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Ventana Research

Introducing performance management into customer intelligence and demand chain can help companies manage performance and determine market position and company profitability.

Today’s business climate places a premium on creatively addressing and improving a firm’s performance level throughout all departments, including customer-facing organizations. The effort to meet financial and organizational expectations is transforming the way many organizations do ­business. This evolution is driving higher standards of competence in day-to-day operations and adding new pressure to increase stakeholder value. The agility with which a company manages its performance can determine market position and company profitability.

Companies are searching for ways to bring IT investments in line with their most critical business priorities. This quest has prompted a shift from transaction-centric to information-centric approaches, offering collaboration and information that drives decisions. This focus is the impetus behind a new class of software capabilities now evolving from the roots of business intelligence (BI) and decision support, which helps organizations manage performance in a methodical and coordinated manner.

Customer intelligence reflects a company’s emphasis on ­customer interactions. This is a fundamental shift from a product-centric mindset to one that revolves around the customer. The ability to manage performance from this customer-centric perspective requires broad adoption of a customer culture and information management strategy. The strategy is the foundation on which a firm can build its capacity to understand customer activity as it relates to the firm, optimize the organization’s activities with respect to customer interactions, and align individual and group performance to maximize the value of customer interactions. This customer framework provides the entire organization with a structure and discipline for managing both resources and time to focus strategic, tactical, and operational efficiencies toward enhancing the customer experience.

When properly executed, the payoff comes from the improved value of and return on customer-focused assets. These include the considerable assets devoted to marketing, sales, and customer service (i.e., assets devoted to creating and capitalizing on demand). Ultimately, this approach further elevates the customer as a recognized asset of the firm - an asset to maintain, nurture, and value.

Understanding Performance Management

Performance management is the business strategy and methodical process to manage execution of an organization toward a common set of goals and objectives. The performance management process enables individuals to understand, optimize, and align the business and achieve optimal performance through intelligent action. This is only achieved by business and IT organizations aligning to leverage technology to provide information for strategic, tactical, and operational purposes.

Performance management is important because it enables business to rely on a repeatable process for predicting results at a greater level of confidence. Three business drivers facilitate the change required to support the goals and priorities of the organization:

• Efficiency. Intelligently guide the operations and actions of the organization, business processes, and individuals to ensure they result in defined goals and desired outcomes. Achieving higher levels of efficiency reduces the cycle time to gain consensus and take action through collaboration resulting in improved productivity.
• Quality. Continuously improve the state of relationships, processes, and products or services to maximize the value of resources and assets. A quality-driven organization requires empowering individuals with information that enables them to be effective in their role and with their interactions within the organization.
• Value. Manage and leverage assets (i.e., people, processes, and information) to increase business throughput and to deliver long-term ROI with the goal of maximizing stakeholder return.

These drivers set the framework for how business fully leverages performance management to optimize individual effort to the performance mandate.These drivers can also motivate management and act as a guiding principal to align future investments to drive competitive advantage.

The performance mandate and process are not new for many organizations. Currently, the use of people, reports, and physical meetings are still the standard methods of management. This creates some challenges responding to opportunities and issues in a timely manner along with managing the overwhelming amount of information from inside and outside an organization. To overcome these challenges, organizations leverage technology and information to provide relevancy and timeliness from automating aspects of managing performance.

This leads to the obvious conclusion that creating a performance management framework without supporting technology is unfeasible. This sets the business tone for organizations to focus on and prioritize existing IT investments to leverage maximum return on these investments. This, in turn, requires strong business leadership in partnership with IT management to leverage existing IT investments to purchase and develop new performance management solutions.

Successful performance management systems move beyond reports to provide a business solution to the entire performance process. They must provide an information network that enables self-service throughout the organization. They must help optimize business actions through planning, forecasting, and predictive analytics to align individual performance with goals and objectives using dashboards and metric-driven notification that provide guidance and not just measurement.

The Role of Customer Analytics

Much of the focus of customer-facing applications has been to streamline and automate operational processes. In an in-bound service call center, the goal has been to shorten average call duration while meeting customer satisfaction criteria. Salesforce automation systems are largely tasked with consistent application and measurement of a chosen sales methodology and/or tracking sales-pipeline progress. Marketers employ marketing automation systems to simplify and more consistently execute campaigns, be they direct mail, email, Web-based, or other.

The challenge being tackled by forward-thinking firms is to leverage these and other operational systems and the information they collect and maintain, and to elevate customer-facing organizational performance management to another level.

Customer analytics can be an effective means to that end. Customer analytics is any transformation, derivation, manipulation, or extrapolation of information about the customer that gives actionable business insight into his or her habits, preferences, behaviors, attitudes, or intentions, and that is applied to enhance the customer experience and improve the value to the firm. Some key elements to this definition warrant further comment:

• Information about the customer. It is astounding the range of firms that do not, have not, or will not collect and maintain information about their customers to the degree that they collect and maintain information about their products, capital equipment, or office supplies. Customer intelligence is every bit as important.
• Actionable business insight. Beyond interesting tidbits of trivia, analytics must do more than simply further the unused knowledge base about customers at a point in time.
• Enhance the customer experience. Give your customers reasons to feel good about having done business with you and they will come back again. Creatively applied analysis of customer behavior speaks volumes to their satisfaction with your actions.
• Improve the value to the firm. It’s not just about reducing the average length of service calls; it’s about leveraging ­incremental revenue from the interaction, immediately or in the future.

The nature of the analytics applied at a given firm can take on many forms and levels of sophistication. Analytics as we have defined them can range from fairly simple customer demographic segmentation to very complex behavioral likelihood multinomial logit models and beyond. Depending on your size and competitive circumstance, the nature of your customer interactions (B2B, B2C, B2E), and your vertical industry (retail, financial services, manufacturing, etc.), your priority points of leverage will of course vary; that’s precisely why a broad definition of analytics is appropriate.

Driven by our key definition points, Figure 1 outlines examples of the customer analytics value chain, which describes how information about the customer can provide valuable insight and further leverage customer interactions to the advantage of all parties. These examples are by no means exhaustive, nor are they independent of each other. Every day, firms are finding new ways to transform and manipulate their customer intelligence base toward new insights to the business. In fact, the only limitation to what is doable is the imagination (and budget) of the organization wielding the customer intelligence (see Figure 1).

How does an organization determine what level of analytics is appropriate? The key to assessing the value of any customer analytics approach is embedded in our definition. In any circumstance, the firm must first consider the business insight provided in the context of the application. Next it must determine the value to the organization and its representative in the customer interaction, and how it will address and improve business performance. Finally, the firm must consider the analytics value from the customer’s perspective. How do the analytics help enhance the customer experience? In the best-case scenarios, each of these value considerations will stand up to scrutiny within the context of a performance management evaluation process.

The Performance Process - Customer PerformanceCycle™

The leverage sought by firms through customer intelligence and the execution and application of customer analytics can be readily applied in the context of performance management by plugging it into the Ventana Research PerformanceCycle process of “understand-optimize-align” described above (see Figure 2).

Understand

To understand the customer-business relationship, a business model that represents the activities and processes that describe how the organization interacts with customers must exist or be created. This model provides the platform to measure the historical context of customer interactions through quantitative and qualitative information. This base of information is examined through a set of sub-steps - model, access, discover, and interact with information. Built on a robust customer intelligence foundation, often including operational CRM applications, customer analytics provide huge contributions to this baseline.

Optimize

To optimize the business, you must enable both automated and manual methods to collaborate and share knowledge gained and apply analytics for performance improvement. Clearly within the domain of customer analytics’ application to enhancing the customer experience and value to the firm, this can include implementation of straightforward or sophisticated models and algorithms. Applying the forecasts and plans derived from analytics can simply yet dramatically change the organization. This PerformanceCycle stage addresses the firm’s ability to forecast, collaborate, integrate, and act on information.

Align

To align the business, the firm must coordinate and drive group and individual actions based on information and performance targets. Here the firm strives to leverage historical internal and external benchmarks and customer analytics insights as reference points for driving change in an organization. Customer intelligence-based models and insights are applied to improve customer-facing procedures, automate business processes, and modify policies to the benefit of the customer and the firm. Here is where the rubber meets the road, where the learning gets applied to the way the firm functions in the context of goal setting, scoring, notifying, and automating the performance management process.

Customer Performance Management Network

Recognizing that an organization consists of groups and individuals with varying perspectives and range of issues, it is important that firms apply PerformanceCycle at many levels, and that individuals can ­collaborate and share information prior to taking action or making decisions. This will build an inter­locking PerformanceNetwork™ where the ability to optimize groups and align individual actions can operate multi­directionally. The PerformanceNetwork is comprised of three key areas: the level of the organization, the focus in managing performance, and the type of information. The network truly relies on the performance of others in the network to achieve, and then sustain optimal performance (see Figure 3).

Level

The level of the PerformanceNetwork determines the types of user requirements for which individuals need to understand, optimize, and align performance. The common three levels are executives, management, and individuals.

Focus

The PerformanceNetwork focus reflects the organizational scope of information and collaboration among individuals. The three levels have corresponding focus in the organization: executives have a strategic focus; functional management carries a ­tactical focus; and the typically larger set of individuals with task-oriented operational focus.

Information

There are three types of information in the PerformanceNetwork for which the organization requires information for managing performance. The three types of information that correspond to the level and focus of the organization are: executives who have a strategic focus and require summary-level business information; management personnel who have a tactical focus and require business-entity information; and individuals who have an operational focus and require process-level information.

A properly configured customer intelligence Performance­Network will bring customer-centric issues to the surface at all levels, with the appropriate information to address each focus area within the firm. The challenge is no different than that of the business intelligence community in making sense of ERP data in context of the “understand-optimize-align” process and delivering it to every stakeholder at the right level, in the right form, and at the right time to leverage and improve decision-making.

Summary

Performance management provides a critical foundation for organizations to manage their businesses and empower individuals to make the right decisions to maximize efficiency. The ability to leverage customer interaction information and apply customer analytics throughout the PerformanceCycle’s “understand-optimize-align” steps will improve the quality of customer experience with the organization and add inherent value to the firm. Capturing the knowledge gained and deploying it across the organization can build long-term value for stakeholders.

Customer intelligence strategies can dramatically leverage the firm’s customer information asset, build a foundation of customer understanding, and deploy insights gained with customer analytics. This is further enabled by building a roadmap for performance management and aligning existing and future technology investments. Now, as never before, businesses have the ability to implement performance management with a customer-centric focus to transform organizations and focus on goal achievement.