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Managing "Informed Channels" with Business Intelligence

In a previous article, I analyzed the structure of institutional memory and its relation to business intelligence (BI) technology and organizational learning. Here, I propose to explore how the enterprise uses customer relationship management (CRM) and BI technology to learn about its customers through contact channels and, subsequently, to identify the message content appropriate to send across different types of channels. The end result is that channels are "informed" and can execute a consistent customer strategy, capturing the results in institutional memory that I will henceforth call organizational intelligence, which includes the BI suite and much more.

Channel Dialog with the Environment

An organization is in dialog with its environment, including customers. The dialog consists of sending messages to the environment by way of customer channels and receiving and processing feedback from these channels. Channels range from physical venues like retail outlets, sales agents and direct mail to media (radio, TV and print advertising), to electronic channels such as the Internet, contact centers and voice response. Each channel has unique characteristics, economics and capabilities. These are related to the cost, the type of customer and the type of product. For example, high value complex and/or customized products lend themselves to a human agent channel such as a sales rep. Less complex and lower value products can be distributed over lower cost channels, like a contact center or Web site. Some channels provide the organization with direct feedback (e.g., a Web site or customer agent) while others (radio, TV, print) have only indirect feedback response. Contact channels effectively act as the "sense organs" of the enterprise.1

To understand how organizational intelligence informs the channel dialog, we need to consider the enterprise as a cognitive system. To learn from experience, the enterprise has to perform several important cognitive tasks: 1) sense and monitor the environment (e.g., using its channels); 2) relate the information gained from this to the operating norms that guide the business (e.g., using the BI suite); 3) detect deviations from these norms; and 4) initiate corrective actions when deviations exceed some preset level.2  If these tasks are done well, a process of cybernetic information exchange is created between the organization and its environment, including that of customers (see Figure 1). The overall experience is captured as organizational intelligence.

Figure 1: Cybernetic Information Exchange of the Enterprise with its Environment

The technical part of this process is usually constellated as the channel(s) platform together with a CRM data repository and its analytic software - the BI suite. The CRM repository collects historical records of customer interactions with various contact channels and allows managers to apply analytic tools to digest the data. From this information, marketers can derive business rules from the data in the repository that drive personalized customer interactions; the channels are "informed" by the results of analysis and the results monitored against expectations.

The only problem with this idealized model is that it doesn't explain actual experience with CRM. Why are the technical periodicals full of CRM and enterprise resource planning (ERP) failure stories, ranging from 55 percent to 70 percent of installs, depending on whom you believe? If we can get beyond the BI component as a technical artifact that assists this process, we can see that real management of customer relationships is a strategy and way of doing business. It is embodied in organizational intelligence, which includes the BI technology.

Organizational Intelligence

For our purposes, we will define organizational intelligence as the capacity for the enterprise to collectively know itself in relationship to its environment and to act on that knowledge in a way that furthers its position with customers and the marketplace. To see how this fits together, we need a model for how organizations store and use the intelligence gained from experience. This is illustrated in Figure 2.

Figure 2: Organizational Intelligence

Here, organizational intelligence is a three-level field of consciousness: acting, thinking and being. Each level is associated with certain types of knowledge, actions and decisions appropriate to the level. By "consciousness" is meant a field of knowledge that everyone and everything involved in the channel dialog can access and use to inform their activities. This model is consistent with how scholars understand the structure of organizational knowledge previously described in DM Review. A coherent multichannel customer strategy has to be anchored in all three of these levels.

  • Acting is the tip of organizational intelligence. This is the level of channels, business processes, software technology, the BI suite as well as the physical channel apparatus that customers use to interact with the firm. Sales and service reps that meet daily with customers function at this level of intelligence, as do retail outlets, Web sites and contact centers. This is the level of sensing the customer, capturing the customer's responses and responding to the customer, whether the response is personal or emanates from automated systems that are embedded deeper in the organization's infrastructure.
  • Thinking and strategy are the next and less visible level of organizational intelligence. This is where the explicit rules that govern customer interaction reside. These rules are embedded in software and technology or in processes and policies and the general know-how of employees. For example, if a bank uses a campaign manager tool, the campaign rules exist at this level. The second level is what informs the channel level for action and execution. The firm managers advance thinking can help figure out how they want to direct the dialog with customers, implemented as rules that drive customer interaction over channels. It is the level of knowing the customer.
  • The third level of organizational intelligence is that of being. This is the level of principles and values where the firm's vision and reason for existence are known. Here is where the firm's basic value proposition exists, the reason why the customer should do business with the firm instead of with its competitors. At the level of being, the firm decides what it is in the world and why that is important to its customers and the market. The decisions at this level inform the level of thinking and strategy. Articulating the level of being is a senior management responsibility and can never be delegated to technicians, though it can be disseminated to all. The level of being is generally stable, and decisions here do not change often, but need to be revisited occasionally to determine if the firm is aligned to the feedback it is receiving from its environment.

CRM/ERP projects can fail because they are aligned to only the top layer of organizational intelligence. Failed projects do not embed the strategy level into multichannel design and implementation and give even less attention to how strategy is aligned with the firm's self-knowledge at the level of being.

Informing Channels with Organizational Intelligence: Infrastructure versus Information

The three-tiered organizational intelligence structure described above gives us some guidelines for the types of messages that are appropriate for different channels. From the perspective of the customer, channels function to enable customers to seek information, shop and compare, purchase and receive service. Not every product is suitable to every channel, depending on the complexity, maturity and value of the product. So what messages are used to inform different types of channels?

It is the author's opinion that the most important message a company can send to its market is what the company stands for, what its value-proposition is to the customer. This message is developed at the level of being in the organizational intelligence model and should be propagated throughout the company's channels in the strategies, tactics and physical configuration. If this is done, then the firm sends a coherent message to its customers when they encounter the firm in the marketplace. Using this, we can look at channels in terms of their ability to carry this message and reinforce it.

A construct that I have found useful to represent channel capability was developed in conjunction with the Santa Fe Institute in New Mexico by the late Howard Sherman and is described in his book, Open Boundaries.3 The basic idea is to consider the firm's channels in terms of how infrastructure-intensive they are compared to the informational content they contain and can communicate to customers. For example, a physical bank branch is very infrastructure-intensive in facilities, people and technology and is, correspondingly, quite expensive when measured on a cost-per-customer-visit metric. On the other hand, a branch can deliver nearly the full range of a bank's products, including high-value products like home equity loans and investments. Moreover, the level of personal attention that a customer can receive at a physical branch is high compared to less infrastructure-intensive channels such as a call center or the Internet. The branch channel is high in both infrastructure and information content; it has the ability to carry the bank's overall value-proposition to customers, communicating the being level of the bank's organizational intelligence to the customer. It is also very costly compared to other types of channels.

Electronic channels such as the Internet, ATMs and contact centers are not as infrastructure-intensive as physical channels, but they have sufficient information content to reach more customers at a lower cost. Thus, the cost-per-customer visit is typically lower. Lacking the human and physical touch, however, these channels do not lend themselves well to communicating the deeper values of the enterprise to customers. Clearly, the customer should receive a consistent message and view of the firm, whatever channel he/she chooses to access service. That is not at issue here. But from the point of view of the channel manager, electronic channels should first be designed to do no harm to the firm's value-proposition as experienced by the customer. Electronic channels are not as suited to carry messages from the being level of organizational intelligence to the customer compared to the more infrastructure-intensive channels. All of us have likely called a contact center only to be "walked" through multiple levels of a voice response tree before we can talk to a person. That doesn't communicate the message, "We value you as a customer," and would do harm to such a value proposition. However, it does no harm to the message, "We're here for you 24 hours a day." The latter message is a statement of a value-proposition that involves a corresponding commitment of infrastructure (voice response channel) and doesn't promise the human touch that a voice recording cannot deliver.

The tradeoff between infrastructure and information content is illustrated in Figure 2. The 45-degree line through the middle of Figure 2 is a frontier of tradeoffs between infrastructure and information content of the channel mix, and nearly any kind of channel can be mapped somewhere on either side of its surface. Here it is seen that high-infrastructure channels (e.g., branches, retail outlets, a sales force) are better suited to carry messages consistent with the being level of the organization: the value-proposition to the customer. Infrastructure supports value-laden messages better than purely electronic channels can because physical infrastructure can communicate the personal touch, the nuance of design, relationship, presence and other human experiences that electronic channels perform less well.

Figure 3: The Relationship Between Infrastructure and Information Content of Channels

On the other hand, information-intensive channels (internet, voice response, ATMs, print, media, etc.) are better suited to reinforce the basic value-proposition and to backfill it with customer service from the top two levels of the firm's organizational intelligence. The tradeoff here is the difference, e.g., between buying merchandise from a catalog or Web site versus shopping at an upscale department store; there is no comparison! These are two different realms of human experience, and a channel strategy needs to factor in the difference and not just the cost.

From the standpoint of organizational learning, high-information content channels are very efficient at capturing the feedback from customer interactions and comparing them to intended results (e.g., the clickstream captured by a Web site or a phone response to a media ad). Also, electronic and media channels deliver messages with greater consistency than high-infrastructure channels can, which are more subject to the vicissitude of person and place.

Firms that want to project a high value-added image in their market will likely gravitate toward more infrastructure-intensive channels and use electronic channels to backfill routine customer transactions, such as order status and address changes. But a firm that wants to project a low-price image will migrate customer-facing functions to electronic channels in order to keep the cost-per-visit down. For most firms, the challenge is to figure out the right overall channel mix for each customer segment, assuming that management has articulated the firm's value proposition and can propagate it into the firm's organizational intelligence.

To reiterate, the value proposition from the basic level of organizational intelligence needs to be communicated consistently across all channels so as to set reasonable customer expectations in the market. It is inconsistent to set customer expectations as "high touch" and then to only deliver "high tech!" The enthusiastic adoption of electronic channels by many businesses but especially by banks, utilities, airlines and phone companies has created much cynicism in the minds of customers who remain convinced that this has nothing to do with service and everything to do with profit at the customer's expense. There is no substitute for managers always keeping an eye on what the customer wants and will pay for and relating that knowledge to the firm's capabilities at all levels of organizational intelligence.

In this article we examined the relationship between customer contact channels and organizational intelligence. Contact channels effectively act as the "sense organs" of the enterprise. The reality, however, is that multichannel systems frequently do not live up to expectations, in spite of the functionality of the software. The reason for this is that channel-enabled CRM is more than a technology; it is a business strategy that involves a commitment larger than its technical artifacts in order to be successful. This commitment needs to engage all levels of the organization's collective intelligence to effectively inform the customer's channel experience.

References:

1. S. Stalinski. "Organizational intelligence: a systems perspective." Organizational Development Journal 22, (Summer 2004).

2.. E. Schein. Organizational Culture and Leadership. San Francisco, CA: Jossey-Bass, 1997.

3. H. Sherman & R. Schultz. Open Boundaries: Creating Business Innovation through Complexity. Reading, MA: Perseus Books, 1998.


Jerry Kurtyka is managing director for Whitestone Technology, an independent consultancy focused on the humanistic and leadership aspects of technology. He is a frequent writer and speaker on the topics of BI and CRM. His credentials include consulting, sales and marketing of CRM software to international banks and nine years as a banker where he held VP positions in strategic planning, retail banking and new business development. He holds an M.A. degree in Organizational Systems.

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