Forum: Strategy Is About Making Choices

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You probably expect this article to be a point of view onnew products or partnership options. But this is about a different type of strategicchoice: the choice to focus on customer service.

During the 1980s and 1990s, cable operators made sometrade-offs. Given current valuations, these were probably wise.

Chief among the strategic choices was to focus on assetaccumulation and network development. Service systems were developed to handle the primarydemand -- taking orders and installing service. Service was not viewed as an integral partof the overall product -- something that many operators have still not fully appreciated.

As fate would have it, demands on the service system wentwell beyond these revenue-generating activities. Service became a significant cost ascustomers called in about confusing bills, unclear offers, scrambled signals and otherproblems.

As these additional demands were made, operators faced achoice: continue to add people and trucks to keep up with demand, or let service levelsslip. In the interest of cash flow, the decision path was fairly clear -- especiallywithout any competition.

Unfortunately, there were other choices that were not givenfair consideration in most operations. So today, with increasing competition, mostoperators are finding that the service that customers associate with their brand does notsupport their growth objectives. Operators would love to use service as a marketablecompetitive advantage against new competitors, but most lack service strategies, offeringservice levels well below those that customers have come to expect from providers in otherindustries.

To remedy these problems, operators need to address fiveissues.

DEVELOP A CUSTOMER-SERVICE STRATEGY

For many MSOs, publishing a strategy of customer-serviceexcellence today would be met with skepticism, and maybe even cynicism, by employees andcustomers alike. For this reason, we recommend development of a two-phase strategy.

This strategy focuses on first getting the fundamentalsright. The path can be accelerated, but the elimination of drivers of service disadvantageis critical to the cost structure, service culture and near-term consumer perception.

• Step 1: Get the fundamentals right. Don'tgive customers a reason to switch.

• Step 2: Become the preferredcustomer-service provider. Service becomes a marketed component of the value proposition.

After the fundamentals are in place, focus can shift toanticipating and exceeding customer requirements -- and even to the routine delighting ofcustomers.

BUILD A SCORECARD

Motorola Inc. coined the expression, "No metric, nomovement." For many MSOs, the scorecard has been simple: achieve your EBITDA(earnings before interest, tax, depreciation and amortization) target. This becameslightly more granular in some cases, where marketing was responsible for revenue, andoperations for cost.

National Cable Television Association service standardshave been reported on by many MSOs, but they typically haven't been a driver ofperformance improvement.

One exception on the measurement front has been CoxCommunications Inc., where for years, general managers have had their variablecompensation linked to EBITDA, customer service, individual goals and system scores on anemployee survey.

For the cable industry, huge demands that are avoidable areplaced on the service systems -- they are defects.

For our purposes, it's useful to think of almost allnon-revenue-generating inbound calls and truck rolls as preventable. These should bemeasured and reported routinely, and their levels linked with performance measurement atall levels.

Perhaps most important, these measures should be used as atool for improvement, and not solely as a report card.

RESOLVE IT ISSUES

For the cable industry, investments in call centers;billing systems, automated dispatch and other service facilitators were not given priorityover other uses of capital. Big chunks of the industry are still playing catch-up.

One unfortunate side effect is that the shortcomings ofinformation-technology systems are often used as the reason for not pursuing serviceimprovement today.

Consider the following case examples from several largeMSOs:

• 28 percent of inbound calls were due tounnecessarily aggressive billing practices that didn't distinguish between loyal andhigh-risk customers. Minor process changes saved $1.9 million annually.

• 66 percent of non-revenue-generating truck rollswere due to move/transfer disconnects, most of which were reconnected within three months.Process changes yielded annualized saving of $1.6 million.

• Repeat truck rolls were reduced by more than 50percent, saving almost $1 million annually by increasing the amount of supervisory timespent in the field.

• Other opportunities related to rebuildcommunications, customer-service representative troubleshooting skills,marketing-operations integration and dispatch methods have yielded similar results.

In fact, IT systems need significant overhauls to supportthe promises of bundled services over the new advanced broadband networks. But the time toimprove processes is now, before new demands hit the customer-service systems.

PICK AN IMPROVEMENT METHODOLOGY

Cable operators don't have a lot of tolerance for process.This is not all bad, unless taken to the extreme.

We have witnessed the ideological warfare in some companiesover process-improvement methodologies. In the end, what really counts is a method thatdelivers three things: results, speed and ownership for change

The method selected should be known to work -- testimonialsfrom other companies should be easy to come by. Speed is critical: If it takes too long,management will have moved on by the time a solution is proposed.

Finally, results are dependent on people buying into andimplementing the solutions. The process selected must be inclusive. At the same time,management has to be completely in charge. Nothing puts implementation more at risk thansenior management being surprised with solutions that they cannot accept.

BUILD AND SUSTAIN MOMENTUM

We urge companies to pursue a customer-service strategyafter a lot of thought and discussion.

Taking actions to improve service -- or to free up costsfor reinvestment in new products, marketing or EBITDA improvement -- should be a normalpart of work. When a company is ready to build this into its culture, it's the right timefor a customer-service strategy.

SUMMARY

A cable-industry executive once told me that anything to dowith process improvement needed to begin in January so that the payback could be shown inhard cash by year's end.

As part of any good customer-service process, there will bepayback in a reasonable time frame -- hopefully many times over.

But let's not forget that the same things that driveunnecessary costs for a cable operation also drive customer and employee dissatisfaction.This is one of the few places where leaders can get three positive outcomes with onedecision.

Tackling customer service is a strategic choice. It's onethat many companies have made and that few regret. As the industry continues to evolve toone where customer loyalty is key to growth, the time is right to put this high on yourlist.

Robert H. Davis is managing director of theconsumer-broadband group at international management-consulting firm Dove Associates Inc.

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