Are Best Practices Your Worst Enemy?

by Holly G. Green

When I speak to CEO groups, trade associations, and industry conventions, this is one of my favorite questions to ask.

Why? Because I love the reaction from the audience. They look at me like I'm nuts!

Questioning the sanctity of best practices in a roomful of corporate leaders and managers is like walking into a Boston Red Sox convention wearing a New York Yankees cap. Or walking into a Microsoft Corp. strategic planning session with an iPad in your hand. I might as well criticize mom, apple pie, and puppies.

But I dont ask the question merely to provoke a reaction from the audience. I ask it because it may prevent someone from going out of business.

In the 1980's, when Japan was eating our collective lunches in one industry after another, best practices played a critical role in helping American companies develop better quality products. We wouldn't be where we are today had our business leaders not embraced the concept of studying what works best and applying what they learned in their companies.

Over time, however, best practices have become somewhat of a sacred cow. We rarely (if ever) take the time to re-examine them and see whether they still make sense for current market realities. And in today's high-speed business environment, accepting anything on blind faith - even a best practice - can be fatal.

Let me clearly state that I am not advocating that business leaders do away with all best practices. Just the ones that get in the way of achieving your strategic goals and objectives. Here's one that I see all the time.

During strategic planning, a common best practice involves conducting research in your industry to determine where the opportunities and threats lie. Who could argue against this practice? After all, in order to plan the future you have to understand the present.

The problem is two-fold.

One, this kind of research is almost always conducted by experts in their field who bring a boatload of preconceived ideas and assumptions about the way the industry operates. Two, this practice fails to take into account that your next biggest competitive threat may come from an area not even remotely related to your industry.

Do you know anyone who uses a fax machine anymore? Fifteen years ago, the makers of fax machines didn't worry about a little blip on the horizon called broadband Internet. They were too focused on important industry issues like baud rates, printer quality, and the cost of replacement ink. They never even saw e-mail coming.

So when I work with clients on strategic planning, I strongly recommend they make a list of everything they absolutely know is true about their customers, markets, and industry. Then I suggest they have a non-expert research each and every one of those truths. For example, have the CFO look at customer data. Or have the sales manager look at purchasing practices. It's amazing what a fresh set of eyes can see!

Each researcher shares their information with the management team. They explain the approach they took, the data they found, and any recommendations they have. Then I ask, "What questions do you have as a result of your research? What do you believe is possible to do that you aren't currently doing?"

Why is it so important to have non-experts conduct the research?

Because experts are human, and as humans we don't believe what we see. Instead, we see what we already believe. We constantly seek to prove what we think is right, and as a result we miss critical data and limit our success by getting locked into ideas and assumptions that may no longer be true.

So here's a new strategic planning best practice: research what you know to be true, both inside and outside your industry, and do it with non-expert eyes. My guess is that 50 percent of your "facts" will turn out to be wrong, especially if they're more than two years old.

The business world changes very quickly these days, and so should your best practices. Otherwise they may well become your worst enemy.

Which best practices are getting in the way of your success?


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Holly is the CEO of THE HUMAN FACTOR, Inc. (www.TheHumanFactor.biz) and is a highly sought after and acclaimed speaker, business consultant, and author. Her unique approach to creating strategic agility, helping others go slow to go fast, will change your thinking.

Planning and Designing Excellent Service

by Damian Kernahan

It's the Me-conomy stupid.

And so sums up in just four words the feeling a lot of us have as consumers as yet again we encounter another average service experience with a company we have provided our custom, our dollars and our time, often over many years.

In this article we will look at trying to understand why we so often have these average customer experiences, why services are still most often developed using an industrial product mindset and how that might be improved. We will also provide a new approach to ensure that services are more regularly designed with the end user in mind rather than as an organic process, which has little connection to the importance of the crucial revenue stream that it has been set up to deliver.

It has been proven there is a huge gap between companies' and consumers' perceived customer experience. Bain and Co conducted a study several years ago across 362 firms. Of those firms, which were a representative sample across businesses, 95 per cent said they were customer-focused. Of those companies, 85 per cent believed that they delivered a superior experience for their customers. And the corresponding amount of customers that agreed with them. Eight percent! Yes, that's right, only eight percent of customers believed that they were being delivered a great experience. By my count, that is a rather large discrepancy between what the company intended and what they actually delivered upon. It's an even scarier number for any company that operates as a service business given their product is 'customer experience'.

According to the ABS, nearly 75 percent of the business conducted in Australia is produced by organisations that provide services as their means of generating revenue and growth. Importantly, that figure is growing annually, not only in Australia but across nearly every developed western country as manufacturing moves offshore to cheaper more cost-effective countries.

With the service sector growing in terms of both numbers employed and its importance to the economy, the requirement of having a process to maximise the value of the service exchange to both company and customers becomes even more crucial, especially in a world that is becoming increasingly complex.

In the '80s there was only one way to access the funds in my meagre bank account and that was by fronting up with my passbook and talking with the teller. Now, in addition to the traditional teller, you can transact with a bank via phone using the keypad, Internet, Paypal, and even more recently via smartphones. The world has changed and with that has come added complexity. With more channels and avenues to connect with customers and for customers to connect to service providers, logically that should result in a better service experience. Paradoxically with this increased complexity and choice has come greater difficulty in providing the customer with a better experience.

Accenture published a global report in January of this year with specific focus on major western countries, one of which was Australia. It showed that over 52 percent of customer expectations were never or rarely met and 64 percent of customers left at least one provider last year due to poor service.

So, why is that? Why, given the size of the service economy, the number of jobs and the importance in delivering business growth, is the service experience so average? It can't be that business leaders don't believe in delivering a great customer experience, because apparently 95 percent of business leaders do.

Our hypothesis is that service organisations in determining how they will reach their business goals have a firm belief that they face a choice. They can deliver increased margin and profitability at the expense of the customer experience. Alternatively, they can choose to focus on delivering the superior customer experience that nearly all managers are aspiring to and forgo potential margin and revenue because of the investment needed to do so.

And using traditional approaches they are absolutely right. Using the skills and frameworks that thousands of postgraduates - including myself - learned in the leading MBA programs in this country, we very quickly determine that we need to make a trade-off between the two choices at hand. As the saying goes, 'money talks', and nine times out of ten, forgoing the customer experience in exchange for the most efficient process will always almost win out.


DESIGNING SERVICES

Businesses have used design as part of their new product development process for decades. But unlike products, services are produced only at the point of consumption. So how do you design something that is ostensibly intangible?

The good news is that using proven approaches developed over the past 15 years by leading US and European Business consultancies-cum-'Big D' design companies such as IDEO, organisations now have a legitimate and robust process they can successfully call on to prevent the need to trade-off between profitability and customer experience.

Working alongside small and not-so-small organisations, some firms have successfully demonstrated that when you spend the time to design and determine what the ideal service scenarios look and feel like, it significantly increases the chances of the customer experience actually being delivered as it was intended. When that occurs consistently as part of the customer journey, it significantly enhances the value of the service for both the service provider and customer.

The discipline that is resolving this trade-off is known as 'service design'. Service design is the thinking and design that goes into every interaction that a service organisation has with its customers, in such a way that the organisation delivers both a dramatically improved customer experience and increased profitability. It helps organisations identify where, when and how their services can be improved and made more valuable for both themselves and their customers.

As a discipline, service design occupies a new space combining the skills of management consultancies, research agencies, and marketing and design firms. The firms occupying this space formed as a result of the inability of traditional approaches and disciplines to solve the myriad of non-traditional problems and complex business issues.

The positive impact of design on practically every measure of business performance, especially service businesses, including market share, growth, productivity, share price and competitiveness, has been shown repeatedly by data from the UK Design Council National Survey of Firms. It shows that:

• More than 80 percent of design-led companies have introduced a new product or service in the last three years, compared with just 40 percent of UK companies overall.


• 83 percent of companies in which design is integral have seen their market share increase, compared with the UK average of 46 percent.


• 66 percent of companies which ignore design have to compete mainly on price. In companies where design is integral, just one-third do so.


• 80 percent of design-led businesses have opened up new markets in the past three years. Only 42 percent of UK businesses overall have done so.

So how does it work? Well it begins with understanding what a company is trying to achieve. Most business challenges for service-based organisations boil down to successfully answering one, or more likely, both of the following questions:

• Retention - how do we improve the customer experience so we grow our loyal customers?


• Acquisition - how do we create ways for new customers to engage with us?

Upon closer inspection, service design firms often help answer questions that need solutions. They typically look something like the following:

• We currently just make products - how do we go about becoming a service-focused business?


• How do we build a strategy around a coherent suite of services that supports our product range?


• How do we come up with compelling service propositions that meet customer needs and deliver against our strategic objectives?


• How can we deliver new and improved services around a particular brand?


• How can we add far greater depth to our service concepts to ensure long-term competitive advantage?

If you find yourself asking these or similar questions in your business and want to take a positive step in creating better services and happier customers, then there are five areas that you can immediately focus on to start the journey.

A good starting point is to look at the following service design principles as a way of determining where, when and how your company can approach the creation of better services.

Using these principles alongside a methodology, tool set and skillset that have been purpose-built to drive service innovation, will provide the significant boost required to drive new and improved growth for any service-based organisation.


PEOPLE

Services, unlike products, are only created at the point that users and service providers come together. Providing a great customer experience relies very heavily on the delivery by staff of that experience. Without scripts, training and a deep understanding of the outcome they are ultimately trying to create, staff will never be able to deliver a sustainable and consistent experience for their customers. The other key point is that people leave, get promoted, forget and are fallible. Knowing this ensures that companies take these aspects into account when designing the system.


SERVICE PROPOSITIONS

Services are often referred to in service design literature as 'propositions'. It makes sense, as a service is often a collection of different elements and touchpoints that combine to hopefully deliver a compelling service proposition. The reason this takes on such great importance is that unlike manufactured products, services are quite often developed organically, and they lack the pro-active design and development required to ensure that service providers take all the available opportunities to maximise the desired experience. Companies generally focus on the 'during' phase of the service and spend far less time on what occurs 'before' or 'after' the service exchange. And the economic tragedy of that is that these areas are quite often the sweet spot where significant value can be created for a very small investment.


TOUCHPOINTS

One of the key differentiators of service design is that it looks in great detail at the entire customer journey of any service. As indicated earlier, a service takes place over time and a well-designed service also enables customers to access information, help or customer service the way that they wish to, not just the way that a service provider thinks it should be provided. By starting with the end-user in mind when designing the various touchpoints, it significantly increases the ability of the service provider to determine where and when they wish to inform, engage or influence the behaviour of current or new customers.


SYSTEMS

How many meetings have you attended where multiple ideas are generated to improve the experience for your customers? You know these meetings because they are filled with statements like 'wouldn't it be great if we ...'. And you know what is always missing at these meetings? It's the backend systems or processes to link these 'wouldn't it be great if we' statements to the operational aspects of service delivery. Focus on the development of user-centred (useful, usable and desirable) customer opportunities and understand and appreciate how the operational limitations of the back end systems will impact the successful execution of the idea. This ensures that as an organisation you always keep your promises to your customers.


SHARED VALUE

Finally, service design focuses on creating mutual value for both company and customer and is one of the crucial aspects of delivering the required performance. Innovation, it is often said, is created when someone solves the previous requirement to trade-off between two options. And in using the same logic, service design resolves the need to trade-off between value created for the company or the customer. The process is about maximising the total mutual value for both parties - a much smarter and far more 21st century approach to growth.

Which brings us back to the opening line of this article, "It's the me-conomy stupid", borrowed from a David Armano presentation.

If last century was about organisation control or organisation-led service, then this century will be about customer control or customer-led service.

The internet has given us the ability to access information and knowledge easily. We no longer need to accept things at face value, we can check to see if there is a better and/or cheaper option. We can look around with a few clicks and see if what brands and companies are promising, they are actually delivering. No longer do customers have to wait to determine if they will be in the 92 per cent of customers who are likely to receive average service; they can look online and choose which companies have proven repeatedly that they will deliver the service and the experience they promise.

With so much at stake for service-based companies, the opportunity exists even in the face of greater complexity to deliver against the constantly changing and increasing expectations of their customers to their great benefit. And if those companies listen hard enough they will have thousands of their customers saying to them, "But enough about me, let's talk about you ... what do you think of me?"


Giving Service Design Wings

Nestled in a nondescript brown industrial park near Mascot, an inner city suburb of Sydney, something very interesting is taking place. It involves a $10 million capital investment, a 5000 square metre facility and 18,000 staff per year in an effort to deliver better service for the company's customers. And the company involved? Qantas.

Qantas has embraced service design as a key driver of reaching its vision. As part of its journey as possibly the first Australian company to embrace service design, it is now focused more than ever before on its quest to deliver what it describes as "the combination of world class product and flawless service at every customer touchpoint".

With $1.7 billion invested in product, Qantas decided that service design was key to leveraging that hard investment in order to deliver the service standards needed to compete in a fiercely contested market.

For Qantas, the move to focus on delivering better customer service involves three key elements:


USING SERVICE CHAMPIONS AS ADVOCATES

Understanding the scope of its challenge, last year Qantas endorsed over 200 sales, cabin crew, customer care, pilots, engineers and corporate staff to act as service champions across the business. Their role is to continue to reinforce service levels and encourage other staff they come into contact with to deliver against the standards that Qantas has set for itself.


THE 'CENTRE OF SERVICE EXCELLENCE'

An old engineering apprentice workshop was rebuilt as a purpose-built facility to help employees experience and understand the Qantas brand and desired customer experience. The end-to-end customer experience has been recreated in the facility so that employees can feel, see and touch what the brand represents and more importantly how it is presented to customers (THE 'EXCEPTIONAL PROGRAM').

As the kick off to a wider company change program, this year Qantas is planning to take 18,000 of its staff through a one-day learning experience at the Centre. Initially, they will learn and experience how they can play their part in delivering the right level of service for their customers. In a good example of practising what they preach, from the time attendees are picked up by a dedicated bus at Sydney airport to the time they leave the facility at the end of the day, every interaction they have has been carefully designed to ensure all staff are clear on what is expected. To reinforce the initial day, ongoing initiatives have been developed to reinforce the key messages and maintain staff commitment levels.

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Damian Kernahan is the managing partner of corporate growth consultants, Proto Partners, www.protopartners.com.au.

Innovation Perspectives - Strategy From Above?

This is the fifth of several 'Innovation Perspectives' articles we will publish this week from multiple authors to get different perspectives on The Importance of Innovation Strategy. Here is the next perspective in the series:

by Dan Keldsen

Arguably there is no important time than NOW to ensure that your organization has an innovation strategy.

After all, without a strategy, how are you going to making the changes to your business that you need to make, in order to survive the economic storm, and (if you move quickly and intelligently) to be well positioned to blow past your competition as the economy improves?


But strategy isn't enough...

Yes, companies need an innovation strategy - and ideally, that innovation strategy is no different from the business strategy at large.

As very smart, and quite wealthy friend of mine once said in doing the upkeep on his home - "if you aren't fixing it up, it's breaking down." And that most certainly applies to businesses and business models as well as it does to homes.

So, innovation strategy should either be your business strategy, or a sub-set of the overall organizational strategy, but strategy, even very deep, extremely well planned strategy will not do a SINGLE thing to move your company forward.


Execution is what counts - the rest is theory

There is an IBM commercial from the early 2000s that I frequently reference, that goes something like this:

A business managers has a room full of his team, and he's proudly showing off the 3-inch thick paper binder with the "strategy that took us 12 months and 3 million dollars to create. It's the most cutting-edge strategy we've ever had, and we're extremely excited by this. My question to all of you is... can we do it?"

(dead silence for 10 seconds)

No! Absolutely not! No way!

(the manager is stricken, deathly pale as the team lampoons the strategy)


Strategy needs to connect to reality


By connecting to reality, I mean that while the goal may be to "think out of the box" - you need to take into account how your business operates now, what skills, technical capabilities, existing technology investments, partnerships, clients, etc. exist RIGHT NOW.

Connecting the dots between the current-state of the business, with the future-state of the business, means that the hard work to actually walk that path from here to there, needs to happen, and THAT is all about execution.


Is your team ready? Is your business ready? All of it? A certain piece of it?

Humans are adaptable creatures by nature, but some are more adaptable than others - which is why recommend taking a more scientific approach to understanding which people are equipped to create the brilliant, disruptive ideas, who can run them to actually delivery as a new product or service, who SHOULD be paired up to solve problems, who absolutely should NOT be working on similar teams, and so on. Measure their problem-solving and decision-making strengths, and take the best of the best for each type of problem that comes up, and the odds of successfully solving and executing on the solutions are that much more likely.

While it's far easier to identify the weaknesses of teams or business models, leveraging the strengths is for many, quite difficult. And while some companies can "turn on a dime" or instigate rapid change throughout the organization, more often, there is a leading and a trailing edge to certain areas of the organization that are likely to make the jump to the future first.


Lead and Pull

Leverage the adapative leaders and pull-through to the rest of your organization, and you just might be able to make your innovation strategy turn into reality.


You can check out all of the 'Innovation Perspectives' articles from the different contributing authors on The Importance of Innovation Strategy by clicking the link in this sentence.

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Dan Keldsen is Co-founder and Principal at Information Architected in Boston, MA, providing analysis, consulting and training services to organizations worldwide on the application of technology to knowledge workers and managers.

Is Operational Excellence the Enemy?

OK I admit it. I've grown frustrated by the fact that a capability or insight that proves valuable to an organization - operational excellence - is also such a big impediment to innovation. It's strange that something that in some regards is so good for an organization can also be so detrimental as well.

How, you might ask, is a focus on operational excellence a detriment to innovation? Well, individuals measured on operational excellence want consistency, a clearly defined process that people follow closely, the elimination of failures and mistakes, the elimination of variance. These are GOOD things for an organization once it has determined the appropriate mix of products and services customers want. To be able to deliver the products and services at the highest quality and lowest cost is valuable.

However, all that focus on eliminating waste and variation and risk creates mental barriers for innovation that are very difficult to overcome. If a person or team has been evaluated and compensated for making the machine run efficiently and effectively, can they really stop in mid-stream and now work in a very different model - the model that innovation requires?

So, for years operational excellence has been my nemesis. But I've decided to use innovative thinking to turn the problem on its head. Perhaps what we should be asking is how to create an operationally excellent innovation process.

Those of you who follow this blog understand that firms that are successful at innovating have intentional innovation processes that are sustainable over time. It makes sense that if we want people in an organization to accomplish a complex set of tasks, we'd implement a defined process and method within which they can work. This is where the worm turns - if innovation is a defined process, then perhaps our friends who are interested in operational excellence can help us make those processes more effective and efficient.

Imagine changing the mindset of the organization - changing the cultural attitudes of the organization - by reinforcing the "operational excellence" concepts within a innovation oriented mindset. Let's find the best new ideas, and implement them in the best way possible. Suddenly these two concepts, which have been inimical, can now work in support of each other. This attitudinal change is not a simple one, but it is one that could happen. What's required is leadership from the senior executives to explain why innovation is so important, and how the concepts and methods of operational excellence can enable and support the organization to become more innovative.

It's at least worth a try.

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Jeffrey Phillips is a senior leader at OVO Innovation. OVO works with large distributed organizations to build innovation teams, processes and capabilities. Jeffrey is the author of "Make us more Innovative", and innovateonpurpose.blogspot.com.