Stakeholder Magazine - Feb. 2010

Creating value for customers, employees and shareholders

February 2010 £4.50

COMPANIES IN THIS ISSUE Microsoft Carclo Cisco Wolseley Everton F.C. British Gas Lego

THE CARCLO STORY Business transformation through leading - edge innovation

CO-CREATION EMPLOYEE ENGAGEMENT UKCSI RESULTS CONFERENCES BOOK REVIEW

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News

Customers’ favourite supermarkets, Top 10 consumer complaints and the Top Consumer Trends of 2010.

February 2010 32 Research Sarah Stainthorpe provides a summary of the different types of research and their purposes.

7 Latest Thinking Co-creation - part 2 of the new customer experience.

13 Case Study

34 Employee

Nigel Hill takes a look at the evolution of Carclo.

The role of engagement in great customer experiences.

37 Fast Guide Attitudes and behaviour

19 Customer

38 Book Review

The national measure of customer satisfaction.

The Future of Competition: Co-Creating Unique Value with Customers.

In this issue...

VOLUME 7 ISSUE 1

24 Employee Ray Robertson examines the employee - manager relationship in the workplace.

28 Conference World Class Contact Centre Forum. www.stakeholdermagazine.com

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February 2010 Stakeholder

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YourSayPays

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Benefits Fast response Get results in a few days Low cost from £950 for up to 10 closed questions and 1,000 responses

Easy Email your questions and we’ll do the rest

More information For all enquiries please contact Jude Nottingham on 01484 467035 or email judenottingham@leadershipfactor.com We’re happy to talk through the options available and how this could work for you.

YourSayPays

Nigel Hill editor

In the June 2009 edition of Stakeholder Satisfaction, the Leighs Paints case study described how a UK manufacturer had transformed itself in recent years. This time, starting on page 13, we look at a Yorkshire company that goes back over 200 years. Carclo’s amazing story starts as a very profitable supplier of textile machinery and moves through decline, evolution into an undifferentiated metal basher, revival by concentrating on growth markets, near death at the beginning of this century to current success through investing in leading-edge innovation and product development. It’s a powerful endorsement of the benefits of taking the long term view and investing in the future.

In recent years Carclo has involved customers heavily in the development of applications for its ground breaking new technology. The second article in our co-creation series, starting on page 7, points out the somewhat ironic fact that organisations that have gone furthest in adopting co-creation are often not the obvious consumer market companies that go on about the customer experience all the time. The reality is, very few of them actually co-create the customer experience, they just deliver it. No, the best exponents of co-creation tend to be high tech companies such as IBM, product manufacturers such as Lego and software developers such as Intuit, although they probably don’t use the jargon. In the article we develop the views of Prahalad and Ramaswamy, the leading academic exponents of co-creation whose point is that co-creation is about a deeper more customer-focused approach that ‘goes beyond staging experiences’. It’s about understanding customers, giving them choices, enabling them to customise how they inter-act with you. We also review Prahalad and Ramaswamy’s book on page 38.

To make co-creation work, mass market companies will have to drill down to much lower levels in their customer research. On page 32, Sarah Stainthorpe looks at some of the new technology survey options such as IVR, web surveys and texting in the context of how companies can move from periodic e.g. annual customer satisfaction surveys to much more frequent ‘transactional’ surveys with consequent increase in sample size and frequency, and still do it within budget.

There are two articles about employee engagement from guest authors Ray Robertson on page 24 and Doug Shaw on page 34. Stephen Hampshire reports on the latest UKCSI results on page 19 and on the World Class Contact Centre Forum. Starting on page 28, Stephen’s conference article contains a very interesting piece about Everton FC’s adoption of social media. …which, as you’ll see is more than some of our contributors have done.

We list the early adopters’ favourite social medium.

Best wishes Nigel Hill

Stakeholder Satisfaction is the magazine for people who want their organisation to deliver results to employees, customers and any other stakeholders as part of a coherent strategy to create value for shareholders. We publish serious articles designed to inform, stimulate debate and sometimes to provoke. We aim to be thought leaders in the field of managing relationships with all stakeholder groups.

Our people and their favourite social media:

Editor:

Nigel Hill Social Media?

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Printers of Stakeholder Satisfaction www.stakeholdermagazine.com info@stakeholdermagazine.com Stakeholder Satisfaction PO BOX 1426 Huddersfield HD1 9AW Tel: 0845 293 9480 NB: Stakeholder Satisfaction does not accept responsibility for omissions or errors. The points of view expressed in the articles by contributing writers and/or in advertisements included in this magazine do not necessarily represent those of the publisher.

Whilst every effort is made to ensure the accuracy of the information contained within this magazine, no legal responsibility will be accepted by the publishers for loss arising from use of information published. All rights reserved. No part of this publication may be reproduced or stored in a retrievable system or transmitted in any form or by any means without prior written consent of the publisher.

Copyright © STAKEHOLDER SATISFACTION 2010

ISSN 1749-088X www.stakeholdermagazine.com

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February 2010 Stakeholder

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News

news

Customers’ favourite supermarkets A survey of 13,025 shoppers undertaken

by Which? in January 2010 asked customers to rank supermarkets on price, product quality, availability of goods and store environment. The winner was Waitrose, but Aldi and Lidl also did well, beating all the big four.

The Which? report said: "Shopping at Waitrose is a pleasure, according to several members. One loved its uncluttered stores with their wide aisles, and some rave about the quality of both its products and staff". Aldi received praise for the freshness of its fruit and vegetables, the quality of its dark chocolate and its ultralow prices. Lidl customers said that frustrations about its limited range were made up for by its "wonderful bargains" and high quality fresh vegetables. The top ten are:

· Second-hand cars bought from independent traders · Televisions · Mobile phone service agreements · Mobile phone hardware · Laptops · Car repairs and servicing from independent garages · Second-hand cars from franchise dealers · Upholstered furniture · Women's clothing · Landline telephone services

1. Waitrose 79 2. Marks & Spencer 64 3. Aldi 61 3. Lidl 61 5. Sainsbury's 58 6. Morrisons 56 7. Asda 49 8. Tesco 49 9. The Co-operative 45 10. Netto 41

The Top Consumer Trends of 2010

Top 10 consumer complaints In 2009, advice service Consumer Direct responded to over 50,000 calls and e-

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mails from customers who were unhappy with a recent purchase. Complaints about second-hand cars bought from independent traders topped a list of the most common consumer gripes for the fourth year running. Just under half of those who made contact with the dealer about the problem said it was completely rectified.

Nearly 30% said the problem had not been fixed at all. Among those who paid to resolve the problem, the average cost was £465. The full top 10 is:

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London Business School marketing professor Nirmalya Kumar has outlined his top consumer trends for 2010. Here’s an interesting selection.

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· Mobile internet · Consumers are voting that they want internet where they are, not where the PC happens to be. Cloud computing, 3G networks, and next generation smart phones are only going to accelerate this trend. · Social networking · Kumar asks: “Would you rather get 68 million results on Google to your search for “digital cameras” or 68 filtered by the preferences of your Facebook network?

At the end of 2009 for the first time, people spent more time on social networking sites, like Twitter and Facebook, than on email.” · Decline of traditional media · ”With all the time spent on smart phones and social networking something has to give. Unfortunately, it is traditional media.

Expect to see more newspapers, magazines, music companies, advertising agencies, book publishers, book and music stores disappear, restructure, or seek new business models.” · Democratic content · ”Remember when TV executives, DJs, and book publishers decided what the little people should see, hear, and read?

New content is being uploaded on You Tube at 20 hours per minute – equivalent to 1200 TV stations a day!” · Product development follows the money · New products have often been developed in the image of what US consumers wanted but innovation is now moving east. New cars developed

by Porsche and BMW have been stretched as rich buyers in China prefer to be driven by chauffeurs. Kumar also states that as new money from China, India, the Middle East, and Russia drives luxury consumption it’s bad news for under-stated European luxury brands like Armani because the ‘new money’ likes to display its wealth. S

Co-creation Part 2: Value through Choice

Some trends over the last couple of decades are well known. Exponential technological innovation has led to huge efficiency savings enabling firms to provide better value to customers. But they’ve had to because customers’ unprecedented access to information and easy networking with other customers has turned them into expert and confident buyers. This has led some customers, but a much greater percentage of suppliers, to focus on price as the key differentiator. Companies’ pursuit of price competitiveness has resulted in growing standardisation, the net effect of which, ironically, has made it harder for suppliers to differentiate themselves. Hence yet more focus on price, discounts and savings in marketing messages.

Choice

Choice

Choice e

oic h C

But most customers don’t just buy on price.

They buy on value. People know buying the cheapest can sometimes end up being poor value for money whilst a premium priced product can represent good value if it’s exactly what you want. Bradley Gale1 suggested that value equals quality relative to price. Price includes all costs of doing business with a supplier (e.g. travelling to a more distant supermarket as well as its prices), quality includes all non-price product and service attributes. Quality, price and value are relative not absolute. In other words, a slightly higher price in a competitive market for undifferentiated products can seem very expensive. This relativity is shown in the customer value map in Figure 1, over page, where each blob represents a competing supplier. Gale maintains that markets (i.e. aggregates of customers) make a rational purchase decision based on relative value. So companies perceived to offer relatively poor value (high price relative to quality) lose market share whilst those offering better value gain market share. Not surprisingly, most companies in competitive markets occupy the ‘fair value zone’, the diagonal band.

CAR SERVICING

Latest thinking

Figure 1 Customer Value Map

Higher price

Worse value

Choice Fair-value zone

Price 1.0 index

Choice

Choice Better value

Lower price Inferior

1.0 Market-perceived quality ratio

Companies towards the lower left corner provide fair value by being cheap, cheerful and good enough whilst those towards the top right have higher prices but are still perceived as fair value due to the superior benefits they offer.

Whilst still a good analysis of the way markets work, companies are increasingly trying to treat customers as individuals.

Nor does the diagram encompass the relative weights given to price and quality in the purchase decision. Do they have equal weight, as the diagram suggests or does one or the other mainly drive the purchase decision? We all know that the weight given to price in the value equation will vary from one customer to another – some are more price sensitive than others. But many companies under-estimate the extent to which the weight given to price varies across the purchase decisions made by each individual customer.

Even the most price-sensitive customers don’t buy everything on price. So what determines which purchases are pricebased and which are driven by the ‘quality’ elements of the value equation?

Two main things: 1. How important is the purchase?

People are more price sensitive when buying things that are of little interest to them, but they buy on quality when something is really important to them. For some

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Superior

people it’s their hobbies, for others it might be the children’s education, their car or their holidays. I wonder how many cost-conscious football fans buy their normal clothes in the sales or at the supermarket but regularly spend £48 on the latest Manchester United replica shirt and have the away and third kits too.

with the supplier they’ll do it with other customers through formal or informal networks and communities. When you think about it, customers’ willingness (often eagerness) to become engaged in this way presents a wonderful opportunity to suppliers. What a pity so few exploit it to the full. So how is it done?

2. What’s the point of paying more?

For some products and services it’s easy to see how some customers conclude that there’s no real difference between competitors so you may as well buy the cheapest. The car insurance market is a good example. Most promotion is price based. Where insurers do offer valueadded benefits they often don’t break through the price promotion noise and therefore don’t succeed in differentiating themselves from competing suppliers.

Moments of truth

Personalised experiences This is where co-creation comes in.

Prahalad and Ramaswamy2,3 (see book review on page 38) maintain that the process of value creation is “shifting from a product- and firm-centric view to personalized customer experiences”. Today’s knowledgeable and confident consumers want their customer experience to be just right and they’re increasingly prepared to engage in research, dialogue and co-creation to get it that way. If they can’t do that

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In recent years it’s been in vogue to use Jan Carlsson’s ‘moments of truth’4 as a training tool to encourage staff to put themselves in the customers’ shoes and brainstorm how they can improve the customer experience. It’s great fun to plot the customer journey, debate whether the steps are ‘moments of magic’ or ‘moments of misery’ and brainstorm how you can turn ‘tragics’ to ‘magics’. This approach is illustrated in the Car Servicing Moments of Truth diagram, figure 2 top right.

In its time, the moments of truth concept was a great tool for overcoming one of the main barriers to good customer service – the fact that employees in many organisations had no empathy with the customers.

They just didn’t think like customers or put themselves in the customers’ shoes. This is the first essential step towards delivering a great customer experience, but it’s no longer enough.

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Latest thinking

Figure 2 Car Servicing: Moments of Truth

FIND CAR There’s always so many cars that look the same

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e

SERVICE DUE Cost and hassle of getting it done

DRIVE HOME Great - they’ve cleaned it inside and out

BOOK IN Wish I could book online CHECK IN CAR It was a long process last time

CAR SERVICING MOMENTS OF TRUTH

PAY It always seems like a lot

GO TO GARAGE I wish they were open later

Moments of Misery Moments of Magic

GET TO WORK Hope it’s not raining while I wait for the bus

AUTHORISE WORK They’re good at calling you to consult on what needs doing

Figure 3 Car Servicing: Co-creation YEAR PLANNER List of reminder options

DRIVE HOME Leave work at normal time. Nice clean car

BOOKING IN All done by them after a quick phone call

CAR SERVICING CO-CREATION

CAR DELIVERED Full explanation of what’s been done plus anything to look out for PAY With card over phone including 5% discount for debit card

Involvement The key word when moving from customer experience to co-creation is not empathy, it’s involvement. Companies need to think in terms of doing things with their customers rather than for them.

Figure 3 above illustrates how the customer journey for car servicing might differ if it’s based on co-creating rather than delivering a customer experience.

The obvious difference is that the customer is involved in shaping the customer experience. Most customers would want to be reminded when an MOT or a service was due, but how? It would be easy to send customers a pre-paid response card enabling them to choose between post, telephone, email or text. Customers may prefer to spend a few minutes on the phone giving any essential information

CAR COLLECTED By garage from my office AUTHORISE WORK They call to explain what’s needed plus any options and prices

such as specific problems with the car or its current mileage rather than spending time getting the vehicle booked in on the day. Give them the choice. Equally they could be given options for dropping the car off, having a courtesy car or having their car collected. These don’t have to be free. The vast majority of customers are sufficiently rational to understand that the courtesy car and collection options do add cost for the garage, and why should customers who simply drop off their car subsidise those preferring the added value options? There’s also no reason why customers should waste time waiting to pay if they collect the car. The garage could give them the option of pre-payment by phone. In fact it could give a range of options such as web, phone, onsite or invoicing, plus credit card, debit card, cheque or cash payment options. If the price of the service is based on the

highest cost payment method, customers could be offered a range of discounts for choosing less costly alternatives. And when the work is done, customers could be given the choice of collecting their car or having it delivered back to their home or place of work. If you’ve done your research properly and are offering the right choices that do add value in customers’ eyes, there’s no reason why all this shouldn’t be cost-neutral.

The co-creation journey is how CRM databases should be used – for co-creating, recording and delivering the exact experience that each individual customer wants. It should be obvious that a customer’s ability to tailor his or her experience in this way will significantly enhance their perception of its value. This, in turn, will increase customer satisfaction, customer retention and recommendation.

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Latest thinking

Experience or choice?

In their ground breaking ‘Experience Economy’5,6 article and book, Pine and Gilmore suggested that ‘the product is no more than an artefact around which customers have experiences’. This spawned a whole consultancy and training industry to help companies deliver great, unforgettable customer experiences. But how many organisations have designed these experiences from the inside out, and how many have involved customers in co-creating every step of the experience? It’s very misleading to think that you have to deliver ‘great customer experiences’ all the time.

It’s not necessarily what people want. If you’re taking a young child to Build-A-Bear for a birthday treat - see Stakeholder Satisfaction September 2008 at www.stakeholdermagazine.com/articles -

efits add real value in customers’ eyes and improve overall customer satisfaction and loyalty even if they do push up the price. In the December 2003 edition of Stakeholder Satisfaction (www.stakeholdermagazine.com/articles),

we explained how personal finance software company Intuit adopted the Proctor & Gamble technique of following new customers home from the store after they had bought their software and watching them unpack it, install it and learn how to use it.

This helped them to co-create a much more ‘intuitive’ style of software that customers found so easy to use that they recommended it to all their friends. Based on the 3Rs of repeat business, related sales and referrals, not on advertising and promotion, they became a multi-billion dollar company and are one of the few companies that successfully fought off a Microsoft takeover bid.

Who is using co-creation?

you obviously want an unforgettable experience and a chatty friendly member of staff. If you’re rushing to the bank in your lunch hour to pay in a cheque you don’t.

You want efficient members of staff and no queue. Prahalad and Ramaswamy2,3 argue that we need a deeper, more genuinely customer-focused approach that goes beyond ‘staging experiences’. It’s about understanding customers, giving them choices, enabling them to customise how they interact with the supplier. In short, whatever buzzwords you use to dress it up, it’s about giving the customers exactly what they want.

Not managers and departments supposedly responsible for ‘the customer experience’. Ironically it’s been much more heavily adopted by functions not renowned for their customer focus such as IT and R&D. Fantastically successful examples of collaborative product development in web businesses abound, with You tube and Wikipedia at the forefront. In addition, more traditional IT businesses have for many years involved user groups to shape software and hardware develop-

It all starts with understanding customers sufficiently well to know what their requirements are plus the relative value they place on those things. Some things are ‘nice to haves’ but not worth paying for, other ben-

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ment. In the B2B arena, IBM has its worldwide partner innovation centres to involve customers in its innovation process.

Thinking of physical products there has been a significant element of co-creation in areas such as fitted kitchens for many years. Sitting down in front of the computer with the supplier and designing your own kitchen, just how you want it (within budget) has probably been a big reason behind the success of the product category over the last two decades. More recent online product examples include configuring your bespoke built-to-order Dell laptop, building a virtual car with specification and colour/trim options or something as simple as filling your own hamper.

Many of the above product customisation options involve little more than choosing from a wide range of supplier-defined product options or extras. But some companies are starting to involve customers much more in shaping what those options will be in the first place. Proctor & Gamble and Unilever have for many years conducted extensive market research to develop new products that meet customers’ needs but they now take the process much further.

The P&G Advisor programme, for example, enables customers to contribute to all stages of the NPD process from idea generation to prototype testing and to provide extensive feedback on their views. The Lego Factory enables customers, alone or in collaboration with others, to create personalised models online. Customers have the option of buying a specially manufactured version of their design (or the designs of other community members) and if a design is very successful it could become one of Lego’s mass-produced models.

Figure 4 top right illustrates the two dimen-

Latest thinking

Personal Lego Kit

Customer involvement through product development/ service delivery research

N TIO EA

Proctor and Gamble + most fmcg products

Customer led

R -C CO

Figure 4 Customer-led customisation = co-creation

Personalised product/service

Build-A-Bear Standardised Product/Service

Co-production

Customised Product/ Service

Mass customisation Price leader

S N AS IO M CT U OD PR

Multiple Product Options

Ryanair

sions of degree of customisation / standardisation and whether that is customeror supplier-led.

Co-creation in service industries Using the customer-led customisation definition of co-creation, most service businesses don’t qualify. As we said in the first co-creation article, some small service businesses like hairdressers instinctively use co-creation, but can you think of a big service business that does? Most of them are more interested in mass-production rather than co-creation, in the mistaken belief that higher profits come from lower costs rather than added value. Companies should think about their own behaviour. If a supplier, big or small, product or service business, gives you exactly what you want, you stay with them, and probably recommend them to others. The Leadership Factor talks to over half a million customers a year through focus groups, interviews and surveys, always about what makes them satisfied and loyal, or not. Almost without exception it’s down to whether the organisation does best what matters most to them. It’s not about the lowest price or wowing them with a memorable customer experience. In fact, for many basic service businesses such as banking or utilities, customers’

Dell computers

Most cars

Supplier led memorable experiences are almost always bad ones. It’s the irritating things they remember. A good experience for them is something that happens flawlessly and efficiently with no fuss.

Co-creation, therefore, is NOT the same as customer experience. It’s something

much bigger and better and certainly something more profitable. Co-creation is about giving customers choices rather than wowing them. It’s about giving them the experience they want – doing best what matters most to the customer, which could be a boring but efficient transaction rather than a great experience. S

Organisations can move towards co-creation by starting with 2 straight forward steps: 1. Do you really understand your customers enough to know exactly what matters to them and the relative importance of those requirements? Especially which ones add value in customers’ eyes and which are just ‘nice to haves’. You can then use this information to offer customers choices that will enable you and them to co-create their ideal customer experience.

2. Obviously, an ideal customer experience can’t be mass-produced. It’s unique to each individual. To deliver it you’ll have to use your CRM database properly. You’ll have to use it to capture customers’ preferences from the range of choices you offer so that next time their car service is due you know how they want reminding, you know whether they’ll bring it in or want it collecting from home or work and you know how they’ll want to pay. Get that right and they’ll be delighted, they’ll be customers for life and they’ll recommend you to others. And you’ll make more money.

References: 1.Gale, Bradley (1994) “Managing Customer Value”, The Free Press, New York.

2.Prahalad and Ramaswamy (2004) “Co-creation experiences: the next practice in value creation”, Journal of Interactive Marketing, 18, 3.

3.Prahalad and Ramaswamy (2004) “The future of competition: Co-creating unique value with customers”, Harvard Business School Press, Boston.

4.Carlzon, Jan (1987) “Moments of Truth: New strategies for today’s customer-driven economy”, Ballinger Publishing Company, Cambridge, Mass.

5.Pine and Gilmore (1998) “Welcome to the Experience Economy”, Harvard Business Review, July-August 6.Pine and Gilmore (2002) “The Experience Economy: Work is Theatre and Every Business a Stage”, Harvard Business School Press, Boston

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Carclo’s story symbolises the rise and decline of British manufacturing and the re-birth,of at least parts of it, over the last couple of decades. For most of the post-war years it’s a story of high labour input and low value-added, of fierce financial control generating cash to fund generous dividends for shareholders – but little or no investment in the future. According to Treacy and Wiersema , winning strategies are built on unrivalled world class performance in one of three key ‘value disciplines’: 1

- Operational excellence Delivering products/services to customers with optimum efficiency and minimum cost.

- Customer intimacy Dedicating the business to meeting the complete needs of carefully targeted customers and building ‘intimate’ long term relationships with them.

- Product leadership Providing products that continually redefine the state of the art.

As well as leading their field in one of the value disciplines, companies must reach ‘threshold’ levels of performance in all three.

It’s no good understanding customers’ requirements better than anyone else, for example, if you’re not capable of meeting them efficiently or at a competitive price.

Nigel Hill Founder of The Leadership Factor and editor of Stakeholder Satisfaction.

Favourite social media: Can’t really see the point of spending half my life tweeting, but do have a healthy texting circle with my Manchester United and running club friends (if that counts). I also use the telephone when absolutely necessary.

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Case Study

“best product”

Product Leadership

Product differentiation

Operational competence

Customer responsive

Operational Excellence

Customer Intimacy

“best total cost”

“best total solution”

Figure 1: Threshold versus leadership in customer value

Like Leighs Paints (see Stakeholder Satisfaction June 2009, http://stakeholdermagazine.com/articles/), the story starts with undifferentiated products and commodity markets, and there are some similarities such as strong focus on quality and on targeting growth markets. But, Carclo’s transformation has been almost totally driven by focus on one of Treacy and Wiersema’s strategic disciplines – product leadership.

A traditional British manufacturer Carclo’s origins date back to five family owned companies around Huddersfield and Halifax supplying wire and belting products to the textile industry. Some even pre-dated the industrial revolution – Carclo still having a ledger dating back to 1780 for Joseph Sykes, one of the Huddersfield companies!

These businesses were immensely wealthy, often producing returns of 40% for their family owners in the 19th and early 20th centuries. In the early 1920’s the family companies merged to form Card Clothing and Belting Ltd, and in 1959 the company was

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listed on the London Stock Exchange allowing the families to realise capital. Like many asset-rich quoted companies, the company went largely unnoticed until the late 1960s when there was an upsurge of investors (e.g. Slater Walker) who built stakes in dozy family companies valued at less than their assets.

In 1973 John Ewart bought a significant stake, soon gaining management control with the support of Slater Walker amongst others, and renaming the company Carclo.

He then used the cash flows to build a stake in Carclo’s competitor, English Card Clothing (ECC), gaining control by 1979. This also landed him ECC’s highly profitable Indian subsidiary – Indian Card Clothing (ICC) which dominated the Indian textile market and soon generated half of Carclo’s profit.

The problem for Ewart was the virtual impossibility of repatriating the profits from India thus making it increasingly difficult to fund a voracious appetite for dividends. So ICC was sold – breaking up a world leading position in textile technology. Ewart used the proceeds to again target old asset-rich

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companies, often still run by the original family. With no synergy, the acquisitions did little to improve Carclo’s profitability or future strategy. His last acquisition, however, was a Sheffield-based steel and wire business called Arthur Lee and Sons. Although still family managed, the Chief Executive, Peter Lee, was forward thinking, recognised the declining attractiveness of the steel market and had diversified by making three acquisitions in the high growth plastics industry, including a business in the attractive medical market.

Now over 70, Ewart stepped down and appointed Ian Williamson as CEO in 1995.

Williamson took over a £150m steel and wire company comprising five divisions and 20 businesses, with an interesting GEC-like corporate culture that was very focused on financial control, making it highly risk- and investment-averse. Every business, however small, had a qualified chartered accountant who produced detailed monthly management accounts that were rigorously scrutinised at HQ. Every company was independently financed with its own bank overdraft and adhered to a strict corporate capital-debt ratio, which encouraged spending on capital items such as machinery but deterred investment in off-balance sheet assets such as new product development, marketing or staff training.

Consequently, Carclo companies tended to have plenty of production capacity but insufficient skills to exploit it resulting in businesses with poor organic growth, weak market positions and declining profitability.

Case Study

Cost base The company was also top heavy with plenty of managers and controllers and a high wage – high benefits legacy. Carclo was just not geared up to fund the innovation and added value which are the essential elements of competitiveness.

Take Joseph Sykes. Much had happened since that 1780 ledger, including plenty of innovation. The company had pioneered nylon coated wire (remember those coloured paper clips?), had dominated its market and still had only one major competitor. Unfortunately, the competitor, Bekaert, was now 50 times its size.

Sykes’ market position and margins were declining with nothing in the pipeline to reverse this trend. English Card Clothing’s technology was old, its margins eroding.

At £32m, Lee Steel Strip had the highest group sales but was a minnow in a market dominated by world players. The wire rope businesses were loss making, and the automotive cable business was in a tough market. Only the medical plastics business (turning over £6m) was operating in an attractive market, growing at 10% p.a. From 1996 the pound started rocketing against the Deutschmark, and most of the businesses began to lose money.

From metals to plastics To Williamson, the strategy was clear.

Carclo had to target attractive growth

markets and invest to be competitive. The acquisition of the plastics division of EIS in 1997 gave Carclo a 10% market share of UK technical plastics and transformed its plastics business overnight. This was further boosted by some smaller acquisitions - Wipac (an attempt by Wolseley to penetrate the automotive market) Coil, a leader in optical plastics, and Carrera – a US based technical plastics group.

But acquisitions have to be paid for, so Carclo had to sell its past to fund its future. In quite a coup Joseph Sykes was sold to Bekaert for £14 million - equivalent to a p/e of 23 and £ per £ on turnover. Lee Steel Strip was sold for £21m but Williamson had to close some of the companies and sell the assets – a process that’s only been completed fairly recently.

UK manufactured 25% of the world’s handsets. By 2002 we made none!

Marconi was a casualty, 300,000 jobs were lost, but this annihilation of an entire industry went almost unreported.

By 2002, Carclo had lost one third of its sales, closed eight factories, had difficulty servicing its £49m debt and, like most companies was hit with a pension deficit.

With a lot of managers and employees on generous benefits living longer, the fall in asset prices after 9/11 plus the more hostile legislative environment of the 1995 Pensions Act and the recently introduced tax on pension funds’ dividend income, the deficit had suddenly ballooned to £34m by 2003. The combined debt was a big chunk of sales, and many years’ profits.

Strategic response However, the strategy seemed to be working. By 2001 Carclo had a £100m technical plastics business plus a £25m automotive business and a futher £35m in a collection of smaller companies including optical plastics and an aerospace cabling business.

Disaster and debt It was now that disaster struck. Co-incident with 9/11, but not caused by it, the UK mobile phone handset industry collapsed. Over-payment for 3G licences devastated mobile operators’ finances.

No longer able to buy market share, they slashed handset subsidies. In 2000 the

Carclo had to do something radical. The Board’s response was to make several excellent decisions.

1. They didn’t sack the CEO! Many public companies would have, but Carclo’s shareholders were supportive, probably because Williamson had always been honest, open and prepared to meet them rather than communicate through the broker.

2. They resolved never to be so vulnerable to a single market in future.

3. To quickly halve debt, the last of the family silverware, English Card Clothing, was sold as well as cable business Gills and surplus property assets.

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Case Study

4. This helped with the fourth decision - to trade out of the crisis through organic growth, not acquisition.

5. The final decision was a very big one, and the main indicator of the Board’s backing for Williamson. At a time when the debt was nearly as much as the turnover, the company would allocate 15% of capital expenditure into high risk but potentially transformational investments in real cutting edge IPR-type innovation. This last decision would shape the company’s future.

The road to recovery Ian Williamson’s background was in electronics R&D. Looking for and developing new technology is what he was trained to do. So he appointed (internally), a Business Development Manager and sent two managers by Easyjet to the Czech Republic to look for new opportunities, followed shortly by similarly low cost expeditions to India and China. This resulted in the development of a global supply base and, more crucially, the identification of some new technologies that would be growth market-orientated and could, if successfully commercialised, transform Carclo. These included2 the development of high power LED lighting for supercars

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(where Carclo Precision Products’ Wipac business is now market leader) and low cost point-of-care diagnostic devices for the medical market through Platform Diagnostics Ltd which Carclo owns jointly with Inverness Medical Innovations. Other new technology products successfully developed and commercialised include LED optics, active inhalers and RFID antennas, which combine an antenna and sensor and can be used for applications such as intelligent tags that monitor the temperature of goods in transit. But the real jewel in the crown was CIT (conductive inkjet technology).

Out of adversity….

Carclo’s optical plastics business uses specialised coatings to create glass-like surfaces on plastic mouldings. Applying these coatings is expensive and difficult.

One of the first R&D projects Carclo initiated was to use inkjet digital printing to apply the coatings. Motorola asked Carclo to investigate the feasibility of using the technology to print its logo onto mobile phone windows. Working with inkjet specialist Xennia, they developed an innovative solution but when Motorola closed its UK factories, Carclo was left with an infant technology and no cus-

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tomer. So far, Carclo had invested only £30k in ‘conductive inkjet technology’ and it might have ended there but Williamson recognised the technology’s potential in applications such as RFID (radio-frequency identification) antennas. But Williamson realised that to fully exploit the technology’s wide potential complete control was necessary, so by 2005 Williamson had bought Xennia’s share of the joint venture, appointed Chris Malley as CEO and tasked him to turn an R&D company (essentially little more than some promising intellectual property), into a successful commercial business.

Commercialisation of CIT Malley, an accountant by training, who had joined the Carclo steel division in 1998, knew that British manufacturing had often failed to turn promising innovations into sustainable businesses. His strategy for avoiding this trap was: 1. Gain complete control of the technology Carclo owned the company and the intellectual property, but the R&D was still based at Xennia and Carclo was working with other partners to develop and manufacture the inks and the machinery. Malley realised you couldn’t sell a technology if you didn’t understand everything about it.

To do that you have to use it so he moved CIT into its own premises with six employees and a production line for small runs, prototyping and development work.

2. Focus on delivery Faced with the vast potential of CIT, you

Case Study

Please note Carclo are in no way involved in the design and development of the Apple iPhone.

could get carried away with what it might do rather than focusing on what it already can do. Customers were identifying potential applications, but even if CIT received development and prototyping fees, they didn’t cover the opportunity cost of neglecting more immediate opportunities for the technology. So Malley narrowed the company’s potential to focus on delivering a defined technological output – a fully functioning ‘Metaljet 6000’ production line, which was achieved by the end of 2008.

3. Achieve six sigma reliability Although Carclo had worked with the best inkjet printers and machinery manufacturers in the world, it was becoming clear that inkjet printing wasn’t delivering enough reliability for the printing of electronic circuits. For graphics, occasional malfunction of a nozzle doesn’t matter because the flaw isn’t visible to the human eye. In electronics, it means a break in the circuit and a product that’s not fit for purpose. Even if the system could print hundreds of flawless circuits before the lapse occurred, that level of quality wasn’t adequate. In 2008, another Cambridge company, Xaar, developed a new print head with the reliability for single pass printing. CIT modified its equipment to incorporate the Xaar technology, but all this delayed the full commercialisation of the project until the latter months of 2009.

4. Go for the big prize This might seem contradictory to the priority of focusing on delivery, but out of those hundreds of potentially exciting

applications, one or two really will offer a massive return. The supreme test of good management in technology-led companies is to achieve the deliverables whilst allowing a controlled amount of time and resource to pursue the blue sky possibilities and, from the many blue sky options to identify and focus on one big prize. The final step in Carclo’s transformational journey from Victorian metal basher to the knowledge-led British manufacturer of the future is the story of this big prize.

Touch screens Dating back to the 1960s and first commercialised in the 1980s, it’s only in the last decade that touch screens have proliferated, mainly on high cost equipment such as kiosk and EPOS systems. More recently they’ve appeared on small electronic devices like tablets, PDAs and mobile phones. There are two problems with the ‘projected capacitive touch’ (PCT) technology used in these gadgets. First it’s very expensive. Not an insurmountable problem for high margin innovators like Apple but potentially a show stopper for mass market competitors. Second, and a major negative for portable devices, it’s very hungry for battery power.

CIT could revolutionise touch screens but since inkjet printing couldn’t reliably print below 100 microns, (too visible for display applications), Carclo developed a way of using UV light to cure its inks, producing the much finer features that touch screens

need. It is currently installing the machinery to manufacture circuits on polymer film down to 5 microns, slashing the cost and power requirements of touch screens for mobile devices.

On December 8th, Carclo announced an agreement with NASDAQ quoted Atmel Corporation, a worldwide leader in capacitive touch screens. Under the terms of the agreement, Atmel is making a $1 million payment to CIT to secure preferential access to CIT’s production capacity and technology to develop and manufacture a product for use in mobile phones and other electronic devices. CIT will be installing a new production line at its Cambridge facility to produce touch screen sensors which will be operational in the second half of 2010 enabling volume production to commence in 2011. To preserve its preferential access to this capacity, Atmel has agreed to minimum annual volumes for 2011 and 2012.

The next big growth market for touch screens is likely to be laptops. Rumours suggest that Apple is on the verge of launching a product. Windows 7 is touch screen enabled so the mass market Windows-operated manufacturers such as Dell will have to follow suit. But for laptop screens the problems of cost and battery consumption are multiplied many times over with the larger screen formats, making CIT’s technology a potentially industry-changing solution.

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Case Study

STOP PRESS On January 27th 2010, Steve Jobs launched Apple’s new iPad, which he described as "so much more intimate than a laptop and so much more capable than a smartphone." With a 9.7 inch touchscreen it will be a strong driver for the adoption of the technology across a much wider range of personal computing devices. Watch this space.

You’ve probably seen this but here’s the link to the Apple site

http://www.apple.com/ipad/

Managing innovation Carclo has demonstrated that you can manufacture in the UK and that British companies can commercialise technology as well as invent it. Although they hadn’t read the book, it’s a text book example of using Treacy & Wiersema’s product leadership strategy to transform a business.

So what can we learn about product leadership from the Carclo story?

1. You have to invest Since 2002 Carclo has invested considerable sums in potentially transformational innovation – recently around £1m per annum in CIT alone.

2. You have to pursue development and income The £1m has to come from somewhere.

Whilst the tendency of many British and American plc boards has been to pursue short term profits, the temptation for the innovation-led business is the opposite.

Staffed by scientists (around half of CIT’s staff have PhDs), they’re inclined to focus on break-through innovation as an end in itself. What you have to do is find specific applications for it then a specific customer who’s sufficiently interested to get involved and make a commitment.

3. You have to take risks Because it is potentially ground-breaking, Carclo’s innovation has also been risky, especially since the investment has been a significant percentage of its cash flow.

4. You have to have control Partnerships may reduce risk but they

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divert resources into managing the partnership rather than the innovation.

5. You have to have teamwork Innovation works best in small units where staff take ownership, work as a team and live the dream. Top management has only 2 roles. First, lay down very clear objectives and boundaries - budgetary, time frames etc, and make sure staff adhere to them. Second, give help if they ask for it.

Capable and motivated people thrive on maximum accountability and minimal interference.

6. You have to be ambitious If the innovation is genuinely leading edge you must become an enabling rather than a substitute technology - the latter competes on price, the former on added value. Hence the change of emphasis at CIT to UV curing and touch screens.

7. You must protect IP Despite the cost and time involved you must patent everything that might protect or enhance the commercial value of your innovation, track other people’s IP and monitor infringements.

8. You must never compete on innovation alone Back to where we started this article. You have to be the best in your industry at one thing. If that’s product leadership all the above 7 rules apply, but they’re not enough because you also have to achieve consistently high levels of performance on operational excellence and customer intimacy. At CIT they’ve built six sigma levels of operational excellence and not over-

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looked customer intimacy. With such ground-breaking technology, CIT staff could easily see customers and especially potential customers, as an unwelcome distraction. Chris Malley ensures that they treat everyone as a valuable customer from the outset, because eventually that’s exactly what they want them to be.

Ian Williamson points out that he’s an unusual animal. An engineer leading an engineering company, and sees that as a big strength. But Chris Malley’s an accountant. Harvard would place attitude ahead of skills and I agree. I think their success is down to two primary factors.

First, having the guts to take the long term view, shifting the objective from a cashrich present to a sustainable future.

Second, transforming the culture from centralised command and control to a liberated collection of entrepreneurial business units, small enough to build motivated teams striving for clearly understood objectives. Whatever the answer, Carclo’s share price has tripled in the last 12 months. S References:

1. Treacy and Wiersema (1995), “The Discipline of Market Leaders”, Perseus Books, New York 2. For more details of Carclo or CIT go to www.carclo.co.uk or www.conductiveinkjet.com

Customer

Wave 6 Results: January 2010

THE NATIONAL MEASURE OF CUSTOMER SATISFACTION Is recession good for customer service?

Based on a representative sample of 26,000 adults surveyed over the internet by The Leadership Factor on behalf of the Institute of Customer Service, the UK Customer Satisfaction Index (UKCSI) has now established itself as the National Measure of Customer Satisfaction for UK organisations. (results available online at www.ukcsi.com) Customer satisfaction The UKCSI has again risen, increasing across all but one sector since the start of 2009. It has often been assumed that recession should be good for customer service because it causes organisations to focus on keeping and valuing their existing customers, and the UKCSI supports that view.

50

55

60

65

70 72

Services

77

Retail - food

78

Retail - non food Tourism*

72

Finance - Insurance Automotive Leisure*

72

62

Telecoms

67

Transport Public services (National) Utilities

64

80

85

90

95

100

80 79

79 77 79 77 75 77 75 76

75 73 72

Finance - banks Public Services (local)

75 75

72

72 69 69 70 67

Jan 2010 Jan 2009

*Leisure & Tourism was a combined sector in Jan 2009

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Customer

One of the surprises for some people in the July 09 results was the strong performance by the banking sector, which has been maintained in the year end result. Does this mean that the banks have emerged unscathed from the storm of negative press they have experienced?

Not entirely. As we said last time customers are able to distinguish between media coverage, the bank’s image, and their own experiences of service. The majority of the components of UKCSI, which are very specific, are based on those personal experiences and so are immune to the effects of media coverage.

There is one element of the UKCSI which reflects a wider context—we ask customers to score their supplier’s “Reputation”.

When we look at the trends of CSI and the score for “Reputation” for some of the major banks since July 2008 we can see both how the media coverage has affected some banks’ reputation, and the extent to which the other components of CSI can be scored independently of it. RBS and Bank of Scotland, in particular, have seen significant damage to their score for “Reputation” without such serious falls in their overall CSI performance.

RBS Lloyds TSB Halifax Bank of Scotland

80%

75%

70%

65%

July 2008

Jan 2009

July 2009

July 2010

“Reputation” Trend 9 RBS Lloyds TSB Halifax Bank of Scotland

8

7

6

5

July 2008

Jan 2009

July 2009

July 2010

The top 10

Sector leaders

This time 33 named organisations have managed a CSI over 80, compared with 26 a year ago.

The 10 highest scoring named organisations are:

Some sectors are better than others, which means that the stronger sectors tend to dominate the overall top 10. The top named organisations within each sector are showing their sector how to move forward in delivering great customer service. A special mention goes to the Virgin brand, which tops two sectors, and to John Lewis/Waitrose for their success in the retail sectors.

· · · · · · · · · ·

20

CSI Trend 85%

John Lewis (88) Waitrose (87) Marks & Spencer (food) (86) Toby Carvery (86) Marks & Spencer (non - food) (85) Virgin Holidays (84) RAC (84) First Direct (84) Marriott (83) Virgin Atlantic (83)

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Automotive: Finance, banks: Finance, insurers: Public services (national): Public services (local): Leisure: Retail, food: Retail, non-food Services: Telecommunications: Tourism: Transport: Utilities:

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Mercedes Benz (83) First Direct (84) SAGA (83) The Identity and Passport Service (77) The Ambulance Service (82) Toby Carvery (86) Waitrose (87) John Lewis (88) RAC (84) O2 (79) Virgin Holidays (84) Virgin Atlantic (83) SSE (76)

75

Customer

2009 “most improved” As well as looking at the outright winners, it’s interesting to see which organisations are making the best progress. Since January 2009, 13 companies named in both surveys have improved their overall CSI by more than 5 points. The telecom sector has done particularly well in that time, with Vodafone, Orange and Talk Talk all among the big gainers.

“customers are able

to distinguish between media coverage, the bank’s image, and their own experiences of service.

”

As well as Virgin’s success, we should also point out that there are two Mitchells & Butlers brands (Toby Carvery and Harvester) near the top of the most improved list, and both with very good CSIs.

Call centres

The top 10 most improved named organisations since January 2009 are:

This time we asked customers some extra questions about their experience of call centres, always a hot topic. We asked them what were their main reasons for disliking the worst call centre they had experienced. The main problems are shown in the chart below:

· · · · · · · · · ·

We also asked customers who, from a list of celebrities and fictional characters, they would most like to handle their call in a call centre. Joanna Lumley (15%) and Jeremy Clarkson (14%) were the most popular overall, with Holly Willoughby being a more popular choice amongst men (13%) and Dermot O’Leary scoring well with women (13%). The least popular choice was Hyacinth Bucket, with only 3% of the vote.

Toby Carvery (up 8 to 86) Vodafone (up 8 to 77) Harvester (up 7 to 81) Admiral (up 7 to 79) McDonalds (up 7 to 73) Homeserve (up 7 to 69) Iceland (up 6 to 80) Stagecoach (up 6 to 69) British Gas (up 6 to 68) Talk Talk / Carphone Warehouse (up 6 to 69)

0%

5%

10%

15%

Explaining yourself multiple times to different members of staff

16%

Staff lacking appropriate knowledge

16%

Unfriendly staff

25%

30%

18%

Dealing with staff outside the UK

Time spent queuing

20%

13%

11%

26%

All other reasons

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Customer

Customer satisfaction and dealing with problems

Interestingly, though, there are some significant deviations from the overall trend.

In particular the banking sector is generating more problems, and handling them less well, than you would expect for a sector with a mid-table CSI. This means that day to day performance is relatively strong, but that critical incidents are having a disproportionate effect on the 17% of customers that experience them. This suggests that for many banks, the best way to improve customer satisfaction would be to get better at dealing with problems and complaints. S

One of the key tests of an organisation, from a customer’s point of view, is how they react when there is a problem or if a complaint is made. As you might expect, sectors which are better in terms of customer satisfaction also have a lower incidence of problems (i.e. fewer customers say they have had a problem) and are better at dealing with complaints. The two charts below show how strong these links are.

21%

Public services (National)

19% 17%

Finance - banks Utilities

% problems

Public services (Local) 13% Transport 11% Leisure 9%

Retail (non-food) Retail - food Services

Automotive Finance - Insurance

7%

Tourism

5% 65

70

75

80

85

CSI

6.5 Automotive Satisfaction with complaint handling

6.0 Leisure 5.5

Retail (non-food)

Finance - Insurance

5.0 Transport Public services (Local)

Services

Telecomms

Finance - banks

Utilities 4.0

Public services (National)

3.5 65

70

75 CSI

22

Retail - food

Tourism

4.5

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Stephen manages customer and employee surveys for RBS, NatWest, Visa and Pace amongst others. He also presents training courses on employee surveys, customer surveys and data analysis.

Favourite social media: Just like Everton FC, Stephen’s favourite social media are Facebook (as an individual), LinkedIn (for business) and overall, Twitter.

stephenhampshire@leadershipfactor.com

Telecomms

15%

Stephen Hampshire Client Manager The Leadership Factor

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80

85

Employee

An

engaging workplace According to the Great Place to Work Institute, trust between managers and employees is the primary defining characteristic of the very best workplaces. The Institute’s approach is based on the major findings of 20 years of research about organisations where employees "trust the people they work for, have pride in what they do, and enjoy the people they work with". These organisations provide great facilities and flexible working styles too.

Engendering trust and pride The employee-manager relationship is at the heart of trust and pride in the work employees do and the company they work for. Great managers inspire people to be their best; poor managers inspire people to leave! So, managers’ behaviour matters a lot. After all, employees’ perceptions of the organisation they work for is shaped significantly by their day-to-day relationship with 24

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line managers. They bring organisational values, business objectives and policies to life. Get that right and employees feel able to voice their opinions, feel that these count and strive to do their best for their colleagues and customers. Get it wrong and lots of dispirited, disengaged and disinterested employees turn up for work – hardly a recipe for great teamwork and customer satisfaction.

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So strong is the belief among great managers that if you build your people first, the rest – customer satisfaction and financial success – will follow. Harvard Business School’s research about the Value-Profit Chain speaks volumes about the connection. What is a great manager? There are some very specific things that they aspire to “be” and “do”.

Employee

What an effective manager must “be” There are 10 behaviour-based characteristics at the core of what an effective manager must be. These are: A good communicator A good listener A magnet for talent Comfortable with allowing other people to take the credit 5. Even-handed and even-tempered 6. Good at reading people’s character and skill level 7. Genuine 8. Sensitive to personal issues 9. Transparent, not opaque 10. Unquestionably honest

such as “good communicator, genuine, a good listener and transparent” are good for relationships with customers – and for training in customer related skills too.

8. Respect confidences 9. Show enthusiasm and drive; they are infectious 10. Treat people as adults

What a manager must “do”

To what extent do employees in your organisation think managers do these things? How do managers feel they measure up? Where are the contradictions?

Many of the ten things are related and this was ably demonstrated to me recently by employees who took part in focus groups, where they told me: “Managers here do a great job at bringing through people at lower levels in the organisation. They know how difficult it sometimes is for junior employees to progress their career, so the development provided makes them feel just as valued as people in more senior jobs and who earn lots more money.”

Not doing the ten things is virtually guaranteed to alienate employees and the signs are there for all to see – disengagement, disinterest and de-motivation.

1.

2.

3.

4.

Similarly, there are 10 actions that describe what an effective manager must do. These are:

Knowing how well current managers demonstrate this behaviour helps inform self-development programmes for individual managers or groups of managers.

Interestingly, some of the characteristics,

1. Actively help people with their personal development 2. Allow people to learn from their mistakes without retribution 3. Allow people to speak out no matter what their role is 4. Always do what you say you are going to do 5. Give credit where credit is due 6. Put yourself in your employees’ shoes and know what they are going through 7. Never become detached

Making the job interesting and enjoyable When employees really enjoy their job, I believe they work smarter and stay longer than employees who don’t. They are “engaged”. So, what is it about the relationship with their job and the organisation that makes it intrinsically enjoyable? Five things stand out.

1. Knowing what to do and why Make sure employees know what to do and understand how that contributes to the organisation’s performance. By involving employees in developing its vision and values, Accor Hotels, UK communicated what mattered most to the company and that provided the context for everybody’s job. In the current economic climate, employees should be told what’s going on and be given a picture of what the future could look like.

2. An interesting job What one employee finds interesting another may find boring. A supermarket checkout job suits a person who likes dealing face-to face with customers but doesn’t want too much administrative responsibility. A software developer will be looking for challenging work, relatively complex and novel situations where standards of excellence have to be met and there is the opportunity to be a proactive problem solver. A senior manager will want a combination of technical or commercial challenges which stretches their abilities across all aspects of their work – perhaps involving building crucial relationships with key customers. Production operators who craft high quality leather seats for prestigious cars, like using traditional skills and modern technology and meeting the customer who’s ordered the model they’re working on. They often strongly identify with the brand too.

3. Autonomy to do what’s best Don’t micro-manage. Give employees a degree of discretion to make decisions in line with their experience and risks

involved. This will bring out the best in them and help them do what matters to customers, internal or external. Decision making authority should be cascaded to the lowest level possible in the organisation, so that employees resolve day-to-day problems when they arise and act in the best interests of colleagues and customers, and do so with appropriate speed. Great managers give coaching which concentrates on building an employee’s strengths rather than turning around their weaknesses. Some employees may not be for “turning”.

Strengths-based coaching encourages employees to come up with new ideas and extend the boundaries of their capabilities. They might just come up with an outright winning product or service for customers.

4. Access to business leaders and 4. customers Too often employees feel isolated from the people at the top of the organisation or its customers; sometimes they don’t see or hear from them at all. If this continues, smart employees will be off to the compe-

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Employee

tition when the economic upturn comes.

All senior managers at one of my hotel clients, employing around 1,000 people, hold bi-monthly meetings with employees to discuss business performance and employees’ concerns. A summary of the issues raised and agreed actions is sent to all Board members. At Assael Architects, a 68 employee firm of architects, Managing Director John Assael interviews

all job applicants and mentors students.

Browne Jacobson, a 500 employee legal firm, has introduced, at the request of employees, facilities where employees can meet informally with clients.

5. Appreciation for work done Thank you messages from the manager, a personal letter/email from a senior manager, a visit from a director – all are important at the right time. The General Manager of the hotel referred to above, shows lots of appreciation for the work employees do for guests, by making impromptu visits to departments, presenting small gifts and spending time with them to talk about their achievements. Employees attending focus groups held during a review of HR practices spoke enthusiastically about the appreciation shown by the General Manager – clear leadership in an engaging workplace.

DON’T MICRO-MANAGE. GIVE EMPLOYEES A DEGREE OF DISCRETION TO MAKE DECISIONS IN LINE WITH THEIR EXPERIENCE AND RISKS INVOLVED. 26

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Having great facilities and flexible working styles This article would not be complete without an example of a successful company which has featured regularly in best places to work studies. From it’s website, here’s part of what Microsoft does to create an engaging workplace.

Health and well-being “Making sure everyone has a healthy mind, body, and soul is really important to us. We have ‘Wellbeing Centres’ in our offices in London and Reading where people can get help and information on a whole range of medical and health issues including vaccinations and consultations with doctors, nurses, and occupational therapists. They also offer alternative therapies such as acupuncture, hydro-therapy, reflexology, and Indian head massage. But there’s more to your health and wellbeing.

We know life can sometimes be complex and confusing. That’s why we can recommend a Life Coach to anyone who feels they need it. It’s a personalized development process designed to help you reach any business or personal life goals you set for yourself.

Fantastic facilities No matter which U.K. office you call home, you’ll enjoy state-of-the-art facilities. While they may vary from location to location, each facility is an exciting place to work. From great coffee shops and restaurants where you can hang out and swap ideas, to chill-out zones that help you relax and free your mind for the next brainwave, we have it all.

Want to take a break and play Xbox?

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You’ll find them all around our offices.

Fancy a walk on beautifully landscaped grounds? A picnic? Maybe even a free ice cream? You’ll find it all here. We even have gyms, packed with the latest sports and entertainment equipment, to help you burn off those calories!

Would a dry cleaning service at work make life easier? How about on-site cash machines, banking facilities, and financial advisers? A photo processing shop or somewhere to rent DVDs? Perhaps you need your car washed or would you like our Waitrose Service to deliver your groceries straight to the office?

If you answered ‘yes’, then we’ve got it covered. After all, if it’s important to you, it’s important to us. Want to work from home? We offer a trusting culture that allows you to work flexibly and efficiently.

Have a family to look after? That’s why we offer extended maternity and paternity policies and have a day nursery at our Reading campus.

Employee

Top 10 tips for creating an engaging workplace

Flexible working We believe flexible working is about making people’s lives easier through effective communication, quick decision-making, state-of the-art technology, and most importantly, trust. Our people have different backgrounds, interests, lives, and commitments. We understand that to get the best out of people, and help them reach their full potential, we must offer more than one flexible working solution.

So whether you want to work flexible or compressed hours, we’ll do our best to accommodate you. If job sharing would suit you better, talk to us about it. Need to work from home or another office? We have the technology, the freedom, and ways of working that can keep you in the loop, no matter where you are.

Social groups We like doing things with our colleagues.

That’s why we have a great range of sports and social clubs whose members are keen for you to join in. For the thespians amongst us there are fantastic deals on theatre trips, plus weekends away for those who think travel refreshes and broadens the mind. You’ll also find clubs that can help you discover a new sport or activity you’ve never tried before.

Who knows, you could be a natural at photography, a first class polo player, or the next big name on the cycle track.

Whatever strikes your fancy, chances are you’ll find a group ready and willing to share the experience with you.”

Source: www.microsoft.com/careers/ukbenefits

1. Highly visible business leaders who “walk the talk”. In small companies the MD could hold “breakfast clubs” at the main location to discuss business issues and employee concerns. In large companies heads of business units could do the same. Additionally, all new employees, at induction, spend an hour with the MD or head of business unit. In small companies each employee might have a mentor on the Board.

2. Leading edge technology where appropriate – enable employees to test your products or services; this can be invaluable later when they’re contacting customers.

Raymond Robertson Director Strategic Reward Tel: 01425 612789 team@strategicreward.com Favourite social media: My favourite social medium is LinkedIn, because it's business focused from the outset...none of this "chit chat” stuff.

3. Access to gurus or other experts, inside and outside your organisation, with appropriate knowledge from whom they can learn.

4. Opportunity to work on a challenging / key customer project.

5. Encourage employees to share their ideas and concerns.

6. Allow employees the autonomy that can lead to rapid career growth and recognition.

7. Opportunity to give something back to the local community or environment.

8. Make employees feel appreciated – never take them for granted. If you do, they’ll go elsewhere..

9. Make sure your physical work environment says what you want it to say.

Plants and colours never hurt anyone! If you want creativity – give people the space and relaxing areas to be creative.

10. Ask employees what matters to them – sometimes it’s the little things that really count!

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Conference

Doug Shaw, What goes around limited Doug spoke passionately and well about the importance of engaged staff in delivering great customer experiences. I liked Doug so much that we’ve included a full article from him elsewhere in this edition.

See page 34.

Like an increasing number of organisations, British Gas has done some interesting personality work with its people, branded “Look who’s calling”. The idea is for their teams to learn about themselves, colleagues and customers, and to understand how this may affect interactions. What is the best way to deal with a customer who is a “feeler” or a “thinker”? This kind of work can be really valuable in helping to engage with customers on an emotional level, even if it achieves nothing but raising staff awareness of the concepts involved.

Beverley Rowney, British Gas Beverley says her role is to improve life for her people and customers. Much like Doug Shaw, her message is very clearly that a great customer experience starts with engaged people…and that, of course, means getting senior buy-in to the idea.

At their call centre they have moved away from what Beverley calls a “metric-driven culture” to focus on behaviours rather than output (in the sense of traditional KPIs). The customer measure is the most important.

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Beverley listed a number of excitingsounding innovations, such as speech analytics, using Flip videos for staff engagement, introducing a concierge to make people’s lives easier, encouraging staff to vent frustrations and so on.

Far more revolutionary, I thought, was the promise that they would stop using IVR since 96% of customers said they didn’t like it. I was also pleased to hear her say that their strategy was to do more outbound, proactive, calling. I think this is a

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major area of weakness for larger organisations, and a significant opportunity for reducing inbound call volumes as well as customer dissatisfaction.

Martin Hill-Wilson, Datapoint Martin systematically tore apart every premise behind the forum’s title. There is no “world class”—that’s way too far down the road, and we’re obsessed with our immediate problems (like bums on seats).

Planning has gone out of fashion (“who has a customer service strategy?”). What does multi-channel mean? More complexity and more cost, unless you plan properly.

The answer is to realise that it’s all about relationships with customers, and that technology is not the answer. “Humans are much better at compensating for organisational incompetence than auto-

Conference

mated services”, that’s why voice is more popular with customers. As Martin says, “You can’t hear customers screaming online.”

If call centre and online contact are going to be integrated, when was the last time the contact centre team, web team and marketing were all in the same room? Self service is a great idea, but, as per the point made by Prahalad and Ramaswamy in our co-creation article (page 7) “many examples of self-service provide benefit for the wrong party”. Those that do benefit the customer, like ATM, are eagerly adopted.

Tony Watson, Everton FC Tony spoke brilliantly about his use of social media to boost fan engagement at Everton Football Club. I’d say that, in half an hour or so, he converted a roomful of slightly antagonistic sceptics into advocates for social marketing. Having experimented with a range of social media options, he’s settled on a combination of Facebook, Twitter and LinkedIn for his strategy.

- Marketing - Viral campaigns - Listening to customers Everton has 18,000 fans on Facebook.

The beauty of social media is that communication can be two-way. As well as offering another channel for “broadcasting” news about the club, Facebook allows fans to comment. Instant feedback on this scale has never been possible before.

Tony is anxious to point out that these conversations are happening out there anyway—when he started there was no official Everton fan page but over 400 unofficial groups. Having a social media strategy lets you gain control of the conversation, or at least the ability to

Stephen Hampshire Client Manager The Leadership Factor Stephen manages customer and employee surveys for RBS, NatWest, Visa and Pace amongst others. He also presents training courses on employee surveys, customer surveys and data analysis.

stephenhampshire@leadershipfactor.com

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Conference

respond. A good example of this is hotel reviews on sites such as Tripadvisor— negative reviews can have a big impact on a hotel’s popularity, but those savvy enough to respond can go at least some way to offsetting this.

If you think that’s small fry, when Everton reached the FA Cup final last year they staged a screening at Goodison Park which made a small fortune for the club.

The screening was marketed only through Twitter and Facebook.

- Traffic generation - Signposting complex sites - Listening to customers

- Commercial links - Conferencing/events

Twitter is the most misunderstood social marketing tool. “But what’s it for?” is the most common question, followed by “why should I care what you had for breakfast?”. Tony uses Twitter mainly to generate traffic to specific parts of Everton’s large and complex website. He gives an example of posting a picture of a wedding that took place at Goodison Park, which instantly generated fifteen extra wedding bookings.

If you think social media is all about consumers, you couldn’t be more wrong.

Twitter is probably used more for business networking sites than anything else (except perhaps puffing the egos of celebrities).

LinkedIn is the leading networking site, and Tony uses it for the more corporate side of his social marketing strategy.

In terms of direct business development (selling) Tony argues that LinkedIn allows him to be much more targeted, making for less annoyance and higher conversion rates. Two of Everton’s corporate sponsors have come direct from LinkedIn.

Simon Macklin, Wolseley Although at times it tended to veer into a sales pitch for the vendor (Salesforce.com), Simon’s discussion of the benefits Wolseley have found from using a remote cloud-based CRM system was fascinating.

The challenge was to have a single repository for customer data across the business that everyone could use, and in which all customer contact was logged. At the beginning of the process only around 1,500 of the 7,500 daily customer contacts were being logged.

The benefits of cloud computing in this case were easy mobile access for staff based in the field, and the fact that the transition to the new system could be achieved “despite the IT department”.

Simon was particularly keen to stress that

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the benefits of a good CRM system are much wider than sales, although Wolseley did see a £3.6 million increase in sales after the switchover. It also made it easier to track problems from complaint to resolution, to allow customers to track the status of their orders through a portal, and to “democratise the data”—making it easy for people to get at.

Dave Thomson, Cisco Dave opened with the assertion, backed by research, that companies don’t like having call centres, customers don’t like using them, and staff don’t like working in them.

So what’s the future? A technical solution is virtualisation and increasing use of home agents. Many organisations use virtualisation to manage volumes already, but ultimately this might mean the virtual elimination of the “call centre”. Particularly if more organisations adopt Dave’s second suggestion, which is to eliminate the cause of the calls. Ultimately it may be a case of replacing physical call centres with virtual call centres. He gave us the example of a hardware store using virtualised call handling based on location—if no one is available at your nearest branch the call is routed to the next nearest, only ending up at a call centre as a last resort. Why don’t more organisations (banks?!) use branch staff as their frontline? If the banks adopted co-creation, what do you think the customers would vote for?

Another way to reduce call volumes is to adopt better self-service models. Done right customers can be perfectly happy with self-service models (Dave points out that, starting from scratch, the retail service model sounds horrendously UN-customer-centric. Time invested in training customers to serve themselves can be beneficial—so rather than fixing the problem, show the customer how to get the information they need from your website. S

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Research

Current technology has multiplied the number of ways to collect customer feedback, often making it confusing to work out the best way to carry out customer research. Sarah Stainthorpe provides a summary of the different types of research and their purposes, as well as the pros and cons of different ways of obtaining customer feedback.

Sarah Stainthorpe Research Manager: The Leadership Factor

Sarah specialises in using data mining to provide customer insight to Direct Line, Churchill and RBS amongst others.

Favourite social media: Sarah doesn’t have time or energy to waste on social media.

email: sarahstainthorpe@leadershipfactor.com

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Underlying attitudes or transactionspecific?

Fundamentally there are two main types of survey to monitor customer satisfaction and loyalty – first, a snapshot of customers’ overall satisfaction and loyalty attitudes at a point in time, e.g. annually, and second, continuous surveys that usually relate to a specific customer experience or transaction. Satisfaction status surveys measure customers’ underlying views based on their total sum

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of experiences with a company. More recent experiences will typically be more influential but customers’ underlying attitudes will often be affected by things that happened months or even years ago.

This type of survey tends to be more common in business to business markets.

Companies in consumer markets are increasingly using transaction surveys which measure customers’ experience with a specific transaction, rather than all experiences over a time period. This may

Research

be a specific claim on an insurance policy, a repair in your home, your most recent visit to a store or a hotel or even something quite fleeting like a specific call to a contact centre. The advantage of this type of survey is that it’s more specific and more crucially, can be attributed to a particular store, repairer, call centre or even staff member.

face-to-face but are more commonly conducted by telephone. Technology has now produced an array of self-completion methods, including, web, email, text and IVR (Interactive Voice Response) as well as the traditional postal surveys. The selfcompletion methods tend to have similar pros and cons to each other. Here’s a quick summary of some of the main ones;

Benefits of transactional surveys

✓ Cheaper than interviews especially when larger volumes are required, although it’s worth noting that postal is usually more expensive than the other self-completion methods (but can reduce if questionnaires are included in existing mailings to customers or in an existing publication).

to be crucial for understanding the reasons for customers’ views and therefore identifying ways to improve. With interviews, the interviewer can clarify any potential misunderstanding of questions as well as probe for more detailed information such as reasons for dissatisfaction.

Conclusions

There are several reasons for the increased use of transactional surveys: 1. They allow a more targeted approach to making customer service improvements. So instead of putting equal emphasis on all stores to improve a specific aspect of customer satisfaction, e.g. queue times at the till, the company can focus their improvement efforts on the exact ‘priority for improvement’ in each individual store – perhaps queue times in one, cleanliness in another, availability of help from members of staff in another etc.

2. Employees’ interest in customer satisfaction scores and making improvements is understandably higher if the feedback is relevant to the service delivered by their store or department.

3. Companies are increasingly using customer satisfaction bonuses to ensure staff are focused on improving the customer experience. According to Leadership Factor research, nearly half of companies are now paying some form of customer satisfaction-related bonus. These bonuses will have more impact if based at a lower level rather than company-wide.

✓ They are often quicker than interviews (although postal is slower) so the results are available closer to the customer experience event, thus increasing their impact with staff. ✓ A given survey method may be more relevant or easier for the customer, dependent on the context. For example, if customers conduct all their business with a company online it may be more relevant to carry out the research this way too. T Mobile uses text surveys which is more relevant for their customers than it would be for many other businesses. ✗ There may be some limitations on a given method for producing a representative sample and an accurate result.

Everyone has a phone but not all customers use text or email. This may affect how representative the responses from customers are e.g. a text survey would attract fewer responses from older customers.

Survey options for large samples

✗ The response rate for self-completion surveys tends to be lower than telephone, usually not more than 30%. The bias from non responders makes the data less accurate, especially because self-completion surveys tend to attract responses from customers with extreme views i.e. highly satisfied or highly dissatisfied.

The fundamental types of survey method for comparison are interviews versus selfcompletion methods. Interviews can be

✗ Detailed and high quality feedback from customers is more difficult to obtain via self-completion methods, which tends

However, the drawback for transactional surveys is that it is costly to get sufficient responses to obtain reliable sample sizes at lower levels, especially if you are taking it down to individual employees.

Considering the objectives of the customer research is crucial to selecting the most appropriate data collection method.

Where companies have more than one objective (which is often the case), it’s possible that that mixing data collection methods may well give the best solution.

Telephone is the ideal option for carrying out a survey of customers’ underlying, long term satisfaction and loyalty attitudes. This is absolutely crucial information for strategic decision making and planning because customers’ future purchasing / supplier selection decisions will be based on these underlying attitudes. A telephone interview allows a longer questionnaire plus the probing necessary to fully understand customers’ views. This survey data can therefore be used to identify detailed areas for improvement and to generate specific messages to be communicated to customers and staff. With a sufficiently large sample this can be done right down to low levels. But that comes at a cost, so…

If companies also need to generate scores at very low levels such as individual staff member or store, either for bonuses or to drive ownership and accountability, then a low cost self-completion method such as web or IVR can be a cost-effective way to extend the telephone survey results. The main telephone survey can even be used to generate the longer term more strategic information, supplemented by speedy information from a few questions via the web, text or IVR. Such surveys can also be useful for keeping track of customers who are dissatisfied with a certain issue or who have made a complaint to check that their issues are being addressed. S

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Employee

The rol ole of engagement in g great cust s omer expe ex erienc n es By

Doug Shaw I was recently invited to speak at a conference about the part an engaged workforce plays in delivering a great customer experience. My experience and research shows this link to be essential, so I’m concerned to read that the CIPD says job satisfaction is falling in the UK. Job satisfaction falling

Retaining talent

According to their latest Employee Outlook survey of 2,000 staff, the CIPD’s measure of job satisfaction has dropped from a score of 46 to 37. More people (42 per cent) reported excessive pressures at work, compared to six months ago (38 per cent), while employees were also more likely to say they have seen increases in stress and conflict at work, as well as bullying by line managers.

Another interesting figure from the last report in April is a rise from 34 to 40 per cent of staff that ideally would like to change jobs. My own experience shows me that workers with scarce skills are already migrating and there is increasing talk of a war for talent as the economy picks up.

The previous survey had shown some resilience, based on the premise that people felt “lucky” to have a job. Claire McCartney, the CIPD’s resourcing and talent planning adviser, said:

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In the spring we interpreted high job satisfaction in the face of the recession as a ‘fixed grin’, where employees felt lucky just to have a job.

In this quarter, the fixed grin is slipping and the temporary goodwill is being replaced with increasing frustration.

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This may come as a disappointment but I doubt it is much of a surprise. For months here at What Goes Around Limited we have been asking business leaders questions like: - How are you going to motivate your people?

Employee

- How are you going to get them to give the discretionary effort that’s so vital in delivering a great customer experience?

- How are you going to get your people to trust you, and each other?

Recognition and engagement Referencing the first question specifically, our experience in large organisations shows us that simple basic recognition is poorly executed. In a global telco, we found less than 3 out of 10 could strongly agree with the statement

- We don’t communicate change effectively There is some interesting research published by Right Management which supports this connection. According to their recent global study, ninety-four percent of employees who report that change was not handled well in their organizations are disengaged. They also note that less than half (43%) of employees are confident in their organisation’s change process and ineffective change management negatively impacts an organization’s ability to attract and retain talent. They go on to identify nine drivers of successful change which in turn support high levels of engagement. They are:

That’s despite the fact this statement is widely acknowledged as critical in the relationship between managers and staff.

1. Senior leaders implement effective change 2. Safe and healthy workplace 3. Efficient work processes and people systems 4. Fit-for-purpose structure 5. Open and honest communication 6. Employees empowered to make changes to the way things are done 7. Teamwork between business units/departments 8. Resources to do the job well 9. Line managers have appropriate skills

Change management and engagement

Empowerment

There is a strong connection between the strategy, planning and delivery of change management, and employee engagement.

Our experience in organisations which struggle with engagement shows me they also struggle with managing change. In one such organisation I have observed that only 6% of employees can strongly agree with the statement “I feel that change is well managed in this organisation”.

Examples of why this is so include; - We don’t finish what we start - We don’t engage, we tend to dictate

I agree with a number of these points, particularly 3, 4, 5, and 7, 8 and 9. Whilst I acknowledge that senior leadership has its place I am seeing encouraging signs of successful change being co-created by workers and customers. Sometimes this has the endorsement of senior leaders but they often have little or nothing to do with its implementation, and quite rightly so. They rarely get close enough to the customer or front line staff to have any direct experience, and so they are much more powerful as an encourager rather than a do-er.

In the last 7 days I’ve received praise or recognition for good work

Likewise, empowerment is a word often used to encourage people to get involved, or take action themselves. Too often though, the accepted culture is to wait for empowerment to be given, after all we define empowerment as

to give someone official authority or the freedom to do something.

What organisations really need is a culture of getting on and doing the right things for the right reasons, without waiting to be told.

This comes from a culture of autonomy, trust and respect, and as my experience shows, can lead to great, sustainable business results.

So how can we make these things happen? A practical thing that one can do at any meeting is to ask, “What have we agreed to do?” and in turn, “What are you personally going to do to help us achieve what we have all agreed to do?” Then listen for a SMART objective. Anyone is more likely to deliver what he or she hears themselves commit to aloud in front of their peers than to fulfill someone else’s draft of the minutes of a meeting long after the discussion. Our experience shows us that commitment and delivery builds positive trust very quickly.

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Employee

10 practical tips

4. Lead, manage and coach.

Also, we have a wealth of good practice at our disposal. In a recently published article on HR Zone, we offered up ten practical engagement tips for managers. These were compiled through a series of interviews with top performing line managers at all organisational levels, so they are based on people’s actual experience.

1. Create the 'right' culture.

Pretty much everything you do as a manager impacts the culture. Two important aspects are contact and communications.

Make sure that contact and comms are regular, concise, relevant and meaningful.

As well as face-to-face, one-to-ones and meetings, use technology e.g. MS Communicator. The important thing is to have contact; it doesn’t always have to be face-to-face.

2. Be honest.

Tell your people how it is and always give the rationale. It’s a manager’s job to translate the high level messages and make them relevant. It’s also a manager’s job to ensure that the priorities are clear, small in number and reasonably constant. Ensure the team understands that some things cannot be changed. Explain why this is the case and ensure they know what can be changed and importantly, how you and they can work together to achieve this.

3. Trust and respect.

Both work two ways. Show faith in people’s abilities and treat them as individuals. Get to know your team and what they do, understand them as individuals and understand what motivates them. Ensure you work with your people so that they have the skills and capabilities to deliver what is needed now and in the future to meet their long-term career aims. Be creative about how you work with them on their development e.g. getting your best performer to mentor someone new to the team.

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Set direction and focus and then ask the team how they will support. Encourage your team to be creative. Turn ideas into actions and monitor performance against what has been agreed. Allow large teams to become self-managing and give them empowerment. Think about your own development – get 360 feedback from your team, manager and peers. Identify someone who you admire as a leader/manager/coach and use them as a role model.

5. Encourage people to act.

Give clear objectives and encouragement so they become self-supporting, selfmanaging teams. People are motivated to do well if they feel valued and if they believe that they are listened to. When trying to achieve beyond the ‘norm’, people need to be encouraged to be bold. When things don’t go to plan, the subsequent discussion should be about recovering the situation and sharing the learning from it, not about blame.

6. Recognise good work or extra effort.

People appreciate their work being recognised, a simple ‘thank you’ can mean a lot to your people. Think about the form the recognition should take. Some people thrive on recognition amongst their peers. For others, it’s the opportunity to spend time with their management team one on one. There are ample ‘e’ recognition schemes available and make sure recognition isn’t only delivered in 1:1s or by email

7. Feedback.

Give behavioural feedback to your team based on evidence and encourage them to do the same for you. Do not avoid giving difficult feedback to individuals about their performance and ensure you follow it through.

8. Take responsibility.

Avoid 'I don’t want to do this either'. Also ensure you are aware of any issues in the

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team and follow them through as appropriate. Try and maintain consistency and avoid the ‘need it now’ peaks as much as possible.

9. Honour commitments.

For example, one-to-ones, and team audios. Ensure that you do not re-arrange or miss commitments as if this happens too often, your people will not feel valued.

10. Enjoy working with your team.

We all spend a lot of time together at work and no one has ever said we shouldn’t enjoy it. Make sure you have fun together. S

Doug Shaw runs What Goes Around Limited, and advises organisations on how to combine employee, customer and social engagement in order to co-create and deliver great service. Doug speaks publicly to a wide variety of audiences on sustainable change, leadership and engagement.

He also writes the Stop Doing Dumb Things to Customers blog, runs a business behaviour group on LinkedIn and writes articles for a number of magazines and websites.

Prior to establishing the business, Doug was Director of Change Management for BT Global Services in the UK which involved establishing and leading the sustainability practice for BT Wholesale.

Doug can be contacted on: Mobile – 07736 518066 Email doug.shaw@wgalimited.com Web www.stopdoingdumbthingstocustomers.com

Fast Guide

Attitudes and behaviour

Many organisations fail to manage customers effectively because they don’t distinguish between customers’ attitudes and behaviour. Both are relevant to customer satisfaction and loyalty, but they’re different concepts requiring different information and decision making. Since it’s behaviours that deliver financial benefits we will examine that concept first.

Customer behaviours Customers can behave in good and bad ways. Desirable behaviours include staying with the company a long time and spending lots of money by buying more often, buying a wider range of the supplier’s products or becoming less price sensitive. Organisations also want customers to recommend them, to make constructive suggestions for product and service improvement and to fit in with the company’s operating procedures. They don’t want them to be price sensitive switchers or to increase the organisation’s costs through not understanding or accepting its operating procedures. The most loyal customers display all the desirable behaviours, even “thinking like owners”. In other words they go out of their way to help the company, e.g. passing on examples of poor service or staff attitude, pointing out offers or benefits available from competitors and forgiving minor service problems.

The challenge for organisations is building the good behaviours and eliminating the undesirable ones. In recent years many organisations have tried to use software or other tools to ‘manage the customer relationship’. Even assuming your customers do want a relationship with you (unlikely if you’re a utility, a local authority or an insurance company for example),

why would they abdicate its management to the supplier? In practice, customers make judgements about the benefits to them of being loyal. Suppliers aren’t in the driving seat. They have to respond to customers not manage them. If they concentrate on fully understanding customers’ requirements, follow the customers’ agenda and co-create experiences customers want to have, most customers will judge that they have more to gain than to lose by sticking with the supplier. But how do they form those judgements?

Customer attitudes Customers’ judgements about how to behave with organisations are based on what they think about them and these attitudes are based mainly on their personal experience with the organisation and sometimes on what other people say. Thirdly, they can be affected by what the supplier says.

In competitive markets few companies perform badly enough to dissatisfy a lot of customers. But in most markets suppliers need to do much more than not dissatisfy customers if they want to maximise the benefits of customer satisfaction. These days most people think they can do better than ‘OK’, ‘average’ or ‘good enough’.

To keep customers, an organisation has to be so good at meeting or exceeding customers’ requirements that they will know it would be difficult to do better elsewhere. After that you can start to form emotional bonds with loyal customers that stop them even looking elsewhere.

FOR A COMPETITIVE SURVEY QUOTE contact Jim Alexander on: 01484 467025 or jimalexander@leadershipfactor.com

Jim Alexander Client Manager: The Leadership Factor

Jim has over 30 years’ experience of creating, interpreting and using many kinds of research information from customer satisfaction and loyalty to forecasting and strategy development. Jim is author of ‘The Handbook of Customer Satisfaction and Loyalty Measurement’ (Gower) and has spoken widely at events on customer satisfaction and loyalty in the UK and overseas. His clients include Rolls Royce, Farnells, Rockwool, Sulzer, Reliance Security, RWE npower and many more.

Customer surveys should be focused on the first oval in the diagram – measuring customers’ attitudes on how they feel about your organisation. Customer behaviours, e.g. customer defection rates, average spend and complaints are very useful measures of organisational performance but they reflect what has already happened in the past and do not tell you how to improve on that. Improvement is achieved by understanding customers’ attitudes so that you can build on things they like about the organisation and address the things they don’t. S

Attitudes and behaviours Customer attitudes

Customer behaviour

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Organisational outcomes

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Book Review

Harvard Business School Press

The Future of Competition Co-Creating Unique Value with Customers C.K. Prahalad and Venkat Ramaswamy1

Both professors at Michigan Business School, Prahalad and Ramaswamy may have come up with a very prescient title for their book on co-creation. The book was published in 2004 but the authors actually introduced the concept four years earlier in their Harvard Business Review article ‘Co-opting customer competence’2. They are both very eminent in different fields. Ramaswamy is an expert on innovation, IT, online business and communities as well as customer management. Prahalad specialises in strategy, especially future trends and strategies and in 2009 he was named the world's most influential business thinker on The Thinkers 50 list, published by The Times.

Fundamentally, the authors argue that ‘value’ will be increasingly co-created by the firm and the customer, rather than being created entirely inside the firm. But what does this mean?

Some people simplistically think that cocreation is just a new buzzword for delivering a great customer experience.

Others say it’s about involving customers.

This is closer but still misses the mark.

The key word is choice, the authors main-

A CUSTOMER EXPERIENCE THAT IS CO-CREATED WITH CUSTOMERS (SHAPED MORE

BY THE CUSTOMER IN FACT THAN THE SUPPLIER) WILL GUARANTEE THAT CUSTOMERS GET EXACTLY WHAT THEY WANT...

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taining that consumers seek freedom of choice to interact with the firm through a range of experiences. But critically, these choices need to be customer- not supplier-led because only customers will define the choices in a manner that reflects their view of value. A customer experience that is co-created with customers (shaped more by the customer in fact than the supplier) will guarantee that customers get exactly what they want, that the supplier really does ‘do best what matters most to customers’ and consequently that customers will be truly loyal. Then they will engage in all of Harvard’s key loyalty behaviours – repeat business, related sales and referrals, thus increasing the supplier’s profitability.

So the key word is choice and the key outcome is meeting customers’ requirements, not ‘delivering great customer experiences’. This can result in some counter-intuitive win-win consequences.

For example, some suppliers have successfully dumped some of their work onto customers, be it filling your own tank with petrol, getting cash yourself out of the ATM or laboriously filling in order forms, delivery and credit card details for internet shopping. The suppliers costs are drastically reduced, there is little or no opportunity for building a relationship, but the customers love it because it gives them choice, flexibility and time saving benefits. Of course, if you try and pass costs and labour onto customers in ways they don’t see as beneficial to them, that’s a different matter. Weighing and pricing your own fruit and vegetables in supermarkets is an example of one such ill-conceived initiative that didn’t succeed.

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The authors are very definite about what co-creation is not. It is not about outsourcing activities to customers, it is not about supplier-led mass-customisation and it is not about scripting or staging experiences or events. It is about evolving the organisation’s offering and tailoring the way customers interact with it based on what suits customers. The more this can be done at the level of the individual customer rather than customers in the aggregate, the closer you will be to cocreation.

References: 1. Prahalad and Ramaswamy (2004) “The future of competition: Co-creating unique value with customers”, Harvard Business School Press, Boston.

2. Prahalad and Ramaswamy (2000) ‘Co-opting Customer Competence’ Harvard Business Review January S

Engaging for Growth 14th April 2010 - Savoy Place, London

Come and learn how to treat your most valuable asset from a host of impressive speakers!

This employee engagement event will cover: - Engaging for success - Leading change through engagement - Employer & Employee attitude - The science of motivation and lots more‌ Visit

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