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Second Generation Definition of 360-Degree View
In the new book The Relational Enterprise: Moving Beyond CRM to Maximize All Your Business Relationships author Kenneth Carlton Cooper extends the 360-degree view to all the components of a company's universe. What follows is an excerpt of chapter 7.
For the rest of the July 2002 issue of CRM magazine please click here
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I love to snowboard, because it's like sledding except that you don't have to walk back up the hill. This year we were riding the back bowl at a Colorado summit area resort, and found out they had a sno-cat that would take anyone up the backside of the bowl where there were no trails or lifts. At the end of the ride there was a thirty minute walk up across the ridges until we reached one of the highest points in the area. You had to be determined, because the air is thin at the 12,500-foot height of the path. Once there, we were stunned, mostly by the foot-slogging, lung-searing hike but also by the vista. Talk about a 360-degree view. We stood there, turning around, seeing thousands of feet down in every direction. Highway 70 was a thin ribbon glimpsed between the slopes. We were glad that a couple of our friends had chosen not to join us. We thought it was exciting, but they would have needed tranquilizers and a ski patrol sled to get off the mountain. It was a spectacular view, but it would have been sensory overload for them. There was just too much mountain at too high a difficulty. You can see where this analogy is headed. Put yourself in the "ski boots" of a customer interfacing with a financial institution like Bank of America, with its 156,000 employees. Where do you start? Whom do you seek out for service? If you are an employee, what is the right department to which to refer this caller? Once there, where do you start within this department? With the advent of voice mail and the obsolescence of receptionists, figuring out the entry point in a complex organization is nearly impossible. And it is even more confusing when dealing with a spider chart of separate companies or agencies. Workers don't know their own organization and procedures well enough, much less those of other companies, and customers don't know enough to ask for the right directions. A true relational enterprise provides customers and workers with the ability to see each other through every stage of the business cycle. Think of it as looking down the mountain and also looking up. The label used is a "360-degree view of the customer." This is one of the most overhyped and least understood concepts in business today.
A Bidirectional 360-Degree View A 360-degree view, often equated with customer relationship management (CRM), is typically defined as "providing everyone in the organization with a consistent view of the customer." This is one of those definitions that sounds vaguely helpful but doesn't convey much. What does a "consistent view of the customer" mean? Should we be thinking only about a customer view? What about an enterprise view? The first question to clear up when talking about 360-degree view is, whose eyes are we looking through? The most common definition is the one above, that we are referring to the enterprise's view of the customer. This requires effectively capturing customer data and sharing it throughout the spider chart. As we learned in Chapter 6, this single-enterprise view of a customer requires different roles to add value at various stages of the business cycle. Some organizations, mostly those at the leading edge of Web technology, are focusing on the reverse, "a customer's view of the enterprise." Self-service Internet systems distill the entire enterprise into a single view, so that customers can work their way through the business cycle on their own. In addition, customers want a single point of contact within the organization who can take their issues to resolution on the initial contact. These two viewpoints are both first generation customer concepts. By that we mean that these definitions of 360-degree view are relatively unsophisticated beginning points. Getting all customer data into one coherent system so that everyone can access it is an important starting point, but it doesn't provide much of a value-add to the organization. The real issue is what that view can help an enterprise accomplish. Providing consistent customer data is a feature, not an advantage. (Stomp, stomp.) The second-generation definition is: 360-Degree View: Treat customers throughout the business cycle based on their lifetime profitability. It's not enough to provide consistent data. So what? The leverage is in what the data enables workers to do while serving customers, and what it enables customers to do with self-service. In the search for revenue growth throughout the 1990s, many organizations lost sight of profitability. Lifetime Customer Profitability Lifetime customer value has been a fun-damental building block of customer service systems for many years now. Carl Sewell of Sewell Cadillac in Dallas wrote about his typical $332,000 customer--the cost of twelve luxury cars plus associated service revenue. Grocery retailers know that the typical consumer shops at three locations, and spends an average of $100 per week at a favorite store. With an average time between moves of seven years, the lifetime revenue of a grocery customer is over $36,000. Note that the definition of 360-degree view focuses on lifetime customer profitability, not revenue or value. Revenue is the wrong measure. It's like the old New England farmer who was asked what he'd do if he ever won a million dollars in the lottery. "Well," he said, "I'd just keep on farming 'til it's all gone." As many Japanese companies found out in the 1990s, and the dot-coms found out at the end of the decade, the long-term pursuit of market share ultimately had to be supported by a profit stream. Value is also the wrong measure. Look it up in the dictionary. Value focuses on worth or exchange. Profit is a measure of excess. Customers pay more for something than it costs to give it to them. (As comedian Yakov Smirnoff would say, "What a country!") The more profitable the relationship, the more vendors can do for customers. There are three major goals of profitable relationships. The first is to make existing profitable customers more profitable. This is accomplished by one-to-one marketing in cross-selling and up-selling existing customers. The second is to acquire additional profitable customers. This is a function of customer profiling and target marketing. The third is to turn unprofitable customers into profitable ones. This can be accomplished again by cross-selling and up-selling. It also means doing analysis to understand individual profiles, and then identifying and chasing away (or sending to competitors) customers who will never be profitable. This second-generation definition seems like a small distinction, yet defining "360-degree view" properly can prevent miscues. I had the chance to talk to two bankers while teaching a seminar in Australia. When we got to the lifetime customer profitability issue, they mentioned that their bank had just spent millions of dollars on a marketing campaign to acquire 10,000 new customers. The bank had met its goals with just one minor problem. The customers were mostly consumer accounts and, on average, about 60 percent of individual accounts are unprofitable. Certainly, this bank had the opportunity to cross-sell and move as many of the 6,000 unprofitable accounts into profitability as possible. Yet it would have been far more beneficial for the bank to understand who its current profitable customers were, profile them, figure out to reach more of them, and then target a tailored campaign to attract them. The bank spent millions of dollars to increase their losses. And the marketing group probably received a bonus for meeting goals. What were they expecting? Four thousand profitable accounts are more than offset by 6,000 unprofitable ones. As far as lifetime customer profitability, the two attendees said that the bank had no idea how many of the new customers would ever reach profitability. There had never been any data collected to use in making projections. It's like the old Saturday Night Live TV commercial parody for the "Change Bank." How does a financial institution make money when its sole service is making change? Volume! 360-Degree View and the Business Cycle The best way to understand the 360-degree concept is by linking it to the business cycle. Many system vendors are describing their offerings as giving organizations a 360-degree view of customers, when the actual coverage is far less. A 1999 META Group survey of a hundred companies involved in customer relationship management found that although most organizations wanted to buy integrated systems, many were actually installing line-of-business point solutions. There are a number of factors behind this. No software vendor can be best-of-breed in every functional category. Enterprise-wide integrated systems are extremely difficult to design and implement. And enterprise customers are still organized into line-of-business and departmental structures that resist the levels of integration required for a 360-degree view. META Group found that a majority of organizations had implemented at least one customer relationship system, most often the service function. As Figure 7-1 shows, implementing any single CRM application--such as sales force automation (SFA), service/support, or field service--provides only a 30-degree view of the customer. This single application approach is called a "point solution"--meeting one department's needs without worrying about the bigger integration picture. Our catch phrase for this approach is, "Point solutions--you get to do it right next time." Stand-alone solutions that address just a single stage in the business cycle provide only localized value to the enterprise. This is because they attempt to solve one problem at a time, often with incompatible systems from different vendors. For this reason, analysts predict that most point solution vendors will either go out of business or become acquired, and existing process automation systems will have to be gutted within two years. As shown in Figure 7-2, even combined solutions such as marketing/SFA, or support/service offer only a 60-degree localized value view of the customer. While there is some synergy between pairs of applications, only a small portion of the business cycle is addressed by such a system. And a 360-degree self-service view is impossible because only a small portion of the customer cycle is addressed. The current approach of software vendors is to offer a CRM application suite that is touted to offer a full 360-degree view of the customer. However, a CRM suite alone actually represents only a 90-degree customer view. As Figure 7-3 shows, CRM suites still cover only a portion of necessary business cycle stages. This is why a stand-alone CRM suite delivers only reactive value to the enterprise. The problem is that the applications in a CRM suite deal with "lagging data" in an after-the-fact manner. The first indicator is that most of the data is inputed by CRM end-users themselves. Recording the results of a sales call, creating a service trouble ticket, or providing quality improvement feedback are all examples of lagging activities. CRM helps employees deal with customer incidents after they have occurred. While the use of any CRM application will generate some operational benefits, business results will never be optimized solely through the use of a CRM suite. At best it provides only a 90-degree view and facilitates the ability to react to events after they have already happened. A true 360-degree view is obtained by encompassing all stages of the business cycle as shown in Figure 7-4. This approach incorporates data from both the back office and front office, and then combines it with analysis so that employees can add proactive value. The result is that people in various roles can anticipate a customer's sales and service needs, leverage analysis information to target marketing campaigns, link to buying histories and billing information, and see the customer's entire relationship with the organization in order to make better service decisions. A true 360-degree view also lets customers serve themselves throughout the entire cycle and take their own proactive measures. Summary "360-degree view" is one of the hottest concepts in the area of customer relationships. Everyone is talking about it, but no one really understands what "a consistent view of the customer" means. A better definition focuses on allowing everyone in the organization to be proactive with customers based upon their lifetime profitability. A 360-degree view is also required to enable what customers are demanding--self-service throughout the entire business cycle. Every constituent in the spider chart must be operating using the same definition of 360-degree view, whether from the organization out or from the customer in.
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