Service transformation risks

The right calculation of risk to cost ratio is a balancing act, which requires vision and extended strategical consideration on the impacted and influenced activities. For example, one such metric is the customer experience index – internal or external.

Please note that the term “customer” applies to any organization or entity receiving goods or services, which can be an external, internal, or third-party entity.

If you ask yourself why this particular example, our answer will be – “competitive markets”. As it is well known, brand success and positive exposure are hugely dependent on the quality of the customer relationships and loyalty. This is why companies should carefully consider how scaling or eliminating budgets related to customer-facing personnel, processes, technologies or operations is affecting the above mentioned due to the high empiric data suggesting a high risk for far-reaching negative effects.

Prioritization of self-service over human interaction, adaptability, and innovation

In principle, self-service, automation and newer technologies like machine learning, ITOM, automated CCR, etc. offer a wide range of tools, processes, and benefits directed towards optimization of the resources engaged. Hence, ensuring that the human capacity is directed towards the activities that cannot be automated or automation is simply not profitable, such as solving complex customer issues, strategic long-term adjustments, and realization of dynamic/tailor-made approaches for different customers.

Such initiatives need a smart, judicial, analytical, and consistent approach. If not done properly the risk of automating everything or anything, which looks interesting is high, thereby wasting resources for replacing real humans with AI-based software or analytical tools, which often compromise the ability to deliver.

Our experience shows that investment in developing a strategy and methodology yields great success when directed towards the goal of creating an environment where the human component can work in tandem with the tools and technologies provided to collectively deliver results not possible otherwise.  

Neglecting holistic financial strategies in favor of present pressing issues

Most of our customers are familiar with the term “the squeaky wheel gets oiled first”.

However, this reactive approach is one of the quickest roads to repeated failure where the significant risks of this approach are not considered in a timely manner. A short-sighted financial plan is in fact common among many organizations.  The reason that often these problems are often missed is sometimes because of creative accounting. The same creative accounting also pushes companies towards the cost-cutting abyss.

A prime example is the case of companies that suddenly begin hiring staff with lower requirements for education and/or experience, therefore, lowering the immediate cost for seemingly the same service. The reality however is that this example company is creating higher costs in the later stages of the services, which often leads to a negative customer experience.  It is common that in the aforementioned situation customers will start looking for alternatives. Hence, from cutting some costs in the short term a situation is created where costs are raising down the line and the company is giving up customers to their competitors for free.

Shared responsibility in customer service.

When an organization is involved in the delivery of goods and services or dealing with customers on a daily basis, the customer service organization often develops a state in which customer service becomes the job of everybody and nobody at the same time. In short – diffusion of responsibility is a real danger of cyclic operations and such which have a slow consistent organic growth.

In such situations, we advise our customers and trustees that, the first step is to establish a pattern and practice of leadership for every customer-oriented operation. Lack of investment or acquisition of the proper C-level or lower roles like Chief Service Officer, Alliance Executive, or Customer Success Manager sometimes has a positive expression in terms of cost since all of the above are considered “overhead”, but often the reality is much different than that.

The absence of clear leadership and accountability with a clear mandate to develop, maintain and drive the organization towards positive results (in some cases seeking accountability from the company for promises) blocks the materialization of the made or would-be investments in customer relationships, service, and positive brand exposure, just to name a few.

Permanent underfunding of marketing programs.

It is a common practice to view marketing as a liability or a cost point, which pulls this part of the business under the gaze of the cost-cutting crusade in many companies. The reason is simple – marketing activities seem like an easy target in achieving cost-cutting or optimization for the simple reason that the ROI is not immediately evident.

Such examples are promotional campaigns where funding is cut, promise to customers is not held, which results in loss of customer base, negative brand exposure and a multitude of rippling negative effects thrum the entire company.  

It is our practice to advise our customers/trustees that nothing can replace a good analysis of what the result of their marketing efforts really are and the customer experience received in correlation to each other before the optimization is considered.

Lack of investment in outsourcing relationships

Outsourcing relationships are not necessarily the ones where a company reduces resources on one side and ramps up resources with a third party.

Outsourcing itself can happen on many levels for example increasing short-term capacity, offload activities that are at the core of the business as such, optimizing resources, creating partnerships, widening portfolios, and many many more. One such example is the cloud craze we all see and observe. Do you disagree? – think of it – putting something on the cloud is in fact outsourcing by nature.

On common venues in outsourcing are the so-called shared call centers, security operations, and service desks. Either way – outsourcing can be a central indispensable component in delivering best-in-class services and strategy in but not limited to the above-mentioned fields.

Naturally, not all outsourcing relationships are beneficial or equal for that matter.

If not taken seriously by at least one of the parties such relationships do not bear fruit and do not yield the desired results. Such relationships could be the ones where a better service is promised at a much lower cost, so when you think to yourself “this is too good to be true” it probably is…

Companies and corporations often succumb to the mouthwatering offers where a dysfunctional process or sometimes organizations are beaten into submission thru outsourcing before being written off completely or sometimes go into the never-ending vendor change.

In principle and de-facto practice outsourcing a high-value business process, service or operation requires a high level of planning, preparation, and research including rigor and resources. This especially applies in the early stages of such initiatives where the benefits of reduced costs are not strongly visible.

Our advice to companies exploring outsourcing is – focus on delivering the best possible quality of service first and then reduce costs thrum improvements, technologies, and practices at a later stage.  

In total, it suffices to say that based on our experience – cheap service means substandard or in some cases unacceptable service.

Having entertained our reader to read 1292 words to this mark, we can summarize with the clear understanding that even in the case where a company has the best business strategy humanly or otherwise possible, organic or normal growth will often force companies to cut costs at some point.

Companies must be careful not to damage the organization, customer relationships or create a negative brand exposure by undertaking poor cost-cutting or optimization initiatives.