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Best Face Forward
by by Jeffrey F. Rayport and Bernard J. Jaworski
How do you serve your customers? Let us count the ways. You serve them through your retail stores, through your Web site, through your catalog and customer service call centers. You serve them through touch points that are human, like clerks and concierges, and you serve them through touch points that are automated, like vending machines and voice response units. If yours is like most companies, it has a broad collection of these interfaces and is investing in even more. But what it probably doesn’t have is an interface system. That is to say, all of those ways you connect and interact with customers don’t add up to an integrated and unique capability to manage relationships.
Unless you manage it explicitly for advantage, that portfolio of interfaces is going to become your biggest liability. Too many people and too many machines operating with insufficient coordination (and often at cross-purposes) will mean rising complexity, costs, and customer dissatisfaction. Turning that liability into a competitive asset is possible—indeed, it’s what will separate the winners from the losers in practically every industry sector. But realizing new levels of effectiveness and efficiency will require a serious reengineering effort.
Perhaps in the context of the front office the term “reengineering” is surprising. Since it took the business world by storm in the 1990s, the approach has usually been applied to behind-the-scenes operations. But reengineering’s principles—starting with a clean slate, redesigning processes in light of current capabilities—are strikingly suited to today’s front office. Every indication, whether it be declining customer satisfaction indexes or the actions of the typical retail employee, signals that the customer interface is ripe for reinvention. At the same time, the rapid evolution of what we call “interface technologies” is making the reinvention of frontline service interactions—and of the entire service sector—possible.
Reengineering the front office will probably not be much easier than reengineering the back office. In some respects it will be harder. But consider the alternative. Your interface system is ultimately the face your company presents to customers and markets. Can you afford not to put your best face forward?
The Interface Imperative
The truth is that interactions with customers, and the customer experiences that result from those interactions, are, for many businesses, the sole remaining frontier of competitive advantage. If this seems to overstate the point, consider the four broad trends that have brought us to this watershed.
First of all, competitive differentiation along traditional dimensions of corporate performance is becoming largely unsustainable. Ours is an era of near total commoditization. Several years ago, consumer electronics executives in Taiwan developed the habit of using the English phrase “three-six-one” to refer to the competitive dynamics of their business. What they meant was three months to create a feature, function, and price configuration that differentiated an offering in consumer markets; six months to harvest the margin afforded by that differentiation; and one month to liquidate excess inventory after the offering became a commodity. A ten-month product life cycle! Such abbreviated life cycles have infected nearly every industry (partly as a result of the diffusion of electronics itself into every sector of the economy), making new offerings generic or obsolete faster than ever before. Sector after sector in the economy suffers from overcapacity. And margins, even for highly sophisticated technology products, are difficult to maintain. For most businesses in most industries, the opportunities to create sustainable offerings-based advantages are few and far between—or simply nonexistent.
Second, there is longstanding evidence that quality of service matters very much to customers—in many cases, much more than price or performance. One large-scale research study spanning consumer and industrial businesses, for example, measured the role of service quality in customers’ decisions to switch vendors. The variables the researchers examined were service quality, product features and functions, performance, and price. The results showed that service quality had five times more weight in influencing purchase and repurchase decisions than any other attribute tested.
Third, given the greatly expanded scope of service work in the economy, finding appropriately skilled labor is getting harder and harder. In most developed countries today, the vast majority of jobs are service oriented and involve interaction with customers. Recent data from the U.S. Bureau of Labor Statistics indicate that over 90% of workers in industrialized economies are employed in service positions. Back when frontline employees represented a small proportion of the total workforce, it was easier for companies to fill customer-facing jobs with cream-of-the-crop talent. Companies trying to staff their front lines today are dipping much deeper into the labor pool, tapping less skilled workers. Airlines, hotels, and retailers of all stripes have a notoriously hard time recruiting and retaining motivated and presentable individuals for frontline positions. Consider fast food. Franchises recruit high school students, who spend an average of four or five months in these jobs. The low-skill workforces that fast-food franchises field have an annual turnover of 138%. This is a big part of why corporate America spends $50 billion a year on the remedial education of its workers. To be effective in customer-facing roles, employees must be literate and numerate and, ideally, have analytic capabilities, well-honed interpersonal skills, and emotional intelligence. The cost of such talent will only escalate as the baby boom generation ages and exits the workforce and demand for such labor grows.