By Donncha Carroll and Sean Williams
While 80% of leaders feel their company is good at crafting strategy, only 44% believe this is true for implementation. According to Harvard University, a recent survey of more than 400 global CEOs found that executional excellence was the number one challenge facing corporate leaders in Asia, Europe, and the United States, heading a list of some 80 issues.
Business intelligence (BI) solutions—in particular, dashboards developed using those tools—are often designed to support the execution of strategy. These dashboards provide a means of monitoring internal and external factors that influence success, providing insights on how execution is progressing. This information is invaluable because it enables the redeployment of resources to maintain focus on the activities and invest in the capabilities that make the biggest difference to results. These benefits are exactly why according to Gartner, global spending on BI and analytics will approach $18 billion in 2017. And yet despite all that investment in Business Intelligence, executional excellence is still the top challenge for CEOs.
During the execution phase of any strategy, it’s crucial to provide leadership with visibility to the factors that are driving or influencing success. Good measurement and reporting can highlight progress on the initiatives that influence results and provide the management team with critical insights that support more agile execution. Agility is important because it allows the team to more quickly change focus as new information comes to light. Of course, becoming more agile is not easy because it demands a higher level of comfort with change, and leaders and managers need focused, actionable and fast information to support efforts to make those changes.
Unfortunately, many companies are getting lost in the complexity of getting their arms around the big data revolution by taking a bottoms-up approach to data management and analysis. This approach results in data-related initiatives that are too large in scope, take too long, have a higher risk of failure, and deliver a lower ROI. The leaders that embark on this journey will find that prioritization pays higher dividends and delivers real value on an accelerated timeline.
In our experience, companies with good measurement and execution tie their efforts directly back to the strategy, and focus on the critical few areas where they can identify, understand and react to changes quickly. Some years ago, Jeff Bezos communicated the Amazon retail strategy to his team by sharing three very simple customer preferences: lower prices, bigger selection, and faster delivery. Each customer preference can be addressed by pulling on certain organization levers that can be readily measured—and that’s exactly where organizations like Amazon set their priorities for measurement.
This diagram, called a “value tree,” can be further developed to the right depending on how deep you want to go (e.g., local inventory on-hand requires warehousing facilities that are close to population centers, which in turn requires the efficient build-out of each facility). Unfortunately, organizations often start with the data they have or the infrastructure they think they need and not the business problem they’re trying to solve. In our experience, the five most common mistakes organizations make in building out their measurement infrastructure are:
1. Focus on too much too soon. Organizations often start by seeking to measure everything that can be measured in order to satisfy all needs. This introduces unnecessary complexity not only to the project, requiring higher levels of resourcing, but also to the dashboard itself, making it much less useful.
2. Develop the wrong measures. The infrastructure is created from the bottom up instead of starting with the essential needs of the business. Starting from the bottom almost guarantees that the process will be exploratory rather than strategic, and much less efficient.
3. Allow data quality to overly influence the approach. Data is never perfect, and few organizations have everything they need to measure with perfect accuracy. Some analytics leaders use data quality challenges to explain why dashboards don’t effectively support decision-making, or to stop measurement development altogether, rather than seeing an opportunity to identify and address what’s broken in the measurement process.
4. Emphasize technology at the expense of value and impact. Real-time data, embedded analytics and self-service enablement are incredible business intelligence technologies. But displaying data faster or better is not what dashboards are built to do. If they are not closely tied to what a user needs to make good decisions, these technologies can be expensive distractions.
5. Choose cool displays over useful information. How the measure is defined, the types of charts used to display information, data filters applied and the timeframe for presentation can all influence the utility of the dashboard. Many organizations spend a great deal of time iterating on data visualizations that provide interesting views of the data, but do not tie those visualizations to the decisions they need to make.
Strategy development and execution is all about making decisions on the future direction of the organization; business intelligence is about providing insight to inform those decisions. If these things are not tightly connected, then dashboards at best become an unnecessary complication and, at worst, a misleading distraction. But there is a relatively simple, five-step process that is both efficient and delivers high-impact results.
1. Start with the business strategy. Whatever the organization’s strategy, start by identifying the specific things the organization will need to achieve in order to execute against it. Both dashboard developers and business users must be prepared to frame their interactions in terms of how the organization will get there.
2. Identify the critical drivers of value. Build a value tree by determining which capabilities you need to have, or the activities you need to perform well, in order to execute effectively. Then determine which of those are most important. This exercise of unbundling the organization’s strategy establishes a direct link to the strategy and prioritizes what leadership needs to monitor.
3. List related questions and decisions. Focusing on the critical drivers, list the most important questions that need to be asked and answered and the key decisions that will need to be made. Taking the time to understand how leaders and business users will actually use the dashboard is critical to getting the focus and design right.
4. Define the measures that matter. Identify the measures that will provide the information needed for each question and decision, and then determine the primary data source and format required. This is the opportunity to identify and address gaps in data availability and quality. Again, everything you do here ties back to the strategy so investments made at this point will be highly targeted and impactful.
5. Develop designs that present information in ways that draw out key insights and address a number of different business scenarios. Review and iterate designs with leaders and users and constantly test for utility. Develop a design that supports decision making.
Applying these five simple steps will give your team the information they need to more effectively monitor and adjust the execution of your strategy, leading to higher growth, profitability and realization of organizational goals.
Contact Donncha Carroll and Sean Williams. Learn More
By Sean Williams
The recent Wells Fargo settlement—to the tune of $185 million—has given business leaders pause to examine the contributing dynamics. A combination of aggressive cross-selling strategy, insufficient employee monitoring, and incentives misaligned with the best interests of customers set the stage for a massive employee fraud in the creation of unauthorized accounts driven by the desire to earn bonus compensation. Learn More
Hardly unique, Wells Fargo is one of many companies placing aggressive goals on customer-facing employees, most in a direct position to inadvertently do harm, and they must carefully evaluate the strategic, legal, and reputational risks.
Clearly, substantial changes are often necessary to remain competitive as employees adjust to new ways of interacting with customers to deliver profitable growth. While post-Wells Fargo activities may include new value statements and requisite hours of training, actual employee behaviors are much more difficult to monitor, and frequently fraught with blind spots.
But how is a leader to know if employees are upholding and reinforcing company policies and standards rather than potentially destroying value by pursuing individual goals at the expense of customers?
One source of safeguarding against these risks is to employ something many companies already have: a voice of customer program.
How could a voice of customer program help a bank address its blind spots in employee behavior? Obviously, customers will not know—at least not immediately—if a bank employee opened an account for them without their permission. But a voice of customer program employing outreach to recently-opened account holders asking for customer feedback on the sales process—a common activity—can illuminate such a disconnect.
But such an approach is not foolproof in that this type of feedback is solicited only from the small number of customers who have opened accounts, and many will routinely decline the interview for reasons that have little to do with unethical bank behaviors (e.g., customers commonly believe there was a mistake). Beyond customer declinations however, it may be likely that either the email address or phone number designated to the new account is bogus.
However, if the question was asked of any customer conducting any transaction on an active account, it would provide a broad data sample that could easily be used to monitor and evaluate employee behavior, notably illuminating any discrepancies between the customer’s assertion that they have not opened an account and bank records indicating otherwise. More importantly, these disconnects will reveal potential problems in branch locations where new goals have been rolled out, strategies implemented, etc.
Such dynamics transcend the financial services industry, certainly, and an effective voice of customer program can be useful for managing risk from employee behaviors in any company. For example, many automobile manufacturers reimburse dealer service departments for the parts sold for repairs, but not for actual car repair. This creates a subtle mismatch between the ideal activities of the service personnel (repairing cars) and the service for which the manufacturer is paying (installation). Such a disconnect creates easy opportunities to “game the system,” which in turn creates clear risk for the manufacturer.
When a customer returns for the same service on the same vehicle, the manufacturer can safely assume that the repair was not correctly performed on the first attempt. But the manufacturer may be unaware if service personnel created duplicate entries for the same repair, if repairs sold were not required, or if the customer had repairs performed elsewhere.
These blind spots can be easily addressed by asking the right questions of customers. For example, inquiring with a customer as to when the last time a specific repair was performed may indicate if service personnel unnecessarily replaced parts not yet past their lifetime expectancy.
In the insurance sector, companies that are increasing pressure on claims can install new processes and due diligence, but the clear potential to harm claimants means that insurance companies should be auditing customers to ensure such processes are being followed. Manufacturers changing warranties and retailers modifying return policies could also better manage risks by more frequently surveying the customer experience.
Of course, collected customer data may never be perfect—and will be effective only insomuch as the customer remembers interactions. For example, in the earlier banking illustration, the customer could incorrectly remember opening an account, when such a transaction in fact occurred, or inaccurately recall the bank, if they do business with more than one.
But this random noise will not change significantly over time or vary much by location, which are exactly the indicators a bank should be seeking. And the voice of customer data can provide vital information exactly where there are few other options for examining employee behavior. To realize monitoring value of voice of client programs, the programs should be integrated into the strategy implementation and risk management processes. Consider the following five steps:
1) Examine the new strategy with the appropriate cross-functional team of leaders from strategy, sales, marketing or human resources. Identify where the new strategy unintentionally incentivizes employee misbehavior toward customers. Eliminate as many of these incentives as possible.
2) Explicitly list any remaining potential avenues for employee misbehavior. The more specific about the different ways this misbehavior could manifest, the better.
3) Work with the data and analytics function to map out which of these manifestations can be identified today, and which could be monitored through existing infrastructure with some additional work. Think through the analytics and reporting that would be necessary to ensure that what can be seen, will be seen. The remaining manifestations of employee misbehavior are the blind spots.
4) Work with the voice of customer program to shed light on the blind spots, by asking the right questions of the right customers at the right time. Make sure that the voice of customer program and the data and analytics functions work together to produce integrated reporting for the leadership on the manifestations of misbehavior, including rates, trends, and locations. Establish baseline values of customer responses before rolling out the new strategy, goals or incentives.
5) Make sure there are no remaining blind spots. If blind spots remain, or new blind spots are identified later, consider adding a customer survey or other data collection mechanism as necessary to address the new blind spots.
This approach helps ensure that problems are identified before they become widespread, which will help put both executives and regulators at ease while minimizing situations where employees may feel encouraged to act against the best interests of the customer, mapping and monitoring such behaviors to course correct when required.
Axiom’s work in supporting the strategic planning process at First Interstate Bank is featured in the Bank Administration Institute’s Banking Strategies. Patricia Smith, Senior Vice President of Segment Management at Billings, Montana-based First Interstate BancSystem, Inc., writes:
“Our strategic planning process explored new terrain and definitely shook things up. At first, senior members of the management team were reluctant to admit the need for improving customer relationships. After all, we enjoyed dominant market share in our territories and our lenders, tellers and service representatives knew many customers personally as neighbors and friends. However, a fuller analysis of existing relationships and market penetration revealed vulnerabilities and opportunities, which led us to initiate the strategic planning process.”
As the Strategy Design Team and the rest of senior management became comfortable with the idea that improvements were needed, Axiom’s Susanna Mlot introduced a framework to help guide the execution of a more customer-intimate strategy. The “Customer Centricity Spectrum” (above) shows the range of ways that a company can be oriented to its customers, as well as how business strategy, organizational design, and go-to-market approach reflect that orientation.
- Customer friendly. Companies in this category emphasize personal customer connections. They rely on after-the-fact evaluations of their efforts to meet customer needs, principally by gathering informal customer satisfaction data. Marketing is not segmented; products and services are presented as a broad array of offerings.
- Customer focused. Business strategy hinges on proactively meeting customer requirements, relative to the competition. To maintain that focus, these companies gather formal and informal customer satisfaction data. Customer intelligence is leveraged primarily to inform one-off tactical decisions.
- Customer Centric. At the customer-centric company, customer requirements are at the core of the business model. Aligning products and services with those requirements is of paramount strategic importance. Capturing customer intelligence about current customers (as opposed to the broader market) is a formal, ongoing process and the customer insights gleaned from that research help drive the work processes and how the company is organized. Customer segmentation is an important factor in the go-to-market approach of customer centric companies, but the foundation of segmentation is basic demographic data.
- Customer Intimate. This fourth stage represents the deliberate alignment of strategies and objectives with customer requirements. Customer-intimate companies capture a host of intelligence about current customers, but also seek to understand the needs of potential and defector customers, as well. That intelligence enables greater market segmentation. Information about profitability, loyalty, demographics, and other factors help customer-intimate companies market with greater precision, resulting in higher profitability.
The Strategy Design Team used the Customer Centricity Spectrum and its dimensions as criteria to assess the extent to which First Interstate was customer intimate. The Spectrum brought to life the differences among the levels. The team discovered the bank was somewhere between the first two stages on the Spectrum, and a far cry from the desired end state of “customer intimate” that would truly differentiate First Interstate from other financial service providers.
First Interstate Bank’s Smith reports:
“Now, five years later, implementation of the strategic plan is driving major progress along the Customer Centricity Spectrum. Delivery on service commitments across the bank is now regularly and carefully scrutinized through third-party assessments at the branch level. Net Promoter Score research is constantly uncovering opportunities to improve customer loyalty. The one-size-fits-all market mentality has given way to a strategy of serving distinct customer segments in ways that fit those customers’ needs and process efficiencies have been found along the way.
- Loan processing for small business customers, for example, is more streamlined.
- The timeframe to establish new wealth management accounts has been halved.
- There is now a greater focus on understanding the needs of realtors and accelerating the mortgage loan fulfillment process.
- Our digital initiative aims to satisfy the requirements of current customers as well as anticipate needs of the next generation.
Furthermore, the bank has implemented a customer engagement process that spans the first 15 months of a new customer’s relationship with the bank. The focus is on building more consultative, long-term relationships, not pushing products. In short, First Interstate is creating profitable customer relationships by going beyond “customer friendly” and progressing well toward “customer intimate.” By improving each customer’s experience, we are in turn able to measurably improve the company’s financial results by increasing the lifetime value of customers, reducing customer attrition and improving efficiencies, thereby increasing the value of the brand and enhancing customer acquisition in terms of volume and cost.”
Read the full article: From Customer Friendly to Customer Intimate. Learn More
A growth strategy narrative starts with a simple, three question exercise that gets the leadership team on the same page about how to grow the organization.
By Steve Strelsin
It seems that top-line growth is integral to almost every executive’s plans, and in a lot of cases it’s simply taken as a given. But when we ask executives why they want to grow, why they believe that their growth objectives are within reach, and how they are planning to manage the change and adjustments that naturally come with growth we often get silence or poorly thought-through answers. Often the answers to these questions differ meaningfully across a leadership team and, of course, further down the organization.
There simply is not a clear or consistent narrative about the growth imperative or journey within many organizations. As a result, leadership teams are not prepared sufficiently to pursue the growth they all agree is so important. So, what are leaders to do?
We suggest starting with a simple exercise to test the alignment and readiness around a clear growth strategy. First, ask all members of the leadership team to briefly document their specific answers to the following three questions that are the basic elements of a growth narrative, including:
- Why do we want to grow?
- To what extent are the growth opportunities within reach?
- How will we support and sustain the desired growth?
Second, compare the various responses to these questions and identify any inconsistencies, lack of clarity or weaknesses in the responses overall. Finally, spend time gathering additional information where there are gaps, and discussing and further considering the collective thinking around these three questions until the growth narrative is clear, compelling, defensible and representative of the entire leadership team’s thinking. Only then will you be able to effectively pursue the growth strategy, explain it to others in the organization and, most importantly, achieve the growth objectives.
Now, let’s explore these questions a bit more.
Why do we want to grow?
In our experience, few leadership teams address this basic question even though it is the critical starting point for any serious growth discussion. Without alignment around this question it is difficult for leaders to guide how they will grow. As a result, they risk going off course quickly.
For starters, let’s acknowledge that there are appropriate reasons and some inappropriate reasons for growth. Among the inappropriate but far too common driving forces for growth are the desire to lead a larger organization for ego reasons; a general belief that bigger is better; and concerns about keeping up with the growth of other organizations. Pursuing growth for any of these reasons sets your organization down a path where, at best, you’re playing someone else’s game. At worst, you commit significant focus and resources on actions that fail because they don’t reflect market, competitive and/or internal realities.
Conversely, there are several valid reasons for wanting to grow, including:
- Ability to achieve economies of scale that meaningfully drive down unit costs;
- Achieving the pricing power that often comes with greater market share or achieving greater placement power that often comes from product line breadth and brand strength;
- Reflecting and satisfying customer demand for a broader array of products, and services, or pursuing vertical integration.
Each of these reasons (and others) is only valid for your organization if market, competitive, and internal realities provide necessary evidence of validity. Furthermore, each of these reasons suggests a different way to grow and likely dictates a possible or desired growth rate.
For example, growing to achieve pricing power often requires greater concentration in core products and may be limited in degree and duration of growth by the longevity of demand for those core products. Growth for the sake of achieving economies of scale also usually involves greater concentration in core products. On the other hand, growth through vertical integration involves expanding offerings and requires broadening core capabilities and often brings new competitors into play.
To what extent are the growth opportunities within reach?
This question needs to be divided into two parts: internal and external. The external part relates to clear indications that growth opportunities are available in your relevant market space. Here you need data-driven evidence of 1) structural opportunities in the market (e.g., overall, and predictive market growth rate); 2) unmet/under met needs in your markets or customer base; or 3) indications of future market shifts in needs and buying behaviors that can be realized through new forms of differentiation. Through sound market sensing and strong voice of the customer analytics your organization can find and size possible growth paths on which at least some organizations can capitalize.
The internal part of this question relates to how your organization is positioned to capitalize on the market opportunities uncovered in answering the external question. After all, many organizations have failed by pursuing real and well-analyzed market opportunities for which existing or new competitors are better positioned.
This internal assessment is based around two basic analyses. First, an organization must determine the critical success factors or necessary circumstances to capitalize on a particular growth path (e.g., what skills, resources or positioning with key stakeholders are pre-conditions for success). Second, the organization must do a brutally honest assessment of internal strengths and weaknesses and, more importantly, map those to growth opportunities and pre-conditions for success. Only then can you gauge the likelihood for success down a particular growth path and address any risks inherent in following that path.
How will we support and sustain the desired growth?
Growth, for all its advantages, can put tremendous strains on an organization due to the nature of change and added complexity. These strains come in several varieties, ranging from infrastructure to culture to talent. A checklist of the four most important factors (and points of stress) for supporting and sustaining growth includes:
- Leadership skill and capacity—It is common for organizations to outgrow their leaders. Sometimes this is just a function of leaders who have not led this type of growth journey before or have not been a leader inside an organization with the size and complexity you are trying to achieve. Other times, the challenge stems from changes in leadership skills and success drivers associated with the growth initiative.
- Talent planning and deployment—Growth initiatives often require rethinking staffing levels, organization design, and the critical skills and core competencies needed to reach the end state of the growth journey. The obvious areas that are affected are market and account coverage and the deployment of customer-facing roles, but the changes in talent are usually more pervasive than that.
- Culture—An organization needs to assess whether it has the right amount of accountability and “performance tension” to drive the growth strategy. Other cultural considerations involve the nature and degree of autonomy, collaboration, innovation, and transparency that are required to support and sustain the organization going forward.
- Analytical processes and tools—Most growth strategies require a significant enhancement in getting, analyzing, and drawing insights from internal and external data. Furthermore, better goal setting and performance monitoring, measurement, and reporting are required.
In short, it is important to anticipate the changes and stresses associated with your growth plan, and prepare adequately to handle these effectively.
Asking the right questions about growth and answering them in the right order as a leadership team is a simple but powerful starting point for thinking about top-line growth. The process of discussing these questions will help create the clarity and commitment from the leadership team that are necessary ingredients for success. Finally, the growth narrative that results from answering the three questions will help to 1) establish the most appropriate growth plan and objectives for your organization; 2) effectively communicate the plan to ensure the full understanding and support from others in your organization; and 3) help ensure effective execution of the growth plan. Learn More