XSC: The Valuenet Experience Scorecard.

Beyond CRM and Customer Satisfaction
By Fabian Szulanski

Abstract:
In this entangled and interdependent economy, where attention is a scarce resource (Davenport, 2001), and a faithful customer is a volatile concept, it is increasingly difficult to define, design, execute and manage corporate endeavors that aspire to build a robust and enthusiastic customer base that will assure business sustainability. With this challenge in mind, we introduce in this article an integrative methodological framework and tool that will enable the sustainable generation of memorable impressions in customers while interacting with all facets of corporate brand: products, services, and specially crafted experiences (Schmitt, 1999) and (Gilmore & Pine, 1999). This integration is achieved after shifting several focuses: from customers/consumers, to valuenets (Mercer Consulting, valuenets.com), from customer satisfaction, to ‘brand evangelists’ (Kawasaki, 2000). Corporate valuenet will play both demand and supply roles. In the former, it will be a requisite to fully delight it, and in the latter role, valuenet alignment is an unavoidable task to tackle. We rely on the Balanced Scorecard (Kaplan, Norton, 1996) framework for defining a Management Information System and Decision Support System for designing, communicating, and deploying the strategic theme of obtaining and delighting brand evangelists. Performance drivers will be the system of initiatives that will expose the valuenet to the most appropriate mix of products, services and experiences. We delineate the necessary organizational change that should occur in the management of corporate offering within this fundamental strategic theme. An implementation process is described, and challenges and future research opportunities are introduced.

10X Zoom: Shifting focus from customers to valuenet
There exists an extensive literature, diverse qualitative and quantitative methodologies, and different software applications that are focused in managing and improving corporate customer relationships, increasing their satisfaction, which will subsequently increase brand loyalty and the quantity of repeated purchases. There are more advanced developments, especially in ERP (mysap.com) environments, that also include the management of relationships with suppliers and strategic allies. Organizations should manage the relationships with their complete valuenet (Sawhney, mohansawhney.com). This ‘all-RM’ should be systemic and also include the remaining actors of the strategic landscape (Slywotzky,1999) : distribution channels, talent sources, media and lobbyists with influence, and even competitors, when co-opetitive (Brandeburger, Nalebuff, 1997) projects receive corporate thrust . Current valuenet relationship management is materialized through lobby and strategic public relations activities, rather than through an integrative management framework that might include the design, planning, communication and deployment of the strategic theme that aims to optimize those relationships. Defining the proper indicators will enable monitor those relationships. They will provide information feedback and will give opportunities of making improvements in the corporate offering. A chain will break in its weakest link, thus it should be fully assured that every node of the corporate valuenet is absolutely satisfied of interacting with the corporate brand.. If just one node of the corporate valuenet is deceived due to a negative impression, the effect could be catastrophic. Positive word of mouth is always the target. Rumor will spread saying that the corporation provides compelling brand experiences (doblin.com) that in turn generate memorable impressions in the corporate valuenet. Negative word of mouth should be avoided, as it spreads much more quickly than positive word of mouth, leading to collapse. We claim that an aligned and delighted valuenet will increase the corporation’s strategic resources in a sustainable manner, with the only limit of their own production, ‘servuction’ – production of services- and experience generation infrastructure. We urge to broaden the focus of analysis, and to embrace the challenge of achieving the state of valuenet alignment and delight that turns all of its nodes into brand evangelists.

Profitable Enthusiasm: Shifting from a satisfied customer to a brand evangelist valuenet
In the classic literature, corporate objective is always around customer satisfaction. One would probably read hundreds of times “A customer that is satisfied, is a loyal customer”. Is that right? Is it a robust premise? In our opinion, it is not. Just think in a commoditized product or service, in a market that is highly price sensitive, In this case, this premise will describe the situation better: “No faithful client can resist a 10 cents discount”. In this context, a satisfied client can easily migrate to other supplier valuenets. What can be done? To enable customers’ advancement in the loyalty path, which has an ultimate stage, named ‘brand evangelists’. In this stage, customers not only purchase and repeat purchases over time, but also prescribe the corporate offering to all their personal network, and initiate positive rumors that sometimes generate more income than top corporate salesmen do.

If brand evangelists are delighted by the corporate offering, higher leverage will occur, as less resources are needed for supplying a smaller group of people with the proper mix of product, services and experiences. And due to the previously described network effect, strategic resources of the firm will grow sustainable and exponentially.

Shift in supply: More than just a good product or service
Recalling the double role of valuenet, in its role as supplier, it provides an offering that impacts itself in the demand related nodes. A necessary condition for a valuenet node for advancing through the loyalty path aiming to arrive to the brand evangelism stage, is that the impressions they receive should be consistently positive and memorable. Those impacts are of rational, sensorial, emotional, relational and behavioral kind (Schmitt, 1999). We call impression to that diverse and multifaceted system of impacts. The main objective of the firm is to generate positive and memorable impressions in its valuenet in a sustainable way, supporting our main hypothesis that says that this accumulation of positive impressions will make valuenet advance towards advanced stages of the loyalty path. Why is sustainability so important? Every impression has a lifecycle, with start, climax and declination phases (Gilmore & Pine, 1999), and should be refreshed in a smart, adaptive and customized way, for avoiding the ‘been there, done that’ syndrome. This refreshment will be the source of real differentiation over time. The offering distribution channels that aim to generate memorable positive impressions span from retail environments, websites, salesmen, promotions, media, tradeshows, and especially crafted events which constitute experiences with their own value added, differing from the products and services of the valuenet. This network of channels should be managed carefully, looking concurrently for an optimal resource allocation mix and a superb quality in generated impressions (Schmitt, 1999)

Valuenet alignment for total satisfaction of demand
We claim that all valuenet nodes should be absolutely aligned around the fundamental strategic theme of generating memorable impressions in its demanding nodes. The impact of this effort will be the advancement of demand through the loyalty path. Could the reader recall extremely attractive shopping or consumption environments, which ruined the experience by providing a deceiving customer service? It is highly probable that he will. There are millions of these deceiving impressions that occur in the market while interacting with the brand (Underhill, 2000). And it is evident that after a negative impression, any of the disappointed valuenet nodes might easily migrate to other valuenet as provider. This implies value, resources and time destruction, and an increase in negative rumors about the firm’s valuenet. How could be designed a coherent valuenet alignment action plan? The firm should allocate resources to fundamental valuenet delight drivers, such as training, process improvement, innovation, technology, knowledge management, quality initiatives, ‘valuenet service’the valuenet equivalent of customer service- improvement initiatives, strategic communication within the valuenet, and smart financial initiatives for improving throughput (Goldratt, 1992) All these initiatives should aim to excellence in valuenet management, which in turn will be perceived as a positive asset by the valuenet, and also improving their impressions over time, making them memorable and sustainable. There is an example based in an experience with Singapore Airlines, aligned in providing an overall compelling experience to passengers, generating memorable impressions (Schmitt, 2001) This is causal, and not casual.

Valuenet Delight*: Shifting from Customer satisfaction
Customers are often the focus of attention. This might be a somehow limited vision. For instance, if the firm fails while interacting with a supplier; or there are communication mismatches with the strategic allies, it is highly probable that some unintended negative impressions might emerge. This effect could be far away in time and distance from the original action. Resentment could accumulate over time until it could reach a critical level. These negative actions will for sure deviate valuenet alignment, and might generate negative impressions eventually in all of the valuenet nodes. If the firm wants to contribute to the objective of nurturing a delighted, motivated, loyal, and ‘brand evangelist’ valuenet, absolute alignment is compulsory. How could behave a valuenet node that has been disappointed because the supplier node is not aligned? You would agree with the idea of imagining sad, disappointed, unmotivated face expressions, unhelpful attitudes that could be heard or interpreted by observing body language. This reaction shows clearly that delight does not exist, and consequently the valuenet ‘s experience quality collapses. Taking into consideration that the firm’s valuenet assumes both roles of supply and demand concurrently, it is a necessary and sufficient condition that valuenet should be delighted in both of those roles. All of the firm’s valuenet nodes should enjoy interacting with all of the firm’s valuenet nodes. Thus, there exists a double objective: Alignment around delighting valuenet on the one hand; and enjoying the interaction with valuenet nodes on the other hand.

Now is the moment for introducing the fundamental hypothesis of this article: “ A firm with an aligned and delighted valuenet will increase its fundamental dynamic strategic resources (Warren, 2002) doubleexponentially” This hypothesis should be proved in future research endeavors. * Delight:: In this context, satisfaction up to such a level that leads the valuenet node to advance quickly through the loyalty path. How does the concept of delight differentiate from the concept of well being? Delight is a dynamic driver, while well being drives stability.

CXO: An individual or a trans-valuenet managing team?
Firms should designate an executive accountable for the leadership, management and execution of experiences so they impact positively and generate memorable impressions. They call him CXO (Chef Experience Officer).(Gilmore & Pine, 1999). Here are two expansions to that suggestion: The first, which is inspired in community design and planning methodologies, is that CXO’s responsibility should be shared by an integrated team, with members from all of valuenet’s nodes. Why? Because this will decrease close to zero the feedback delay from a not so delighted node, allowing a quick redesign of the value proposal. This will minimize brand damage and loss of valuable resources. Before of this suggestion, two different negative impacts might exist: The costly redesign process, and the deteriorating quality of impressions while redesign is being carried. After implementing this suggestion, immediate feedback would be available in the very same design process, much before execution begins, thus minimizing the costs and damage of implementation rework cycles. And also it would shorten execution time because of this same reason (Szulanski, 2000). The second expansion that is suggested in this work is that the CXO managing team should be as diverse as possible, in order to take advantage of the perspective mix. This will allow a richer and more systemic value proposal design process and outcome. To fully assure ‘freshness’ of thinking, roles within the CXO team should rotate on an annual basis (Haughton & Jennings, 2001). We also suggest that process coaches or facilitators should take care of group dynamics, in order to enable a fluid and generative communication that will surely lead to an effective group decision making process.

Current Management Gaps
We could identify different gaps: • Current management methods don’t consider the complete valuenet when they design the firm’s value proposal. How could this gap be closed? Defining an integrative and systemic management framework that considers whole valuenet delight. • Supply: There exists in the market a myriad of consulting firms that provide product, service and experience design, production, and tactical deployment, focused in achieving memorable impressions in customers (Experience Engineering, The Doblin Group, customization.com, meetschmitt.com, and many others). There are very few (close to none) that are focused in experiences supervision, and strategic alignment and deployment of the value proposal of delighting the whole valuenet.. There are very few (close to none) that take care of monitoring valuenet’s impressions over time. This gap is double. How could it be closed? There should be stressed the execution of a shift from customer satisfaction to valuenet delight. • There exist few methodological frameworks, and tools for managing and assuring memorable and sustainable valuenet impressions, such as Yamamoto-Moss Experience Audit; Experience Engineering methodology, and Customer Experience Scorecard from The Forum. A Customer Experience Management book from Berndt Schmitt is in the pipeline (Schmitt, 2002). • Current focus is in describing memorable impressions qualitatively. There exists very few documentation about measuring or quantifying (Yamamoto-moss). If that could be done, it would help assess if the firm is in the correct path or if a change should be done in value proposal design and in resource allocation policies. • There are very few software tools that support the strategic management of customer experiences (Satmetrix.com) and none that supports the strategic management of valuenet experiences and impressions. • Neither exists the possibility of adding scenario analysis (Schwartz, 1996) or dynamic simulation engines (Forrester, 1961) and (Sterman,2000) that would allow to safely test different resource allocation policies in each scenario. In the following section we will introduce a methodology, conceptual framework and tool, that eventually could be integrated to the firm’s knowledge management and information system. We coined XSC (Valuenet Experience Scorecard) as its name, and it will have the objective of closing all the aforementioned gaps, allowing to manage systemic, sustainable and professionally the strategic resources of the firm around the theme of Total Valuenet Delight.

XSC: Valuenet Experience Scorecard

Strategic alignment , deployment and monitoring of valuenet’s experiences and memorable impressions
We propose the Balanced Scorecard (Kaplan & Norton, 1996) as the methodological framework and tool that will give foundation to the Valuenet Experience Scorecard (XSC). We strongly believe that it will help close the gaps we mentioned in the previous section of this article. Why the Balanced Scorecard? The criteria for choosing it id that the BSC is a tool for strategic alignment, strategy communication and deployment of all main strategic themes of the firm, enabling it to advance in the path that goes from Strategy to Execution. Which are the milestones in this path? The Strategy map, which interrelates in an influence diagram the main strategic themes of the firm. Then comes the identification of strategic objectives, and their mapping for each of the selected strategic themes. After that, Key Performance Indictors (KPI) are identified and their measures formulated. With the main KPI, an early-alert system is built, allowing managers to quickly be aware of deviations from the specified objectives, giving space to strategic and tactics redesign processes. Then the drivers –levers that impact with the highest leverage on the KPI- are proposed; and Strategic Action Plans are designed, explaining how the drivers are going to evolve over time, what resources are going to be allocated, who is going to be accountable, time horizons, and other critical documentation action plan information. The XSC (Figure 1) has to be aligned with the BSC of the firm. In the XSC the main strategic theme is the sustainable generation of memorable impressions in the firm’s whole valuenet, providing the optimum mix of products, services and specially crafted experiences. Each of the four perspectives of the XSC should include objectives, KPI and drivers from all of the valuenet’s relevant nodes. Both supply and demand roles of the valuenet should be reflected in the XSC. The issue of KPI identification should focus on which of the valuenet nodes and its associated channel would be the ideal for delivering value. For example, it is not the same to buy a toy in the Internet or in a retail environment. Neither is the same to interact with a human bank teller than with an ATM. The experience and impressions indicators and drivers will most surely differ.

Figure 1: The XSC The Delight Path: Cause and Effect Relationships and Strategy Map
PROCESSES CLERICAL PRODUCTION INTERNAL AND EXTERNAL LOGISTICS VALUE PROPOSAL: GENERATING MEMORABLE IMPRESSIONS IN VALUENET VALUENET EXCHANGE OF PRODUCTS SERVICES & EXPERIENCES

CULTURE KNOWLEDGE TECNOLOGY INNOVATION

DELIGHTED VALUENET

POSITIVE NET EFFECT AND BRAND EVANGELISM

$ $ $ $

ALIGNED VALUENET AROUND THE OBJECTIVE OF ITS TOTAL DELIGHT THROUGH MEMORABLE IMPRESSIONS

MEMORABLE IMPRESSIONS

DOUBLE EXPONENTIAL EFFECT

PURCHASING ACTIONS

SUPPLY
BUDGET NURTURED FEEDBACK FOR INCREASING SUSTAINABLY THE FIRM’S VALUENET STRATEGIC RESOURCES Valuenet Learning and Growth Valuenet Internal Processes

DEMAND

Valuenet Internal and External Customers

Financial

XSC PERSPECTIVES

Country and corporate culture, market segments and type of organizations will affect the identification and selection of memorable impression indicators. Memorable impressions might differ broadly depending on those factors. Sometimes it differs from one person to another, though they could be clustered in common behavior or interests groups. There are going to be different levers for each of the valuenet node and each value distribution channel, e.g. for retail, tradeshows, Internet, etc.

KII: Key Impression Indicators Key Performance Indicators for memorable impressions
Frequently a survey or well designed questionnaire or interview will suffice for collecting data and information that will allow to elicit knowledge about valuenet’s memorable impressions. When that is not possible, the CXO team should sharpen their creativity and wisdom, distilling valuable information from other sources, or somehow converting tacit into explicit knowledge. For example, analyzing videotapes of consumers or clients interacting with the firm’s value delivery channels (Underhill, 2000) Verbal an non verbal information should be collected, and analyzed. Some of the information will arrive with a delay, e.g. the indicators of positive or negative word of mouth, or the indicators of advancement through the Delight Path. This data and information collection is not so easy, because it includes many ‘soft’ variables, but it is a process that is very important to tackle in the XSC design and construction. Soft variables add reality to this model (Forrester, 1961) We stress that the best policy is to allocate resources for delighting valuenet’s brand evangelists, as it is the policy with the highest systemic leverage (Ritchie-Dunham,1998). In Table 1, we show some KII examples, for different value delivery channels. Table 1: Examples of KII

Retail Survey Interview Questionnaire Observed Photo Videotaped Delayed Access Price Quality Touch Sighs Glimpses

B to B Speed Logistics Respect Energic Affable Collaborative

Internet Speed Simplicity Design Clicks Time Unique Visits

Salesman Kindness Empathy Pragmatism Urgency Complaints Questions

Radio Intrigue Musicality Conciseness Phone Calls Sent Letters Public in Radio Studio live

TV Interest Content Dynamism Similar to Radio

Tradeshow

Climate Usefulness Noise Ask for Info Laughs Observes

PURCHASE OR VISIT REPETITION, COMPLAINTS, BRAND EVANGELISTS, NET EFFECT
Feedback

XSC architecture and integration to the firm’s Information and Knowledge Management System
After information and knowledge collection and synthesis about valuenet experiences and impressions is complete, integration with some information technology platform for its proper management should be performed. What is the minimum platform? A naïve advice could mention paper and pencil, but the dynamics and complexity characteristics of reality would make knowledge extremely difficult to manage in that way. Therefore we recommend a spreadsheet as the starting kind of software application for administering this information and knowledge. In case the firm already has an integrated management software application (ERP, CRM or similar), it is highly probable that it does not have Key Impression Indicators and the associated drivers included within the main variables of the ‘management cockpit’. Therefore, a data, information and knowledge synchronization between the XSC and the existing application should be performed. In a higher level of sophistication, there exist specific Balanced Scorecard software applications, ranging from free of charge packages up to a module of an ERP solution. Professor Mohanbir Sawhney stresses the importance of managing all the value generating relationships existing in the firm’s valuenet, shifting from CRM to ‘All-RM’. We take his recommendation and add value to Forum’s Customer Experience Scorecard, using the XSC to fill the gap of scarcity of Balanced Scorecard applications that take care of all relevant valuenet nodes. Another value added by the authors is the concept of Valuenet Delight, which is nonexistent in current BSC applications.

XSC is a framework that, if it is properly lead, will be in the future one of the more value adding ways of helping corporations allocate resources to different drivers of valuenet delight.. However: On the one hand, most organizations are focused in products or services, and do not allocate a fraction of their budget to the design, development and deployment of experiences that aim to generate memorable impressions in their valuenet. This lack of systemic focus is risky business in an economy where products and services tend to be considered as a commodity, and only compete by price. There has to be a harmonic and dynamic equilibrium between order and chaos, the productive and the creative, the bizz and the buzz (Schmitt, 2001) Therefore the challenge for the firms will be to think about how to design experiences that mill generate delight in their valuenets, making them become their brand evangelists.. One of the more valuable leadership skills in today’s economy is that of “letting go” negative or unproductive habits (Haughton, 2001), such as not including experiences and their associated valuenet delight in their mindsets. This conservative behavior does not generate growth, and could generate the sudden death of the firm due to lack of differentiation. Another challenge for leadership is to expand focus to valuenet in their roles both as part of supply or demand. As a consequence of valuenet diversity of perspectives from their people, another challenge will be to choose or define the appropriate Key Impression Indicators for each industry and specific experience distribution channel. We consider the following opportunities for future research: • High Leverage Experiences design, and their associated KII definition by ad hoc academic, consulting and corporate consortia. • Benchmarking and Best Practices in Experience Design and Management. • How to achieve1 to 1 valuenet node delight on a shoestring budget. • Best Practices in the adaptation of experiences and KII in global corporations according to different countries, cultures and market segments. • Integration of the firm viewed as a Valuenet Delight Generator, with other tools and methodologies.

Challenges and opportunities for future applied research

References: Authors, book titles and interesting websites
Davenport, T.: The Attention Economy. Harvard Business School Press, Cambridge, MA, 2001. Brandeburger, Nalebuff: Coopetition. Doubleday, NY. 1997. Experience Engineering: Expeng.com Forrester, J.: Industrial Dynamics, MIT Press, Cambridge, MA, 1961. (Available through Pegasus Communication, pegasuscom.com) Gilmore, J & Pine, BJ: The Experience Economy. Harvard Business School Press, Cambridge, MA, 1999; customization.com Goldratt, E.: The Goal. North River Press Publishing Corporation. Great Barrington, MA, 1992; goldratt.com Haughton, L., Jennings, J.: It’s not the big that eats the small, it’s the fast that eats the slow. HarperCollins, NY, 2001; itsthefast.com Kaplan, R , Norton, D.: The Balanced Scorecard. Harvard Business School Press, Cambridge, MA, 1996; bscol.com Kawasaki, G, Moreno, M: Rules for Revolutionaries. HarperBusiness, NY, 2000; garage.com Ritchie-Dunham, J: Systemic Leverage. System Dynamics Society’s 16th International Conference, Quebec, Canada. 1998 SAP: Example of an ERP, BSC and CRM software solution; mysap.com Satmetrix: Software for customer experience management. satmetrix.com Sawhney, M: Managing the Relational Equity (paper online); mohansawhney.com Schmitt, B: Experiential Marketing. The Free Press, NY, 1999; meetschmitt.com Schmitt, B: Build your own garage. The Free Press, NY, 2001; meetschmitt.com Schmitt, B: The Customer Experience. John Wiley & Sons, NY. (not already published); meetschmitt.com Schwartz, P.: The Art of the Long View. Currency Doubleday, NY, 1996 Slywotzky, A.: Profit Patterns. Random House, NY, 1999; profitpatterns.com; Slywotzky, A.: Valuenets: valuenets.com Sterman, J.: Business Dynamics. McGraw-Hill / Irwin, NY, 2000. Szulanski, F: SNAP: Accelerated Project Design and Planning Methodology. Buenos Aires, 2000 (In Spanish); 5campus.com The Doblin Group: Compelling Experience, doblin.com The Forum: Customer Experience Scorecard; Forum.com Underhill, P.: Why we buy. Touchstone Books. Carmichael, CA, 2000; envirosell.com Warren, K.: Competitive Strategy Dynamics. John Wiley & Sons, NY, 2002; strategydynamics.com Yamamoto Moss: The Experience Audit; yamamoto-moss.com

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