Escalating operational costs in a market which has become increasingly competitive is a major challenge for utilities across the globe. New entrants in market are threatening the legacy business models which were once considered ‘too good to fail’. Thanks to increased competition and the digital storm, real-time responsiveness, personalised treatment and ease of doing business have become basic customer expectations from industries like retail, telecoms and banking. These expectations are gradually migrating to utilities.
The only way to stay ahead of the competition and adhere to regulators’ calls for better customer service is to ensure delivery of what is right for the customer.
The dichotomy between quality and customer satisfaction
According to Puneet Mehra from EXL, “Most utilities have designed their business processes around existing IT systems, organisational policies, budgetary constraints and compliance guidelines. This inside-out approach adopted by utilities in designing business processes overlooks one key aspect - customer outcomes. Customers want the processes to deliver what they expect and have very little regard for the constraints.
Success of business processes is traditionally measured on KPIs which are not necessarily aligned to customer outcomes. Definition of quality is restricted to processing transactions within service levels and adhering to defined procedures.
Utilities have also built extensive controls to ensure procedural adherence. Elaborate documentation, implementing knowledge management solutions and building system validations are among few of them. Quality audit models, which rely largely on transaction monitoring, are used to measure efficacy of these controls.
It is commonly assumed that procedural adherence guarantees quality – as customers view it. Then why is it that contacts, complaints, and churn show no correlation with the measures of process quality? What we observe here is the famous system archetype – ‘Limits to Growth’. With processes built on incorrect foundations, meeting or exceeding quality criteria does not guarantee customer satisfaction.
Mehra cites an example: “In one of our engagements with one of the UK’s leading utility's, we observed that the quality for business processes was consistently above 98%. Executives were satisfied with the performance until one day the reality dawned. Their customers were leaving at an alarming rate, and those who chose to stay were getting more expensive to retain due to increased contacts and complaints.”
He added: “Utilities now have to change their strategies if they wish to retain their existing customers or attract new ones.”
CSAT and NPS are not restricted to front office
Talk to utilities about customer experience and you are likely to hear about how they are focussing on customer touch-points. CSAT or NPS are considered to be metrics applicable only for front office. Undoubtedly, the interactions which customers have with utilities help in building their perception about the service.
However, utilities need to redefine what is considered as quality in business processes. Only by looking at the customer’s experience through their own eyes, along the entire journey which includes business processes, can utilities really begin to understand how to meaningfully improve performance. In most cases, it’s not the touch-points which are broken, but the journey as a whole – largely attributed to business processes.
Mehra tells Engerati: “Throughout the customer journeys, the front office is becoming more customer centric and embracing new technologies to reach out to customers more effectively, however, the back office continues to work on traditional key performance indicators which focus on service levels and turnaround times.
"Customers are telling us what they need all the time – through calls, complaints, CSAT surveys etc. We can’t fool ourselves with over-achieving KPIs such as service levels. It’s about time that utilities measure the success of business processes based on how well they were able to achieve customer outcomes."
A structured approach to assuring delivery of customer outcomes
Quality cannot be measured against a defined standard. It has to be measured against customer expectations.
Mehra described how EXL’s Customer Outcomes Assurance Model (COAM) drives this philosophy. COAM embeds customer centricity in back office operations by identifying customer outcomes for each journey and aligning the success measures with customer outcomes. This shifts the balance in favour of process effectiveness as against process efficiency. The outside-in view brings the customer to the centre of operations and measures quality from their perspective.
COAM lays the foundation for customer centric operations. It not only measures what is right for the customer but also helps in identifying what is working and what is not.
Consider an example of a customer billing process.
Traditionally, the focus has been to resolve all exceptions within 5 days and see the bill out of door. Therefore, exceptions are resolved on a FIFO basis. However, with the COAM approach, utilities have to be mindful of customer outcomes – timely billing in this case. To ensure customers are being billed on time, utilities now have to prioritise exceptions based on a customer’s bill due date. Similarly, if the customer wants an accurate bill, there is hardly any merit in sending them an estimated bill faster.
EXL have developed a methodical approach to implementing COAM:
· Identify customer outcomes: Analyse journeys from the customer’s point of view. Review calls, complaints and CSAT data to identify what customers want.
· Redefine what quality means: Ensure that quality for business processes is when customer outcomes are met.
· Change the audit model: Drift away from a standardised checklist approach to measure transaction quality. Focus on identifying why a customer outcome was not delivered instead of measuring procedural adherence.
· Close the continuous improvement loop: Assure delivery of customer outcomes by building controls in the process such as changes to workflow, systems and processing guidelines, employee training, reward and compensation policies etc.
"We have a proven track record in implementing the same for our utility clients and have demonstrated a positive impact on end-customer outcomes," points out Mehra. During 2015, the model was recognised by Aecus as an innovation in the world of outsourcing.
He adds: “COAM delivers a mind-set shift from the way quality has been looked at traditionally. It focuses on process analysis to identify reasons for failure in meeting customer outcomes. EXL offers a complete support ecosystem and partners with suppliers in COAM implementation from start to end. Whether it involves data analysis or change management, we provide the support they need to make all of their business processes more customer-focused.”
During one of the most recent COAM implementations, EXL delivered following results:
· 86% improvement in on-time billing
· 0.7% improvement in bill accuracy
· 30% reduction in site visit cost
· 7% improvement in customer retention
“EXL’s customer outcome assurance model is a paradigm shift from measuring transaction quality to measuring process effectiveness. The model ensures that our delivery is aligned with customer expectations – which is critical in UK’s highly competitive energy market. EXL worked very closely with British Gas in designing and implementing the model across all offshored processes and we have seen significant benefits as a result. The model embeds EXL’s deep understanding of the market and demonstrates their commitment to put the customer at the center of decision making. Measuring what is right for the customer enabled EXL to identify opportunities and re-design processes to deliver an improved customer experience. The Customer Outcome Assurance Model is the first part of our journey enabling us to move towards removing exceptions through a Customer Outcome framework.” – Head of fulfillment
Customer centricity is a journey
Mehra points out that customer centricity is not a point-in-time activity. With ever evolving operations – it’s a journey. Customer expectations, competition and markets evolve and in response, utilities have to be prepared to make a long term investment.
He points out that alignment of the objective starts at leadership level.
He explains: “Leaders have to show their commitment to the change in strategy. Without this, it will be difficult to drive COAM forward.” He also adds that staff need to be trained on the new quality model and its relevance. Outcome linked performance levels are to be defined not only at a process level but also at individual level. Staff development must be factored in if you want to make a success of the customer centric approach.”
Utilities have come a long way. The first step towards improving the customer experience is recognizing the need for improving it and it seems most have done this. While the maturity of markets differs across the UK, US, Australia and Europe, there is always room for improvement.