Having spent a number of weeks speaking at, or chairing, various industry events, I’ve seen how firms are nervous about the rise of fintech/insurtech and are convinced they should focus on digital and technology for growth.
Is that right? Does success and sustainable growth come from that focus?
In response, I want to share a two-part blog post, based on a talk that I’m giving to mutual lenders in London.
The topic concerns where to focus as a 21st century business. I hope it will help leaders grappling with competing demands on their time and attention. Here is part one.
Where to focus? (Winds of change)
In our ever-changing world, where should you focus to succeed with improving performance and readiness for the future?
Many social and business commentators will highlight key trends. These include:
- The rise in the power of consumers (including transparency and ease of switching)
- The erosion of trust in organizations (especially financial services)
- Increased regulation (including conduct risk)
- Rise in services expectations driven by experience from other sectors
- Emergence of technology disruption/innovation scene
All these combine to make it ever more urgent for lenders to regain trust, by both meeting service expectations and communicating more appropriately. Both of those twin aims are informed by better customer insight: genuinely understanding your customers and the jobs they want to get done (including when), better than your competition.
See also: How to Take a Bold Approach to Growth
Fortunately, alongside the societal and technology challenges I listed above, opportunities also present themselves.
- Increased availability of wider range of data and computing power to analyze
- Growth in analytics tools/market (including data science and statistics)
- Improvements in marketing automation, service bots and personalization capability
- Evidence from disrupters (like Metro Bank and Aldermore) of service differentiation
- Financial Conduct Authority (FCA) focus on behavioral economics giving opportunities in “regulatory sandbox”
Based on my experience of both creating/leading such teams for more than 15 years and coaching leaders across the U.K. and Europe, I see tremendous commercial potential.
However, too many firms rush into hiring data scientists without clear business goals. As too many have discovered to their cost, the real value comes from improved customer insight (not technology or data science for their own sake).
On the encouraging side, a number of studies have shown that businesses that make extensive use of analytics can outperform their peers. But, just as has previously been seen with the “hype cycles” of data warehousing and customer relationship management (CRM), a lot of technology spending can also be wasted. How can businesses avoid that pitfall?
Many lenders (and financial services firms more broadly) aspire to “customer-centricity“ as a business strategy. Far fewer achieve both improved customer experiences and sustainable profit growth as a result.
Insights 2020 findings
A key global study focused on understanding why some businesses succeed at this challenge, while others fail, was Insights 2020. As reported in Harvard Business Review, this collaboration talked to more than 10,000 practitioners and 330 leaders across more than 60 countries. Insights 2020 identified three factors that distinguished those who achieved customer-centricity, measured through customer satisfaction, digital engagement and commercial return.
These three priorities are:
- Purpose-led, data-driven, consistent customer experiences (multi-channel/journey)
- Embedded customer obsession in culture (decision-making, performance management and embracing experimentation)
- Customer insight team is an active, equal business partner
Getting clear on customer insight
What do I mean by customer insight?
Different organizations will have different answers. Some appear to equate the term with research, others with analytics. A few relate it to targeted database marketing, and almost everyone can see the importance of quality data for any such work.
Benchmarking best practice within customer insight, especially for financial services firms, has taught me that a more holistic approach works best. The most capable teams combine technical skills in data, analytics, research and database marketing. But, as the saying goes, it’s what you do with it that counts. Using those technical skills in concert, to achieve a deeper understanding of your customers that enables behavioral change, is where true customer insight lies.
My own definition of customer insight is:
“A non-obvious understanding about your customers, which if acted upon, has the potential to change their behavior for mutual benefit.”
Key strengths needed (including soft one)
To achieve that depth of insight and impact requires two key strengths.
First, the use of the use of the four technical disciplines I mentioned above, in concert to produce synergy. I normally explain this through use of Laughlin Consultancy model for Holistic Customer Insight, a virtuous circle of how to operate in multi-disciplinary teams.
The second strength needed is analysts who can speak to your business. There is no point discovering great insights into your customers if these remain on the shelf. For that reason, several leading customer insight teams have benefited by investing in softer skills training for their technical teams.
The model I use is a nine-step model, from incisive questioning (to determine real business need) all the way through to following up to ensure insights are acted upon in the business (to achieve customer and commercial targets).
See also: The Formula for Getting Growth Results
Your data foundation
For most organizations, reaching that level of capability begins with a focus on data.
When speaking with leaders from across many different sectors, I find that a perennial headache is either getting the data they need or being able to achieve a single customer view. Such a focus on data, as the foundation of customer insight and customer-centricity, makes sense.
However, I would like to make a plea for a focus on two aspects that are too often neglected. Data models and metadata may sound too much like topics for technophiles or data geeks, but lack of both can have big business impacts.
Faced with the challenge of capturing and using more data, egged on by technology suppliers, too many companies leap straight into a technology solution and technical build. However, with the pace of change and ever-growing list of data that may be needed (considering the growth of Internet of Things, for example), businesses need a more sustainable and technology-independent map. That is the role of the too-often-neglected conceptual and logical data models. These should be treated like blueprints for your business ecosystem.
Alongside that data gap, another common lack for analytics team is missing metadata. That is data about data. In all the excitement to gather more facts about customer segments, or potential triggers for marketing campaigns, the basic need for things like a data dictionary can be missed. Many insight or analytics teams rely on what senior analysts hold in their heads. But the expertise about what different data items mean, which can be trusted and how to interpret different values – all this is too valuable to allow it to walk out of the door.
That’s it for part 1. Part 2 coming soon….