Over the horizon – emerging trends and sector shifts
Reading Time 15 mins
Our management team has spent the first month of 2020 reflecting on emerging trends, customer expectations and sector shifts. Where should leaders be focusing their attention and efforts as the year continues to unfold?
More human experiences
71% of companies are concerned about the impact changing customer expectations will have on their growth.
More organisations need to place their customer at the centre of everything they do. In recent research we found that 71% of companies are concerned about the impact changing customer expectations will have on their growth. We believe the organisations who will be most successful in 2020 will look at their business through a more human lens: taking an end-to-end view of the customer journey, thinking about how digital technologies can augment human interactions (rather than replace) and, most importantly, better engage colleagues on their change journeys.
“2019 saw the challenges faced by customer experience professionals become yet more complex, and critical to business performance” reflects Dave Pattman Managing Director of Customer Experience Services. “On the one hand, there is the challenge of how to respond to the rising expectations of customers in terms of convenience, responsiveness and quality. On the other, we see the pressures to reduce cost to serve driven by increased competition from digital new entrants and business model disruption.”
These challenges are becoming the new normal and will no doubt continue, and probably accelerate through the rest of the year and beyond. The need for organisations to respond to them will see strategic focus and investment increase in three key areas of customer journey management.
1: Identifying factors of customer experience advocacy vs hygiene
As brands and organisations seek to deepen and retain relationships with customers in an environment where sustainable product differentiation is harder to achieve, and margins are driven relentlessly downward through online competition; Customer Experience becomes a major, albeit not the only tool of differentiation. Perception of customer experience is individual but is not confined to the personal interactions between customers and organisations. Social media and the social web mean that experience of a few people can become an organisation’s reputation online.
There is a difference between hygiene experiences: those that make it easy for customers to purchase, use and manage your products and experiences at moments of truth that drive genuine connection and advocacy.
The customer experience hygiene benchmark is continually being raised as customers are exposed to more digitally enabled, low-effort experiences. These combine convenience and simplicity for the customer with lower cost for the organisation through higher levels of self-service and automation. Brands that continue to lag in their digital transformation will lose on both customer value and cost to serve. The challenge is that investment in these areas are merely a ‘ticket to the game’; they create loyalty based upon convenience rather than emotional connection.
Designing the human into high value experiences is becoming as important as designing the human out of the low value ones.
Emotional connections are, by definition; human. How customers are engaged and assisted when they have difficult, complex or personally important needs influences their level of emotional affinity to a brand. Customer experience professionals face a challenge identifying when and how engaging with a human advisor creates sufficient value for the customer and organisation to justify the associated cost and effort. Designing the human into high value experiences is becoming as important as designing the human out of the low value ones.
2: Technology enabled agility
Organisations that find themselves hindered in their ability to evolve (let alone transform) their customer experience due to a dependency on inflexible legacy technologies and systems will pay an increasing competitive penalty. The gap between the digital experience leaders and laggards will also increase and translate directly into customer, and ultimately enterprise value.
For this reason, we will see customer engagement and customer management technology appearing higher on the list of priorities for CTOs and CIOs. Addressing siloed technologies and data that result in siloed customer experiences across channels, products and journeys will continue to be a strategic imperative. Failure to prioritise this typically results in higher demand and cost in contact centres and poorer customer experience.
The move to the cloud for customer experience related platforms, software, computing and data hosting/storage will accelerate as we move from early adoption to broad adoption in many sectors. These solutions allow for greater agility through API enabled ecosystems that reduce the costs and effort associated with systems integration and support.
3: Messaging; do we, or don’t we?
the opportunity to combine a high conversation concurrency with well designed bots and automation can make messaging a highly efficient channel for interaction.
It offers genuine convenience for customers. Messaging apps (WhatsApp, Messenger, Apple Messages etc) are already present on most mobile devices and have amongst the highest usage levels. They allow customers to have conversations that can switch from being real-time (synchronous) in nature, to spread-out over time (semi-synchronous). These changes in conversation tempo are made possible by the persistency of the chat history within the app, customers can start a conversation but then pause it, for example when going into a meeting or losing signal on the Underground and then pick it up again later.
Messaging also provides organisations with the opportunity to develop conversational applications that combine chat with functionality and rich media capabilities like those of a dedicated mobile app. This is an ideal environment to introduce a chatbot that can triage and treat a range of customer queries. Those issues that it cannot resolve can be escalated to a human agent without the need to switch channels.
The challenge for organisations is that the introduction of messaging as a new channel for customer engagement may not result in a reduction of volumes in the voice channel, making a business case based on cost reduction harder to realise. Experience has shown us that the convenience of messaging can result in a net increase in customer contact.
Forecasting demand, workforce planning and deciding whether to blend agents across channels are all operational questions that need to be addressed when launching messaging. Our view is that the opportunity to combine a high conversation concurrency with well designed bots and automation can make messaging a highly efficient channel for interaction.
Herve Mazenod, Managing Director of Insurance and Investment, discussed that 2019 has predominantly been about continuing investment in technology. He explained that there has been a realisation and an increasing number of technology specialisms which require some very specific partnership engagements. “Certainly, disruptors have started to make some headway, but they have not yet shaken the market up completely, as with some other sectors. What they have done however, is embedded new ideas, such as automatic claim settlements, auto-enrolment and the use of AI for underwriting decisions, which has meant that the more traditional firms are increasingly at risk of falling behind.”
95% of respondents expressed concern with the impact that the current speed of technological change will have on their growth.
We recently undertook some research on the topic of customer experience and digital transformation across the whole business, revealing an overall feeling of optimism across the board. In insurance specifically, 70% of firms expected their revenues would increase in the next 12 months. Despite this optimism, insurance was also the most concerned sector when it came to technology, with 95% of respondents expressed concern with the impact that the current speed of technological change will have on their growth.
When commenting on this research, Herve explained that, as the year progresses, there will be an increasing use of integrators to make sense of all the different technology partners available and ultimately pull the best together to serve the purpose of the entire customer/client experience. He explained, “as the pace of both M&A and technology change continues to increase, organisations will need to be more focused on the human angle of transformation. We believe that those who will be the most successful will need to look at their business processes through a more human lens. We want to put human experience at the heart of everything: taking an end-to-end view of the customer journey, leveraging digital technologies with to augment human interactions, and engaging colleagues on this journey. Those who succeed in this will ultimately get ahead.”
When speaking to Jonathan Shawcross, Managing Director of Banking, he too expressed a need to focus on human experience first and foremost. He commented, “Technology is only part of the answer though. For organisations to win in the race for customer loyalty and stronger profitability, they will need to successfully marry great technology and innovation with a major focus on what this means for people – customers, employees and partners – in the transformation journey. Taking this human lens will differentiate the quality of solutions offered, drive greater efficiency in getting there and will engage their own people more significantly in the change and in delighting customers. 2020 is already shaping up to be a huge year in determining who will ultimately succeed and who may not be able to make the scale of changes required in time.”
The challenge is ensuring great experiences are delivered no matter the channel chosen.
We also spoke to Vanessa Flather, Managing Director of Retail. She identified that while digital is, and will continue to be a key component of strategies, abandoning bricks and mortar carries great risk. As customers demand greater flexibility, physical locations can showcase brand-purpose, assist conversion through other channels, and with 49% of consumers using in-store pickup as a faster alternative to home delivery, act as a key engagement point.
It’s now not a question of digital vs physical, the challenge is ensuring great experiences are delivered no matter the channel chosen. As digitally native brands such as mattress retailer Casper, athleisure and footwear brand Allbirds and even juggernauts such as Amazon eyeing up increasing physical estates, the importance of getting this blend right is of utmost importance and urgency.
Taking a deeper view on health food given that consumers are becoming more and more savvy on this agenda, she explained, “for them, it’s not just solely about being ‘meat free,’ embracing complex carbs or reducing packaging in isolation - it’s now about all of these things combined together. Innovation will be key to this, but so too will brand transparency.”
Vanessa believes that consumers are wanting to know more and more about where their food comes from. Provenance and processing methods are becoming vital pieces of information in selecting products/brands. It’s no longer acceptable for ‘part-solutions’ e.g. the organic sauce that’s full of salt, GMO, soy or even chlorine-bleached teabags. She contends that consumers now expect as a standard to know – or be able to find out – pretty much everything about the brands they engage with. “Certainly, today’s mindful consumer knows exactly what they want, and our retailers are going to have work hard to fulfil that need.”
High tech Outsourcing
Chris Hallmark, Managing Director of Specialist Sectors, provided some interesting remarks on the future of high-tech outsourcing. He talked about how 2019 followed the ongoing trend of legacy ‘lift and shift’, outsourcing to low cost regions becoming a model of the past; explaining that organisations have instead been building relationships with high-tech outsourcing vendors that support them to scale digital transformation, with outcome based commercial partnerships (instead of traditional FTE based). Chris expects to see this trend accelerating as the year progresses, but with increasing complexity.
He said that, “the skills high-tech outsourcing vendors require to design and deliver these end-to-end solutions are in very short supply. Individuals with these skills are typically overloaded and stretched across multiple projects. It will therefore be increasingly important for high tech outsourcing vendors to develop operating models that enable this kind of complex solution development. In reality, this will mean building multi-discipline transformation ecosystems and leveraging best of breed suppliers of services, to differentiate from an increasingly competitive market.”
Chris Hallmark also provided some insight on Shared Services Operations and explained that in 2020 these business units have a unique opportunity to reshape how they operate, and consequently, the value that they deliver.
He explained that a shift from pure service delivery to becoming disruptive, digital front-runners within their organisations will result in greater strategic value. However, to achieve this against a backdrop of rising expectations and the challenges in end-to-end ownership, he believes they will need to look at things differently. “by placing customer experience at the forefront of all their decisions Shared Service leaders can intelligently blend digital and human interaction to deliver the next wave of transformation.”
The Public Sector
There will be an increased focus upon experience and associated technologies to support, both efficiency as well as effectiveness.
Last, but not least, we asked Chris Hallmark about how he saw the rest of the year unfolding for the public sector. He was keen to note that in the current political context, most of the public sector spend has been focused on the NHS and policing. This means that other public sector departments, such as Government bodies, are increasingly challenged from a budget perspective. Whilst there is no direct competition for Government departments, the way in which their ‘customer’ contact performance is measured is evolving (and for the better).
Chris believes that there is now a greater emphasis on the experience of these service users, which is more akin to Key Performance Indicators (KPIs) found within the private sector. He explained, “these measures are publicly reported on, heightening the risks associated with poor performance. As such, we believe there will be an increased focus upon experience and associated technologies to support, both efficiency as well as effectiveness. This will present significant challenges within the public sector, because they are less likely to have pre-existing technology partnerships or the required in-house transformation capability to achieve this.”
He concluded, the ability to innovate, and deliver proof-of-concept projects, will have to become a key priority. This will not only enable far more effective business case development but allow them to build partnerships with external suppliers and create more diverse capabilities.
What the future holds for consulting firms
“a cookie cutter approach simply won’t be enough.”
Mark Palmer, CEO believes that it is time to reinvent consulting. He explains “the new normal of consulting is an industry that combines traditional consulting with managed services, and is moving from a time and materials approach, to an outcome-based fee structure.” Palmer notes that this new era will be motivated by purpose- led, relationship driven consulting, and will put the client at the forefront of all decisions. He also maintains that this new era will rebuild trust in an industry that has suffered from negative press.
He also predicts that clients will become far more reliant on a partnership approach using multiple experts to deliver transformation. He noted, “The ability to bring together a full set of solutions to deliver transformation is less likely to be delivered by the client’s own team given the increased number of complex, component parts. What clients do want is both someone to help make sense of this, as well as a partner to share the risk.”
Another key driver of change in the industry is consulting firms won’t hold all of the knowledge in-house for themselves either. With this in mind, partnerships between tech companies, recruitment firms and many others, will be paramount to deal with the more complex and bigger ticket programmes. “a cookie cutter approach simply won’t be enough.”
To thrive over the next 12 months, firms should be prioritising the following key activities:
1. Aligning spend with value
With the rise of challengers with very clear value propositions, there has never been a more important time for organisations to focus on what makes them successful, and channel investment into these areas. Spending time with clients and listening to their needs has to be top of the agenda. Where activity makes little difference to the customer, leaders should ask whether it can be simplified, combined, eliminated, relocated or automated.
2. Invest in what the client needs
In recent research we undertook on the topic of customer experience and digital transformation, 62% of respondents expressed concern with the impact of technological change on their business. We believe that in 2020 there will be an increase in the use of strategic solutions integrators, who will bring together technology providers to provide solutions rather than a series of product implementations.
Structurally, many businesses we see are still not set up to take full advantage of new technologies. Leaders need to reimagine how their businesses are organised, rather than simply add another layer to the problems. We call this an operating model rethink; it's great therapy.
3. Outcome-based consulting
Those using consulting will see a reinvention, with a move away from traditional consulting with its time and materials logic to an outcome-based fee structure. Clients don't want to pay for consulting services “on the clock”; they are more prepared to pay for outcomes based on want consultants say they will deliver.
While 2020 will no doubt prove just as challenging as previous years, taking the same approaches to large, strategic issues will continue to yield marginal results. For businesses able to take a step back, focus on the people they serve and work alongside, there is an abundance of opportunity.
If you don’t, someone else will.