The Paradox of Rising CX Investment and Modest Improvements

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The Paradox of Rising CX Investment and Modest Improvements

The Paradox of Rising CX Investment and Modest ImprovementsHas the customer experience (CX) related focus on digital transformation been mainly driven by an ever-growing digital demanding customer or by consultants pushing their own digital transformation agenda?

When it comes to digital transformation, on one hand, there is the necessary digital enablement (fuelled by a COVID-19 related surge in customer e-commerce activity) and on the other, there are those digital initiatives that are sold under the guise of enhancing the consumer experience.

Recently Forethought was involved in an audit of a vast CX consultancy. The CX consultants had prepared process maps and proposed a digital transformation item under each customer “moment”.  There were seventeen recommended initiatives.  All of them were based on an exemplar from entirely unrelated categories.  None of the proposed initiatives were based on identified customer needs but instead, relied on an unchallenged philosophically-based belief that digital is beneficial to the customer and the business – regardless.

 

Should digital transformation constitute CX investment?

The misallocation of CX resources is compounded when consultants, whose principal domain expertise is selling consulting services and generating consulting revenue, propose CX solutions derived from their own storytelling and sales acumen – rather than evidence.

The misallocation of CX resources is compounded when consultants whose principal domain expertise is selling consulting service.

Here we are today amidst an ever-accelerating digital transformation of the customer journey.  Amongst other things, digital transformation gets mentioned in the same breath as disruption from non-traditional competitors, technology as an enabler, costs out, and customer-centricity.  But just because the team of consultants’ report begins with “insight”, does not mean digital transformation is driven by an urge to be more customer-centric. Specifically when insights are derived from a small, qualitative, convenience sample of customers, such as the product of human-centered design.

Mass customization was a term that first entered management’s lexicon in the early 1990s.  In the context of customer experience, digital transformation gives meaning to delivering individual customer experiences.  Indeed, on that basis, today mass customization is everywhere and the means for delivering it is digitization.

What muddies the water is, digital transformation is also seen as the contemporary means for removing future costs from the organization.  The line between enhancing the customer experience and driving costs out has become blurred.

The line between enhancing the customer experience and driving costs out have become blurred.

There are lessons from the past worth reflecting on.  From a customer interaction perspective, prior to digitization, the last transformation of similar magnitude was the introduction of the telephony-based contact centre.  Back then, the quest to deliver a better customer experience centred on the specialization of the call centre agent.  For the agent, specialization meant deeper although, narrower knowledge.  The downside of narrow knowledge was more handovers from one agent to the next.  Customers generally disapprove of handovers.

In 1999 if someone had an issue with their Nokia 6110 infra-red port and a separate question about billing, the telecommunications carrier would bounce the giddy caller from one call centre agent to the next.  The effort required to resolve an issue was a satisfaction driver back then and still is today.  The point is, the call centre agent specialization was implemented in the name of customer-centricity and yet for many, it resulted in a poorer customer experience.  Every initiative undertaken in the name of CX should be verified as delivering to the customer and organization a benefit.

 

Engaging Independent Consultants

When engaging an external consultant, the challenge for the client and the consultant is managing the risk of conflict of interest.  Such risk arises when professional advice is likely to primarily benefit the origin of that advice.  For example, the consultant recommends digital initiatives, and the same or related consultancy then undertakes to build those initiatives.  Rigorous screening of the CX-related drivers of behavior allays the risk of proposing what might be an entirely legitimate cost-out initiative based on the unchecked justification of customer-centricity.

The challenge for the client and the consultant is managing the risk of conflict of interest.

In the past 18 months, Forethought has audited several large-scale customer experience programs.  General insurance, power utility, health insurance, telecommunications, superannuation are some category examples.  The purpose of the independent audit is usually to understand why considerable investment in CX programmes has failed to yield meaningful improvements such as customer retention.

When choosing a consultant, the master brand of the consulting firm can be distracting to judging domain skills of the consultants who will undertake the work.  So too can the portfolio of precedents from other jurisdictions undertaken by other teams of consultants but, under that brand name.  Is the consultant’s domain expertise in selling professional services or driving CX investment decisions which simultaneously raise the prosperity of the organization and the utility to the customer?  Given the preponderance of CX consultancies, this is an important question.

What has been the benefit of these sizable consultancies?  The repeated finding has been that little or worse, negative economic benefit has been achieved from building initiatives designed to address unfiltered pain points.  The hallmarks of the failure have been a costly consultancy, innumerable initiatives, and an absence of any rigor in linking initiatives to customer behavior.

The following exhibit provides an illustrative history of CX.  The lift in CX investment has been brought about by growing internal CX teams, more initiatives (one organization we audited has more than 600 initiatives concurrently running), the rush to implement CX technology, digital transformation, and the accompanying appearance of a battalion of CX consultants.

Rising CX Investment

The rocketing CX “investment” begs the question, when will the return on CX expenditure match the investment?  Forethought would argue that a positive ROI will only be achieved when science and rigor is applied to the screening of initiatives.

Implied in the centricity nirvana is the promise that with centricity will surely come a relative change in bottom line performance

The lack of applied rigor extends to the consulting firms.  Hidden in plain sight has been the bourgeoning penetration of consultancies claiming to enable businesses to become more customer-centric.  Implied in the centricity nirvana is the promise that with centricity will surely come to a relative change in bottom-line performance.  From our auditing, we would say the hypothesized improvements are imagined and not real.

For some consulting firms, CX is the new Y2K bonanza.  (Y2K was also known as the Millennium Bug.  It was believed that computer programmes that represented years with just two digits would, with dire consequences, at the turn of the millennium revert to 1900 rather than 2000).  Just as it was at the dawning of the new millennium when we were all left wondering what IT “disaster” had really been averted, at the end of the CX bonanza, brands will be left pondering, for all those consultancies and transformational initiatives, what objective change to the relative position of the organization was achieved or, for all those “pain points” did we just incur a whole lot of marginal costs with next to no marginal benefit?

 

About Forethought:
Forethought is an advisory, strategy and analytics company driving business outcomes. Our focus is Brand, marketing communication, CEX and Offer Optimization. Taking the consumer’s perspective, Forethought is a global leader in quantifying the hierarchy of organization behaviors that drive customer response, both emotional and rational and subsequent action.

Ken Roberts is Executive Chairman and founder of Forethought.

 

Photo by Medienstürmer on Unsplash

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