World renowned expert on business innovation and growth, and Harvard Business School professor, Clayton M. Christensen was the first featured speaker at Interactions 2012 — Interactive Intelligence’s (News - Alert) annual meeting of customers, partners and analysts in Indianapolis. And, what a kick-off it was. Facing a large audience of contact center solutions professionals from around the world, he stated that all of the talk about focusing on the “customer experience” probably has all of us thinking about how to improve customer relationships incorrectly. To say the least, that and his skepticism about outsourcing and a few choice jabs that our business school’s are not doing our economy any favor got people’s attention.
Christensen’s presentation hit on three major themes for those who wish to be successful both in terms of engendering trust, and in creating sustainable and profitable differentiated value and competitive advantage. They are:
- Focus on the job to be done
- Be careful about what you measure and how you measure it
- Disrupt other people
In what was a true tour de force, he set the event abuzz with his contrarian view to what the industry has adopted as gospel, and set the stage for why his forthcoming book is likely to be a best seller.
Getting the job done
Christensen started by saying we hire products and services to do jobs for us. We reward those who do the job better than competitors. He noted, what another famous business thinker, Peter Drucker, stated years ago: “The customer rarely buys what a company thinks it is selling him.” In this case what they should be selling is a superior way to get the job done better. Where improving the customer experience comes in is in getting it done perfectly so that in a fickle world people do not look for alternatives.
The example he used was fascinating. Work done for premium ice cream retailer Cold Stone regarding sales of milkshakes was the subject. Christensen said that while the company had lots of demographics and psychographics about their customers, it was having trouble improving sales. He and his cohorts decided to delve deeper by asking customers not how good or bad the milkshake was compared to others but rather what job a milkshake was being hired for.
It turned out that most customers bought milkshakes early in the morning, were alone and drank them to break up the boredom of long commutes along with having something that satiated their appetites until later in the day. Milkshakes were determined to be better at doing this than competitors for the job such as bagels or candy bars. They take a long time to drink, give you a filled-up feeling, provide an energy boost and obviously taste great.
The lesson here was that the desire for an early milkshake went way beyond having a good milkshake from a preferred vendor, but it went precisely to filling the needs of a job these people wanted done. Using these insights, Cold Stone improved the viscosity of its milkshakes and added an unpredictability twist to the drinks by adding chunks of fruit. The end result was a longer lasting and compelling experience that generated improved sales. Christensen even added that the fruit was not added to improve the customer experience by making them feel they were doing the job of making the drinks healthier. He feels that would be a hard sell. Rather it was done because it improved the job of making the entire consumption experience more satisfying.
Be careful about what you measure and how you measure it
Christensen related the story to show that companies that concentrate on improving the customer experience miss the point if they are not tying that desire into understanding what job needs to be done. His research showed understanding the job is the right metric. It also showed that focus on the job increases customer satisfaction70 percent while focus on the customer experience yields only a 15 percent increase. In other words if you focus on irrelevant factors you will invariably get the wrong insights, but if you focus on the right ones you will succeed.
Christensen then articulated three levels of questions of what he called the architecture of a job:
- What’s the job to be done? (Each job has functional, emotional and social dimensions?
- What experiences in purchase and use must be provided to do the job perfectly?
- What and how to integrate to reach perfection?
He went through a variety of examples to prove his point including the success of Ikea, who he believes has no competitors because it understands its job is to give people affordable furniture when they have an urgent need to furnish their homes and apartments. Their process, practices and products are all focused on doing that job better than any alternative by concentrating on points two and three based on having asked the right questions and gained insights from the right data.
Disrupt other people
Building on themes in his seven previous books, Christensen then laid out how industry leaders disappear because they focus on improving products while people who look not to make improvements at the margin but rather disrupt the old ways of doing things by making them affordable and more accessible. In fact whether it was the automobile industry, the steel industry and several others he cited, the history was the same. Large integrated industry leaders outsourced the low margin activities to others to move up market and eventually were displaced as the up-starts became vertically integrated but at lower prices. Think Toyota starting in the U.S. with the Corono and now owning a good chunk of the luxury market with Lexus as the Big Three over the years let them have more and more of the lower margin business. In the process they gave away their core competencies and virtually assured destruction as was the case with the minicomputer manufacturers.
Christensen not only criticized the dangers of this outsourcing of competencies, but said it was fed by business schools teaching managers that they need to concentrate on things like net return on net assets (RONA) and internal rate of return (IRR). He stated that if you outsource your assets obviously RONA and IRR are going to look great in the short term for shareholders, but are actually sowing the seeds of creative destruction. The bottom line is that the captains of industry may think they are steering the perfect course for success, but in reality like the captain of the Titanic they are steering the perfect course to hit the iceberg.
The lesson here was obviously to the disruptors will go the spoils. They have insights into getting the job done better instead of making the existing product better, and they are ready, willing and able to make their solutions affordable, simple and accessible.
Christensen’s conclusion about all of this was that the smart people who run many category leaders did not become dumb because they concentrated on improving the products and margins on existing products to sell to their best customer. They just missed the importance of disruption. Hence, it is important to understand that while improving customer service is a noble and necessary cause, if it is focused only on creating more loyalty and up-selling opportunities for your best customers it is no elixir. In fact, he feels today’s small markets have the best chance to be tomorrow’s big ones, and today’s disruptors and not industry leaders will be the ones in the best position to leverage innovation.
As you might have guessed, he urged everyone to embrace disruption—make a priority of constantly having your best people figure out how to totally disrupt your existing products and culture. The reason is simple, that is what competitors spend all of their efforts doing. What they are not doing is spending too much time and money looking at irrelevant factors.
He also advised the audience to take data analytics and the supposed insights generated with a grain of salt. In his view data tells you about the past, especially when you are measuring irrelevant factors, when what you need is a theory that can be tested about the way things should/will be. In fact, Drew Krous, Research vice president of Gartner (News - Alert) Group, who followed Christensen, made much the same point. He paraphrased the famous Wayne Gretsky quote about the way to be in the best position to score goals in hockey was to know where the puck was but concentrate on anticipating where the next pass would be going.
Technology plays a critical role in the disruption of markets. With so much on display here regarding things like the integration of contact centers with unified communications (UC), social media, business process automation, CRM, ERP and mobility the next few days now cast in the context of the language of disruption and the role of improving customer experiences will be fascinating.
Edited by Brooke Neuman