By Brent Haumann, Managing Director, Striata
Companies today feel more pressure to be operationally efficient. That’s hardly surprising. The global economy has taken a battering over the past year or so, as has the average South African’s wallet. According to the Reserve Bank’s latest quarterly figures, real final consumption expenditure by households contracted 5,4% in 2020. This was more than the contraction in 2009 following the global financial crisis.
All of that means companies face very real pressure on their bottom lines. As a consequence, they may feel the need to lower operating costs by operating more efficiently. In a business context, operational efficiency can be defined as the ratio between an output gained from the business and an input to run a business operation. When improving operational efficiency, the output to input ratio improves.
But while operational efficiency is something to be desired, it shouldn’t come at the expense of good customer experience. While many of the output measures for operational efficiency – most notably revenue and customer growth – are also indicators of good customer experience, the two do not amount to the same thing. In fact, putting too much focus on operational efficiency can negatively affect customer experience, to the detriment of the organisation’s long-term viability.
That’s because leading with an operational efficiency mindset requires an inside-out approach. This involves reviewing technology and customer engagement channels and finding opportunities to replace analogue with digital, manual processes with automation and humans with artificial intelligence.
Though each of these steps is critical for building a competitive business in a modern economy, it cannot be assumed that these steps result in a better customer experience. In fact, not elevating customer experience to being the centre of the requirement and then working backwards to build operational efficiency around it adds a huge risk that the technology and process decisions will constrain your customer experience options. That almost always leads to sub-optimal customer experiences that are hard to correct.
So, for example, a company might add a new option for customers to create their own quotes via its website, with the intention of reducing pressure on its contact centre, shortening processing times and saving it money. While that may be true in the short term, it may hurt the organisation in the longer term if the customer’s experience is negatively affected – or even just perceived to be affected. In fact, if this process is primarily driven by technology and efficiency and does not lead with the customer’s experience, it may result in more confusion, lower engagement and a higher drop-off.
It’s also worth bearing in mind that even if an organisation’s operational changes do end up benefiting customer experience, taking an approach that centres on operational efficiency is limiting. That’s because the ultimate goal of operational efficiency is to save money and there’s only so much money an organisation can save before cost reduction becomes harmful to customer experience.
In fact, an approach that actively leads with customer experience at its core and then works backwards to build the most efficient process is almost guaranteed to outperform an efficiency-led strategy over time. That’s because there’s no upper limit to potential rewards that come from an outside-in approach that centres on customer experience.
We already know that companies that earn $1bn annually can expect to earn, on average, an additional $700m within three years of investing in customer experience. We also know that 86% of buyers are willing to pay more for a great customer experience. Additionally, the more expensive the item, the more they are willing to pay.
But to reap those benefits, organisations need to understand the experience their customers want, and build inwards from there based on what they want to achieve. A useful consequence of this approach is that operational efficiency can still be achieved anyway, not least because it saves the company from investing in technology it might not need.
The economic climate means that it’s entirely understandable that organisations need to concentrate on savings by becoming more operationally efficient. But if they’re interested in their longer-term survival, they will need to value customer experience over operational efficiency.
Operational efficiency should never come at the expense of customer experience, but when the former is allowed to lead the way, organisations put themselves at risk of this becoming their reality.