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by Jonathan Poe

What Really Matters: Extremely Satisfied IT Customers

Feature
Apr 07, 20046 mins
CSO and CISOData and Information Security

Many CIOs wish executive perceptions would improve – yet few take specific action to advance them. World-class CIOs create business relationship managers and measure just one metric to ensure high customer intimacy.

META Trend: During 2003/04, global competition, IT resource collaborative control, and alternative sources for IT services and roles will place greater emphasis on quantifying and justifying IT value. Cultural understanding will play a significant role in implementing the value management process. By 2005/06, 60 percent-plus of Global 2000 IT executives will combine IT value management with IT portfolio measurement (for example, infrastructure, applications, information, business and IT organization processes, human capital) for planning, monitoring, adjusting, and marketing business-relevant IT products/services and strategic IT initiatives.

Achieving tight, highly integrated business relationships is the cornerstone strategy in achieving a world-class business/IT partnership. As IT organizations (ITOs) evolve from cost centers to centers of innovation and value in the eyes and perceptions of their line-of-business (LOB) clients, top-notch CIOs use structured, building-block approaches to accelerate the evolution of their ITOs. In today’s environments, where operations excellence and technical proficiency do not guarantee tenure, CIOs must arrange, advise, and audit their ITOs on how to correctly work toward customer centricity.

Currently, although 60 percent-plus of Global 2000 firms have appointed business relationship managers (for example, customer service representatives, business analysts), fewer than 15 percent of Global 2000 firms have achieved Phase 2 business relationship management, where the CIO is not the primary liaison between the business and the ITO. By applying proven relationship management techniques, we expect this number to grow to 35 percent through 2005 and to 60 percent-plus by 2008. More importantly, through the exchange of best practices and lessons learned, by 2006, 25 percent-plus of Global 2000 firms (versus the current 2 percent) will achieve Phase 3 business relationship management, where a customer-focused center of excellence is accountable and responsible for the health of business/IT partnerships.

During the past year, our research surveyed in great detail 18 ITOs that have made the successful transition from a Phase 2 level of business relationship management to that of a Phase 3 relationship (the highest possible level of business relationship management). Our findings are shockingly similar to those found by two highly respected third-party customer relationship management firms that have surveyed thousands of IT service purchasers in dozens of organizations over the past four years. The data also cross-checks against our consulting database of go-to-market leaders. Based on these findings, we believe that achieving high levels of customer satisfaction boils down to two important questions summarized in one singular metric.

As demonstrated in consumer retail research (Reichheld, 2001), loyalty is highly correlated to profitable growth and to a business’s willingness to partner with an ITO. The challenge has always been in measuring future loyalty – that is, the willingness of the customer to re-engage in future IT services. As IT becomes more pervasive and familiar to business users everywhere, IT products and services become like general consumer commodities. With cycle times diminishing, street-smart CIOs can now take advantage of known consumer metrics and methods.

While many customer-focused and customer-centric ITOs measure customer retention or satisfaction, these measures are backward-looking. They tell an organization how fast customers leave rather than how customers stay. Especially when customers are held hostage by large switching costs, satisfaction scores can also mask how few loyal customers an ITO actually has.

Customer satisfaction scores are even less reliable. Over the years, META research shows that there is a 75 percent-plus chance that satisfied customers will switch if given a better value proposition; for extremely satisfied customers, the chances are still 45 percent-plus. Therefore, satisfaction lacks a consistent connection to actual customer behavior and partnering.

The One Metric That Matters

The defining metric for future customer loyalty then is, “How likely would you (the surveyee) be to recommend the ITO’s services to a fellow coworker?” In the aforementioned studies, “highly likely” recommenders have been shown to be active promoters of the ITO’s brand, products, services, and quality. To gauge responses, a simple 5-point Likkert scale works well (that is, highly unlikely, unlikely, neutral, likely, and highly likely). Simple scales help new practitioners immediately understand what the solution’s focus must be. Successful ITOs work to get their LOB customers to be “highly likely” recommenders of future IT services.

Yet focusing on the promoters and enthusiasts in the customer base – those who scored the ITO a perfect 5 (of 5) – is not a solitary activity. Since authenticity matters, experienced ITOs also concentrate on optimizing the quality of a customer’s experience. In other words, recommendations matter the most from those who also rank the quality of the IT experience a perfect 5 of 5. In short, on a scale of 1 to 5, customers who answer a 5 on the very high quality of the experience and a 5 on their highly recommending this service to a coworker serve as the best references, promoters, and users of the ITO. When users genuinely promote their experiences to peers, IT credibility and perception simultaneously improve.

Keep It Simple and Straightforward

Another lesson learned from these 18 progressive ITOs is to keep customer surveys simple. Simple surveys generate timely data that management and the ITO can universally act upon. Customer feedback becomes an operational tool, not a (market) research tool. Several of the studied firms did engage a third-party research firm to verify results. Examining their data only confirmed our conclusions – that simple surveys enable fast processing and improvement of the results. Customers with the highest quality of experience were more apt to promote coworkers to take advantage of said services.

Emergence of Future Phases

Although many ITOs would have considered Phase 3 to be a state of IT nirvana, our research of these world-class ITOs indicates a possible Phase 4, where ITOs and business partners understand the corporation’s external customers and their loyalties. In the same manner that the ITO learned about the business, the business, in these cases, must learn much about IT for the entire team to be effective. This potentially includes understanding purchasing processes, multimedia channel branding, and entry and exit barriers. For a Phase 5 level of maturity, the business and the ITO must both understand the corporation’s (supplier/value) network of external customers and their loyalties, where keiretsus (co-prosperity partnerships) compete against each other’s networks of partnerships.

In outbound business relationship management, ITOs move from being reactive, to being proactive, to being collaborative. By focusing on whether a customer becomes an ITO enthusiast, ITOs will more rapidly achieve the goal of being true business partners, where information and technology create opportunities for increased corporate growth and profitability.

Bottom Line: Street-smart CIOs now have an emerging, best-practice shortcut to attain long and successful tenures. By exploiting business relationship management and a singular, meaningful, forward-looking metric, focused executives can quickly evolve to become intimate with their customers.

Business Impact: Maturing and mechanizing customer loyalty reinforces a true business/IT partnership. Partnerships lead to collaboration, agility, and innovation.