Category Archives: Strategy

Why is Customer Service still the Achilles’ heel for the Service Industry?

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Recent experience has reinforced my deeply held belief that for many service providers, enhancing the customer experience is the last thing on their mind. But when customer service is possibly the one true competitive advantage you can have, why do so many service providers perform so badly when dealing with their own customers?

We know that competing on price alone can be a race to the bottom where nobody wins, and everyone loses. Competing on technology only gets you so far, especially as we operate in an increasingly open-source environment. And first-mover advantage is not always an option, unless you can quickly recoup the higher investment it takes to be a market leader from Day 1.

I also find it increasingly infuriating that nearly every service provider claims to be poring over their customer feedback, yet their service levels rarely improve. Not only are customers expected to be brand advocates (via social media, word-of-mouth marketing, testimonials, etc.), they are also expected to provide training material for the customer service department (see “Some gratuitous advice for customer service managers – 7 handy hints”).

Last week I had to visit the retail outlet of a major service provider in the communications sector. When I tried to explain how frustrating it is as a customer to discover that the company’s website has different information to what I was being given in-store, I got the following responses:

  • The website is nothing to do with in-store service, and is only there for information
  • It doesn’t matter what’s on the public website, counter staff can only go by the information displayed on their in-house computer terminal
  • If I wanted to pursue the matter, I would have to make a complaint (by phone, or on-line – not in-store)
  • If I was unhappy, I could cancel my purchase and get my money back (and presumably take my custom elsewhere?)

Not one to give in easily, I submitted a detailed complaint on-line. A few days later, I received a call from someone who said she represented the “On-line Support” team. She simply reiterated that the public website was only there “for guidance”, and that the on-line content was managed by a different department. The most accurate information could only be provided at the in-store point of sale. The representative also said she would e-mail the web team, but could not guarantee a response as “they don’t communicate with us” – and this is a major communications business!  (Not surprisingly, the person I spoke to could not appreciate the irony in this.)

Banks, utilities, insurance firms, telcos and government departments are regularly criticised for their poor quality of customer service – from their billing systems, to their habit of building their external service delivery around internal business silos – so it’s somewhat encouraging to learn that one local bank is attempting to address this by providing one customer contact person from start to finish. We can only hope that the idea of consistency and continuity of service will catch on.

 

Oxygen Ventures brings some fresh air to Australia’s #Startup Community

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Last week, Larry Kestelman’s new investment vehicle, Oxygen Ventures gave 5 local startups the opportunity to bid for a share of A$5 million in funding at the inaugural Big Pitch night in Melbourne (#thebigpitchAUS).

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The Judges at the Big Pitch

 

The #Startup Contenders

Drawn from over 300 applicants, the hopeful candidates (in alphabetical order) were:

Bluesky  Shopping portal for leading fashion and lifestyle brands.

ECAL On-line event and brand marketing calendar launched by E-DIARY.

etaskr Enterprise productivity solution that allows employees to ‘bid’ for in-house projects based on their expertise.

KartSim New go-kart game for PCs, from developer Black Delta.

WeTeachMe Booking platform for short-courses and special interest classes.

After each contestant made a short presentation, they were questioned by a panel of judges, comprising CEOs, entrepreneurs, corporate advisers and business development experts from a range of well-known organizations. Most of the questions related to the startups’ revenue projections, funding requirements and growth opportunities – but some were grilled in more detail about their business models and financial performance to date.

How did the participants fare on the night?

The Joint Winners were ECAL and WeTeachMe – with the People’s Choice Award (based on audience votes) going to KartSim.

My sense is that ECAL came out on top (with A$2.5m of funding) on account of their early success in signing up a number of high-profile sporting franchises in the USA and Australia, demonstrating their growth potential – otherwise with 1 million users, but only $440,000 in revenues, you’d have to think the business model would struggle.

WeTeachMe was successful in attracting A$2m in funding because the business model is simple, it falls into the growth category of lifelong learning, and the platform had already achieved significant productivity gains for its commercial clients. Plus it has the potential to scale up and go international.

With KartSim, I admit I have no interest in computer games, but it would seem to me that with a headful of (virtual) Steam behind it, the developers might be better off tapping into crowdfunding opportunities, as the early interest suggests ready and eager buyers out there, enabling a successful commercial launch without giving up any of the equity.

Feedback from the panel on Bluesky suggested that despite offering a ‘one-stop-shop’ for consumers, the margins generated from the sales commission model would be insufficient to cover fulfilment costs (so it would only ever be a transactional purchasing platform); nor would the retailer aggregation model ever be allowed to encroach on brand or retailer loyalty schemes, thereby limiting the options to develop added-value services for customers.

As for etaskr (which I have featured before), it is still one of the few B2B startups that I have seen, which may make it appear less attractive to potential investors, since there seems to be some wariness around anything that is not consumer-focussed, or that does not play in a 2-sided market. Personally, I think this type of productivity tool is just the sort of tech startup that we need as it taps into the technological, organisational and demographic changes facing the modern workplace, and current attitudes towards job structures, collaboration and employee engagement and retention.

Footnote: What is ‘Disruptive’?


Interestingly, one of the Big Pitch sponsors was Uber (current darling of the startup community – if not of taxi drivers) which has been making presentations around town on what it takes to market a disruptive startup.

For me, there are three key attributes to a #disruptive startup:

  • Technology
  • Business model
  • Market engagement

A business like Uber ticks all three boxes – its proprietary technology comes in the form of the algorithms that track things like customer usage and vehicle capacity (not so much the apps which are similar to other peer-to-peer and #sharedeconomy solutions); the business model is rather like a network of city franchises (a common global platform with local autonomy); and the disruptive market entry strategy is designed to by-pass highly regulated industry structures – although Uber also likes to stress that it is working with taxi regulators.

Of the five startups that competed at the Big Pitch, only etaskr brings an element of disruption, because it is using a technology solution to challenge traditional notions of what a job is, and allows companies to tap into in-house resources that they might not otherwise be aware of. KartSim has some proprietary programming, but at the end of the day is just another computer game. WeTeachMe and Bluesky are trying to bring operational efficiencies to disparate markets, but they are both broker-aggregators, and don’t appear to have proprietary technology or unique business models. And ECAL is a neat content management solution to a problem that companies have been aiming to solve in other sectors – such as travel, education and health services – although it is not trying to break the existing market nexus between suppliers and customers.

But full marks to Oxygen Ventures, its partners, sponsors and the participants themselves for bringing a fresh perspective to the startup pitch night experience.

Digital transactions hold the key for Australia Post

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Last week’s news that Australia Post is shedding jobs made unwelcome reading for the 900 unfortunate employees who are affected, and the recent proposal to restructure (combined with the implicit risk to rural postal services) has generated some highly charged media commentary and prompted very passionate customer responses.

My personal view is that Australia Post will have to maintain a commitment to letter delivery as part of its protected monopoly obligations. But a “user pays” model that results in higher charges for a “premium” postal service may fail to offset losses from standard snail mail – because businesses will make greater use of existing document exchange and courier services, and retail customers will prefer to receive their utility bills and bank statements by e-mail or other digital solutions such as mobile apps.

Australia Post faces a dual challenge, quite apart from the decline in its letter business (which is rightly seen as a community service, albeit one that should be able to at least cover its costs). First, although it has diversified with a range of products and services, there is very little cohesion across its individual lines of business, and nearly all of them face strong competition, and/or rely on external service providers. Also, according to one software developer I spoke to several months ago, the sheer number of available services meant that some customer service staff did not have sufficient product knowledge and needed an in-house app to train them on how to up- and cross-sell these products.

Second, although it is trying to get into digital solutions, it seems late to the party (e.g., the MyPost Digital Mailbox, which has taken about 12 months from initial announcement to market launch). A few years ago, when I was working on a standard business identifier solution for the financial services industry, Australia Post was well placed to leverage its in-house knowledge of business customers (location, size, industry, spending patterns, logistics, etc.) and combine it with a unique entity ID to enhance and upgrade its business CRM database. However, it was unable to incorporate third-party data sources that would have resulted in even greater analytics on business customer behaviour, because the legacy data systems were unable to cooperate (and the teams that ran them unwilling to collaborate…).

Australia Post’s anticipated expansion into financial services hasn’t materialised (the current CEO is a former banker). If Australia Post became an Authorised Depository Institute, it could offer on-line banking services in its own right, giving it an alternative funding source (in addition to, or instead of, issuing corporate bonds that are implicitly guaranteed by the government). Or, in conjunction with relevant partners Australia Post could expand its Load&Go pre-paid VISA card to become a universal stored value card (such as Hong Kong’s Octopus system).

Instead, Australia Post is relying on the current boom in online shopping to drive revenue growth from its parcels and logistics operations. To me, this is a short-sighted strategy.

If digital is the key to future growth (especially for a data-rich business that operates in logistics, communications and payment transaction services), Australia Post should be looking to  provide and expand business and consumer solutions in the following areas:

  • Digital document verification, validation and transmission (to help offset the decline in snail mail)
  • Location-based payment solutions (to leverage its geographic and transactional knowledge of business customers, especially retailers)
  • Update the current post code system to provide more granular customer data to businesses and to streamline delivery and location services (e.g., like the UK’s system of house number and postcode – imagine how that would make life easier for taxi drivers!)
  • Develop off-the-shelf productivity tools for SMEs – such as on-line data forms, CRM, CMS, e-commerce (become the IKEA of small business data apps – rather like flat-pack, self-assembly furniture, many businesses might welcome such a service)

Finally, if Australia Post thinks that parcel services will carry them through, consider this: each time I want to send a parcel overseas, the counter staff have to undertake the following steps:

  • weigh the item
  • calculate the postage (using a cumbersome sequence of drop down menus on their terminal screen)
  • capture some ID information (such as my driver’s license)
  • attach the customs declaration form (which I have manually completed) to the parcel
  • print the postage label and attach it to the parcel
  • attach an “ID sighted” label to the parcel
  • attach an “Air Mail” sticker to the parcel

More steps are involved if I want use any sort of tracking, insurance or express delivery service. What if I could complete an address and customs form label, and print it before I leave home (or at a terminal at the post office)? And what if this label had scannable items, such as the destination address, for easier processing at the counter?

 

 

 

Tools vs Solutions: When does our core offering need to change?

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As regular readers of this blog will be aware, recent posts have focussed on digital – content, products, pricing etc.

I’ve also been immersing myself in the digital design process (next step: learn code?) and earlier this month I attended a workshop by a leading digital design studio. While most of the session was devoted to their own particular design methodology (basically, UCD with some fancy footwork) it also revealed that in developing tools to help customers undertake their own design projects, they have become a subscription software business. No doubt, they will continue as a design consultancy, but clearly the core offering is changing.

This shift echoes an analysis of McKinsey Solutions by the Harvard Business Review in late 2013. Basically, it suggested that rather than providing an all-in-one solution (based on black box consulting methodologies and processes), consulting firms are having to unbundle their offering, allowing them to remain relevant and move to more defendable positions in the value chain. In the case of McKinsey Solutions, embedding analytical tools at client sites is a cost-effective way of delivering services, while gaining insights on their customer needs, which in turn allows them to develop enhanced tools.

So it raises the question: Do consultants need to re-think their offering – rather than being solutions providers, should they focus on being enablers? This may seem overly disruptive (and potentially disenfranchising) for the consulting industry; but in the long run it should mean clients become more reliant on value-added solutions that deploy tools that they know, understand and trust (and can use for themselves). It should also mean that clients will want to retain access to these tools as they evolve, because they will be more invested in their development and use.