Reimagine customer experience to unlock value

Most companies want to improve customer experience, lower costs and increase revenues. But only a few are actually successful at achieving these goals. It is not that they are not forward-looking. They have many improvements initiatives in different areas of the business. But the cumulative effect of these initiatives is still not sufficient to move the dial on overall performance.

Analysis from McKinsey has shown that for companies to create sustainable value by providing differentiated customer experience at a lower cost, they need to focus on customer journeys. Using a combination of digital technologies and operational capabilities in a focussed manner on customer experience is the key to achieving a step change in performance.

To achieve this goal, companies need to change two major aspects of the business operation. First, they must change the way improvement initiatives are managed i.e. instead of running fragmented initiatives across the organisation, they should execute a coordinated program around improving customer journeys. Secondly, they should apply technologies and operational capabilities, in combination and in the right sequence, to these customer experiences.

“(Customer) Journey transformation means fundamentally reimagining and redefining all customer experiences. We are doing it in a way that has the customer at the center of everything we do. We are breaking down corporate silos and transcending long-held views to deliver better experiences for our customers, and this drives better commercial outcomes.”

Anthony Cahill, COO or National Australia Bank.

Let’s see what this involves:

Replace fragmented efforts with an integrated improvement program organised around customer journeys

Almost all companies have multiple independent initiatives underway at any time. The aim of these initiatives is to improve performance, improve customer experience, and reduce costs or risks or a combination thereof. But the overall impact of these on the customer experience is marginal at the best. This is because the benefit is lost during the handoff between units. This is not dissimilar to improving parts of a highway, resulting in cars just driving to the next bottleneck faster. However, the overall journey time and satisfaction is only marginally improved.

The first step is identifying key customer journeys. At a bank, for example, account opening, account maintenance, introduction of a new product or account, using the account and resolving problems are key customer journeys. Targeting a limited number of important journeys can unlock most value in a short period of time. McKinsey report a European bank achieving over 50% increase in mobile app usage, 20% increase in online customers and reduced operating costs in about 18 months.

The focus here should not be limited to small improvements in these journeys but on entirely reimagining and simplifying these journeys using the technologies available today. This will highlight opportunities to unlock massive value.

Sequenced application of different technologies achieves compound impact

Five approaches

Five approaches are typically used to improve operations.

  1. Digitisation is a process for improving customer journeys by making information more accessible. Digital tools can transform customer-facing journeys in fundamental ways. These can bring simplicity, deliver timely and relevant information, reduce manual intervention and create a potential for self-service. As can be seen by online banking, digitisation can unlock tremendous value and improve customer experience.
  2. Advanced analytics is a process of using data analytics in an autonomous way to generate insights and make recommendations. Amazon, Google and others are well known examples of companies using advanced analytics in action. In other less known examples advanced analytics has been used in transaction fraud detection and in claims approval processes.
  3. Intelligent process automation (IPA) is an emerging technology that allows process redesign with machine learning. IPA can replace human efforts and human judgement in processes that require data aggregation, or data extraction from different sources. These can enable creation of intelligent workflows where majority of ‘simple tasks’ are handled by machines and more complex judgements are handled by humans. This can result in faster throughput and lower costs.
  4. Business process outsourcing (BPO) uses resources outside the company to complete specific tasks. Typical BPO applications are in the areas that are not customer facing e.g. payroll or accounting, where labour cost arbitrage is achieved using cheaper sources of manual labour.
  5. Lean process design enables elimination of waste and redesign processes. Lean also encourages a culture of continuous improvement. Agile practices are based on lean principles. Lean is versatile and can be applied to many types of internal and customer facing processes.

Applying these approaches

Best results are obtained when these approaches are applied in a holistic way keeping the entire customer journey in mind. McKinsey suggest three design guidelines:

“The next-generation operating model combines a bunch of technologies and operational levers in a tailored sequence and integrated way to get stacked wins for companies.”

  1. Ensure that each approach is applied to maximum effect – Unless the approaches are applied to their fullest, often the resulting gains are small. Usually by relying on small implementations that are underway, companies get complacent. Instead, companies who push the new techniques to their limits get the real rewards. In analytics, pushing the models to the maximum and analysing data from various sources, developing and acting on the insights at the front line can unlock great value that is just not available with a limited implementation.
    Learning and implementing changes in a step by step way is ok. However, the program should have an ambitious goal to fully exploit the techniques by continually experimenting and refining.
  2. Implementing in the right sequence. It is not necessary to use all these techniques for every problem. Depending on the nature of the problem, one or more approaches may be required to unlock the value. The best results can be obtained when the approaches are used to build on each other. After identifying ‘key value propositions’ companies can use a systemic approach to evaluate which approaches are suitable and what is likely to be the size of the benefit. This analysis can then guide the sequence in which different approaches can be applied.
  3. These approaches should interact with each other to give a multiplier effect. Lean and digitisation used in tandem, at one bank, delivered a significant impact in mortgage application customer journey. Some companies use a heat map to identify which approaches work with which opportunities and create an enterprise wide view. This helps in creating awareness and also helps in prioritising efforts. It also helps in leveraging learnings from one customer journey to another.

Think holistically and avoid silos

Leadership teams have a key role in implementing these techniques. They must first convince others that such an operating model change is indeed more effective in unlocking value than the plethora of individual initiatives. With such a buy-in, a CEO can align the business around targeting selected customer journeys first. These can then become the role models for future improvement efforts.

Transformation cannot be a siloed effort. The full impact of the new operating model comes from the integration of operational improvement efforts around customer facing journeys with combined use of approaches and capabilities.


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