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Customer-Lead, Trust-based Value Generation Services

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This article explains how an enterprise can leverage increased value generation, thereby aiding competitive advantage, by adoption of the `Enterprise Value Generation Service Orientated Architecture Platform’ (SOAP).

The SOAP model presents a holistic, product independent, business-integrated approach to creating a customer-lead, transactional trust-based, market leading enterprise.

The model creates ‘transactional fold’ – between ‘customer desire & transactional trust’ and `enterprise customer intelligence’ – closing the ‘service transaction gap’ by full alignment and integration of the business and service strategies as well as the interrelated layers – including ITIL (IT Infrastructure Library)- which represent the enterprises’ service portfolio. The primary benefits of which are:

  • Increased business agility; responding quickly and efficiently to new business threats and opportunities
  • Optimised business processes; introducing new and quickly change existing
  • Reduced business and IT costs
  • Greater reuse of IT assets
  • Faster delivery of value to the business and its customers.

Introduction

The increasing importance of organisational agility within today’s global economy is the primary driver behind the rise and development of Service Orientated Architecture (SOA). A term coined around eight years ago, SOA is fast becoming the latest IT industry buzzword, defining how services can and are used to implement business processes whilst, providing an imperative for organisations seeking to grow and maximise not only customer current and latent needs but also, the ongoing customer relationship.

Parallel to the rise of SOA, the continuing growth of Internet users has spawned increasingly sophisticated use of web technologies and customer relationship management software in an attempt to leverage maximum revenue. Current statistics available indicate that as at February 3 2005, 817.5million people (12.7% of the world’s population) use the Internet; the monthly average growth of Internet users being 10.2 million per month from March 2003 to February 2005 (inclusive)1.

Indeed, every major vendor appears to now offer an SOA strategy with ‘services’ forming the core of applications such as IBM WebSphere, Microsoft .NET, BEA WebLogic and Oracle 1Og. However, to focus SOA on IT delivery mechanisms only is to ignore major business opportunities. Only through full alignment and integration of IT and the business, a set of design and architecture principles and, a robust service delivery platform does SOA offer sustainable competitive advantage.

The SOAP model offers all of these as well as addressing age-old problems such as how to maintain customer loyalty and satisfaction levels whilst rapidly identifying emerging customer needs and desires.

The Need for SOAP As many companies collectively continue to spend billions on web and CRM technologies many have failed to meet management expectations in terms of return on investment. Part of the problem appears to be the piece-meal approach taken to implementation and, the absence of holistic and congruent business and service strategies focussed on the customer.

Many companies appear to have interpreted CRM as being all about the customer relationship in name only as often CRM metrics used to assess success are primarily based on cost savings via the automation of sales and service processes – by putting the responsibility onto the customer through self-service. Still worse, other companies implement CRM to gain only short-term revenue gains via targeted offers and cross-sell attempts. These tactical initiatives plainly do not underpin the building of lasting relationships.

Compounding these issues, a fundamental problem with CRM software is that it only records what the customer has actually bought and, when they bought it. The CRM software acting as a historic sales repository and personal contacts database. Though useful for marketing campaigns and carrying out trend analysis, the nature of the one-way transfer of information does not provide any opportunity for building trust. Indeed, mass e-mailings and unsolicited customer contact now creates information overload and represents a nuisance amongst customers as well as introducing a risk to the enterprise of facing fines under EU legislation2. So how to address this? Wish Lists. Wish lists provide the customer with the opportunity to tell you want they think they want or need – voluntarily. They create a two-way transaction the foundations of which are built purely on trust.

Clearly, therefore, SOA needs to focus on cementing long-term, collaborative relationships with customers based on mutual trust. Research has demonstrated many times that long-term customers are less costly to serve and that smooth-running relationships are less resource intensive. Companies with a strong reputation among customers also experience lower cost of capital and find their customers much more inclined to accept offers from firms they trust. Massad (2003)3 carried out doctoral research concerning Internet based customer transaction satisfaction. The research found that online purchasing service failures (online transactional or along the order fulfilment value chain) lead to low customer loyalty and repatronage rates and that, from the customer perspective, current online delivery methodologies are not robust enough to sustain even one service failure.

The research also found that most often the primary driver behind online purchasing behaviour is one of meeting deadlines. So for example, same day deliveries and customisation of the service offering should heighten perceived customer satisfaction levels and thus, heighten the probability of reorders/strengthen and develop the customer relationship. The key customer satisfiers identified within the research were:-

1. Timeliness of delivery of products ordered

2. Other service capabilities

3. Updating the customer

4. Perceived ease of navigation

5. Perceived price of products/services

6. Availability of products/services

7. Perceived ease of ordering

8. Past experience with service provider

9. Incentives

10. Perceived transactional security

Dissatisfiers were:-

1. Perceived effectiveness of communication

2. Perceived ease of exchange/returns/refunds

3. Perceived attitude

4. Billing accuracy

5. Perceived integrity of service provider

Underlying Principals of SOAP

Ever since Akerlof, Spence and Stiglitz4 won a Nobel Prize for their research regarding asymmetrical information in 2001, companies have been trying to either exploit the miss-match or, address the imbalance in an attempt to gain competitive advantage.

Asymmetrical information occurs when one party to a transaction has much better information than the other. For instance, a company’s customers have a much better idea of what they desire than the company providing the products or services. Equally, current Internet buying habits are primarily held back by ‘customer transactional trust’ concerns regarding credit card security etc.

In short, this is creating a ‘service transaction gap’ in relation to bringing the customer closer to the enterprise. When the customer is brought closer to the enterprise – by folding the transactional gap and reducing the asymmetries of information – the enterprise is able to provide efficient, customised services and products to the customer as well as quickly identifying customer latent needs. Only a holistic Enterprise SOA – such as the SOAP model – can create a `transactional fold’ and bridge the gap creating enhanced Enterprise Customer Intelligence and, increased customer confidence and satisfaction levels.

A good example of an enterprise addressing such customer desires and concerns is amazon.com who provide customers with innovative ‘mass customisation’ options, and quality assurance by way of customer testimonials, fraud guarantees etc. These initiatives in turn provide amazon with the opportunity to track and monitor individual user browsing habits thereby allowing the opportunity to build an individualised ‘profile’ of their current and potential customers. Amazon, as an enterprise, is therefore continually expanding its ‘enterprise customer intelligence’ – the driving resource in determining organisational direction in terms of:

* Identifying market opportunities and,

* Strengthening organisational capability.

Conclusion

Many companies are failing to meet the challenges and opportunities the Internet brought. Narrow, blinkered vision has interpreted the Internet as an ‘addition to’ rather than an ‘instead of’ sales, marketing and customer relationship channel. Only by investment, broad-brush strokes – inherently high risk – and full alignment of IT to the business will today’s enterprise survive and thrive.

Terminology:

Business Levers: – In the following order:-

1. People
2. Processes
3. Information
4. External Relationships
5. Organisational Structure

Customer Desire : Connected to the Customers’ ‘need to heal’5 Enterprise Customer Intelligence – Refers to the data, information and knowledge the enterprise has/holds regarding the customer, for example, order records, personal details, browsing habits etc. Knowledge Capital – The collective experience and knowledge of the enterprise held within employees. The effectiveness with which knowledge capital is put to use differentiates the successful and agile enterprise from the mediocre. Knowledge capital is enhanced and accessed by creating conceptual and transactional knowledge opportunity networks within the organisation; between all Departments.

Latent Needs : Customer needs the customer is not consciously aware of. Financially successful companies create products based on customer feedback – but rely more on inference and intuition as to what products will appeal to their target customers. The general process of learning about and satisfying customer needs, known as market orientation, has seen a shift from responsive market orientation (knowing what the customer believes he/she wants) to proactive market orientation (anticipating his/her needs). The more proactive market-oriented a business is the greater its new product success will be.6

Mass Customisation : The customisation and personalisation of products and services for individual customers at a mass production price7. Implemented via the new interactive technologies, like the Internet, which allow customers to interact with a company and specify their unique requirements. These are subsequently manufactured by automated systems.

Quality Assurance : Broadly, quality is a degree of excellence; the extent to which something is fit for its purpose. In the narrow sense, product or service quality is defined as conformance with requirement, freedom from defects or contamination, or simply a degree of customer satisfaction. In quality management, quality is defined as the totality of characteristics of a product or service that bears on its ability to satisfy stated and implied needs.

Service Transaction Gap : The gap between Customer Desire and Transactional Trust and, Enterprise Customer Intelligence.

Transactional Trust : “Trust” refers to relying on someone or something for a future action. The dictionary defines trust as having a confident dependence on the character, ability, strength, or truth of someone or something. From this perspective trust is a contingent emotional feeling, highly conditional in nature and subject to reappraisal. Transactional Trust originates with Customer perception, hearsay, guarantees, fraud prevention methods etc.

Transactional Fold : Closes the information asymmetries between the Enterprise and the Customer; by way of innovative, rapid response and integrated service layers. The enterprises’ expertise at this can be measured in terms of `transactional capabilities’.

Value Added Services : Not a form of basic service but services that add value to the total service offering. Characteristics include:-

1. Stands alone in terms of profitability and/or stimulates incremental demand for core service(s)

2. Can sometimes stand alone operationally

3. Does not cannibalise basic service unless clearly favourable

4. Can be an add-on to basic service, and as such, may be sold at a premium price

5. May provide operational and/or administrative synergy between or among other services – not merely for diversification

References:

1 Source: http://www.internetworldstats.com/emarketing.htm

2 Harvey, F. (Dec 2, 2003), E-marketing in a straightjacket: As Brussels imposes rules aimed at curbing spam, businesses must get used to new ways of contacting customers, Financial Times, London (UK), pg. 16

3 Massad, N. (2003) Perceived Transaction Satisfaction with Electronic Service Encounters: A Critical Incident Analysis of Product-Related Services and Pure Services on the Web, Syracuse University.

4 Akerlof G., Spence M. & Stiglitz J. (2001) Markets with Asymmetric Information, http://nobelprize.org/economics/laureates/2001/ecoadv.pdf

5 Davis, M. (2003) Desire, Connecting with What Customers Want, http://www.fastcompany.com/magazine/67/desire.html

6 Narver, J. (September 2004) Professor Emeritus of Marketing at the University of Washington, Journal of Product and Innovation Management.

7 Davis, S. (1996) Future Perfect, 10th anniversary edition, Addison-Wesley Pub Co, Harlow, England, ISBN: 020159045X

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Jane Link, UK. MBA, LLB(Hons.), DMS, Cert.Ed., MSP, PRINCE2, ITIL, MCSE, MCP+i. Contact : jane@acerit.com Visit : http://www.acerit.com/casestudies.html to download article inlcuding diagram.

Customer-Lead, Trust-based Value Generation Services
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