Customer Experience – How online retail changed the game for COOs

Customer Experience – How online retail changed the game for COOs

Key headlines 

- Operational excellence has changed, from cost reduction to customer focus, a trend widely influenced by online retailers including Amazon.

- Companies following this path have seen big gains in their customer approval ratings and achieved increased productivity and efficiency as a result.

- Some organisations have appointed leaders to look after customer journeys, as they seek to develop world-beating operations in a rapidly changing market.

- Achieving operational excellence is still constrained by challenges with people, culture, priorities, budgets and legacy technology – and the resources to deliver it.

- With the right mix of information, innovation and improvement, companies can move towards being agile, competitive, transparent and able to grow.

UK Finance’s COO Network met at the beginning of February 2021 to explore operational excellence and why customers are at the centre of everyone’s thinking

When Jeff Bezos announced he was stepping down as the chief executive of Amazon, there was a flurry of news stories about his legacy. In 27 years, he has grown the seeds of an online business operated from his garage into the largest ecommerce platform in the world. It is unrivalled, dominant, and has changed the retail sector beyond all recognition.

But, of course, his influence extends beyond the way we shop. If you look more closely, it’s clear that Amazon has also impacted the way companies are run. Nestled on its website, in the jobs section, are 14 leadership principles. They talk of curiosity and learning, ownership and thinking big, hiring the best people and taking action. And two words now familiar to everyone: customer obsession.

Chief operating officers (COOs) in the financial services sector are tuning in to this trend. The quality of a financial institution’s customer experience has been a huge influence on its success in a digital world. Competition from fintech startups and challenger banks has also recalibrated everyone’s expectations – and the pace of change is unprecedented.

Alive to the customer’s needs

During February’s virtual UK Finance COO Network event, participants were asked for their opinion on the benefits of operational excellence. Among those they cited included being agile – able to respond and adapt quickly to changing markets – along with competitive advantage, financial performance, the ability to grow, and transparency and control. But participants agreed that the top benefit was customer experience. Two stories shared during the event helped reveal why it’s so important.

A few years ago, one building society recognised the importance of engaging with end users of the new mortgage system. Thus, they asked brokers and customers to give their honest feedback about what they valued the most. By mapping out customer journeys and putting the end users at the heart of the product, the building society’s brand has been greatly enhanced, and its net promoter score has skyrocketed. Productivity has also increased, but this has happened as a by-product of focusing on the customer.

One COO from a major high street bank explained that leaders had been appointed to look after seven customer journeys, ranging from personal banking to retirement planning and unsecured lending, among others. The people in charge of these customer journeys are empowered to work across traditional reporting lines to make changes. They are the ones driving operational excellence and they are radically changing the way customers are supported.

Tackling other obstacles to operational excellence

The speed of change across businesses, which has only accelerated in the past year, is creating a unique set of pressure points. Alongside customer expectations and regulatory requirements, operations leaders are focused on costs, efficiency and using data to make better decisions. They are also managing a workforce that is without the certainty of when, and how, they can return to the office. And operations leaders are doing all of this while thinking about the future. The decisions they make today will influence the health of their businesses in the longer term.

During the UK Finance event, the group was asked to share more about the obstacles that stood in the way of delivering operational excellence. The legacy of their older platforms stood out, along with the technology needed to implement change. Their priorities were also a challenge, as they try to decide where to focus time and budgets. But their most significant areas of focus were people, culture and resources, all of which impact the ability of organisations to take on challenges, adopt the right mindset for progress and curate the right conditions for change.

To illustrate: On big transformation projects, there is widespread use of project teams. Too often, people are brought in, they do a job well, after which they are moved to another project. The group at the event was asked if it was important to preserve more institutional memory in these situations. The clear answer: Yes. Having change capability inside businesses is important. It isn’t just about having a great set of project teams. It’s about combining structured change with day-to-day continuous improvement.

In addition, many participants on the UK Finance virtual forum shared stories about managing remote teams. People’s enthusiasm about working from home has clearly ebbed and flowed over the past year. Many organisations are planning to adopt a hybrid model of working in the future. This will take what they hope will be the best of both worlds: time in the office to work on collaborative projects, and time at home to manage emails and think. Also of note, particularly to financial services organisations: Regulators are becoming increasingly interested in how companies are managing these types of risks.

Building for the future

The quest for operational excellence is not easy, but it’s something that every COO is striving to achieve. Through innovation in the way they work, the information they gather and the improvements they make as a result, their companies can become market leaders.

COOs must be able to react quickly to opportunities, focus on competitive advantage and have a greater awareness of business performance and growth. But perhaps most of all, their work must create an experience that customers like and value – and that will keep them loyal.

UK Finance’s COO Network event, which was held in association with Protiviti, took place on 4 February 2021 online. This is a quarterly event held under Chatham House rules. For more information and to find out more about the work of UK Finance, contact head of member communities Zoe Bailey – [email protected].

How do companies measure operational excellence?

Net promoter scores (NPS) are commonly used to tell companies how they are performing in the eyes of customers. Put simply, the score is achieved by asking people how likely they are to recommend a company, product or service to someone else. Once the detractors are subtracted from the promoters, then a score is available. More than zero and up to 100 means a company has more promoters; anything below zero, to minus 100, means more detractors.

These scores do help companies to understand how they are perceived. But leaders also need to promote operational excellence from within. To do this they commonly use scorecards and incentives with staff, which are designed to help deliver the right outcomes. But these will vary between departments. Excellence will mean one thing to a compliance lead, and quite another to a business development manager, for example.

During the UK Finance event, the group acknowledged that measurement of excellence was complex. One COO said his company was focused on traditional measures like cost-income ratio and return on investment. He believed that while NPS was useful, it didn’t provide the whole picture he needed. He encouraged others to think about excellence within a framework and allow themselves the space to change their focus. Because what a business measures will ultimately drive behaviour.