Sunday, May 29, 2011

Is your strategy and organization built around the customer?

I was researching videos of positive customer experiences for another potential post when I discovered this gem from Forrester Research done in 2007. Four years in our information driven society may seem like a lifetime but I listened with fascination as Forrester Research Principal Analyst Kerry Bodine described key elements of a customer centric culture.

Customer centric culture is most likely an industry buzz phrase similar to Total Quality Management and may evoke negative connotations. Industry buzzwords are processes built to solve business problems that have existed since time immemorial. Total Quality Management supposed to reduce fail rates and therefore avoid unnecessary processes. Six Sigma was designed to optimize operations and reduce or eliminated wasting time and wasteful spending. These things happened prior to TQM and Six Sigma. Buzzwords are about the packaging. Similarly, the logic behind building your business around your customers is as old as business itself.

Based on Forrester’s research, Bodine identified five key elements of a customer centric culture as follows (see video):

1. View customer experience as critical to meeting business goals;

2. Develop an accurate understanding of customers and their needs;

3. Align company strategy with customer needs;

4. Support customer experience initiatives from the top down;

5. Have common goals across the organization.

These tenets seem so simple that it is difficult to fathom why we needed to research the subject. But apply them to financial institutions, and levels of complexity surrounding simplicity emerge.

Our primary hurdle to implementing the above elements is culture. As George Millward, a colleague of mine at The Kafafian Group, tells me: “strategy drives structure” (most likely a Peter Drucker quote, as told to me by Ron Shevlin of Aite Group in Boston... thanks Ron!). But strategy has only been around corporate America since the 1960’s, and much later in FIs because of repressive regulation. Ask many CEOs about their strategy, and you may get a blank stare or a clear indication that strategy looms solely between their ears, never to descend to those responsible for executing it. According to my experience though, strategy is clearly taking hold in our industry.

So how about a strategy that puts the customer first? Customers are surely one of an FI’s constituencies, along with employees, communities, regulators, and in some cases shareholders. This form of strategy requires some thoughtful deliberations on our organizational structure.

For example, plenty of banks deem small to mid-sized businesses as their primary customer constituency. But their business bankers are typically lenders, leaving the majority of business deposit gathering to branches. To fully align with customer needs, one would think a business relationship manager would be able to advise the business person on all facets of their income statement, cash flow statement and balance sheet... not just their borrowing needs. But lenders like to lend, and talk deposits only if their boss makes them do it.

Again, it’s culture. FIs tend to organize more around product than customer. I often hear from bankers that a significant percentage of businesses do not borrow or only require a small line of credit. If true, why are lenders responsible for calling on them?

If the business person would like to add a 401(k), the lender can make a referral to some other department with separate responsibilities and reporting lines. In fact, I often hear that the lender or other FI “relationship manager” is hesitant to bring in other FI employees for fear they might screw up the relationship. Does this happen at your FI?

I do not deem the above five elements to be impossible for an FI to achieve. But I have not experienced many, if any FIs that implemented them. We talk about customer centricity, for sure. But if we want to design a strategy focused on customers, it’s time to start walking the walk.

What other elements do you believe are critical to a customer-centric strategy?

~ Jeff

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