I read a post the other day looking at the ROI (Return On Investment) in immediate payment systems (banking speak for instant payments) and one particular statement made by the author made the hair on the back of my neck stand up.
In fact, the real driver may not be the ROI but just keeping up with customer and regulatory needs.
ROI can’t come from regulatory needs and cost savings to be successful. It has to come from customer value creation if you want to be sustainable.
If the ROI is some sort of fuzzy “feel good” or “customer experience” story without strong numbers most businesses won’t invest in these types of problems. In this example, if all of the major banks in a country (such as Britain or Canada) decide that “instant payments” don’t have a positive ROI they will all choose to not build that capability since it isn’t “worth it”. If they do choose to build it it will be based on a “loss aversion” or “cost reduction” ROI and it will likely be built at a high cost and with a high transaction cost (which will obviously be passed on to the customer).
Smaller entities and non-banks might notice that and decide that without their legacy and complexity that they can offer instant payments in a completely new and unique way for a fraction of the cost. This non-bank service would have a revenue positive ROI for that service at a fraction of the service cost that the big banks could offer their solutions. The banks would be left in a position where they need to accept a loss on each transaction or justify their higher cost on some basis to their customers.
This “real ROI driver” that was noted in the article is exactly the foundation of disruption that Clayton Christensen noted in his Innovator’s Dilemma. The approaches that the big banks are taking (avoid the issue or develop expensive solutions within the existing complexity) are exactly the behaviours that other smart organizations (Kodak, IBM, etc) have taken in the past only to find themselves on the outside of their old industry looking in.
Banking is an industry that looks more and more like other industries from the past that have been disrupted by these ideas. Core banking products have become a commodity and there is very little to differentiate any of the banks from each other. Everyone has the same mix of products (savings, chequing, lending, investments etc) which look almost identical. Everyone offers those products through a mix of channels (branch, mobile, online, etc) which look largely the same. Everyone claims to be the most helpful, best customer service, most convenient, etc.
But if everyone is the best then nobody is. I think if you’re honest with yourself there isn’t much to differentiate most of the banking options that exist today.
If banking has become a commodity and carries such a high cost of delivery that the only ROI for new services and features to be “keeping up with customer and regulatory needs” then isn’t that a market that is ripe for someone to disrupt? Think of disruption from new business models, new cost structures, and most importantly – new customer value!
The best way to combat commoditization and disruption is to focus your efforts on delivering customer value. The ROI of customer value is lasting and it comes in the form of revenue and profits (not loss aversion and regulatory compliance) if it is done right.
Customer value isn’t hard to do, but it requires focus and an ability to discard old assumptions and approaches. You need to challenge yourself and your team to consider important questions about your business that might require a significant change in perspective. There are some great strategies to get yourself focused on customer value that you can use to help.
Six Strategies for Customer Value
1. Take On Your Customer’s Problem
Work to not only provide quality products and service, but go beyond to understand your customer’s unmet and unarticulated needs. Use ethnography and other design thinking approaches to better understand your customer and how you provide them value. Start by walking in your customer’s shoes and thinking deeply about the jobs they are working to do and then find ways that your products and services can help them get those jobs done.
2. Make Your Customer’s Life Easier
The convenience of buying from your company is a critical deciding factor for any customer. Are you constantly striving to make doing business with your customers easier? What policies, procedures, communication roadblocks or hours/location issues might be making it more difficult for your customers to actually do business with you that you can fix? If you look at leading organizations who are constantly striving to make it easier to do business with them you need to look at Amazon. From their 1-Click Ordering system to their Prime services Amazon has worked tirelessly to reduce the friction of their transactions (and in the case of Prime even created a revenue stream from it). You don’t have to just be easier to deal with than your competition, you need to be easier to deal with than doing nothing… sometimes that “no action” competition is greater than you might think.
3. Provide Access to Value Instead of Ownership
The new sharing economy is driving more value to customers by providing them access to the things they need at significantly lower prices than the old model of providing ownership of those capabilities or experiences. From car services (Uber), to room rentals (AirBnB), to creative and digital tools (maker spaces), to music (Spotify) people are comfortable with paying for a slice of something when they need it rather than buying the whole capability. If you look at your business and the value you are offering your customers in a different way you might find that there are ways for your customers to “rent” your value rather than buying it which may create significant new opportunity for your business.
4. Include Knowledge not just Service
In a service business (and in particular consulting type activities) your customer can purchase your services to help them deliver on a specific goal, but at the end of the engagement they have one output and no new capabilities. By engaging your customer in the process of delivery and in the process of the service you may find that you can actually empower your customers at the same time as you are delivering the services. If you leave your customer more capable than when you joined them, then you have differentiated what you do and can charge a premium for that service. In addition as you create capabilities in your customers you move them to higher levels of need and they will look to you for support on larger and broader initiatives and partnerships.
5. Don’t Forget to Be Human
More and more of our daily life is moving to interaction with systems. Voice prompts wherever we call, bots when we email and message companies, robots like Alexa and Google Home who respond to our every need, Siri available at the touch of a button. Systems, software, and algorithms are simplifying many of our day-to-day tasks, but they are also taking away some of our human contact and interaction. Look for ways that you can offer that human touch and interaction where it makes sense and can differentiate you or perhaps consider new products and services which you can add to your lineup that are tailored to that type of consumption. Creating opportunities for true human connection also creates opportunity for real trust-building, to demonstrate the character and values of your company, and to create a long term relationship that the customer will value differently.
6. Be Responsive
Time is money is the old saying, but today more than ever that’s true. Consumers are used to instant gratification in almost everything we do and consume. One-click ordering, swipe for a date, instant search results, and even instant payments mean that customer expect things to happen fast. Always be looking for ways to be able to fulfill your customer needs with more speed or consistency, and perhaps even look for ways that you can communicate that commitment through guarantees. Pizza sales skyrocketed in comparison to other delivery foods (and in comparison with “doing nothing” and making something at home) with the advent of the 30 minute guarantee, so think about your own product or service and ways that you can meet your customers needs faster and with more commitment to deliver more value.
Return on Investment is best when it comes from new revenue, new models of profit, and real business value, not when it comes from “keeping up with customer and regulatory needs”. To deliver that real ROI you need to focus on the value you are delivering to your customers and these strategies will help you get there.
If you’re struggling to get focused on your customer value proposition or aren’t sure where to start with the strategies, give us a call. We can help you to build new value in your business quickly, we will teach you how to repeat that process, we can deliver leadership when you need it, and we will commit to a guarantee on our timeline. Call us today to drive more ROI in your business!
Tim Empringham is a passionate advocate for Innovation in organizations of all sizes as a mechanism to drive growth, create uncontested market space, create new customer value, and drive efficiency into the internal organization. His focus is on disruption of thinking and markets through integrative thinking, structured Innovation frameworks, and leadership development of Innovation and Change leaders within the organization.
