The New Holy Grail – In Pursuit of Customer Success

“The problem with average is that other people are better at being average than you are”. Seth Godin

As discussed previously here and here, the future of successful businesses seems to rely more and more on the organisations’ reinventing themselves and aligning their value propositions to customized customer solutions.

Even for products of little monetary value the opportunity for customization is sometimes mind boggling e.g. think of how many options one has for buying a pair of jeans or a box of cereal.

It has now become apparent that “Customer Satisfaction” is merely the beginning, the new average, what MAY allow you to begin the interaction with the customer but, very unlikely what would win you the deal. As Seth Godin very eloquently explains with his maxim above, “other people are better at being average than you are”. So, if Customer Satisfaction is no more the right target to built a successful business on, what is?

It is becoming apparent that the future of successful business will be all about pursuing Customer Success.

Screen Shot 2015-04-11 at 9.04.08 pm THE PURSUIT OF CUSTOMER SUCCESS AS THE NEW HOLY GRAIL

I first came across this idea i.e. the trend of shifting away from targeting Customer Satisfaction towards pursuing Customer Success, in the much acclaimed and highly recommended classic book from Tom PetersRe -Imagine”. In the book, Peters views Customer Success as the necessary target of what he calls the Experience Economy.

Paraphrasing from the book:

Peters reflects on Four Different Generations (evolving as of the 1940s).

  1. 1940: The Raw-Materials economy: e.g. grandma spends about a buck to buy flour, sugar, and other raw materials. Using those raw materials, Grandma produces a birthday cake ($1)
  2. 1955: The Goods economy: e.g. Mom goes down to the local supermarket, spends a couple of bucks, and makes the cake from a packaged industrial good. Betty Crocker cake mix ($2)
  3. 1970 – The Service Economy: e.g. Bakeries are available to ordinary folks, not just the rich and super-rich. Mom heads to the bakery at birthday time and shells out $10 for a professionally baked cake ($10)
  4. 1990: The experience economy: e.g. Dad is in charge of the kid’s birthday now. And the kid lays down the law: “I am having a party, Dad. It’s going to be at XYZ venue and I’m bringing my pals.” Dad obliges and forks our a C-note for the experience. ($100)

For these four Generations the organisational measures and targets vary widely.

More specifically,

  1. In the Raw-Materials economy: The measure is the effective tangible output i.e. the Raw Quantity  (A very practical measure)
  2. In the Goods economy: this is the era of e.g. Six Sigma, process design.
  3. The Service economy: is the one where Customer Satisfaction is prevalent.
  4. The Experience economy: though moves forward to target Customer Success.

Just to make the notions of service and experience a bit clearer, think the notion of service as a transaction.

Experience though, goes further to be holistic, encompassing, transforming and emotional.

Lou Gerstner, the CEO of IBM in the 1990s, who is responsible for the complete culture change of the company declared:

“You’re headed for commodity hell if you don’t have services” Lou Gerstner

Paraphrasing Gerstner, I feel that his advice can now be updated as follows:

“You’re headed for commodity/service hell if you cannot offer memorable, emotional experiences capable of moving people enough to become your brand’s evangelists”.

Do you see this shift in your industry?

How can you translate the Pursuit of Customer Success in your business?

 

George Vrakas

 

 

Photo Courtesy of Eddi Van W.

5 milestones to Sourcing Excellence

“Sourcing excellence = professional knowledge + market knowledge + product knowledge” Jonathan Dutton

As per a recent study conducted by IACCM, 88% of Contract Management professionals indicate that improvement of the quality of the Requirements was the number one factor to improve contract performance in their organisations (IACCM – Contract and Commercial Management – A Operational Guide).

I have discussed the importance of understanding and clarifying the scope with your vendor as part of the Iron Triangle (here).

As we all know, having incomplete, erroneous or unexamined specifications for a product or service category lead to confusion, rework or simply sub-optimum  results.

To be successful, you first need to fully understand the scope and alternatives yourself i.e. what the business really needs and different possible ways to achieve it.

Let’s see some practical tips on how to do so.

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The 5 milestone Road to successful Requirements’ Identification and Sourcing Excellence

1) Know your stakeholders

First of all, you need to know your own stakeholders.

Anyone, the project affects directly and indirectly is a stakeholder.

Some of them are affected more than others and some of them will have a greater influence in determining the success of the project. So, if during the procurement process, you miss out on engaging with a stakeholder, you then risk project failure.

HOW to: Brainstorming and looking at the process and usage of the product and service should reveal who you need to approach.

2) Know you business objectives

You also need to know your business objectives.

You should embrace a different approach if the business objective is a strategic one e.g. entering a different market, rather than a tactical or an operational e.g. improving a process or removing cost.

Moreover, different stakeholders will have different motives and will probably target different outcomes in order to consider the project outcome successful. These need to be identified and defined.

Hence, the stakeholders need to know and sign off on the final defined business objectives.

HOW TO: Use interviews and questionnaires to define the requirements, needs and expectations from each one. Then ask them to review and sign off on the final result.

3) Understand the Specification

This is self evident. If you cannot articulate the functional and technical specifications then you probably do not have a good grasp of the project and would not know how to evaluate the suppliers.

Try defining this using AMPP technique (Ask, Mirror, Paraphase and Prime) and see that you have a good understanding of it and its implications.

Moreover, check that the functional and technical requirement are aligned with the business objectives and that at the end of the process all stakeholders have a high level of confidence of the final defined results.

HOW TO: A number of effective communication techniques can be found in the book Crucial Conversations by Kerry Patterson et al.

Phrases like e.g. “Please let me know if you see this differently….. If I understand correctly……. Is this what you mean…… In my mind this means that ……..” can help.

Moreover, make use of a requirements checklist, questionnaires, interviews, roundtable discussions and brainstorming sessions. Research and benchmarking are tools you can also employ.

4) Agree the acceptance criteria

After the 1-3 steps are complete you can crystallise from the feedback provided the acceptance criteria. These can be categorised in three categories:

i) Hurdles (the Must Have criteria) e.g. ISO certification, Insurances’ cover, No accident record.

ii) The Essential Requirements (for which the vendors can be graded on a scale) e.g. quality, price level…

iii) The Good to Have (additional attributes that may not be immediately required but an extension of the service) e.g. operations in another state or territory that may be a target for your company in the future.

Moreover, the project team needs to have a clear idea of

A) What is the procedure of picking a bid
B) What are the quantifiable, measurable criteria and
C) How assessment and grading will be made.

5) Change Management Process

Scope creep, the process of evolving and ever-changing requirements, is a major cause that many projects fail e.g. run over-budget, over-time.

However, ignoring that there may be changes is not an option.

So, especially for complex and longer on duration projects, a clearly defined practical change management process needs to be defined in order  to have a good chance of been successful.

Based on mutual trust a clearly defined process for approaching changes identified (which can be clearly linked to the business objectives) is key.

HOW TO: An effective way to do this is to agree to change control documentation and a sign off process.

Moreover, great tips on the 5 levels of building trust can be found in the book The Speed of Trust by Stephen M.R. Covey

 

The Speed of Trust - 5 Waves

The Speed of Trust – 5 Waves

 

In essence, working on your internal and external relationships is the only way that will provide the necessary trust that is the bedrock on which any change management process can be based on.

 

RELATIONSHIP MANAGEMENT

The Requirements specification  as well as the overall Procurement and Contract Management process are heavily reliant on good relationship management skills.

Ron Larimer in his article My three issues with the Seven Step Model has made this very lucid in the Procurement model he supports:

The Sourcing Wheel

The Sourcing Wheel

 

So, in thinking about Sourcing Excellence I suggest that Jonathan’s quote needs to be modified a little to include the key element of trusting relationships.

Sourcing excellence = professional knowledge + market knowledge + product knowledge + well established trusting relationships

 

What are the successful ways you use to define requirements in your Procurement process?

 

How to perform a mid-year Procurement review!

Constant reviews are part of every effective system. As Peter Drucker mentioned, every so often, it is crucial to do the “Feedback Analysis” in three steps:

1. Whenever you take a key decision or action, write down what you expect to happen.
2. Review results at regular intervals and compare them with expectations.
3. Use this feedback as a guide and road to reinforce strengths and eliminate weaknesses.

                                                                                                                         Peter Drucker

The end of the Financial year (in Australia) and reaching the mid-calendar year point in other parts of the world, makes for a great opportunity to review the progress made so far, look afresh at your personal, team and/or departmental KPIs and goals for the year and review any new opportunities that may have come up.

Having an appraisal review once a year may have been effective in previous generations but not in the modern post-GFC fast paced marketspace.

Read on if you want to learn about a scheme for performing a General review and a comprehensive checklist to go through during a Procurement specific one.

 

Alexander Knight

GENERAL REVIEW

So, utilise the One-on-One meetings (or other frameworks, some of which I mentioned here and here) sit down with your staff and/or book a meeting room for a space free of distractions and revisit:

  1. Your KPIs
  2. Your team’s or department’s KPIs
  3. Opportunities that may have come up
  4. Challenges that have occurred
  5. Projects in development that may need your contribution or that you can contribute to.

 

PROCUREMENT REVIEW

Especially, for Procurement, there is a more specific list of things to do.

As Richard Waugh, VP of Corporate Development at Zycus, mentioned in his recent post titled “Spring Cleaning time in the Procurement household:A Checklist” in spendmatters.com below are some key areas every Procurement professional should look into.

Based on the article I put together a checklist which I thought I’d share. For more information please refer to Richard’s article which makes a compelling read:

CHECKLIST for EFFECTIVE PROCUREMENT REVIEWS:

Contracts

  1. Look for contracts that have expired or are due to do so soon. Update your Contract calendar.
  2. Review at least one auto-renewal of an evergreen agreement.
  3. Look for maintenance agreements on long discarded assets or not used software licenses. 
  4. Review that rebate provisions are up to date.

Spend Analysis

  1. Refresh your spend data to evaluate changes in spending patterns.
  2. Analyze for purchase price variance i.e. paying different prices for the same item.
  3. Analyze for Payment Term Rationalization – standardizing on contracted payment terms with preferred vendors.
  4. Look for Supplier Rationalization opportunities i.e. root out “supplier creep”

Supplier Management

  1. Look for duplicate and inactive vendors in your vendor database.
  2. Ensure that insurance, quality, diversity, or other certifications are up-to-date.
  3. Update the Supplier segmentation matrix (categories: strategic, critical, important or tactical).
  4. Ensure Supplier Managers are allocated to strategic, critical and important suppliers.

Category Management/Sourcing

  1. Review category strategies taking into account commodity price trends and forecasts.
  2. Look for opportunities of hedging through longer term contracts where price increases are projected.

Performance Management

  1. Refresh your scorecard including value offered by Procurement and Contract Management in recent gains in “spend under management, realized cost savings, increased user adoption, cycle time reduction, contract compliance, supplier enablement” etc.
  2. Benchmark your performance against the market. 

 

Image courtesy of Alexander Kaiser, pooliestudios.com / www.flickr.com

The 4 absolute basics to a contract deal (the 4Ps)

What are the absolute basics towards a steady foundation for a written deal?

Imagine that you have been working on a deal for weeks and during a meeting with the supplier (or customer) you reach a breakthrough agreement. Both parties are quite excited and shake hands. Is this enough?

Certain cultures consider this to be enough.

Irrespective of the integrity (character) of both parties though, it is always best to write things down as a Letter of Intent (LOI) or a Memorandum of Understanding (MOU) or Agreement (MOA).

But what do you actually need to take down as a minimum to make this deal valid, workable and to later avoid disputes.

Read on if you want to find out the 4 elements that are widely acknowledged as the absolute basics to a deal.

handshake

The 3 Ps

A deal is considered to be valid if it refers to three basic elements commonly known as the 3Ps. These are:

  1. Parties
  2. Price
  3. Product

It is quite obvious that if we do not have the parties that are covered, the price agreed (and what is included and excluded in the rates) and the product (an exact description of what the product/service is and any agreed variations) then, really, there is no deal. As without these elements there is inadequate clarity to any deal.

3Ps augmented – (the IRON TRIANGLE contribution)

I don’t believe that the above are enough though in the current environment as I have elaborated here based the concept of the Iron Triangle.

This concept reflects the importance of the balance between i) the Scope-Product, ii) the Price and iii) the Performance-Quality-KPI expectations when agreeing a deal.

What the Iron Triangle concept contends is that if these three elements are not in balance the deal is in high risk of failing.

As you can see, the Iron Triangle concept adds to the 3P concept one more element. The element of Performance-Quality-KPI as an absolute basic to any deal.

SUMMARY – the new model = The 4 Ps

So, in summary, combining the two models, the absolute basics to any deal are as follows:

1. Take down the deal in a written agreement (LOI, MOU,MOA etc)

2. Include the below in the written agreement:

  1. Parties
  2. Price
  3. Product
  4. Performance (Quality – KPIs)

What are the elements you use as the absolute basics in a written deal?

 

Image courtesy of anchor1203 / www.flickr.com]

This post was first published on the CILT Australia blog page