There is no doubt that the traditional management approach is no danger of going anywhere and nor should it. It is well entrenched and serves to enable people in organisations to make the majority of decisions quickly and efficiently.

For those very same organisations who have larger and more important decisions to make and more often than not  ‘don’t know what they don’t know’ there is another option to complement their traditional approaches. Using a Design Attitude enables organisations to develop a range of new and alternative options instead of forcing them to choose between their current options.

Most CEO’s will move in order to move forward make a decision based on current options and why wouldn’t they? They have achieved that role as a result of making decisions in the traditional manner – why change a proven formula?

Because the world they now operate in is different to the one that those successful decisions were made in. Companies now face far more channels to market, a greater potential for disintermediation from new competitors and are far more removed from customers than they have ever been – despite drowning in data.

We recently undertook some Service Design work in the financial services sector and after spending time with customers, staff and then more customers uncovered a large problem. It was large because it was preventing their most profitable customers from doing more business with them and it was caused by their chosen business model.

A big problem.

On the surface, changing a company’s business model is not a quick, easy or inexpensive decision. The Management’s approach was to face the issue that was preventing significant customer growth by choosing between available options – a Decision attitude. ‘I have 3 options which is the best (or least bad)’.

Using a Service Design mindset we first set out to establish the ideal Customer Experience and work back from that point using the two other filters of feasibility (can we do it) and viability(can we make money from it )

In taking a Design attitude, we approached the problem by deciding there was very little chance they could or would change it and anyway we had the skills and a Design attitude which enabled us to look at a variety of ways we could solve the customer problem by generating new options to choose from.

The outcome, the requirement to invest $5 million was removed from the decision set and a variety of alternative methods to achieve the same outcome with no capital investment added in.

When next you are asked how you demonstrate the value of Design Thinking and Service Design, connect the cost of the traditional decision versus the cost of using a  ’Design Attitude’.

In this case, an annual interest cost of $200,000+ versus just a fraction of that.

The take-away - there is a time and a place for both. Its important to know when and how to use both to maximise all stakeholders value.

Lets not be shy in highlighting the significantly greater potential for transforming growth by using a Design Attitude versus the more traditional Decision Attitude.

For more information on how to balance the two, give Proto Partners, Australia’s leading  Service Design consultancy a call.

That is why organisations need to stop leaving  the delivery of outstanding service  as an accident and set about using a process like Service Design to intentionally design the environment and interaction so that the experience is outstanding. Its the only way that we can ensure that our customers derive great value from our service offering, they stay with us year in and year out and we increase our profitability by factor of 7 times over 7 years.

If your customer is worth $1000 in year 1, look after them well and they will be worth $7000 after 7 years. Now isnt that a recipe for guaranteed revenue and margin growth (see yesterdays article below on the dollar value of customer experience)

Do you have a plan and a process to ensure you deliver Outstanding service every single time? if you would like to discuss how, please contact me on 02 8113 2311 or email me at damian.kernahan@protopartners.com.au .

What’s expected vs. what’s amazing

I visited a favorite restaurant last week, a place that, alas, I hadn’t been to in months. The waiter remembered that I don’t like cilantro. Unasked, she brought it up. Incredible. This was uncalled for, unnecessary and totally delightful.

Scott Adams writes about the cyborg tool that is coming momentarily, a device that will remember names, find connections, bring all sorts of external data to us the moment we meet someone. “Oh, Bob, sure, that’s the guy who’s friends with Tracy… and Tim just tweeted about him a few minutes ago.”

The first time someone does this to you in conversation (no matter how subtly), you’re going to be blown away and flabbergasted. The tenth time, it’ll be ordinary, and the 20th, boring.

Hotels used to get a lot of mileage out of remembering what you liked, but it was merely a database trick, not emotional labor on the part of the staff.

Today, if you go to an important meeting and the other people haven’t bothered to Google you and your company, it’s practically an offense. We’re about to spend an hour together and you couldn’t be bothered to look me up? It’s expected, no longer amazing.

On the other hand, consider Dolores, a clerk with kidney problems at a 7 Eleven, who broke all sorts of coffee sales records because she remembered the name of every customer who came in every morning. Unexpected and amazing.

You can raise the bar or you can wait for others to raise it, but it’s getting raised regardless.What

It just means that those of us who work to improve the customers experience for the the purpose of increasing customer retention and hence revenue, need to work harder to communicate the message.

This is an excellent article and a proof that increasing focus on Customer experience through Service Design is not only valuable, but a requirement for leaders of businesses if they are to deliver on their mandate to increase shareholder wealth.

Lets keep spreading the news, in the “tipping point we trust”.

Yes, Virginia, There Is A Return On Customer Experience Investments

In some business circles, getting people to believe in a return on customer experience investments is a lot like getting them to acknowledge the existence of Santa Claus.

Admittedly, it can be difficult to quantify a specific profit or revenue impact from some types of experience enhancers—more robust “voice of the customer” programs, more polished customer statements, better trained front-line personnel, streamlined customer touchpoints, a more user-friendly website, etc. The financials surrounding such initiatives are much less precise than those of hard-dollar initiatives, like the renegotiation of real estate leases or the consolidation of corporate functions.

Of course, that doesn’t mean customer experience investments have any less of a compelling return than these other endeavors. It just takes a little more work to quantify it. And, frankly, in some cases, it requires a leap of faith.

Leap of Faith?

I know what you’re thinking. Most Chief Financial Officers won’t look kindly on a business case grounded in a leap of faith.

The fact of the matter is, though, there are plenty of big business decisions that are routinely made with limited quantification and a healthy leap of faith. Corporate re-brandings, advertising programs, synergistic mergers, and even the hiring of highly compensated, star CEOs—these are all examples of initiatives that bring with them a good deal of risk and expense, yet must be green lit without the benefit of a precise, quantifiable business case.

…there are plenty of big business decisions that are routinely made with limited quantification and a healthy leap of faith.

How does a senior executive, CFO or Board member give their assent under such circumstances? They complement what limited hard data may be available with gut instinct. They get comfortable taking a leap of faith because they simply believe in the concept behind the investment, whether it’s the power of a reinvigorated brand, the potential unlocked by an acquisition, or some other venture.

So when executives push back on customer experience investments, citing the absence of an iron clad, quantifiable business case, their reservations may actually reflect a deeper skepticism about the true value of customer experiences strategies.

One way to address such underlying skepticism is to elevate the dialogue, getting executives—even for just a moment—to focus less on project-by-project justifications and more on the macro impact of experience-oriented business strategies.

Is The Market Rewarding Customer Experience Leaders?

To that end, Watermark Consulting recently conducted an analysis of stock market performance for customer experience leaders and laggards over the past three years, a time period encompassing the market’s run up to its all-time high in late 2007, to its Great Recession-induced nadir in early 2009, to its more recent bounce back.

To identify the leaders and laggards, we used Forrester Research’s 2007 Customer Experience Index study, picking the top ten and bottom ten publicly traded companies from Forrester’s rankings. Then we compared the total return from investing in an equally-weighted portfolio of customer experience leaders to that for customer experience laggards and the broader market (as reflected by the S&P 500 index).

The results were quite revealing:

From 2007 through 2009, through the best and worst of times, the customer experience Leader portfolio outperformed the broader stock market, generating cumulative total returns that were 41% better than the S&P 500 Index and 145% better than the customer experience Laggard portfolio.

During each of the three years, the Leader portfolio always outperformed the index and the Laggard portfolio always underperformed the index. Looking at these data points, it certainly appears that customer delight and customer misery have very different influences on company stock performance.

In addition, while the Leaders portfolio declined in value during the depths of the recession, the decline was less pronounced than that for the broader market. As the recession abated in 2009, the Leaders portfolio also proved quite resilient, more than doubling the return of the S&P 500.

This performance profile supports the notion that customer experience leaders are somewhat cushioned from the most severe impacts of economic downturns, because they represent one of the last places consumers cut back and one of the first places to which they return.

What The Numbers Really Mean

There are plenty of criticisms that could be lobbed at this analysis: the three-year time period is too short, the Leader and Laggard sample sizes are too small, the Forrester study isn’t a good measure of customer experience excellence, stock market returns aren’t good indicators of long-term company performance, etc.

No analysis is perfect and this one is hardly meant to suggest that any company embracing a strategy of customer experience differentiation will outperform the S&P by over 40%. There are many variables at play, not the least among them pure execution (embracing a strategy and actually implementing it are two very different things).

Companies that successfully bring great, end-to-end customer experiences to the marketplace are rewarded—by consumers and investors.

These results are also not meant to preclude attempts to cost justify customer experience improvement efforts on a project-by-project basis. That rigor must remain; this data merely provides some much-needed air cover.

What this analysis does suggest is this: Companies that successfully bring great, end-to-end customer experiences to the marketplace are rewarded—by consumers and investors. Their operational excellence and attention to detail, their simple and straightforward communication, their well-equipped and genuinely helpful front-line staff—the sum of these parts pays off in the end, even if the precise impact of individual components is uncertain at best.

Hopefully, by framing the return on customer experience excellence in terms executives can easily understand (stock price and market value), this analysis will begin chipping away at the lingering doubts that some of them harbor towards experience-oriented investments.

And with that target of skepticism removed, all that’s left to figure out is who eats the milk and cookies on Christmas Eve.

He tells us about the value of Stories in effectively communicating complex pieces of information, a lesson anyone in Service Design would benefit from reading. Its amazing, recently we have undertaken weeks and weeks of research for one of our clients and despite the rigour and ideas we developed, the most powerful and most effective way of demonstrating our grasp of their business was telling them a story about a particular interaction that occurs time and time again when potential customers try to engage with our client.

You can source the original post from John here at his blog Edge Perspectives or read it below. Either way, take ten minutes to have a read and think about the implications and opportunities for helping communicate and deliver change in your organisation.

From Research Monographs to Story-Telling: New Forms of Communication in the Big Shift

The Big Shift cascades through all dimensions of our life.  The Big Shift will also transform how we communicate with each other. We are moving from a world of deep analysis communicating explicit knowledge to a world of rich, personal narratives communicating tacit knowledge. Narratives powerfully help to shift perception from static objects to dynamic relationships (the focus of my previous posting).

20th century communication – research monographs rule

The 20th century was an era of research monographs, slicing into the complex reality we all confronted, seeking to simplify it and focus us on the elements that really mattered.  We pursued research and explored many new frontiers but we did not rest until we had the knowledge stocks appropriately codified and reduced to writing in iron clad patents and copyrights. We knew that the real work and wealth creation did not start until we had protected stocks of explicit knowledge and reduced the knowledge to routine tasks that could be efficiently scaled.

Serious research required large data sets that could yield statistically significant results.  It would be even better if the results could be reduced to a simple yet universal formula that could be reliably applied to yield predictable results across as many situations as possible.  The more universal the results, the more scalable the activity could become.

Stories, on the other hand, were for kids. As early as possible in school, children were brought into the world of abstract concepts and scientific analysis. Stories at best were ghettoized into literature classes. Literature and arts were nice to have, budget permitting and as long as these programs did not conflict too much with the real work of bringing children to a level of “maturity” that would allow them to enter the workforce and become productive employees, able to handle the basics of explicit knowledge, literacy and numeracy.

This message was reinforced in a variety of subtle and not so subtle ways.  Virtually everyone in their academic careers has encountered the ultimate put-down: “The plural of anecdote is not data.” Get serious. Forget the stories, even if there are many of them, and focus on hard, raw data that can be massaged into real knowledge.

When we entered the workforce, this message was reinforced time and time again.  “Don’t tell me stories, bring me data” could be emblazoned above the door of every conference room in the large corporations that drive our economy. Spreadsheets and PowerPoint charts ruled while memos summarized the findings and made the case for action. Stories could be read for entertainment and relaxation in our leisure time, but they had no respectable role in the workplace. Workers furtively gathered at the water cooler to tell stories, but quickly disbanded when their bosses showed up to check in on them.

The impact of the Big Shift

But here’s the thing. Knowledge stocks in general diminish in value as the changing world renders more and more of this knowledge obsolete.  This increases the need to generate new knowledge. New knowledge inevitably has a higher proportion of tacit knowledge in its early development. Tacit knowledge is the knowledge that is the most difficult to express, either because it is so new and so unfamiliar or because it is so deeply embedded in our practices that we are not even aware of it.

As tacit knowledge grows in value, we need different ways of communicating it. When we first encounter new and unexpected events or results, we often have a hard time even expressing what happened, much less reducing it to the abstract, conceptual language that explicit knowledge pulls us toward. We need different ways of communicating what we encountered.  What do we tend to fall back on?  Stories.

Pick any area that is just emerging.  It could be some new technology frontier like cloud computing or a new set of practices like open source courseware.  One key indicator of these emerging areas is a rapid growth in the number of conferences. What are people doing at these conferences? They are telling stories to each other, sharing experiences, seeking advice and input regarding those experiences and learning from each other.

The unique value of stories

Stories emerge as an increasingly central form of communication in times of rapid change because they so richly reflect the needs of the time. In particular, they help us to shift our perception from static objects to dynamic relationships.

Stories by their very nature are dynamic rather than static. Stories are ultimately about movement and development.  They engage because they immerse listeners in changing circumstances and the challenges and opportunities created by change.  Stories focus on sequences of events and highlighting the causal forces shaping these events. They are far more “true” than snapshots.

Stories are about relationships at multiple levels. Stories situate their protagonists in context – they help the listener to understand a complex set of relationships that shape the choices and movement of the protagonist. In a story everything is related. Stories integrate apparently disparate elements and make their relationships visible. They take people and things and focus on relationships rather than objects.
There’s another set of relationships developed by stories – the relationship between listeners and the protagonists as well as between the story-teller and listeners.  Even more generally, as PJ Manney reminds us, stories help to cultivate empathy, encouraging listeners to understand the perceptions and motivations of others.  This empathy extends far beyond the story at hand and helps listeners to be empathetic in all aspects of their lives. Thus, in many ways, stories help to build new relationships, rather than just describe existing relationships.

Stories powerfully illuminate tacit knowledge. By focusing attention on the motivations and practices of the protagonists they help us to gain insight into tacit knowledge that cannot be reduced to explicit knowledge.  We indirectly access the tacit knowledge through a deeper understanding of context, choices and practices of specific individuals.

Stories inspire the imagination, rather than simply communicating existing knowledge.  By pulling us into a new and often unfamiliar context and helping us to see this context through the eyes of someone else, stories help us to break out of our existing frames of reference and inspire us to see things in very different ways.  As a result, stories can generate sparks of new insight that, properly nurtured, can lead to fundamentally new knowledge about complex and rapidly evolving situations. In the end, stories are not just powerful ways to communicate existing tacit knowledge; they help to catalyze the creation of new knowledge.

Stories are catalysts. One story often pulls out other stories from other people. Stories can begin to build upon each other and draw other people in.  They spark broader conversations and begin to establish a common ground for shared understanding, helping to build trust based relationships.

Stories provide powerful filters that help us to orient ourselves in complex and rapidly changing worlds.  On a daily basis, we are bombarded by an ever expanding array of stimuli that spread our attention ever more thinly and risk disorienting us in terms of a sense of what matters and what is simply noise.  Stories help to focus our attention.  The task of the story teller is to reduce a complex situation to its essence, making difficult decisions about what matters and what is simply extraneous while still preserving the relationships and textures that drive forward movement.  The result can be very helpful to listeners in terms of communicating what is really important in a world that distracts and diminishes our ability to focus. At the same time, stories also encourage listeners to use their own imagination to enrich the context of the story – they pull listeners in and invite them to co-create the world at hand.

Stories focus on agency. Stories highlight the role of individuals and groups in acting upon challenges and opportunities.  They give listeners a sense of the possibility and importance of action, rather than simply passively absorbing what is going on around them.  They motivate listeners to make choices and act.  They also show the potential to reflect on and to learn from action, as the listeners are encouraged to do when they hear stories about others.

Stories help develop a questing disposition and passion. Stories are often about protagonists who are curious and seeking something that is difficult to attain.  By helping us to put ourselves in the situations of these protagonists and experiencing the questing disposition in a very personal way, they inspire us to pursue similar quests. Passion is about pursuit and stories can similarly ignite passion as we experience in a deeply personal way the satisfaction and rewards of pursuits. The potential for passion is enhanced by the passion that successful story-tellers bring to their craft.  The stories that engage the most are the ones where the story-tellers communicate their own passion as well as the passion of their protagonists.

For all of these reasons, stories will become an increasingly central form of communication in the Big Shift.  Stories help us to make sense and to make progress in complex and rapidly changing times in ways that more conventional forms of communication simply cannot.

Bottom line

So, what does this mean for corporate executives? Executives have generally viewed stories as somewhat suspect distractions from the focus and data required to run the business.  As we move from a world where scalable efficiency is the source of wealth creation and capture to a world where scalable peer learning becomes a much more powerful source, stories assume a much more central role in the communication arsenal of executives.

The ultimate task of leaders is to help the people around them make sense and to make progress.  In a world where performance pressures are mounting and the old assumptions no longer have as much validity, stories can be a powerful means for leaders to accomplish their mission. Stories become critical to build shared understanding among employees, but they also become increasingly powerful in helping to orient and engage third parties and customers.

Leadership is about pulling people out of their current situation and helping them to see the potential and opportunities that exist around them.  Leadership is ultimately about helping people to pull out of themselves their potential, helping them to see and achieve the potential that lies latent within all of us. By pulling people into a different context and building connections with other people, stories can help leaders to be more effective.

For those who are intrigued by the increasing importance of stories, Steve Denning represents one of the most thoughtful proponents of narrative as a way to strengthen leadership.  In particular, his book, “Squirrel, Inc.” explores a broad array of story-telling genres and analyzes their importance for leaders.

On a personal level, stories help to integrate our own experiences into an overall personal narrative. Personal narratives help to provide us with context and orientation in our own lives. Daniel Siegel in his important new book Mindsight makes the case that integrated personal narratives are an important marker of psychological health.

Stories matter.  Analysis and explicit knowledge still have a major role to play.  But stories and the tacit knowledge they convey are essential if we want to venture out to the edge, build a deep understanding of what is happing out there and help to communicate that understanding back to our colleagues in the core.

We have a choice. We can stay closeted in the core, hiding behind patents, research monographs and charts of compelling data, and staying well in the comfort zone of the forms of communication that have contributed to our success to date.  But the complacency that breeds can be very dangerous in the Big Shift.  Far better to venture beyond our comfort zone and master new forms of communication that will help us to make sense and to make progress in an increasingly complex and challenging world.

And, yes, I am aware of the profound irony that I wrote this entire blog posting without telling a single story. I am a prisoner of my 20th century education and still struggling to master the art of story telling.

6.30pm, Tuesday 19 January 2010

Trinity Bar, Surry Hills (Google map for Trinity Bar).

We’ve got two awesome presentations lined up. A great service design case study of Contours ladies gyms from Damian Kernahan (Proto Partners) and some wise words of experience from Ellie Nichol (BT Financial Group). Followed by a quick round-up of what’s been happening in service design around the world from Suze Ingram (Service Design Hub).

This is only our second meeting. The first was a hit – so don’t miss this one.

Let us know if you are coming by sending a quick “I’ll be there” email to servicedesigningau@gmail.com.

Both Ben Reason and Jeremy Walker from livework argue that:

“Data, whilst valuable, is a commodity, and an easily replicated one at that. Therefore as it becomes more widely available its value will drop. Businesses with data products often prop up the price with additional fields of information but this is simply another type of devaluation as the customer is getting more for the same price. We have helped our clients achieve the opposite – more revenue for less data – by developing services around the information. These services provide additional value to customers by understanding how the data fits their business.

This is where the process of refinement comes in. We need to refine the data into services. And these services need to meet the needs and issues of the businesses that information providers hope to sell to. The issue is that, whilst the geek in all of us gets very excited about raw data, business customers are more interested in the immediate challenges that they face. These challenges will be things like effective marketing campaigns, back office productivity or asset management etc.”

The other article was from Forrester Research and Dave Frankland. He also agreed with the livework team:

“According to Amazon’s former Chief Scientist, individuals will generate more data in 2009 than in the combined history of mankind. Think about the implications for your marketing and overall business. On the one hand, it is possible to know more about every prospect and customer, and to improve their customer experience based on what you know about them. On the other hand, it’s very easy to drown in the exponentially growing stream of data. Customer Intelligence (CI) professionals sit at the nexus of this data explosion, while also dealing with tectonic shifts in customer behavior, and an increased demand for marketing accountability.”

Dave goes onto say that given the strategic value of the CMO role, he believed that the next generation CMO’s will come from the Customer Intelligence discipline. That’s not to say CMO’s won’t continue to care deeply about the brand, and the emotional connection that they create with their customers. But, as they struggle to engage with empowered, connected customers who have limited tolerance for marketing, firms will elevate CI within their organizations to influence mission critical business decisions with data-driven insights. These CMOs will help their organizations to focus on customer value, and use it as the connective tissue that causes all marketers and business units to pull in the same direction.“

And that’s where we tie the knot and arrive back at how Service Design can and should play a key part in this process. Its the ability to focus on customer value first and then use this data to develop new and better services that create value for both company and customer. Have a read of both articles which I have linked to above.

My intent was not to break new ground in the study of Service Design, more so to draw upon the knowledge that I have accumulated by both observing and practicing and provide those readers of Fast Thinking magazine (Australia’s answer to Fast Company ) with an easily understandable point of view on the value of Service Design. As the first article published on Service Design in this part of the world, it will be interesting to see the feedback.

You can download a copy of the article here

or visit Proto Partners here

That is, companies have been using product development and design tool-kits to solve service problems issues/opportunities. Only the Service Design methodology offers a tool-set and skill-set that is specifically designed and developed to solve and improve service based issues.

At the same time, it allows companies and customers to mutually benefit, to mutually access value without the exclusion of the other.

Maybe it is time to become more overt in communicating what has been lacking up until now, in order to clearly and confidently communicate to organisations, the significant benefits from using Service Design to achieve sustainable competitive advantage.

I am working on a Pyramid Principle(Barbara Minto) approach to trying to explain in 4 slides why Service Design solves Service based organisations problems unlike any company before them. And given this is the most expensive book i have ever bought,( USD$75 ten years ago) hopefully it will be convincing!!

More later

To that end I have designed my own corporate manifesto. I believe in what I am doing and as i read and believed a long time ago, communication is not just saying something, it is the recipient successfully comprehending your intended message.

So here is my manifesto, the reason that I believe Service Design has the power to help companies transform their service experience for companies and their bottom line through increased customer loyalty and increased revenues.

Proto Partners Manifesto
Working to dramatically transform the way service is delivered, the way corporations default to productivity without the balancing need for quality, and the ambivalence of great customer service expectations in our society.

Proto Partners Aim
Our aim is to overhaul the existing service experience and create a major shift in the way service is not only delivered but experienced in the new millennium.