Friday 31 January 2014

The Benefits of a Single Customer View

In previous roles, I have delivered Single Customer View projects twice. In each case I prepared a very positive business case before getting approval for the project, and in each case the benefits were evaluated after implementations. Unlike other projects that I have delivered the business case at the end actually ended up being more positive than originally forecast.
In this blog I would like to share with you how a well implemented Single Customer View can deliver benefits far beyond the associated costs.


What is a Single Customer View, and why would you want it?

Put simply it’s about having a single “golden” record for each of your customers, so that whenever you refer to a customer, you’re using the most up to date details, and everything you know about that customer is correctly linked to them. It means that when a customer calls your call centre, you can find their details quickly, and can see their history. It means that you know how many customers you actually have, and what they are worth to you. It means that customers are central to your business model rather than accounts, subscriptions or orders.

Single Customer View as a requirement for compliance

If a government or regulator mandates that you strive to achieve a Single View of your customers, then you don’t need a business case. Either you do it, or you lose your licence to operate. An example of this is the Know Your Customer rules that apply to banks, who need to successfully identify their customers in order to avoid being used for money laundering activities.
However, I would argue that the other benefits that come from a Single View are so important that you should consider them too. If it is mandatory, there is a temptation to stop there and do it because you have to. I would encourage you to keep reading. If you have to implement a Single Customer View, then you may as well get as much value out of it as possible.

Cost reduction

If you have a large number of customers and communication with them is a major cost for your business then you can make surprisingly big savings by implementing a Single Customer View. This would typically be an important part of the business case for energy suppliers, telecoms, insurers, banks or local government where regular postal communication to all of your customers is a major cost. In some cases, it may be worth going one step further and thinking in terms of Single Household, and thereby avoid needless costs by sending duplicate communication to everyone in a household.

Risk Management

One of the reasons why governments have mandated Know Your Customer practices for banks is to facilitate better risk management. Each customer has their own risk profile, and if you are managing that risk profile, then it will be a lot more accurate if you make the effort to link everything that you know about a customer via a single customer record. The risk profile for a customer will be much more complete if you can link their borrowing to their savings for example. If you can identify a returning customer who has been with your competition for a while, then you can assess their risk profile much more accurately than if you treated them like a new and unknown customer.
The more accurately you can assess your total risk, the less provision you need to make to cover unknown risks. This in turn releases capital for other opportunities or further investments.

Customer Loyalty


It often comes as a surprise, but most customers actually like it when the companies they deal with have a complete picture of them. It boosts confidence that they are treated as an individual and not just as an account. Admittedly it’s not universal, and some customers value their anonymity, but in my experience the overwhelming majority of customers expect you to know them. When customers hold multiple accounts with you, they expect you to join up the dots, and treat them as individuals. Personally, I like it when Amazon suggests books to me that I might like but I get annoyed when my bank tries to sell me a credit card that I already have. One is showing me that they know me, and the other is showing me that they don’t care about me.

Fraud

If combating fraud is important to your business, then a Single Customer View can be an invaluable weapon in your armoury. This is particularly true if you are operating on tight margins. Losses due to fraud scale typically with turnover, but they go all the way to the bottom line. So, if you are losing 2% of your turnover to fraud, this could easily be 20% of your net profits.
Fraudsters benefit from anonymity and multiple accounts, but many of them don’t apply particularly sophisticated techniques. Significant fraud can be avoided simply by matching small changes in names or dates of birth. Even more can be avoided if you can identify members of the same household who take it in turns to run up debts they have no intention of repaying.
I have seen business cases where fraud reduction was the biggest single benefit for the Single Customer View, and yet it is often overlooked because fraud prevention is not considered as part of the core business.

Business Analytics

The benefit in terms of Business Analytics is one of the least obvious benefits, and also the most difficult to quantify in advance. Nevertheless, I have seen the difference that it makes, and it can be substantial if your business analytics are aimed at understanding customer behaviour in order to be able to anticipate it. Examples are churn prediction or credit scoring.
In these scenarios the benefit comes from improving the quality of the data going in to your analytics. Practitioners of business analytics generally agree that improvements in the quality of input data have a far greater effect than using the latest algorithms. It’s not accounts that decide to leave your company for the competition, it’s customers. If one customer is having problems on one of his four accounts, then he won’t just take that one account to the competition. He will take all four, but if you don’t know that they are linked, you won’t be able to see it coming. Similarly, by linking all of a customer’s accounts you will be able to assess their credit rating accurately when they place a large order that you don’t want to lose but can’t afford to give away.



Conclusion

I have highlighted six areas that I think you should consider when evaluating the benefits side of the business case for the Single Customer View. If you are considering implementing a Single Customer View, the chances are that you are championing one of these benefits as the case for action. I would strongly recommend that you consider the others. For most companies, I would expect the benefits to be at least twice the costs. If you time it right it can even be possible to achieve pay back in the same financial year that you launch the project.

Monday 6 January 2014

How to get to 99% and beyond... it's all about managing exceptions

In my last blog I made the case that getting your business to 99% and beyond can be a source of sustainable competitive advantage and so it should be a priority for business leaders. In this article, I will explain how to get to 99% and beyond by managing exceptions.

That's not what we expected!

Most businesses are structured according to processes. Although there are exceptions that only work on unique projects, most companies are doing a lot of repetitive work and their activities are defined by processes that are triggered by events and which lead to predictable results. Whether you are buying a burger on the high street or an exotic holiday on-line, the decision to purchase triggers processes that deliver what you ordered, ensure that you pay for it, and line everything up for the next customer. Businesses aim for consistent processes to ensure that the end result is the same regardless of who takes the order or what day of the week it is.

However, real life has a way of throwing up surprises that are not foreseen in these processes. Even if you get your customer service to follow a consistent script, you can’t always expect your customers to follow the same script. Processes fail because things happen in the world outside your business that weren't foreseen in your processes.

When I lived in Germany, for example, I opened a joint bank account with my wife. At that point we generated an exception because my wife chose to keep her maiden name when we married. In those days German banks assumed that married couples had one surname; separate surnames on a joint account were not foreseen. In order to open the account my wife was known as Mrs Humphries. While this annoyed her, she could live with it, until the day when she triggered another process that required authentication of ID. Of course, she couldn't produce ID to prove that she was Mrs Humphries, because she wasn't. Luckily, the man who opened the bank account for us was available, and he was able to confirm her identity.

This is an example of an exception, and it’s something that happens daily in every business. In this case an employee took the initiative and saved the situation. His intervention was dependent on his personal knowledge, though. Had he not been there, the bank would have had an angry customer on their hands. Just as important is this: had there been another bank that allowed husbands and wives to have different family names then we would have changed banks.

If my example doesn't convince you, think about the frustrations that you have had as a customer because you are asking for something that falls outside of the mainstream. The simple act of moving house will give you an insight into the number of companies that assume people only have one address and a credit history linked to that address. After all it’s an assumption that works most of the time.

Understanding the nature of these exceptions and dealing with them will take you from getting it right 95% of the time to getting it right 99% of the time and beyond. For the record, 100% is not achievable. How many 9s you can achieve is what’s important. The thinner your margins, the more 9s you need.

Exceptions arise because process designers do not foresee everything that is going to happen. That’s understandable and normal. Reality is stranger than most of us realise until presented with evidence. Process designers typically start with a number of use cases and work them through. A use case is an example of a scenario that triggers a process. They use these use cases to explore possibilities that seem reasonable to them according to their experience. What they don’t do at this point is to think about all the possible exceptions that might occur. If they did they would probably go mad, or start on a work that has no end. In fact it’s a good thing that they don’t attempt to foresee every possible exception, because they would waste a lot of time preparing for exceptions that never happen. One aspect of exceptions that has surprised me over the years is how many potential exceptions never actually happen. I have seen process analysts tying themselves in knots trying to foresee every single possible problem, only to end up with unwieldy processes that are still caught out because something else happened that they didn't foresee.

The good news is that managing exceptions is actually not that complicated. But first you have to acknowledge that they are an unavoidable fact of life, and that they are important enough that you need to deal with them. It is not possible to engineer processes so that exceptions don’t occur. If you can’t accept this, then you should stop reading now, because the rest of this blog assumes these points to be true.
Are we dealing with apples or with fruit?

I have used three techniques which are relatively simple, but together they are extremely effective.

The first technique is to build exception handling into your processes and your organisation. You don’t have to know what is going to happen, but you do need to know what conditions should be met in order to proceed to the next step. When those conditions are not met, you foresee a step to handle the exception, you foresee people whose job it is to handle it and you foresee a consistent means for delivering those exceptions to them. What you don’t do, is try up front to describe exactly what the nature of the exceptions might be and what those people should do in response. Instead, you chose people who are good problem solvers and you give them the authority to use their initiative. It’s also worth considering giving them the option to overrule a control. A simple example that most of us have experienced is when an item in a supermarket is wrongly priced. The cashier cannot overrule the till and change the price, but he or she can call the supervisor, and if the supervisor is happy the price can be changed. The supervisor has the authority to overrule the process. So, the processes foresee exceptions, without prescribing a solution and a means of passing those exceptions on to people who can deal with them. The organisation foresees people who don’t work in the mainstream processes, but rather parallel to them, effectively dealing with all the exceptions that the process can’t deal with, and putting things back on track.

When these exceptions happen, it’s important that the process captures this information. One reason for doing this is to ensure that there is a trace of who is overruling your validations and how often. While it’s probably the right thing to do, it could also be fraud. More importantly though logging each of these exceptions enables the second technique, which is simply tracking the exceptions and performing root cause analysis to understand why they are happening in the first place. This will enable you to improve your processes and eliminate them with appropriate solutions. This technique is powerful because it is fact driven allowing you to focus on real problems. It does not depend on the imagination and insight of process analysts, and you focus your efforts on solving problems that really do happen, rather than problems that might. It also allows you to solve the problems that matter most because they happen more often.

Possibly the richest technique that I have used though is to delve into data quality problems and to feed them back into process improvement initiatives. This is less obvious than the first two suggestions, but often even more effective. Data and process are interdependent. Processes consume, modify and generate data, which in turn steers the processes. Process designers make assumptions about the data that drives their processes. If you can define these rules, and then search for data that doesn't respect them, then you win twice. Firstly you can identify data that will cause processes exceptions because it doesn't respect the business rules for the process. If you can identify the problematic data then you can fix the problem before it happens. Even more valuable though, is that data that doesn't fit the rules gives you an invaluable insight into how reality really is, rather than how you thought it was. By finding and analysing data that doesn't fit your rules, you get to understand the environment in which your business really operates, and how this is different from the way you assumed it works. If you then feed this back into your processes, again focussing on the problems that really occur rather than those that might, then you have a really powerful technique.

All animals on a sheep farm are sheep. All sheep are white.

So that’s it. The difference between getting it right 95% of the time and getting it right 99% or more of the time is down to managing exceptions. If you foresee these exceptions rather than fight them, and accept  them for what they are, you can reduce your waste, increase your customer satisfaction and increase your competitiveness. Furthermore, it’s a virtuous circle: once you allow for exceptions, and allow them to drive your process improvement initiatives, then you can actually eliminate the most important exceptions by building them into your processes.