CUSTOMER VALUE IN A TIME OF PANDEMIC

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Pandemics are Darwinian. Attacking the weakest, only the fittest survive. Pandemics attack businesses in the same Darwinian way. Major organisations with deep pockets, strong products and ample resources are thriving in the current environment. But for others who are not so favourably endowed, survival depends on the ability to change and to do so quickly.

History shows that pandemics have a singular effect. They usher in prolonged periods of innovation leading to cultural, technological, and social transformation. The Black Plague is thought to have led directly to the Italian Renaissance. Other pandemics and plagues have similarly led to the flowering of the arts and advances in social policy and technology. No doubt these episodes of change were amplified by the innate and universal impulse to survive.

That the post-COVID world will be different from the world we all remember is a given. The task awaiting our organisations is not merely to survive, but to thrive in the coming age of transformation. Business leaders must assess how they stand in meeting the expectations of their customers and employees, and how those expectations might change.

As the Economist points out: “The adoption of new technological behaviours in response to the pandemic, means usage has already reached levels that were not expected for many more years. Some firms will get stronger. Bricks and mortar retailers will suffer. Many will fail altogether (Topshop). But there is a silver lining, as these changes open new areas for innovation. Companies are devising fresh tools to improve the experience of remote working, collaboration, and learning; to support new kinds of contactless and appointment-based retailing and to provide new types of online social experiences from virtual conferences to virtual tourism. There is no going back to the past that existed before the pandemic. Instead COVID 19 has propelled the world into a very different future.”[1]

What will it take to survive and thrive?

Enterprises exist to create value for their customers and thus create value for themselves. To answer this question, examining value creation is a logical first step.

 

If you are not familiar with our version of the classic value equation, the terms on the left are primary for the new customer who bases a judgment of value on the interplay between the product or service and its cost. The terms to the right pertain to an established customer and are the keys to customer retention.

We believe that in a pandemic the left-hand terms stay relatively stable as customers’ needs do not change greatly. True, the widespread need for face masks suddenly appeared in the spring but needs for the basic elements of life such as food and shelter remain as before.

However, for many organisations the right-hand side of the equation is rapidly changing, driven by changing customer expectations. As a result of COVID the product may be the same, but how it is sold and delivered may differ from past practice. Consider the plight of the retail industry.

To prepare for the Post-COVID world all organisations need to examine their version of the customer Value Equation carefully and to understand how the content of it may need to change to survive and thrive. The goal is always to improve the service component while making it ever easier for the customer to buy and do business with you. Speed is key as pandemics and the responses to them wait for no one. Lacking crystal balls, organisations will have to check in more often with customers and monitor their changing expectations. In this environment, agility is a critical organisational trait.

As Luke Johnson said in The Sunday Times on the 15th March 2020, businesses have been forced to change their business models overnight to survive the Darwinian impact of the disease. Those not so agile may not survive. Many businesses are learning tough lessons. To paraphrase Churchill, if they do not learn from the errors of the past, they are doomed to repeat them.

Also important in upgrading the right-hand terms of the equation are data (especially on customer expectations), digitalisation, and automation.

  • Data is useful for improving the service and sales experience quality. Analysed data, converted into insight, is 100 times more powerful still.
  • Automation is a tool to reduce hassle and cost.
  • Digitalisation is necessary for automation and efficient use of data.
  • Agility is the capability to quickly attend to the above.

The business challenge is how to enhance value quickly with data, digital transformation, and automation. The Value Equation is constant and does not change but the terms and conditions within its right-hand boxes are variable.

Agility

To merely survive, many organisations have been forced to adapt very quickly and in extremely focused ways.

  • A small UK butcher changed its business model overnight from “customers coming to our shop” to “we deliver to our customers.” In so doing they sold out their inventory in 24 hours. We see many examples of businesses rapidly changing business models to embrace new customer experiences.
  • The MHRA[2] (the UK equivalent of the USA’s FDA) realised that quick approval for COVID vaccines under development was essential. Consequently, they ran their existing approval process concurrently and not consecutively. Simultaneously, they re-engineered their entire process without cutting corners but by removing vast amounts of deadtime. By doing so, they have also reduced errors, re-work and waste, making the process more efficient and less costly. The result: vaccine approvals within two months instead of two years or more.
  • Recently Rowan had a 45-minute video-based patient consultation with a NHS healthcare professional, something he had never done before. Health care providers were able to adapt to this new service model very quickly. Now most (>80%) patient consultations are conducted in this way. Our expectations as patients have been permanently changed by this COVID-inspired innovation.

My need to see a health care specialist has not changed; however, my expectation of the way that need is delivered has been transformed. From my perspective, I was able to be seen about 10 times sooner than before (in two days), the cost to me (petrol and parking) was reduced to zero and the hassle (lengthy delays) was taken away. In addition, lacking a need to travel, I gained two hours in my day. The whole experience was much more valuable to me. Organisations that are slow to adapt will be perceived as providing a less valuable offering. They may not survive.

The importance of data

The butcher knew within 24 hours that if they did not compile a customer database quickly, its switch to their new “We deliver to customers” model was doomed to fail. Even if that database was a simple spreadsheet, they knew that they had to capture their customers’ orders, email and personal addresses and phone numbers at once. Luckily, their customers were very willing to help them and gave their GDPR consent rapidly. They needed meat!

The MHRA’s entire improved processes depended on data, captured instantly by fast links.

Data is the new oil. Many years ago, Milliken had a sign over the entrance to its factories: “In God we trust, everyone else brings data.” Today having the right data is important for every organisation.

Over the last few months, we have talked with many C-Suite executives about data and found them to be dissatisfied with how their organisations handle data. The summary of these interviews looks like this:

Many businesses have much catching up to do before they can “Compete on Analytics” as promoted by Prof Tom Davenport.[3]. No wonder that data analysts’ salaries are skyrocketing.

The importance of automation and digitalisation

Pre-COVID, Gartner considered that in the next five years, we will see more change due to technical innovation than in the last fifty. Post-COVID their estimation will likely be that change in less than five years.

Here again is the Economist: “The post-COVID world will be far more digital. From remote working to online retail, the pandemic has compressed years’ worth of transformation into months, bringing with it a dramatic shake-up of how people live, what they buy and where they work. [4]”

Central to digital transformation will be the automation of many processes, reducing costs, errors, re-work and waste, speeding up reliable service to customers while also putting many out of a job. AI, blockchain and quantum computing will underlie these transformations. It might sound horrific to some, if you work for any organisation that is not agile, delivers poor service and is slow to adapt, it will be.

But here are two silver linings:

  1. About 80% of digital transformations fail so there will be plenty of work for skilled people to help organisations sort out the mess they are in. The reasons for failure will be many, content for another article perhaps!
  2. Students who went to university in the autumn of 2020 will graduate and find jobs that do not yet exist in companies that do not yet exist. The change that Gartner predicted will involve huge new job creation. COVID has ensured this.

We at Promising Outcomes are automating our service using AI with the help of a grant from Innovate UK. We are not putting anyone out of work, and probably will be hiring people when we have automated.

Implications

Those organisations that will survive and then thrive in the post-COVID world will be those that plan in a structured and well-designed way to rapidly increase their customer value. To this end, they will:

Think through their Customer Value Equation to find opportunities to improve value.

Capture and use data, especially customer expectations data, to improve service quality and reduce the hassle factor.

Use customer data to decide where, in what order and how to automate and to guide digital transformation.

Adopt agility as an organisation virtue.

[1] The Economist: The World in 2021, After the tech-celeration, new technological behaviours adopted during the pandemic will outlast it.
[2] https://www.gov.uk/government/organisations/medicines-and-healthcare-products-regulatory-agency
[3] Competing on Analytics HBR Jan 2006, Thomas H Davenport
[4] The Economist IBID

Rowan Jackson and Bill Fonvielle – Promising Outcomes

http://linkedin.com/in/rowanjackson

https://promisingoutcomes.com/

 

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