Perfecting Service Management

Issue #64

Tuesday, February 15, 2005

Book Recommendation by CCI President Craig Bailey

Want your company or organization to evolve from good to great? If so, then the book Good to Great by Jim Collins is a must read. It is based on a 5-year study of a set of elite companies that made the leap from good to great results and sustained those results for at least fifteen years. This book provides a clear analysis of why some companies make the leap and others don't.

While overflowing with in-depth content, I took away 3 key themes:

1) The importance of getting the right people on the bus, the wrong people off the bus and making sure that those on the bus are in the right seat. To "make the leap" you must confront the reality that the right people are required to go from "Good to Great."

2) Simplify by getting focused. To do so, it is important to answer the following three questions:

- What are you deeply passionate about?
- What drives your economic engine?
- What can you be the best in the world at?

With these questions answered, you will want to focus on the intersection of the three circles, known as the "hedgehog concept." Sound intriguing? Well, I won't tell you how the lowly hedgehog fits in, but clearly answering these questions will create simplicity and a laser-beam focus for your organization.

3) The role of technology In this age, companies too frequently view technology as the answer. Not so with Good to Great companies. Instead, these firms leverage technology as an accelerator of momentum (that already exists), NOT the creator of it. More specifically, the great companies within this study leverage technology that links directly into the 3 intersecting circles of the hedgehog concept.

As commented by Jim Collins, "Some of the key concepts discerned in the study fly in the face of our modern business culture and will, quite frankly, upset some people." So, the key question is - can you afford to ignore these findings?

The items outlined above are what I took away. With the depth of research and findings provided I'm convinced that you will identify your own set of key themes that will make a difference in transforming your company from "Good to Great."

Culling the Customer Herd
by Kurt Jensen

It certainly isn't news that in a typical B2B relationship, each entity involved is trying to maximize revenue. However, a seemingly obvious business basic is often lost in translation between Finance and Service Delivery: customer relationships which do not cover costs cannot be made up in volume. If you find a customer relationship is not covering costs, what can you do? It's simple: fix it or drop it.

Defining Relationship Costs

A key to determining your course of action is clearly defining the cost of the relationship. To be truly effective, this must involve more than simply spreading costs of operation evenly among customers. Customer Segmentation (see CCI Newsletter #22) can be a vital first step. Part of segmentation activity involves applying direct support costs, such as number of situations (e.g. tickets in a given period) and cost per situation (e.g. cost to resolve each ticket) against revenue during the same period. Keep in mind other less obvious inputs, such as cost of escalation, toll on staff (e.g. a historically volatile customer), etc. In the end, you need to be able to answer the question: "Is the effort I'm spending on this particular customer relationship worth it?"

Deep Breath Moment

Answering these types of questions isn't comfortable. In fact, often the same data will produce different answers from various parties with different levels of vested interest. For example, if, as a Service Delivery Professional, you conclude that a certain customer relationship is 'not worth it', look for Sales to disagree. Further, be prepared to include into your findings information which becomes available only after you propose taking action; be prepared to restate your opinion based upon new findings.

Course of Action

Upon concluding a relationship is not worth it, there are only two essential courses of action available to the serious, profit-driven organization:

  1. Try to fix the relationship. This course of action requires a complete end-to-end understanding of what will 'fix' the relationship, a related timeline and expected result. It will also require being in a position to walk away (i.e. acting upon a 90 day cancellation clause).
  2. Drop the customer. As harsh as it sounds, simply dropping a relationship which is deemed 'not worth it' can be extremely liberating. From staff morale (no more 2am dress down sessions) to freeing up resources (reapply or save costs), the bottom line is the needs of this customer would be better served by one of your competitors! One idea: list your competitors' contact information in the 90 day cancellation notification letter!

When applying either course of action, expect to deal with everything from anger to understanding; customers who are truly interested in a winning relationship understand the need for mutual success.

Culling the herd is an aggressive and bold approach to addressing Customer Relationships. Taking focus off of unprofitable (culled) customers enables you to better focus on the profitable customers. Unless you are confident that all of your customers are worth keeping, it is a worthy exercise to analyze "that one customer" you are thinking about right now.

Becoming Customer Centric - Analyze Information
by Craig Bailey

We start this edition with a graphic representation of what we have covered so far in the Voice of the Customer process - "Obtaining the Pulse of the Customer."

Once your company has collected customer-related input and feedback in various forms from various sources and validated this input against customer perception, how do you leverage this invaluable information? The first step is analysis, of two kinds:

  • Analyze customer feedback and information gathered
  • Analyze against other information held by the firm

Analyzing customer feedback involves reviewing both the qualitative and quantitative information gathered to identify:

  • Positive trends (what is working?)
  • Troublesome trends (what needs attention?)
  • Themes being heard from the customer

Analyzing against other information held by the firm involves evaluating customer feedback against:

  • Customer demographics
  • Transactional history (inquiries, orders, service requests, web-site usage, etc.)

As the analysis process unfolds, the observations (themes, learnings, issues, etc.) should be logically categorized so that the firm can make best use of this information. Typically, the general categorizations coincide with the functional areas involved in the program, including:

  • Marketing
  • Product Management
  • Engineering/Development
  • Sales/Account Management
  • Professional Services
  • Training and Education
  • Service and Support
  • Accounting/Finance/Billing

A common outcome of this step is a defined customer segmentation strategy. It may be determined that customers with certain characteristics (demographics, purchasing behavior, etc.) are more satisfied, have longer relationships with the firm, or purchase larger quantities and a more diverse set of products/services than others. Customer segmentation is an effective approach to support the subsequent steps of defining action-plans to respond to results.

It is suggested that a centralized function or single person (depending on the size of the firm) perform the information aggregation and top-level analysis in support of the organization's performance of the next steps that we will cover in the VoC process.

If you'd like to review an outline of the complete VoC program, feel free to download the presentation recently delivered to PDMA's VoC conference.

View previous articles in this series.

+ Culling the Customer Herd
+ Becoming Customer Centric
+ Recommended Reading

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Recommended Reading
This issue's recommended reading is CRM Magazine article
Blending Strategy and Information
, by Jonathan Becher. We all know the importance of data. However, in designing and implementing a CRM system, analysis of data can be misleading. Instead, according to Mr. Becher, organizations should start with overarching business goals, and build from there.


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