CustomerThink Founder/CEO Bob Thompson interviews Neil Woodcock about the keys to success in customer-centric companies.
- What’s Different About a Customer-Centric Company?
- Understanding the Customer Path to Purchase
- Customer Experience and Engagement
- Burning Platform for Change
- Key to Success: Humble Leadership
- Role of Data and Technology
Interview recorded May 25, 2012. Transcript edited for clarity.
Bob Thompson:
Hello, this is Bob Thompson of CustomerThink. For this episode of Inside Scoop, my guest is Neil Woodcock, CEO and Chairman of The Customer Framework, based in London. Neil is one of the UK’s leading experts in customer management and he is the cofounder of QCi Ltd and CMAT, which is a comprehensive benchmarking tool that Neil and I talked a lot about several years ago on Inside Scoop. Prior to starting his firm, he also had great experience at Mobil, Unilever, and some consulting experience at Accenture and McKinsey.
Wonderful background! Neil, welcome back to Inside Scoop. It’s great to catch up with you again.
Neil Woodcock:
Nice to talk to you, Bob. Thanks very much for the interview.
Bob Thompson:
Well, it’s hard to believe that it’s been nearly seven years since we last talked on Inside Scoop. It really is great to catch up with you and get an update on what’s been going on in the field of customer management, as you call it. What we’re going to be talking about is what really helps companies do two things at the same time—be more customer-centric and be more profitable. And I know that’s very much about what your business is about.
So, let’s start with what’s changed in your business. Please tell me what’s happened in the last few years.
Neil Woodcock:
Yeah, sure. QCi Assessment was a very successful company, which, as you said, had CMAT, Customer Management Assessment Tool, as its core product. CMAT was an assessment and benchmarking tool. WPP Group, under Sir Martin Sorrell, bought QCi Assessment and the CMAT software. And we worked with those guys for a few years and they embedded the product within the WP Group—within Ogilvy, for instance—and the product is still being used.
We effectively finished our earn out with them and have set up another company called The Customer Framework, which has a pretty different proposition. What we found with QCi was that we were working with a lot of blue chip companies, other big brand names. And we were assessing how well they manage customers or consumers—whatever they called them. And we gave them a benchmark as a purpose to how they could improve, and then we moved on to the next client. And that had benefits to the clients’ concern, but actually it’s kind of less than thinking, well, what do I do next?
So, The Customer Framework is a very different company. The Customer Framework is set up so that we can identify where companies are strong and where they’re weak, in terms of managing customers. But also we can identify if they want to improve and what that improvement is worth to them from a revenue point of view or from a gross margin point of view, or even from an operating margin point of view, so we put a business case behind it. And then we have a transformation plan behind it as well, which we can help implement if the client wants that. So, it’s, I suppose you could say, a full service consultancy. So, we don’t just go up front and say, “These are your issues. Get on with it.” We actually say, “Look, we think these are your issues. If you do something about it, it’s worth X, and by the way, we can actually help you achieve that.”
Bob Thompson:
How long has The Customer Framework been around?
Neil Woodcock:
Three years.
Bob Thompson:
This is very interesting. It reminds me of an IBM commercial that was poking fun at some consultants. The client was reviewing what they learned. “Here’s your problem, X, Y, and Z,” and then the client say, “Oh, great. So, what do we do about that?” And the consultants looked at them and said, “Well, we don’t actually do anything.”
Neil Woodcock:
Yeah, that’s right.
Bob Thompson:
It sounds like you’re actually getting more where the rubber meets the road now and rolling up your sleeves, working with clients to help them make this transformation possible.
Neil Woodcock:
Yeah, we are doing exactly that, and that’s where the hard work starts, as we all know. Trying to make these things work in large organizations is not straightforward. But one of the keys, and actually one of the things we found since we’ve been doing this is prioritizing—just doing the things that are going to have most impact, that are most easy to do. And some of the 2×2 matrix where you can plug all the different things you could do, and you say, “Right, let’s have one axis which says “impact,” and so another axis which says “ease of doing,” and we’ll pick the one in the top right-hand corner—the ones that are easy to do that have some impact.” And that’s the place to start, I think, isn’t it?
What’s Different About a Customer-Centric Company?
Bob Thompson:
Well, let’s come back to that. I’d actually like to ask you a little bit later what you found with your clients, if there’s any commonality there.
But before we get into that, I want to ask a very, very basic question. This idea of being customer-centric has been around for a long time, and I think most businesspeople will say that at least to some degree, they believe they’re customer-centric. I know that you’ve done some writing. You have a point of view about what’s different about a customer-centric company and a product or maybe a sales-centric company. Could you briefly talk about that?
Neil Woodcock:
Yes, yes. I think customer-centricity is on the agenda of every board of every major client that we meet, but some are playing lip service to them and some aren’t. So, what is the difference? I think that a customer-centric company starts its plans and its thinking with the most granular unit being the customer or the consumer, rather than a product or an SKU. So, everything has the customer at its focus, or the consumer at its focus, and it comes out from there. And products are of course important, and maximizing product revenue is of course important, but the customer is at the center of all the thinking and all the plans.
Bob Thompson:
A company that’s building products—say it’s a manufacturing company—they might argue with you to say, “Well, look, Neil. That’s all great, but in the end, we’re still building products. The products got to work. Customers got to like them.” But would you argue that a customer-centric manufacturer be one that’s really involving the customer in the process in some way, getting feedback, doing market research? How do you in practice turn this great idea of doing this outside-in sort of thinking into a company that’s still building products?
Neil Woodcock:
Yeah, OK. I think you’re touching on one of the areas that I think is very interesting, but slightly over-hyped at the moment, which is full customer collaboration and participation platforms. We know they’re going on. We know they can work very, very well. But what we think is important, is looking at it from another angle. If you look at the way that products around the world are converging in quality—I mean there used to be good cars and bad cars on the road, for instance. Now all cars are good cars. They all work. There are very few of them that break down all the time like they used to. Product quality is converging, product pricing is converging, and there’s more products than ever before because of globalization, because we can get products from all over the world.
So, any product manufacturer now can’t just develop a new product and send it out and expect to make a price premium on it and develop a decent yield. We have to position that product in the marketplace very, very carefully, and that generally means getting the customer right at the heart of what we’re doing. Now, whether that means external collaboration platforms or whether it means just doing what good product companies should do, which is to really understand customer needs, whether that is through various research groups or whatever—it means really understanding what you’re developing, where it fits in the marketplace, and why customers should buy yours rather than somebody else. I think it’s tougher now than ever for product manufacturers because of product commoditization, the globalization.
Bob Thompson:
Right, right. I think there’s a consultancy that does outcome-driven innovation. Their whole idea is about—I think the slang is “jobs to be done.” So, a company that really thinks through the jobs that customers are trying to get done in their lives, and then builds products that help customers get those jobs done, would you view them as being a customer-centric company?
Neil Woodcock:
Yes, I think that’s one very good example. Yes, I think it is.
Understanding the Customer Path to Purchase
Bob Thompson:
Well, I want to just share a real quick example and see if this also makes sense to you. My wife and I bought a Weber barbeque grill. We sold our big house in the suburbs. We’re living in this nice condominium now, but we have a small space in our balcony and we needed a new grill. So, when I went out to research this, I wanted something that was compact, that had a nice style, that fit into our new life. And it was the product that mattered. It was the Weber grill. It wasn’t about the Weber experience. They built something that looked like they had my condo in mind.
But when I went to buy the grill, I found lots of places to buy it. I could even buy it on Amazon.com, believe it or not. There are local big box stores and smaller hardware stores and so forth. I ended up buying it at Home Depot because they had this multi-channel customer experience. So, to me, it says that if you’re a manufacturer, you want to have products that are going to fit into your customers’ lives, but if you’re a retailer, this purchase experience, the research and buying experience has to be well engineered, as well. So, when you think about your methodology, does it take into account both of these scenarios—the manufacturer is building things, a retailer that might be selling things?
Neil Woodcock:
Yes. One part of our methodology looks at the whole path to purchase. So, we break the buying cycle down into four steps, really, into what we call WIN, which is the whole path to purchase process, from intent to consideration to actual conversion. And that conversion process can happen online or it can happen in the retailer’s premises. We look at their attention processes and the value development processes, and the win back processes, if we need them. So, we look at the whole what we call lifecycle of the customer—from awareness to advocate, if you like. And when you look at that through any company, whether it’s a retailer or product manufacturer or a hybrid, you can start breaking that down and you can begin to understand where customers come and go in that process.
And I think one of the differences between when we spoke seven years ago and now is, well, there’s several, but one of them is the proliferation of channels. We know there’s a multitude of ways of communicating and buying out there, through digital and social channels, through mobile, through tablet PCs. There’s a proliferation of ways of finding out about products, of looking at the prices, of looking at user reviews, of deciding where to buy it.
If you’re a retailer somewhere in that process, then you’ve got to make sure that your position fits somewhere in the path to purchase. You have a proposition in there, which appeals to some group of customers. We know and you know that there are some people that won’t buy new stuff online. They want to go and touch and feel it in store, and that’s your opportunity to impress them with an experience. And I think one of the other things that’s changed in the last seven years—and we would say it’s only changed a little bit, but I think for a lot of companies, it’s changed a lot—is the quality of the experience you’ve got to deliver now to differentiate beyond other people.
Bob Thompson:
So, you would say that the expectations are higher now?
Neil Woodcock:
Expectations are much higher, and because people have much more choice, if you want to get the purchase and you want to get the customers’ attention, you have to offer something that’s a little bit different and you know they’ll find that product somewhere else. You know they’ll find it probably at a cheaper price than you. So, you’ve got to offer something, which keeps the customer coming back, and generally that is the experience that you deliver.
Now, in a retailer, that experience is not just through the staff. It’s through the whole environment. It’s even through the high street or the mall where the retailer is. But whatever you’re in, it’s that bit of experience, that little bit of personality, that little thing that says, “Yeah, that was great, I enjoyed that,” which makes a big difference.
Customer Experience and Engagement
Bob Thompson:
One of the things I want to talk to you about is customer experience. It’s been a big trend since 2005. I did my own research study, and since then, there are probably dozens of customer experience management consultancies. And I take it from your comments now that the customer experience is very much a part of your methodology. Can you talk a little bit about how you incorporate that?
Neil Woodcock:
Yeah, yeah. It always was part of our methodology, Bob. Customer engagement as an outcome was always part of our methodology, and engagement generally. Engagement, which says, “I prefer this company. I tend to seek it out. I might recommend it”—that type of engagement—comes from a good experience, which comes from a series of other things. We have a model, which helps define that.
You can’t just deliver a customer experience without any infrastructure around it. And our model looks at the whole infrastructure from direction of leadership, from the people in culture, from the data and technology that you provide, through the way you measure people, because obviously if you measure people in the right way, you generally generate the right behavior and vice versa. And we look at agility and workflow processes because you can have great people dealing with customers, but if they’re very slow in what they do or the way the company processes things—as, indeed, some of the banks and insurance companies were, but they’re certainly getting better. But if they’re slow, that’s a bad customer experience.
There’s a whole set of components that end up in a good customer experience, and we look at all of those in our model. But I should say one thing. Customer experience is vital, customer engagement is vital, but of course, so is profit. And we deal with a number of boards with analysts and brokers and economists, and if the company doesn’t make a profit, it’s going to struggle, particularly nowadays. So, we have to have a balance between the cost of developing the customer experience and the revenue, the margins that it generates. And that balance is what our model strives to achieve.
Bob Thompson:
Right. So, since I’ve been in the industry, as you know, there was a phase of a lot of hype around CRM (customer relationship management). In the last few years, I would say maybe not quite so much hype, but certainly a tremendous amount of interest in customer experience. And personally I think that both are important. It sounds like, when I listen to you talk about infrastructure, data, making money, those sorts of things seem to me to be more about the CRM concept as it’s been implemented in most companies. Not all, some have had a more robust or progressive view of what CRM is about—more about loyalty and experience. But I think most companies have looked at CRM more as this inside-out, technology-oriented focus. But you seem to be marrying that idea with the customer engagement, customer experience side of things.
Neil Woodcock:
I think the goal is, for most companies we deal with—not all—but for most companies we deal with, the goal is to make a profit by developing a good customer experience, because that leads to customer engagement. So, those are dual goals. Now, when we’ve deal with someone you’ll know quite well—I mean, they’re good customer managers and they’re pretty well known in the banking world—Royal Bank of Canada, they’ve been a client of ours for probably 10 years, all in all, through the QCi days and the Customer Framework days. They have moved from product-centricity 10 years ago towards customer-centricity, where the product became less important.
But they found, like a lot of times institutions found, if you don’t focus on products then actually sales disappear to some degree. So, they’ve moved back a little bit towards products. On a continuum, they were 100 percent product and probably 90 percent customer. Now they’re probably 75 percent customer, and they’ve got that balance between customer and product because they get the focus on product sales, so you can sell your loans, you can sell your saving products, you can sell your overdraft facility, your credit cards. You can focus on doing that, but they have a helicopter view of the customer and customer segments, so they can make sure that they’re not over contacting a segment and they’re actually delivering something where the customer is saying, “Yeah, I’m enjoying the experience at Royal Bank of Canada.” And I think that realism is the important thing nowadays.
Bob Thompson:
Yeah, I totally agree. It seems like, at least in my estimation, there’s always this tendency to focus on the magic pill—the one thing that’s going to turn a company into an industry leader. And as I’ve interviewed companies over the years, it always seems like it’s a multi-year journey and you never really finish it.
Neil Woodcock:
No, no, and in The Customer Framework, one of the products we have, which is very different from the QCi days, is we have a senior management visioning tool, and it’s a really simple, simple thing. We look at probably the 15 dimensions of customer-centricity, which is going to be roughly true for any company. So, one dimension might be do you focus on making revenue or do you focus on customer engagement might be a dimension? And what we then expect is an answer in either one, so I’m 100 percent revenue, I’m 100 percent engagement. But we see what that balance is, and for all the dimensions that we have, we ask the single thing, “All right, where do you think you are now on that scale, and where do you think you want to get to in three years’ time—roughly three years’ time?” And in doing this, if you get ten guys from the leadership team together in doing this for various dimensions of customer-centricity, you can get a great sense of whether the senior team is aligned on where they’re going. Because one of the biggest issues we found in the past, and I think it’s a big issue with any change program, is that if you haven’t got a clear aligned vision in enough level of detail that actually makes sense, because everyone can agree to be more customer-centric but they don’t know what it means.
But if you want to be clear about that—actually, no, it means worrying more about engagement as well as cost and revenue. It means thinking about measuring on customer experience measures, rather than measuring on some of the process and speed measures that you were measuring on before. And so, it means changing stuff, changing the way you do stuff, and we’ve done this probably a dozen times now with some of the world’s biggest brands. And when we go back to the senior teams, normally—I think apart from once—we’ve gone back and said, “Look, guys, the good news is, out of let’s say 20 questions, 15 of them, you pretty much agreed on as a team. So, it’s just these 5 that we’ve got to think about, so let’s get to the bottom of these 5 and discuss that with the management team.” And then at the end of that process, you’ve got the senior team that says, “OK, I’m pretty clear on where I’m going,” and then you can start thinking about a plan.
Burning Platform for Change
Bob Thompson:
OK, but one of the issues that I’ve seen over the years is simply, call it “the burning platform.” Is there enough incentive, is there enough motivation to even bring you in and have this discussion? I mean, in your experience, is this motivation, does it stem from fear, from business is in the tank and is either failing or not living up to expectations? Or, is it a new leader that comes in with the bigger vision? What do you find in practice?
Neil Woodcock:
You just answered all those things. I think you’re right. You’re right. So, first of all, just to agree on the basic premise, any successful change program has a clear burning platform and then a clear aligned vision, clear actionable first steps, and the capacity for change. It’s kind of four big building blocks for change, I think. So, the burning platform question, the one you just asked, I think it could be any of those reasons.
One of the things we’re seeing at the moment—I mentioned product commoditization, globalization. I think people’s margins are being squeezed. There’s various reasons in various markets—the aggregators, the transparency of price, the ability to have choices as to where you buy this thing from, and then that generates a competitiveness, which is causing margins to get smaller and smaller in both the manufacturers and the retailers. So, I think margin has been a big burning platform for some.
I think for others—and in fact, I was at a conference yesterday, and this was discussed very, very openly, they’re worried about what they’re not doing with digital, social and mobile and near-real-time CRM—all the big buzzwords. But they’re worried about what they’re not doing, and they think they should be doing something, and even though some of them perhaps don’t need to, but that’s a burning platform. It’s kind of the fear of the unknown.
And I think your other point about CEOs and CMOs coming in, new guys coming in and wanting to make a fresh start—we see that as well. So, yeah, I think there are a number of different burning platforms.
Key to Success: Humble Leadership
Bob Thompson:
OK. In the time we have left here, I wanted to make sure I ask you if you’ve found—kind of going back to what we talked about a little bit earlier. I know that you’ve been in this business for a very long time and you’ve done benchmarking research. You’ve worked with a lot of clients. Is there a common thread that you’ve found in the really successful companies?
Neil Woodcock:
Yeah, I’ve got a really strong view on this because I’ve seen it time and time again where, in whatever sets you’re in, this particular quality of company will show through and will get the right balance and will be successful. And I think the quality is—what would the word be, humble? Is that the word? Willing to listen, not arrogant, honest and transparent, and I don’t necessarily mean in the kind of corporate and social responsibility way. I mean honest with each other about what’s going on—not hierarchical in that sense.
And Bob, I’m sure you’ve seen companies like this where bad news doesn’t travel up. You don’t want to tell your boss bad news, and those sorts of companies who generally can be very arrogant sounding. “We’re successful, we know we are, we don’t need to change, don’t talk to us”—those guys struggle, and we see this. We saw it in our CMAT assessments. We see it in our SCHEMA, our new product. In our SCHEMA assessments and benchmarking, we can see those companies that have great leaders, that have an open culture, and one which is willing to listen and learn are the ones that are most successful.
Bob Thompson:
Yeah, yeah. I have to say that I’ve seen exactly the same thing. The one thing that stands out for me is the dissatisfaction with satisfaction.
Neil Woodcock:
Yes, exactly. Yeah.
Bob Thompson:
Meaning even companies that are at the very top of their game never seem particularly happy. They say, “Well, we’re not that good. We have so much more that we could do.” They never seem to be beating on their chest about how brilliant they are. Even if they are miles ahead of their competitors, they just continue. As you say, they’re humble and really open to ideas on how to get better.
Neil Woodcock:
Yes, I think humble—I’m not sure if it’s the right word—I think it sums up part of it because they can be very confident, still, these companies, confident, but humble is part of it. And yeah, I think that’s key, and I think that comes from leadership. One of the things we look at with direction of leadership is their ability to listen and to learn and to handle bad news, and the honesty in the organization is something we look for. So, we would talk to a sales guy or a contact center person or a brand manager and we’ll say to them, “How do you feel if you had some bad news or some learning here that you didn’t think would be very welcome by your boss or your boss’s boss? How do you feel about that?” In some companies—”Yeah, it’s no problem. We’ll talk about it.” In others, it’s more, “Yeah, I’ve got to be a bit careful how I put that across,” and it’s those companies, the latter companies, that are the least successful.
Role of Data and Technology
Bob Thompson:
Right. So, we’ve been talking about leadership and culture here, but when you look at all of the commentary and a lot of the hype in the industry, it’s really at the opposite end, which it’s all about tools and methods and the latest tricks and tips and so forth.
But that said, there are a lot of exciting things going on in mobile and social and this “big data” area of analytics. You can certainly see that some companies have profited from those ideas. But again, when you step back and think about and look at your experiences—again, both in benchmarking, as well as your clients, have you found that technology, in general, helps these top-performing companies stand out?
Neil Woodcock:
Yeah. I think it’s a great question. I don’t know if we’ll be able to put a picture of our SCHEMA model when we write up the interview.
Source: The Customer Framework
Because the middle bit of it is what we call the foundations of successful customer management, and there’s four bits in it. And we’ve talked about two of them quite a lot—direction of leadership and people in culture. It’s a foundation stone for good customer management. And if you have those two things, they’re probably the most important two things to have, and you could be successful delivering a good customer experience without sophisticated data and technology, in our opinion.
But if you have the other two foundations, which is technology and data, if you have that with the right direction of leadership and the right culture, then you can do this so much more efficiently and effectively. I hope I’m not confusing the answer. I think companies that score really well on technology and data don’t necessarily score well overall and manage customers and engage them in the right way because they might not have the direction of leadership and the culture and the other things you need to have. If you score well on direction of leadership and people in culture, you could score well overall. You’re probably going to score well overall even without data and technology. But if you have data and technology as well, you will be more profitable.
Bob Thompson:
But it really is a combination of things. The first big research study that we did at CRMGuru back in—it was probably seven or eight years ago now. We found five factors—strategy, metrics, alignment with people, processes and technology—and we saw all of them as being important. But I would tend to agree with you that without leadership, a lot of the other things aren’t necessarily put to the right use. They’re not aligned with the direction of the company. And unfortunately it seems like people, too many companies—probably the majority of companies, in my experience—tend to start with the tools and then try to figure out how to sell it to the leaders. And the really successful companies start from the other direction. They start with leaders who care about customers and then they look for the tools and the ways to implement the strategy as efficiently as possible.
Neil Woodcock:
I totally agree with that. And I think the interesting thing, when you look at the IBM CMO survey “From Stretched to Strengthened” and see what CMOs are worrying about, they’re worrying about technology, they’re worrying about social media, CRM, analytics. They’re really worried about that. They feel unprepared for it.
I would worry about other stuff. I would worry more about the culture that I’m developing to deliver the experience I need to deliver to engage customers in a way that’s going to keep them coming back to me. I’d worry more about that, and maybe the survey because it was done by IBM, had that technology focus to it. But I find the surveys that come out of IBM and I think most of the other technology companies, I think they need to have more of a balance around what we’re trying to do to customers, with customers, and less about the way we’re going to do it through technology.
Bob Thompson:
Yeah, the people and leadership issues always seem to be the most difficult. I know I’ve been in some meetings where this issue of leadership comes up and the leader is sitting right there. And it’s kind of a tough problem because sometimes the answer is, “Well, look, you’re not going anywhere,” because the person who really needs to lead this change isn’t really that engaged, doesn’t really believe it. And so, we can improve the technology and we can get on Facebook and use mobile and we can do all these things, but that top executive, if he or she doesn’t have the right vision, doesn’t drive it, how far are you really going to get?
Neil Woodcock:
Yeah, you’re going to make some expensive mistakes. Over the last 20 years, you and I have seen big systems—the answer to everything we want—and of course they’re the answer to nothing. So, I agree, and I think on the positive side, over the last five, six years, I have seen a shift. Partly it could be down to the meltdown in 2008, 2009 and people looking a little bit at the way they run their businesses. But many of the clients we deal with—and we deal with some of the big clients—there is a genuine focus on customer or consumer. I don’t think people quite know exactly what to do. I think there’s that, as we talked earlier, a conflict in between profit and customer engagement, and you’ve got to have a balance, as we said earlier. So, I don’t think people quite know what to do. And I think that aligned vision at enough level of detail that you can think, OK, that’s what I need to do differently, and keep doing these things, that that’s what I need to do differently—I think that’s probably really important because I think there’s a real willingness in the senior teams now to do something different.
Bob Thompson:
Yeah, yeah, that is a positive change for sure, and I think if you look at the broader market and think about the changing sort of leadership styles, that that’s a change that will have long-term ramifications. I mean if senior leaders are now starting to talk about it, think about it, worry about it, it may take a long time, but at least that’s the beginning.
Neil Woodcock:
Yes, it’s the beginning, and I think there’s a couple of real practical things that are driving that. I think the whole what McKinsey called the consumer decision journey or path to purchase, where people can look at testimonials and referrals, means that engaged customers that leave testimonials and referrals will influence the purchase path. So, I think that helps people rationalize another reason why we need engaged consumers, is that we actually win more customers that way. So, never has retention and acquisition been so close together, if you know what I mean. They’re not separate entities, but they’re close together, and I think there’s a rationality there, which people are thinking, well, it’s not just about keeping customers. Actually engage consumers we’ll recommend, and there’s an advocacy piece there, which, through social, can be amplified. And I think that is something, which is coming through a little bit.
Bob Thompson:
Neil, I’ve really enjoyed talking with you. It’s always a pleasure, and we should talk more often because I really admire the work that you’re doing. Maybe it’s just because I’m very much aligned with how you look at the world, so we can at least be in agreement with each other.
Neil Woodcock:
Yeah, we certainly are. Maybe no one else agrees with us, but . . .
Bob Thompson:
Thank you very much for your time here on Inside Scoop. It’s really been great catching up with you, and thanks for all the work that you’re doing in the industry.
Neil Woodcock:
Oh, thank you. I love CustomerThink.
