Part Three: The Critical Leadership Component

(I. Barry Goldberg, principal consulting partner of Matterhorn International, continues his six-part series on integrating customers into strategy to form a truly customer-focused company. Last month, Goldberg provides a framework for measuring capability in the core disciplines needed to operate a customer-centered enterprise.

In my first two articles, I made the point that becoming a truly customer-centric organization requires much more than CRM. If, however, there is a single critical component in all successful transitions, it is found in the executive suite. In my years working with companies struggling with customer management, I have found visionary, courageous and skillful leadership to be the single most reliable predictor of potential success.

CRM is an interesting phenomenon. Although it is sold on the long-term value propositions of customer loyalty and lifetime value, it is too often implemented against short-term goals of cost reduction and customer cross-sell. Garnering the long-term sustainable competitive advantage that is the promise of CRM requires long-term success measures as well. This is not to say that there are no immediate returns on CRM investments or that they are not valuable. Successful CEO's understand that re-engineering a company around customers is not the same as automating a call center to be able to reduce head count by 10 percent--although some of the downstream technology projects to attain these goals might be similar.

What do I mean by visionary, courageous and skillful leadership? It is easy to recount stories of leaders who were clueless about the impact of their actions. (I recently heard a Fortune 500 president tell his company that their service levels were unacceptably low and that "CRM is our business" in the same meeting where he ordered a 10-percent headcount reduction in the call centers and slashed training budgets company wide.) Instead, let's look at some examples of positive customer-focused leadership.

During the Gulf War, the CEO of USAA, retired General Robert McDermott realized that his financial services firm was vulnerable to a high number of potential loss claims. USAA serves military personnel and had at the time an average of over three products per serviceperson's household. USAA could anticipate not only the financial impact of claims, but the difficulties and expense of processing them all as well. Did the General begin cutting costs or looking for low-profitability customers to winnow? Actually he did the opposite; He made customer experience more important than current spending levels.

General McDermott realized that under USAA's structure (separate divisions for different product lines of insurance and banking) the spouse of an injured or deceased serviceperson would be required to file a separate claim with each of the divisions. His response was to tell the CEOs of these business units that having customers go through that experience an average of three times, especially to handle such emotionally charged transactions, was unacceptable. His dictate was for them to find a way to handle all USAA claims through a singular process.

The most vocal opponents were the attorneys. Different regulatory bodies and 50 states to satisfy for compliance made risk unacceptably high and processing extremely complex. The General was adamant, and made a courageous decision to take the added risk and expense. The single claim unit (and the process that supported it) was up in 60 days and, based on customer reaction, is still how business is done at USAA. The story is a fascinating one that I wish there were space to fully explore here.

There are two important factors that made the response possible for USAA. First was the General's foresight regarding profitability. He was willing to incur considerable current-year expense in order to ensure long-term customer loyalty. Second, since he took over at USAA in the mid 60s, General McDermott had invested in infrastructure and business processes that enabled USAA to respond without having to either cobble together systems or embark on a $100 million architecture overhaul. While each of the business units had both unique and shared customers, all customers were included in an enterprise customer master file. At a time when many banks and insurance companies did not even have customer masters, a unique number identified a USAA customer across all products and divisions.

Another great example comes from a man who owns a small chain of tire stores in the West. If you go into one of his stores you will know immediately that he often says to his employees, "It is not about the tires." He sells the same tires you can buy at a half dozen of his competitors. But what happens when you enter the store is much harder to replicate. Someone who really knows tires and how to match your car to the right tire greets you. That person is supported by an information system that helps him identify you, your car(s), your history and his current inventory and workload. It is clear that he has been trained very well. If they tell you 45 minutes, you can set your watch by it. The follow-up call that comes three weeks later is truly to be certain that you are happy with your purchase. So, what does this have to do with leadership?

This small business owner spends over three times the industry average on employee development and pays wages half again above competitors. His information systems were custom built at a cost that would outstrip the budget for businesses three times his size. When you talk with him, you learn that he figured out early that he would die quickly if he tried to compete with tire chains on price. He determined early in his business to differentiate himself based on customer loyalty--and it has worked. No one would call tires a glamorous business but he has grown 30 percent year on year since his second year in business and is now buying out smaller, less sophisticated, businesses in his geographic area.

In each of these cases, we could take apart the actual business practices and technologies involved; however, in each case the key enabler is in the executive suite. When you hear consultants insist on "senior management involvement" in a CRM project, they are only partially right. In most instances, the president and CEO is the only person who can be the executive sponsor for an enterprise transition. This person may delegate project and program office oversight or other implementation tasks. Generally however, the test question is: "Who within the framework of our company can be ultimately accountable for a customer's experience of being in a relationship with us?" Does your president or CEO have the vision, courage and skill to raise a hand?