Ian Smith

Q & A

JLA: What is the key principle of customer service?
IS: It costs six times more to win a new customer than to retain one, so every interaction should affirm the reason why he or she chose you in the first place.

JLA: How can you quickly transform your reputation?
IS: Easily - by delivering bad service you will very quickly damage your reputation. Unfortunately, restoring it can take a long, long time.

JLA: But in a slow recovery, isn't it all about price?
IS: Only if you are offering a pure commodity and have no control over the customer experience. Surveys rate price far below quality, reliability, trust and recovery.

JLA: Does the same apply online?
IS: So long as you provide customers with a simple way of serving themselves. And remember whilst you save on overheads, you only get one shot at impressing online customers.

JLA: How do you build loyalty online?
IS: When a customer feels he's being listened to and the offering is customised, loyalty is greatly enhanced - partly out of reluctance to go through the whole process again with another supplier.


INNOVATION IS ABOUT THE ABILITY OF LEADERS TO TURN IDEAS INTO BUSINESS SUCCESS
by Ian Smith

Having worked and lived through four recessions since the early '70s, I have learned to use recession as a diagnostic tool. Too often, in a thriving economy, companies avoid a forensic approach to their business, relying on market growth to mask their weaknesses. In a recession, they can't.

However, it's an ill wind that blows nobody any good. Some will batten down the hatches and hope to ride out the recession, but others will take the opportunity to show leadership and be bold in their response to the challenge.

Frankly, the overwhelming challenge for the UK is in leadership and management. We're not going into this recession in a strong position. As chair of the advisory panel on leadership and management, I reported back to Government with a number of recommendations for narrowing the productivity and competitiveness gap between the UK and its global competitors. Although some were acted on - for instance, increasing the grants available for leadership and management training for small and medium sized enterprises, and reducing the number of employees that a company must have to qualify - there is much to be done.

The panels research showed, for instance, that whereas the UK was spending €1,100 per manager on leadership and management training, our competitors in Germany were spending €4,400. Given this huge discrepancy, could anyone seriously consider reducing investment in our management training?

I can think of actions that companies could take to reduce the impact of recession, but these assume skilled and qualified management team, capable of implementing them. With this assumption in place, three areas stand out as opportunities that will give a speedy return on investment if radical action is taken.

First, to return to my comment that recession is a diagnostic tool, it's clear that, over the past 10 years, many businesses have benefited from unprecedented growth. Increasing market opportunities, however, have masked inefficiency, bureaucracy and lack of innovation. These businesses are now finding that, in a declining market, their cost structures are inappropriate.

Now is the time to take a forensic approach to your business and really understand what is core to its survival and what is 'nice to have'. By doing this, you avoid the salami-slice method of cost reduction and, where necessary, you can even increase short-term investments in critical areas such as management training, while being bold in stopping non-core activities.

Second, my experience of recessions tells me there is a better return in focussing on my existing customers than there is on a costly effort to establish new business relationships. As president of the Institute of Customer Service for more than 10 years, I'm amazed that so few companies understand how they are perceived by their customers. Why not focus your energies on quick and easy changes to differentiate your company from its competitors? I'm reminded of the line from Robert Burns: 'O would some power the giftie gie us to see ourselves as others see us.'

Your customers have never had a greater choice of vendors. But when did you last look at your business through their eyes? How user friendly are your channels to market? Are your website, billing and call-steering systems and customer services processes organised around your firms internal structure rather than the customers desired experience? It's not your responsibility to set brainteasers for your customers; they can go to Nintendo for that.

Third, your ability to innovate as a company is a true measure of the quality of your leadership and management. Let me remind you what innovation means. It isn't necessary for the leadership team to have bright ideas about how to take costs out of your business or improve customer relations. Innovation is about their ability to turn ideas into business success.

Surely, this is the time to involve your customers, employees, partners and suppliers in the challenges you face? They all live in the real world and are expecting action of some sort. So bold, innovative decisions around working practices, consolidation, shared services etc - all difficult in good times - could well be given a sympathetic hearing, especially if these stake holders are involved in the decision-making.

If necessity is the mother of invention, then recession is the mother of innovation.