Having spent a number of weeks speaking at, or chairing, various industry events – I’ve become aware how much focus there is on technology. FS firms in particular appear nervous about rise of FinTech/InsTech & convinced they should focus on digital & technology for growth.
Is that right? Does success & sustainable growth come from that focus?
In response, I want to share a blog post based on a talk that I’m giving to mutual lenders in London.
The topic concerns where to focus as a 21st century business. Hopefully it will help leaders grappling with competing demands on their time & attention.
Where to focus? (winds of change)
In our ever-changing world, where should you focus to succeed with improving performance & readiness for the future?
Many social & business commentators will highlight key trends to consider.
- The rise in the power of consumers (inc. transparency & ease of switching)
- The erosion of trust in organisations (esp. Financial Services)
- Increased regulation (including Conduct Risk focus from the FCA)
- Rise in services expectations driven by experience from other sectors
- Emergence of technology disruption/innovation scene (e.g. FinTech sector)
All these combine to make it ever more urgent for lenders to regain trust, by both meeting service expectations & communicating more appropriately. Both of those twin aims are informed by better customer insight: Genuinely understanding your customers & the jobs they want to get done (including when), better than your competition.
Fortunately, alongside the societal & technology challenges I listed above, opportunities also present themselves.
- Increased availability of wider range of data & computing power to analyse
- Growth in analytics tools/market (including Data Science & statistics)
- Improvements in marketing automation, service ‘bots’ & personalisation capability
- Evidence from disrupters (like Metro Bank & Aldermore) of service differentiation
- FCA focus on behavioural economics giving opportunities in ‘regulatory sandbox’
Based on my experience of both creating/leading such teams for over 15 years & coaching leaders across UK & Europe, there is tremendous commercial potential.
However, too many firms rush into hiring Data Scientists without clear business goals. As too many have discovered to their cost, the real value comes from improved customer insight (not technology or data science for their own sake).
On the encouraging side, a number of studies have shown that businesses who make extensive use of analytics can outperform their peers on both income & profit metrics. But, just as has previously been seen with the ‘hype cycles’ of Data Warehousing & CRM, a lot of technology spend can also be wasted. How can businesses avoid that pitfall?
Many lenders (and FS firms more broadly) aspire to ‘Customer Centricity’ as a business strategy. Far fewer achieve both improved customer experiences & sustainable profit growth as a result.
Insights 2020 findings
A key global study focussed on understanding why some businesses succeed at this challenge, whilst others fail, was Insights 2020. As reported in Harvard Business Review, this collaboration talked to over 10,000 practitioners & 330 leaders across over 60 countries. Insights 2020 identified 3 factors that distinguished those who achieved Customer Centricity, measured through customer satisfaction, digital engagement & commercial return.
These 3 priorities are:
- Purpose-led, data-driven, consistent customer experiences (multi-channel/journey)
- Embedded ‘customer obsession’ in culture (decision-making, performance management & embracing experimentation)
- Customer Insight team is a proactive, equal business partner
Getting clear on Customer Insight
So, that begs the question, what do I mean by Customer Insight?
Different organisations will have different answers. Some appear to equate the term with research, others with analytics. A few relate it to targeted database marketing & almost everyone can see the importance of quality data for any such work.
Benchmarking best practice within customer insight, especially for financial services firms, has taught me that a more holistic approach works best. The most capable teams, combine technical skills in data, analytics, research & database marketing. But, as the saying goes, it’s what you do with it that counts. Using those technical skills in concert, to achieve a deeper understanding of your customers that enables behavioural change, is where true customer insight lies.
My own definition of customer insight is:
“A non-obvious understanding about your customers, which if acted upon, has the potential to change their behaviour for mutual benefit.”
Key strengths needed (including soft one)
To achieve that depth of insight & impact requires two key strengths.
First, the use of the use of the four technical disciplines I mentioned above, in concert to produce synergy. I normally explain this through use of Laughlin Consultancy model for Holistic Customer Insight, a virtuous circle of how to operate in multi-disciplinary teams.
The second strength needed, is analysts who can speak to your business. There is no point discovering great insights into your customers, if these remain ‘on the shelf’ as ideas. For that reason, several leading customer insight teams have benefited by investing in softer skills training for their technical teams.
The model I use if a 9-step model, from incisive questioning (to determine real business need) all the way through to following up to ensure insights are acted upon in the business (to achieve customer & commercial targets).
Your data foundation
For most organisations, reaching that level of capability, begins with a focus on data.
When speaking with leaders from across many different sectors, a perennial headache is either getting the data they need or being able to achieve a Single Customer View. Such a focus on data, as the foundational layer or Customer Insight & Customer Centricity, make sense.
However, I would like to make a plea for a focus on two aspects that are too often neglected. Data Models & Metadata may sound too much like topics for technophiles or data geeks, but lack of both can have big business impacts.
Faced with the challenge of capturing & using more data, egged on by technology supplier, too many companies leap straight into a technology solution & technical build. However, with the pace of change & ever-growing list of data that may be needed (considering the growth of Internet of Things for example), businesses need a more sustainable & technology independent map. That is the role of the too often neglected conceptual & logical data models. These should be treated like blueprints for your business ecosystem.
Alongside that data gap, another common lack for analytics team is missing metadata. That is ‘data about data’. In all the excitement to gather more facts about customer segments, or potential triggers for marketing campaigns, the basic need for things like a data dictionary can be missed. Many insight or analytics teams rely on what senior analysts ‘hold in their heads’. But the expertise about what different data items mean, which can be trusted & how to interpret different values – all this is too valuable to allow it to walk out of the door.
Irrational Customers, what should you do?
Finally, let me turn to the topic of irrational customers. With the Financial Conduct Authority, both focussed on Behavioural Economics (BE) & expecting providers to take it into account, the days of assuming customers will act rationally are numbered.
I’m sure most of you have at least heard of BE. The success of popular books on the subject, from the easy to read ‘Nudge‘_ to the slightly more challenging ‘Thinking Fast and Slow‘_, have ensured plenty of media coverage and social media debate on implications and appropriateness for policy and action.
As with many academic disciplines, different experts use slightly different nomenclature to order the different irrational behaviour or biases observed. However, for Financial Services clients, a good place to start is the list of 10 biases published by the FCA. My own experience, in helping clients test communications or design marketing to take irrational biases into account, suggests these cover the bases.
Do you test your comms?
Of course, the focus of FCA regulatory action is ensuring the customers receive positive outcomes through products & services suitable for their needs. Unfortunately, some agencies offering to help businesses understand & act to protect customers from BE biases, pitch by seeking to ‘rubbish’ traditional research or the role of customer insight teams. This is so misguided. Most successful BE projects require well designed research, as well as behavioural analysis, data capture & Database Marketing skills in experimental design. In other words, it is probably your existing customer insight team who are best place to take forward such work.
Given that most firms focus first on ensuring their communications could not be accused of manipulating such biases, two (in particular) are often worth considering:
- “Framing, Salience & Limited Attention” is the bias such that different decisions are made if information is presented/structured differently (as sommeliers know well).
- “Present bias” is the over valuing of the present compared to the future (i.e. I would accept a smaller pay-out now, compared to delayed gratification with better return).
But, others matter as well & do occur from time to time. For a fuller list, see this previous post summarising all 10 biases.
In conclusion, let me summarise this collection of musings on where you should focus to be ready for the future. There are many different & exciting innovations happening, including use of blockchain, robotics, virtual reality & machine learning. But, having seen innovators who go on to thrive & those who do not, I am making the case to focus on people not technology.
Developing a strong Customer Insight capability, supported by well-managed data, that is used to guide all interactions with customers is a sustainable route to growth. But, beware, to achieve both customer loyalty & the approval of regulators, you will also need to consider irrational customers. We are practically in a ‘seller beware’ market, so to truly protect your business, ensure you know (better than your competitors) how to help your customers achieve positive outcomes. Oh & learn how to tell them in their language.
Such a human-centred-design approach to business isn’t easy, but it is fulfilling. Focus on understanding & serving your customer better. When you have a compelling story to tell, about how you will do that, you’ll also be able to mobilise one of your biggest weapons. That, of course, is all those human beings who work in your business.
To modify the oft quoted line by Bill Clinton, about what matters most, “It’s the people, stupid”.
The Most Important Internet Statistics & Trends in 2019
NASA’s Female Astronauts Great STEM Role Models
How to Get Ahead … by Slowing Down
Strengthening the Financial Seeds of Tomorrow Through Financial Literacy
25 Ways to Make up Your Mind to Experience More Happiness
How ProFUNDity Can Help Actively Managed Funds Increase Market Share
Do Not Neglect These Parts of Your Business
How to Sell More Life and Annuity Business Through Life Settlements
Why You Only Need 10 Good Stories
How to Start the Day with Your Head in the Game
Digital Strategy2 hours ago
The Most Important Internet Statistics & Trends in 2019
Research11 hours ago
If History Is Any Indication, Stocks Should Rally Until the Fall of 2020
Research11 hours ago
2 Stocks That Will Rake It in When Online Grocery Shopping Goes Mainstream
Advisors in Transition11 hours ago
How to Conduct a Proper Client Segmentation Exercise
Advisor Marketing1 day ago
7 Technologies You Need For Your Advisor Business
Equities1 day ago
The (Trade-Weighted) U.S. Dollar is Headed to All-Time High
Insights1 day ago
Investing in Europe: The Good, the Bad & the Ugly, Part II
Development1 day ago
The Rockefeller Effect: Why the Multi-Family Office Model Has Become the Talk of the Industry