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Strategy Execution Sustainable competitive advantage comes from understanding and acting on your customer behavior and profit patterns better than your competitors understand and act on theirs. Though multiple competitors might have relationships with the same customer, each is different. Different sets of interactions took place to develop each relationship. These interactions capture what the people on the frontline with customers DO to carry out the tactics for acquiring and keeping customers and also what the customers DO. The interaction process is a joint process you and your customers undertake to build relationships one interaction at a time. Each interaction builds value and can be measured. The interaction process across the entire customer relationship is how strategy is brought to life, how it is executed, and how profit is tied directly to customer relationships. Interactions happen in real time. Measuring interactions measures how strategy is working, how value is created, and how profit is being earned—all in real time. Interactions are the essence of real-time strategy execution. Strategy Execution Paper Table of Contents
Execute Directional Strategy by Executing Customer Relationship Strategies. A “directional” strategy makes explicit what business you are in, what your brand stands for, what your promise is to customers, what you are offering, how you are creating it, and how you are promoting and delivering it to customers. Some may call it brand strategy instead of directional strategy. Whatever the name, the strategy is for the company as whole or a business unit and is set by executives to achieve the company’s goals. What’s been implicit is the underlying customer relationship strategy. It is inherent, intrinsic, and intuitive, yet rarely articulated or orchestrated across the customer relationship. Critically, the customer relationship strategy should also be explicit. It is through a customer relationship strategy that a directional strategy can be tied to profit. Profit is earned by the orchestration of functions across the company. The customer relationship strategy ties everything together; it unifies the functions. It is through the customer relationship strategy that the directional strategy aligns with the customer point of view and how it is executed. While it is desirable to use the Religence Framework for Customer Relationship Intelligence to develop and deploy customer relationship strategies throughout the company, it is practical to focus first on top priority customers. Top priority means different things for each company. It could be those who make large purchases or regular purchases, those who pay quickly, prestigious customers whom others will copy, key customers in a new industry or geographic location. Or it could be customer segments with profit improvement potential. See our Next-Generation: Profitability Segmentation paper for various approaches for the latter. Within the customer segments, the focus is on channel/product group combinations, because that is the smallest unit for effective action. It is at this level that relationships are made and the people who make them are managed. There is a customer relationship strategy for each channel/product group. Given that most companies are using at least three sales channels, there will most likely be several customer relationship strategies for every directional strategy—the strategy set by executives to achieve the company’s goals. With the Religence Framework, strategy is made relevant and actionable throughout the organization—from the executive suite to the people working directly with customers. Managers form the bridge from executives and their directional strategy to these frontline people. To be meaningful to the frontline people, there needs to be a customer relationship process that makes it clear what they are supposed to do, what creates value for the customer, and how what they do in their functional areas contributes to strategy execution. The focus on channel/product groups ensures that.
Instead of working in isolated silos, the people on the frontline with customers collaborate across the functional silos in a seamless customer relationship process in the Religence Framework. Each function does what it does best. Acquisition, Closing, and Retention stages in the customer lifecycle are managed as a continuum. Marketing keeps Acquisition; sales has Closing; a new elevated function customer retention, either shared among marketing, sales, and operations or in a new group formed to coordinate the activities, has Retention. Managers and a cross-functional action learning team of their group leaders from marketing, sales, and the new customer retention as well as the staff who support them—business analysts, IT and HR professionals—define a high-level customer relationship process value stream map and high-level tactics for what they do now to execute strategy and create value with their customers at a base level. Managers and the action learning team define when a customer has moved from one stage to another in the Customer Relationship Wings in the Religence Framework. These definitions are critical for better handoffs between functions. The framework makes it easy to see what tactics and critical interaction processes are missing in the continuum to move contacts through the stages, as well as what needs to be added or changed. Some interaction processes are so critical that managers will want to take care of any problems immediately even before completing the evaluation of their current customer relationship strategy. The exercise also stimulates ideas for new alternative strategies and their supporting tactics and processes. Potential new tactics to support strategy alternatives are chosen not only for their traditional promotional value, but for their value in developing the customer relationship to support the strategy. What the tactics should be in each of the stages is not developed in isolation, but by the team. The customer relationship development process is dynamic, with prospects and customers moving among the stages at will. So attention is paid to what the handoffs need to be as well. Managers consider the impact on operations. Will they be able to deliver what is about to be promised? What business rules should be in place? Promises that are kept build relationships. Managers also anticipate the change management techniques they will need to employ in execution in order to align those on the frontline with customers. What kind of training and monitoring will be required? It will be easier, because the action learning team had a part in developing the tactical plan and the customer relationship process. Managers and their action learning team estimate conversion rates from one stage to another and establish a high-level budget for each tactic in each stage. They think about what the differences will be in the numbers between the current or status quo strategy and the alternatives being considered. They anticipate not just the fixed costs in each stage, but the costs-per-contact needed to move each contact through each stage. Estimating and then keeping track of costs-per-contact by what happens with them in strategy execution instead of measuring the costs by a head count of their staffs will be new to most companies, but will give a more realistic picture of what it costs to move a contact through the Customer Relationship Wings in the Religence Framework. Once the current strategy and the alternatives have been defined in this format—what constitutes movement between stages, what tactics to use in each stage, what handoffs, what metrics for movement and cost—the current strategy and alternatives are evaluated and compared in our strategy decision model. The same format is carried into the strategy decision model and then on into an operational CRI tracking system, making it much easier to operationalize strategy consistently. A Comprehensive, Consistent, Disciplined Approach to Strategy Execution Planning. In practice, it is highly unlikely that any one tactic or interaction can move a contact or customer substantially. It is a series of tactics and their related interactions in a process that do that. The calculations need to be done probabilistically on the group—the group in Acquisition stage, the group in Closing stage, and the group in Retention stage—taken as a whole for the entire customer relationship. The calculations then need to be combined with a more comprehensive look at the pipeline conversion rate algebra to include both “wings” in the Customer Relationship Wings in the Religence Framework. This is done in our strategy decision model. Other key metrics in planning are cost-per-contact in each stage, retention rates, referral rates, and Customer Lifetime Value (CLV) for profit. Companies who are already tracking interactions are gaining an understanding of typical interaction flows and are able to apply predictive modeling techniques to better inform model estimates. Another way to inform the estimates is our Align for Success Factor reality check. Key metrics in execution tracked in real time are the interactions themselves, the interaction costs, and Relationship Value, the Key Performance Indicator for relationship development, which is how value is created and how strategy is executed. Relationship Value can also be a leading indicator for profit. The discipline of a model for each potentially profitable channel/product group combination achieves consistent metrics that can be rolled up for the business unit, the division, and the enterprise to give executives a cohesive framework to compare potential and performance against plan. It is the cornerstone of cohesive operational control of customer activities, and a new way to manage sales and marketing and customer service. The metrics are set. That guarantees the consistency and coherence needed to manage within and across business units. How you use the Religence Framework for your business process is not set at all. That is totally customized to your business; it is, after all, your process, your interactions with customers. The framework helps you capture what you are doing already and optimize it for each market or customer segment within channel/product group combinations.
Operations are a day-to-day activity, no matter where in the company they occur. When strategy is adequately operationalized, the operational activities of people on the frontline with customers are intuitive and the value of the simplest action—a call to a prospect or customer—is recognized and measured for its part in execution of strategy. What happens operationally with the customer, either executes the customer relationship strategy, or it doesn’t. Managers and their cross-functional action learning team take the high-level customer relationship process value stream map used for the strategy decision model down a level to a detailed customer relationship process to implement each of the tactics. They run a series of test scenarios to determine the interactions that may typically implement the chosen strategy. The interactions support the intention of the tactic. There may be only a few interactions required to implement one tactic, while it may take a couple dozen interactions to implement another tactic. Next, the cross-functional team determines how the contact might respond to each interaction. Again, this is expressed as a series of possible responding interactions that a prospect or customer might have. Developing a relationship is a joint process—a give and take—between the prospect or customer and the company’s frontline staff. Both sides need to be accounted for. These detailed potential interactions will become the basis for configuring the Religence Framework’s operational CRI tracking system. In the Religence Framework, determining the possible interactions and responses is important, but the magic happens when we value, monetize, and code the interactions and responses to track with the tactics in the plan. This makes it easy to compare the actual day-to-day performance with what is anticipated of the plan in the strategy decision model and to track cause-and-effect. It is these customer relationship metrics that link planning and execution and value creation. What makes the Religence Framework more powerful, however, is measuring what the interactions DO to build the relationship with the customer—the effect. Giving each interaction a relative value for its relationship development potential is a major breakthrough. This Relationship Value metric is what has been missing—until now. The value assigned is based on the interaction’s relative impact and relationship enhancement capabilities. We have an interaction database, based on more than 30 years of experience in sales and marketing, to draw on as a place to start. When a company has been doing predictive modeling, we use that insight to help value the interactions as well. Relationship Value ties together many aspects of the customer relationship process and, when correlated to profit, allows a whole new level of analysis. But Relationship Value has an even more important role. With Relationship Value, plans can be put directly into operation—in a way that generates that all-important operational value creation feedback loop to enable real-time management of the staff on the frontline. Relationship Value is not just for managers; it allows staff on the frontline to make informed, more profitable operational decisions on their own, one interaction at a time. Then, as managers see what is happening, they can innovate with process changes, making immediate course corrections and in-the-moment decisions. That’s why Relationship Value is the Key Performance Indicator for relationship development, which is how value is created and how strategy is executed. Relationship Value can also be a leading indicator for profit. When a value and cost for the interactions are assigned ahead of time and configured in an operational CRI tracking system, the relationship can be quantified automatically, without tedious data entry. Then, when a person on the frontline with customers in sales and marketing or the new customer retention function clicks on an interaction to select it, the interaction and its ascribed value and cost are recorded automatically by the tracking system. The record becomes a stream of data that can be analyzed. Unlike textual data (such as contact reports), this stream of data is structured numerically, which enables far more precise analysis and easy review. It is structured data, in a technical sense. Scoring can become sophisticated with large amounts of data. Typically in business-to-business, there hasn’t been enough relevant data for probabilistic analysis. With the Religence Framework collecting this data stream, there will be sufficient data over time. In fact, there will be enough data to come close to predicting absolute values instead of using the relative values that get the valuation started. When a company already has data, it is used. Having been a top executive at a major company with broad responsibilities and where he was used to having sophisticated analytics to help manage the business, Religence’s own Dave Pearson is keenly aware that management will want to use the interactions that their companies are already tracking and approach tracking additional interactions carefully. For example, companies who use the Internet extensively are likely to have clickstream data that can add greatly to the understanding of the customer relationship process. Whatever data is available is calibrated to the framework, and critical missing interactions are anticipated for the ongoing process. Some companies have been able to successfully model just which interactions are working for them and which ones aren’t. Where there is sufficient data to warrant modeling, and where the value in moving the relationship forward or backward can be extrapolated, it is used to help value the interactions in the current process. This will be an iterative process anyway, with each round improving upon what is known and adding to the sophistication. Within each tactic, there are suggested interactions. Planning the next interaction can be as simple as selecting from the list. With sophistication, the next interaction can be suggested automatically, by a decision engine drawing on the past experience of interaction flows, not just selected by the person using the system. This is a process that can be deciphered to anticipate what to do next—by the individual, and with sophistication, by the system. In either case, the individual has control of the choice of what to do next. The system just guides and helps channel their creativity in how they develop the customer relationship. With the Religence Framework, people on the frontline and managers who supervise them can easily review a customer’s status at any time. Important details are in front of the right people before each customer contact, in an ongoing record of the interactions. Instead of searching for and then plowing through large numbers of emails before an important call, anyone in the company can easily see where they stand with a particular customer, easily choose what to do next to maximize profitability, and easily record what actions they take and what happens. Institutional memory is institutionalized. The results of hundreds of small, more profitable decisions each day are woven into the profitability of each customer. A Breakthrough Way to Measure and Manage Strategy Execution and Value Creation.
3. Then as each sales or marketing representative (or anyone else in the enterprise) interacts with a customer, their response to that interaction defines a quantitative event that can be recorded as a transaction. Reporting is easier to do, and intelligence is built into the process automatically. Now Real-Time Management and Innovation is Possible. Interactions and responses carry out planned tactics in a joint process with customers, interaction by interaction, response by response, across the functions of marketing, sales, and customer retention as a continuum. The process includes not just the interactions carried out by people, but the interactions that were done automatically by the system as well, for example, an ongoing email campaign. A data stream records the results of each interaction in a quantitative way—what value was derived from each interaction in building the individual customer relationship, and what the interaction cost. Instead of using a narrow, incomplete look, function by function—say, at the number of times an ad was run, the number of emails sent, or the number of sales calls made—to judge performance in sales and marketing, what good the collective interactions have had in moving the relationship forward can now be readily seen and what they cost. Are the costs-per-contact in each stage working out as planned? Is it taking more or fewer interactions than expected to move a customer forward? Are relationships being built as quickly as it was thought they could be? If actual performance is not what was expected, then managers can adjust the process, innovating in real time. Tactics can be added or deleted. Interactions can be added to—or deleted from— the list of interactions from which to choose. New responses can be identified and captured. These changes in the process can be immediately reflected in the day-to-day operational guidance for each of the staff members on the frontline with customers. Managers are now armed with structured data to analyze and have a real-time basis for monitoring alerts, for status reporting, and for timely course corrections. They can have continuous feedback for decisions and up-to-date profit results. Click here for more information on How to Profit from Operational Data in Real Time and Right Time or look at our Next-Generation: Operational Control paper or our CEO’s new book Customer Relationship
Intelligence: A Breakthrough Way to Measure and Manage Sales and
Marketing, Chapter 8. There is also more on the operational CRI tracking system and more on what interactions to track. Unlock the Competitive Advantage in Customer Relationships. Now you can take it a step further and add that what happens within the customer base is also different. It is even different within different parts of your own company. Your strategy is more likely to pay off if you leverage those differences rather than trying to copy some other business’s success. Your strategy is more likely to pay off if you have uncovered your own unique formula for developing high-profit contributing relationships and created a business rules-driven learning company. When driven by your rules and your results interacting with your customers, your business model is made better with every iteration. To get started now learning how to operationalize strategy to deliver advantage, we invite you to contact us. Our team of senior people is ready to help you listen to your customers, deliver more value, and identify the customers you should cultivate—who the most profitable customers are and why and what their potential is for profitable growth. __________ For More Information: Take a look at our papers Voice of the Customer Research, Traditional Customer Research with VoC, Profitability Segmentation, Value Creation, and Operational Control. You may also be interested in our other Thought Leadership Papers in our Next-Generation series. For more on operationalizing strategy and building profitable customer relationships, see our extensive Religence Framework CRI Reference Section for these topics:
Another excellent resource is our CEO’s new book Customer Relationship
Intelligence: A Breakthrough Way to Measure and Manage Sales and
Marketing, which explains how to track and manage strategy execution in real time in our operational CRI tracking system. __________ About the Authors and Religence: Dave Pearson is a Senior Consultant at Religence, Inc. Dave sees the big picture and how an integrated balancing of business realities and quantitative process in marketing, operations and finance are needed to achieve success. He’s at home with product pricing, marketing approaches, sales compensation, operational workflow improvement, process gap analysis, improved customer service, and more. Prior to consulting, Dave served as a director of market research at SRI International, followed by his primary corporate experience in senior management positions in financial services with multi-million dollar responsibility. His 25 years of experience translate well to marketing and financial challenges in many industries. He has a BS Electrical Engineering and an MBA Finance/Marketing. Religence is a customer-focused performance management consulting firm specializing in Customer Relationship Intelligence. The Religence Framework links strategic planning to operational execution and customer relationship metrics to profitability for breakthrough business-to-business sales and marketing performance.
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