted the 2,000 hours the package promised? Or did it burn out after 1,000 hours? You don’t know, and it’s such a small commodity item. But for Ford that bulb may cost $50 to change; you will know what its life is.
|SunGard Availability Services’ Jim Simmons|
Hank Bonde (J.D. Edwards & Co.): We have talked about information systems answering the question: “Is this customer profitable?” But even in our own company, we have 17 different databases, which we’re now in the process of consolidating. Rationalizing across 17 different databases to answer that question is really intense. We know there’s an answer, and we have made a major effort to get to it. The customers we work with have the same issues.
Jordan: What’s really fascinating is how long it takes for technology to change how you do something. The patent for the bar code was issued sometime around 1916. You saw some industry efforts in the ’70s, and then finally mass adoption of it in the ’80s and ’90s. So it took 70 years, ballpark, from invention to mass change in behavior. The Web browser, on the other hand, arrived in ’91, yet you have the Charles Schwab business model change in ’95, ’96. Schwab reinvented consumer brokerage in less than 10 years.
So guessing how long it’s going to take for an invention to change how people do something is an insane exercise.
Bonde: The adoption curve seems to be shortening. How long did it take for the telephone to penetrate businesses and homes? Wireless penetration far exceeded that. Adoption is coming quicker and quicker.
Callahan: Do any of you have ways to measure or recognize people who were delighting customers in your business? We measure satisfaction very well in our business; I’m not sure we measure delight.
Simmons: It’s your business model. In a true customer service business, recognizing empowered people on the floor is critical. If your competitive advantage is customer delight, it’s got to be tied into compensation and recognition, and then your IT has to support that so that you can measure and manage it.
Charters: Like you, we’re a services company. And we’re not a call center hiring $5-an-hour people; we’re hiring people who have been heavily trained and we continue to invest thousands of dollars each year in training them. How they delight customers ties back to the personal satisfaction of doing a good job.
|LEFT TO RIGHT: Cap Gemini Ernst & Young’s Brad Callahan and Ceres Group’s Peter Nauert|
Empowered people on the floor love the fact that they can delight a customer. When they’ve delighted a customer, they themselves are delighted. Measuring that is about turn-what’s your turn rate of those highly paid, highly trained technical researchers? If they like the work they’re doing and they’re delighting their customers, they don’t leave you. So one measurement is the longevity of the employees doing the delighting.
John Brandt (Chief Executive): One issue is that we’re only measuring customer satisfaction against what we’re already giving customers. Who needed a Walkman before they saw one on a shelf? Who needed a Post-It note? But those are things that created customer delight. How does a CEO make sure a company figures out how to not just incrementally improve satisfaction but to find all of these new opportunities?
Bonde: It’s getting harder and harder to understand what it is to delight a customer. But it’s as simple as McDonald’s. They’ve set an interesting platform. They’re very consistent no matter where you go. I don’t know if they’re in the business of delighting customers, but they’ve certainly set a quality standard.
The bar keeps getting higher. I know what delights a customer in our business: If they put a system in, it works, they can ship their product on time, bill and collect, and it makes their business stronger.
Charters: That’s satisfying the customer.
Bonde: I meet delighted customers at our user conferences. But I couldn’t sit here and say 37 percent of our customers are delighted.
Kopko: You can count how many accounts you have whom you can trust to talk to any potential new person-that would be an example of a delight metric. One of the things that we’ve done is ask our clients a simple yes or no question: Are we their best supplier, period? And if not, we ask them who their best supplier is so we find out with whom we’re losing the war. So you can come up with metrics.
Simmons: How many experiences does it take to get a customer on the delight side of the scale versus how many bad experiences it takes to get him or her to go the other way? The more you concentrate on delighting customers with technology and systems, the more at risk you are when they fail.
Jordan: Jim, what does delight look like in a subscription model? Because once you have an installed base with switching costs, it becomes really hard for them to move to somebody else.
Goodnight: About 2 percent a year don’t renew the product. We very seldom lose a whole customer, but they drop out on a product. We do a number of things to prevent that. First, before we ship our software we make sure it has almost no bugs in it. Then, with tech support, this year’s target is to have 81.5 percent of all incoming calls and emails answered within 24 hours to the customer’s satisfaction. A week later, we call those customers to verify whether they were satisfied.
We also pull every customer touch point-education courses, calls to tech support, purchasing of publications, attendants of the user group meeting-together to try to model which customers we have who are likely to be in that 2 percent. Once I come up with a list of potential customers who might leave the fold, I send an email to every one of the account execs, warning them of this potential problem. We use our internal systems more to automate the forecasting of which customers are going to be dissatisfied than we do which ones are satisfied.
Tryon: Putting metrics in place to forecast dissatisfied customers before they become dissatisfied is really intriguing. That’s taking a quantum leap.
Bonde: For prospective [clients] we now have a value-assessment tool that assesses their current business and allows them to do an evaluation against competitors within their industry. Depending on what technology they want to deploy, it says, here are the benefits of the associated technology.
|Northwestern Communications Group and Expanets’ John Charters|
Then they get it deployed and we come back and do the assessment again and say, here’s what we said and here’s what it’s delivering. If it’s not measuring up, what else needs to be done? Or, this is what can be done in addition to really help strengthen your business. So we can say here’s the value-add we brought to the table.
Charters: Our ability to make money is directly related to how quickly we can resolve a customer’s issue. If we can resolve it over the phone quickly the first time, that means we don’t have to roll out a truck and an expensive technician. Clients are paying us a maintenance contract, a fixed rate every month, so if we don’t have to do anything then it’s pure margin; the more we have to do the smaller the margin. Every month when we run the P&L, I know what I’m spending.
Goodnight: We recently bought a company called ABC Technologies. It does activity-based costing, where you take all of your expenses and map them back to the actual activities-not just the parts, but the entire activities, so that you can really get a picture of how much the various activities are costing you. Another way is to map the entire P&L back to your customer base to find out which customers are profitable and which are not.
Bonde: We’re a technology company. If you look at the range, companies will spend anywhere from 1 percent to about 15 percent of their revenues on technology. It varies based on the kind of business and industry that you’re in and how important it is within the industry in terms of driving your returns. That’s the differentiator I see in talking to customers.
Do they want bleeding edge, enabling kind of technology to get out in front of their customers and suppliers? Or do they want to be slow to follow, because it doesn’t give you extraordinary return and value-add? It’s a very individual business and industry answer.
Callahan: People are spending about the same or maybe a bit more than last year, but they’ve never been less certain of what will be spent on next year. Our clients are spending more of their money connecting things they already have and less trying to do new things to delight their customers.
Simmons: That’s what I see. It’s more disciplined now. Like most evolutionary technologies, the commonality and use of the Internet was greatly overhyped early on, but over time you will see it become a powerful changer and driver. People are being more realistic and more responsible about ROI.
Charters: Given the economy and the business environment, we’re all a lot more stringent about what capital we spend on which technology, the return we expect and how it will help return more cash to the business. Five years ago when the market was booming and we were all probably growing at rates much higher than we are today, customer satisfaction was important, but it was also about top-line growth and getting more customers. Now it’s much more about base protection and managing the base that you have today by delighting your customers. That forces us to think differently about how we’re spending our capital.
Brandt: Many of us need to improve utilization of what we already have. Maybe early adoption isn’t as important as getting the right functionality.
I’m curious where everyone here sees themselves fitting into technology initiatives within their company. How do you like technology initiatives to be presented to you? What level of involvement do you want?
Bonde: The CIO reports to me, but I don’t look for him to bring in the technology projects. I want the business managers, in conjunction with the IT team, to come in with those projects. In terms of my involvement, over the past 20 months, I’ve been an executive sponsor for two programs, directly involved in the teams that were put together.
Jerabek: The list of things to do is always greater than the available dollars behind it. We have a monthly IT meeting where different functional business heads have the opportunity to argue for their fair share. That probably takes care of two-thirds of the expenditures, and the top third is more corporate-directed, which will sometimes be my initiatives based on what I’ve seen with customers.
Simmons: I think the key role is to develop a business strategy and make sure that all your business executives from all of the different disciplines in your business are behind it. Because the biggest sin you can make is getting 10 projects half done, as opposed to three with a definable date.
Goodnight: Measuring customer delight is certainly not as easy as measuring unhappy customers, because the unhappy customer is always calling you up and letting you know about it, whereas the delighted ones often don’t. One way to keep your customers happy is to ask them to participate in planning. We have an annual ballot that we send out to customers to let them vote on something they want to see us working on next year. That has been successful in helping customers feel like they’re a part of the process.
Callahan: I got an Apple iPod for my birthday this year that’s about the size of a deck of cards. That was incredibly cool to me. I told five friends, but I never told Apple that I was delighted. Shame on me. Extrapolating that into my business, I think feedback from being delighted is by definition unexpected, just like being delighted is unexpected. So, in my business I want to create a vehicle in which to try to capture not only satisfaction, but delight.