Connecting the dots
IT is a strategic linchpin in the service-profit chain, because it provides internal service value waiting to serve the business in the delivery of business services. Yet historically, IT has been viewed as a tactical function, and its services as commodities. This legacy perception remains the norm in spite of the fact that the strategic role of IT has grown spectacularly over the last decade. Unlike externally-focused service centers, most IT organizations and other internal service teams have not yet deployed automated or standardized processes that are the keys to operational efficiency and continuous improvement. This is the IT leader’s greatest challenge, one that supersedes all others, particularly in a dynamically changing business environment - transform the perception of IT from that of a support function to a vital link in the service-profit chain.
When it works well, internal service delivery is seamless. When it works poorly, the costs to Global 2000 firms are billions of dollars wasted annually. A few years ago, I traveled east to present the value and business impact of Change Management to a multi-billion dollar financial services company. The problem with the event was that no one showed up for the morning presentation! They were busy resolving and recovering from an application change gone bad that was now impacting everyone’s (almost 8,000 employees) ability to access email, the internet and hosted business applications. A vital link in the service-profit chain had been severely severed. The company measured their estimated losses in lost employee productivity, over-time IT expense and lost revenue opportunities to the total of $1.5 million for the 28 hours of down-time. The afternoon session was PACKED with all the right people who could and would change the way they performed Change Management. They realized that they needed to quickly get on the road to IT maturity – their business depended upon it.
Low- to medium-performance IT organizations
Are your support services meeting the ever-changing needs and expectations of your company? Are they delivering business value to the organization? Is your IT function helping to create a high-performance organization?
Here are some signs that you might be behind the quickly changing times – read fast – time’s a wasting!
Always ask, never settle
To best address the above challenges, IT leaders must define and manage the linkages and tradeoffs among the four most critical dynamics:
One thing is certain: More is not always better. Organizations spend millions of dollars on support infrastructure, enterprise applications, mobile devices and professional services to become more business-aligned and reduce the cost and complexity of delivering IT services. But does it translate to value creation? Are we over-complicating the model, the design and the delivery? Does it have to be this hard?
In the book “Does IT Matter”, author Nicholas Carr challenges IT organizations not to overspend, but instead to focus on optimizing the performance and cost-effectiveness of its resources. For most companies, IT has to matter and the sooner the better. I am hopeful that publications like this one can inspire leaders to awareness, adoption and action. A recent survey by Accenture's Institute for High Performance Business found that of 370 companies across 35 countries and 19 industries, high-performing businesses (a business that consistently outperforms peer companies in revenue, profit growth, and total return to shareholders) do not necessarily spend more on IT than their peers. Rather, they optimize their existing services, people, projects, and assets to deliver high-quality, highly available, high-value-add services that matter to the business. I have taught IT Management for over 10 years now and have witnessed the professional growth, awareness and business maturity of both service professionals and organizations. It’s been a pleasure to observe their ability to innovate as well as adopt and adapt industry best practices to become a high performing company. They found the “secret” to delivering high-quality, high-available, high-value-add IT services to the business through optimization, utilization and continuous improvement of IT services based on aligned business priorities.
In Frederick Reichheld, Earl Sasser and Leonard A. Schlesinger’s landmark study “Putting the Service-Profit Chain to Work” (1) , firms that placed frontline workers and customers at the center of the service model were benchmarked. The service-profit chain, developed from this analysis, established the interconnected relationships among internal service quality; employee satisfaction, retention and loyalty; service value; customer satisfaction and loyalty; revenue growth; and productivity.
The links in the chain are as follows: Profit and growth are stimulated primarily by customer loyalty; a 5% increase in customer loyalty can boost profits by 25% to 85%. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal, and productive employees. Employee satisfaction results primarily from providing the right technology combined with high-quality support services and policies that enable employees to deliver results to customers.
Cleary a customer experience strategy that encompasses all aspects of how customers want to do business with your company should be a high priority. Leveraging the right combination of technology, processes and the magic human touch at the right moment of opportunity through all of your customer touch points can work to your advantage in creating the best customer experience as designed in your playbook.
IT services deployed throughout the customer experience and touch points can work to your advantage in many ways, most importantly in continuing to grow profitable revenue. In the global marketplace, IT services enable your firm to extend and expand its brand, products and services to new and existing customers cost-effectively twenty-four hours a day. We are selling to one of the most diverse customer bases in the history of business. Continuing to market, sell and service the old fashion way will not support a sustainable and profitable business model.
about how you and your firm can continue to enhance the customer experience
by deploying customer-facing technologies (e.g. customer satisfaction,
loyalty, revenue, profitability) as well as internally-focused systems
(e.g. internal service quality, employee satisfaction, employee retention,
employee productivity). In order for firms to successfully deliver IT
business-enabled services they must shed traditional ways of thinking
and acting. IT leaders must make tough strategic and tactical decisions
to rise to the challenge of competing globally in tough economic times
– their business depends on it.
(1) The Service Profit Chain by James L. Heskett (Author), W. Earl Sasser (Author), Leonard A. Schlesinger (Author)