For sure, communication has improved over the past 10 years. The “cold war” has ended, and the two sides are talking. However, this dialog can often be described by one of my son’s tee-shirts, which says: “I can see your lips moving, but all I hear is blah, blah, blah! And almost everywhere we go we see technology not enabling process or enabling bad process. 

Which party is more to blame? IT is the traditional bogeyman, but I believe that’s misplaced. The business side does not have it’s act together here and is all too willing to point fingers at IT without accepting responsibility. I’ve written two articles on this topic that present my reasoning. You can bypadd the qualification step on our side (which is optional) and go straight to them if interested:

http://www.h-ym.com/articles/Presenting%20Process%20Support%20Requirements%20to%20IT.pdf

The latest McKinsey Quarterly reports new data that should upset those designing organizations and managing operations in O/S (office/service) settings. While manufacturing managed to reduce its expense-to-sales ratio by 2.7% over the past year, despite 90& 0f cost-cutting initiatives failing to last beyond 3 years, the SG&A (sales, general % administration – which is basically front and back offices) remained flat.  And these outcomes defy reason, because office “bloat” is virtually endemic to business and is rarely addressed, while most manufacturing operations had already been streamlined to some degree by year 2000, the starting line for data aggregating.

A quick and spurious retort might be, “Hey, we’re just taking better care of customers.” Wrong. When redesigning office organizations and process Outside-In (starting with customer needs), we routinely find clients can – and should – reduce overall office FTE count by 20%, and often more. All these extra people are standing in the way of delivering what customers want most, second only to quality products backed by quality service – dealing with well-trained, empowered employees. Also, the more hands touching work without adding value the greater the number of “fumbles.”

But those are just the facts (and the McKinsey data is corroborated by heaps of empirical evidence). Whose responsibility is it to streamline O/S workplaces? And considering at least some efforts are underway, why aren’t they improving the overall numbers, which empirical evidence also supports?

An open letter to the management & board of directors of Wells Fargo

As business professionals, you must recognize that building and maintaining customer trust creates more value for the corporation than any product or service. That’s particularly true today, in markets with more supply than demand. So I have to assume that the pain you’re inflicting on your health savings account (HSA) customers has escaped your notice. Unfortunately, that represents a severe lack of oversight on your parts.

Recently, I blogged about your failure to provide your customers proper access to their HSA account deposits―and customer inability to reach your HSA department through any communication channel. I titled the blog, “How Do 60 Minute Wait Times & 10% Unemployment Relate?” (http://tinyurl.com/2935azd) to focus on the disconnect between customer service understaffing and the high availability of skilled employees, many desperate for work. While I was using Wells Fargo as a pertinant case example, I intended a broader focus applying to the many other companies are similarly short-changing customers to save money.

However, subsequent communication from other customers plus reflection on past experiences tell me I grossly understated the problem relative to Wells Fargo specifically.

Here’s feedback to the blog I received from other customers:

“Wells Fargo turns its HSA customers off

My husband and I got the same shameful treatment as you did. We can’t use our family’s 1 (and only) new HSA card because Wells Fargo WITHOUT MY HUSBAND’S PERMISSION changed his HSA fluid account funds into an “investment only” status. Telephone lines are tied up endlessly. And he cannot even access the account online anymore because Wells Fargo made his old password obsolete when they issued him a new card and account number (WITHOUT HIS PERMISSION).

…I’m of the opinion that my husband I should lodge a complaint with the state of California’s Department of Financial Institutions. Wells Fargo due to its high-handed draconian new policies has in effect confiscated our HSA money preventing us from using it for our family’s pressing medical needs. We cannot even transfer the HSA funds to another banking institution.”

“Should be a class action suit against Wells Fargo

I also (unfortunately) have an HSA with Wells Fargo, and have been trying to contact their customer service for 2 weeks, to no avail. I call the “customer service” line and get put on hold for an hour or longer and never get through. You cannot email them if you have an HSA, they do not provide any email address or email form to HSA customers. What a nightmare! This is the worst most customer unfriendly banking experience of my life. I will never bank with Wells Fargo again.”

With lots of persistence and hours with my office phone on speakerphone so I could hear, “We value your business…” or whatever over and over again―for hours―I was finally able to reach customer service. Only then did I learn HSA recently switched over to an insufficiently tested new computer system that’s altering customers’ accounts on its own and not even able to issue more than one debit card per account.

Wells Fargo joins many other companies in experiencing catastrophic customer service issues following unsuccessful system transitions. But I know of no similar situation (except for fraud cases) involving restricting or blocking customer access to money they’ve deposited with a financial institution. Further, it’s unthinkable for an FI to fail to communicate with customers―either proactively or even reactively―regarding their inability to access their money. Wells Fargo is callously treating customer money as its own, earning money on it, and getting around to “dispensing” money to customers on its own schedule.

Why is Wells Fargo doing this? Don’t you understand that today’s customers are highly transient? Don’t you understand that honestly and openly communicating with customers about problems (see Johnson & Johnson) produces far better outcomes than hiding problems and hiding from customers inside your firewalls?

On your website you offer a quote from your Chairman & CEO, John Stumpf: 

 “Integrity is not a commodity. It’s the most rare and precious of personal attributes. It is the core of a person’s — and a company’s — reputation.”

Clearly, Wells Fargo as an organization does not subscribe to these principles. Your HSA function has fundamentally broken trust with customers, showing a distinct lack of integrity and no sign of responsibility to them. And this is not an isolated incident for Wells Fargo, just the most recent and acute.

A couple of years back I posted a blog on CustomerThink, a global gathering site for business people serious about building and maintaining customer relationships. The title is, “Wells Fargo: Fifty Ways to Leave Your Customer” (http://tinyurl.com/28svo7o). While even my most popular posts rarely exceed 1,000 hits, this one has attracted 18,059 hits to date. Why do you think this happened?

Wake up folks. You have lots and lots of angry customers out there. They deserve better (as do shareholders). And if customers don’t get better, you’ll soon need to close lots more than your retail lending storefronts.

Respectfully,

Dick Lee

Principal, High-Yield Methods

dlee@h-ym.com

www.h-ym.com

A new McKinsey study reports: “Only 10% of cost-reduction programs sustain their results three years on.” What goes wrong? Two things. Companies either: 1.) ignore process and just cut bodies; or, 2.) redesign “how” work is done for cost-cutting purposes. The first approach should be discussed in a “Dick & Jane” group, not here. The second approach not only ignores the root causes of inefficiency, but it’s like pulling a coiled spring and expecting it to stay extended. Three years to spring back? Lucky if it takes three months. Or three weeks. Or even three days. 

To create lasting change, companies have to remove the spring, not pull on it. By that, I mean they have to change “what” work is being done; “who” functionally is doing it;” yes, “how” it’s done, although that’s not the most important element; and the underlying technology support. Doing all four creates sufficient change to eliminate the “recoil route,” which is essential to avoid reversion. But how does this reduce expense better than making “how” work is done more efficient – in other words, “cutting costs?” 

Simplement, my friends. By letting customers determine: “What” work should be done; “Who” should do it; “How” it should be done; and the technology that should support the new work. Wait, letting customers drive work saves money? You betcha. Customers HATE: layers of bureaucracy; dealing with un-empowered employees; excess supervision; relying on complex policies instead of common sense; work designed to maintain internal silos instead of delivering customer value – all the damn stuff Outside-In process eliminates, thereby cutting far more cost than accomplished by cutting one body at a time or using a process knife to trim surface fat. 

Comments?

To avoid blowback, I won’t mention these traditional approaches by name. But you know which I’m talking about. The square process pegs designed for manufacturing that process people keep trying to bang into round, O/S process holes.

 Want proof they’re not working? From a new McKinsey report: “While manufacturing efficiencies have helped S&P 500 companies reduce the median cost of goods sold (as a percentage of revenue) by 2.7%, over the past decade, SG&A (the old way to say O/S) costs have remained at about the same level.” And this is during the same decade that failed or underperforming traditional process approach redesigns in the O/S have become a pandemic.

No wonder things aren’t improving. And with SG&A costs rapidly narrowing the gap with customarily much higher COGS, not improving is not an option, or won’t be for much longer. The shame is that process approaches designed for the O/S can readily reduce O/S labor, not by 2.7%, but by 27% and more.

The 64-thousand dollar question is, why do process people continue to prove Maslow right – “when the only tool you have is a hammer, then all the world tends to look like a nail” – and why is senior management still not reacting to all the failed, traditional process “fixes” in O/S settings?

Never doubt the power of an outside observer. We often share observations with clients that leave them dumbfounded they hadn’t this or that prior. But last week, I had the tables turned on me. A participant in a Change Management thread directed a comment about Outside-In Process to me saying, “So what you’re really doing is reverse-engineering process from the customer-in.”

Wow. Why didn’t I think of that? Fourteen years ago, when we launched Visual Workflow, why didn’t I think of that? When I look back on the gazillion words I’ve expended attempting (often futilely) to differentiate O-I process from Lean, LSS, Six Sigma et. al., I want to smack myself upside the head.

And just as O-I process reverse engineers work, Outside-In overall reverse engineers the whole company from the customer in. Perfect description…almost. Just one minor flaw. A preposition’s a horrible thing to end a sentence with.

Hey – I’ve been through this entirely too many times. At the start of the relationship marketing movement; when B2B database marketing got serious; when “micromarketing” started; with TOC (Theory-of-Constraints); and in spades with CRM. All sure bets practitioners could take to the bank. All supposed slam-dunks coopted by parochial economic interests – whether by advertising agencies, media outlets, Six Sigma & Lean, CRM software companies, etc.. Looking back on this history makes me fear O-I is ready for a face-plant.

We’re hearing too much ungrounded exuberance, too many excessive claims, too many ungounded predictions about O-I. And saying that market conditions will force business to go Outside-In  ignores history. Let’s face it straight up. O-I will succede if we make it sufficiently attractive to companies, not because the market “forces” companies to go O-I. And accomplishing this will require much more from the O-I community than the community’s yet prepared to give.

We’re changing market phases now from “Innovators” to “Early Adopters.” To get there, we have to do more than prosletyzing the O-I concept. And to reach some of the penetration levels O-I aspires to, we’re going to have to move on to “Early Majority” clients – which will require an execution level the movement’s not yet close to.

To get O-I into the meat of the marketplace, I believe we have to accomplish four, difficult tasks:

1. Do it right:  Migrating from inside out to Outside-In is a three-step journey: a.) aligning strategy to customers (which requires finely honed planning skills); b.) aligning process to strategy (which we’re best at); and c.) aligning technology to process (which the movement often ignores). Sure we can accomplish quick wins with process change or a customer experience initiative - provided the company already leans O-I, like Best-Buy, Fed-X, Trader Joe’s and USAA . But delivering Outside-In enterprise-wide, to its fullest capabilities requires all three alignment elements, not just one.

2.  Train O-I practitioners across the alignment spectrum:  We have lots of O-I practitioners trained in aligning process to customer strategies. Almost none trained in aligning strategies to customers. And way fewer trained in aligning technology with process. We need to provide training in all aspects of O-I. We’re not doing it.

3.  Focus on the steak. not the sizzle:  It’s easy to toss off claims that O-I is the greatest thing since sliced white bread. It’s another thing to make it work. And making it work in organizations not already O-I of their own volition demands properly and persuasively framing the long-term benefits of the inevitable organizational change required to migrate to O-I, rather than pumping the bellows. We need to stop discounting organizational change requirements and start confidently justifying them.

4.  Over-deliver instead of overpromising:  Overselling sweeping, non-specific benefits or offering growth, profitability or expense-reduction bromides hurts Outside-In in the long run. Face it, helping clients achieve broad-based O-I success requires a “grind it out” mentality. We create value incrementally, step-by-step. Enterprise-wide, O-I does not create whopping revenue gains, profitability gains or expense reductions in a flash – or even a year. Double-digit improvements? Very often. But not quantum leaps. Puffery destroys credibility. Remember, our clients are customers. Overselling them on the benefits of Outside-In is very inside-out.

Outside-In has cleared the “Innovator” phase. But we’ll need to change what we say and what we deliver to make substantive progress penetrating the “Early Adopter” segment of companies. And then we’ll have to make even more dramatic changes to enter the mainstream and penetrate the “Early Majority.” As a community, I believe we have a whole lot of hard work ahead of us before we can  bring Outside-In to the corporate masses. Are we ready?

What do you believe?

We used to be a 100% HP office. Now we’re down to 1 multi-function printer (that we’d ditch if it was used more than once in a blue moon) and an oversized 90 degree pivot monitor (only HP makes them) for process mapping on a vertical screen. Here’s why:

1. HP thinks a B2B customer is a checkbook

2. HP thinks a consumer customer is a credit card

3. Manufacturing quality is in the toilet, making good customer service a must.

4. They develop HORRIBLE software and drivers, making good customer service a must

5. They’ve fired their once excellent U.S. support staff and moved service offshore

6. Now when you call for service you get non-English speakers with bad attitudes (you can’t understand them; they can’t understand you)

7. When you try accessing live chat running IE7 they lock you out, saying you’re using an unauthorized browser (listening, Bill?) 

8. They’ve cut off all channels of communication from customers so CEO Mark Hurd can claim they have no customer complaints

Other than that, HP’s just wunnerful, wunnerful. Actually, HP  is the only company I know that can stick up an outhouse.

The Harvard Business Schools “Working Knowledge” newsletter just published an intervieww with faculty member, researcher and pundit Ranja Guloti. The piece is titled, “The Outside-In Aprroach to Customer Service,” with “customer service” referring to all customer interactions (http://hbswk.hbs.edu/item/6201.html). It’s a five-minute read that imparts exceptional wisdom about achieving customer-centricity based on Guloti’s years of tracking both Outside-In and inside-out companies. Everyone concerned about customer-centricity should read and absorb this.

Gulotti makes many incisive points, including levels of customer-centricity achieved along the long journey there. But the two that struck me most are: 1.)  his differentiating between the constraints of nearly ubiquitous  inside-out thinking about customer needs - and how Outside-In lifts these constraints, creating opportunities for truly innovative thinking; and 2.) how organizational silos prevent understanding of problems from converting to action. To the latter point he says:

“As I delved deeper into companies seeking to become more customer-centric, the biggest gap I discovered was the one between awareness and action.”

We see some of our own clients experience “the gap.”  Despite prior alerts that O-I process redesign changes “what” work is done and “who” (functionally) does work – requiring organizational change – we have clients that understand what needs to change and why, yet freeze-up when it’s time for action. The primary culprit? Not being able to bridge functional silos.A primary reason we’ve now adopted an online maturity modeling instrument is to better preduct when “freeze-up” is likely to occur and when not (it’s often tough to read).

Anyway, I’ll shut up so you can read it.

When we help companies turn themselves Outside-In (customer-centric), corporate politics frequently present the highest barrier. While traditional process redesign focuses on “how” companies work, Outside-In process, the mechanism for turning companies O-I, changes “what” work is done; “who” does it; and how technology supports it – along with the “how.” And that’s where politics enter the picture.

 Changing the “what” and the “who” can both alter the org chart, and usually do. With corporate power and control a zero-sum game, change creates winners and losers among functions, managers and often senior executives. Too many companies try to avoid these potentially disruptive changes by letting customer interests modify “how” work gets done, but stopping there. They may wind up more customer-considerate – but that’s a far cry from customer-centricity, which lets customers drive the work companies do and the functions doing it. And it’s far short of achieving the customer-delight so many companies pursue.

How do you help get your company get over the hump to tackle the “what” and the “who?” First, if you’re going to move your company from company-centric, inside-out to customer-centric, Outside-In, make sure it has the requisite capacity for change – at the executive level particularly – before you try. If it doesn’t, find a new gig with one that does. But if it does have the capacity, and it’s worth the struggle, these two steps may very well help:

1. Map out how many layers of supervision and management separate decision-makers from customers – not just in terms of customer intelligence sifting its way up through the layers until it reaches decision points, but also how many layers high-level decisions affecting customers must work through before reaching the execution level. Many senior executives get the picture. They’re acting on filtered information; and their intentions either aren’t being carried out or get carried out by multiple functions acting on multiple interpretations that produce a mixed bag of customer experiences. That’s not how companies delight customers.

2. Redraw the map with all but top-level strategic decisions made by a single customer advocacy (or customer operations) function sitting one level away from customers – and all the internal support the advocacy function needs provided under customer advocacy guidance. In most companies, this shift will eliminate or shrink layers of staffing extending all the way up to the VP level.

Unfortunately, most C-level executives don’t understand how work flows beneath them, including how much strategy implementers change or even disregard their intent. And an even higher percentage can’t accept higher revenue projections based on achieving customer-centricity – but they’ll jump all over cost-reduction opportunities. I agree the latter approach is more than a bit cynical, and talking about further downsizing staff is tough. However, better to streamline the company and survive than trying to maintain an unsustainable status quo. Plus, doing the right things for the wrong reason is always better than continuing to do the wrong stuff. And bottom line, it’s in company best-interests to get to customer-centricity.

In our experience, willingness and commitment to change structurally pushes organizations over the hump from uphill roads with a change barrier at the top onto downhill paths – to customer-centricity. It’s the tipping point.

“Winner” companies get to the downhill side. “Losing” companies stay stymied, stuck going uphill. And in the long hangover anticipated to follow our current recession, the difference between “winner” and “loser” outcomes will widen into a yawning gap, with lots of “loser” companies leaving the scene.

Just ask Circuit City, CompUSA, Chrysler, GM, Siebel Systems, Sun Microsystems, WaMu, United Airlines and innumerable B2B sellers that continued making good products while customers stopped beating paths to their doors about the risk of staying company-centric. These organizations could (or would) change their management hierarchies to permit customer-centric business to take root. Consequently, they’re dead or needing buyouts (or bailouts).