eiu service on demand
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A report from The Economist Intelligence Unit
SERVICE ON-DEMAND
The future of customer service
Sponsored by
1 © The Economist Intelligence Unit Limited 2016
Service on-demand: The future of customer service
Contents
About the report 2
Key points 4
1. Introduction 5
Definingthedisruption 5
Theaccesseconomywhirlwind 5
Companiesarestillfiguringoutwhatworks 6
Isthe‘Uberisation’ofcustomerservicecomingtoAsia? 6
2. A market eager for disruption 8
Thebuyersareready 8
It’saboutalotmorethancostreduction 9
3. Hesitant suppliers 11
What,worry,me? 11
Thecalmbeforethestorm 12
Experimenting at Mila 12
4. The on-demand customer service model 14
Stillverymuchaworkinprogress 14
Managingperformance 14
Conclusion 18
Next steps for on-demand leaders 19
2 © The Economist Intelligence Unit Limited 2016
Service on-demand: The future of customer service
About the report
Service on-demand: The future of customer service isareportfromTheEconomistIntelligenceUnit(EIU)sponsoredbyGenesys.ThereportwaswrittenbyPaulKielstraandeditedbyCharlesRoss.ItdrawsonasurveyconductedfromFebruarythroughApril2016of200seniorAsia-Pacificexecutivesinvolvedinmanagementoftheircompanies’customerservice(buyers)and75executivesfromcompanieswhichsupplycustomerserviceproductsandservices(providers).Almosthalfoftherespondents(44%)werefromretailing,21%fromgovernmentorganisationsand15%fromthetelecommunicationsindustry.Thesurveysamplecoversawiderangeofseniority,withaquarterofrespondentsC-suiteorabove,34%seniorexecutivesand41%managers.Participantswerefromavarietyofcompanies:56%hadannual
revenuesofunderUS$250mand20%morethan$1billion.
Thesurveyfindingsweresupplementedbyinterviewswith3opinionleaders,expertsandbusinessleaders.Ourthanksareduetothefollowingpeoplefortheirtimeandinsights(listedalphabeticallybysurname):
lMaxLoosen,co-founderandCEOofSendhelper
lAprilRinne,leaderoftheWorldEconomicForum’sYoungGlobalLeadersSharingEconomyWorkingGroup
lChristianViatte,CEOofMila
TheEIUbearssoleresponsibilityfortheeditorialcontentofthisreport.Thefindingsdonotnecessarilyreflecttheviewsofthesponsor.
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Service on-demand: The future of customer service
(% of respondents)
Respondents by Country
Philippines
AustraliaTaiwan
Singapore
Japan
Korea
Malaysia
New Zealand China ex Hong Kong
Hong Kong
India
Indonesia
3%
3%
12%
12%
5%
15%
6%12%
11%
11%
6%
4%
(% of respondents)
Respondents by Industry
Retailing
Government/public sector
Telecommunications
Others
44%
21%
15%
19%
Thisstudymakesfrequentreferencetotwosub-groupsfromoursurveypanelwhotogetherarethecoreofthecustomerservicemarketplace.
Buyers:Inthisstudy,“buyers”arethe200respondentswhohaveinvolvement—usuallyagreatdeal—indecisionmakingaroundhowtheirorganisationmanagescustomerservice.Theyarebuyersinthesensethattheyeitherpurchasecustomerservicecapabilitiesfrom
thirdpartiesorneedtoallocateresourceswithintheirownorganisationssothatthesecapabilitiescanbeprovidedinhouse.
Providers:Inthisstudy,“providers”arethe75respondentswhosaythatthey“workfora3rdpartysupplierofcustomerserviceoffers,channelsorservices.”Someexamplesincludeoutsourcedprovidersofcallcentres,emailresponses,orsocialmediamonitoring.
An explanation of terminology: “Buyers” and “Providers”
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Service on-demand: The future of customer service
Key points
• Theaccesseconomybusinessmodelhasalreadyrevolutionisedindustriessuchastaxiserviceandhotels,buthowfaritcanextend—towhatfunctionsandindustries—remainsanopenquestion.
• Thosewhosetaskisprovisionofcustomerserviceexpectthattheirfunctionshiftingtoanon-demandmodelwithinthenextthreeyearswillbeafundamentalpartoftheirabilitytocompete.
• Currentthird-partycustomerserviceprovidersareequivocalonthepotentialandlikelyimportanceofanon-demandmodel,suggestingtheindustrymayberipefordisruption.
• Transitioningtoanon-demandmodelwillnotbesimple:althoughtechnologyisstartingtobecomeavailable,keyskillsandprocessissuesremain;mostimportant,leadingstakeholders,notablycustomersandmanagement,needtobebroughtonboard.
• Whateverthebarriers,themomentumfortransformationisstrong:morethantwo-thirdsofcustomerservicebuyerssaytheircompanieswouldintroduceanon-demandmodelevenifitbroughtsignificantchangesinhowtheyoperate.
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Service on-demand: The future of customer service
Introduction1Defining the disruption Asuresignofthenoveltyofsomethingiswhenit’sdifficulttoevennameit.Aneconomicphenomenoncurrentlytransformingnumerousindustrieshasjustthischaracteristic.Dubbed,amongotherthings,the“sharing,”“gig,”“on-demand,”and“peer-to-peereconomy,”eachoftheseadjectiveshasreceivedcriticismforbeingeitherincorrectorincomplete.AprilRinne—aconsultantinthefieldandleaderoftheWorldEconomicForum’sYoungGlobalLeadersSharingEconomyWorkingGroup—explains,“Thesetermsareindicativeoftheemerging,complexandoftenmessynatureofthespace’sevolution.Allofthemarevalidinsomeways,butnoneisperfect.”
“Sharingeconomy”isstillthemostcommonnametodescribethosefirmswhichrelyonatechnologyplatform—typicallymobilephone-based—toallowcommunitiesofsmallusersandproviderstoexchangethetemporaryuseofgoods,oraccesstoservices,formonetarypaymentorreciprocalaccess.Thisstudy,though,
looksinparticularatentirelycommercialactivity:howsuchamodelmightaffectthecustomerservicefunction.Accordingly,itreferseithertothe“accesseconomy”,atermcurrentlygainingfavour1,orusesthemorecommon“on-demandeconomy”becauseofthegreaterspeedwhichthisbusinessmodelcangivetocustomerservice.
The access economy whirlwindInrecentyears,severalcompanieshaveshownthepotentiallyhugeimpactofthiskindofbusiness.Uber,aseven-yearold,self-describedcar-ridesharingservicewhichhasturnedtheurbantaxiindustryonitshead,isthemostoften-citedaccesseconomyfirm.Itsrecentfundraisingeffortsindicatealikelyoverallvaluationofmorethan$60bn—alreadygreaterthanthatofFordorGM.AirBnB,ashort-termaccommodationplatform,hasexistedforayearlongerthanUberandreachedavaluationof$26bn,puttingitinthesameleagueasHiltonWorldwideHoldingsinmarketcapitalisation.(Figure1)
Disrupted industries: On-demand entrants overtake incumbents(estimated valuation, 2015, US$bn)
Figure 1
60%
68%
23%
26%
Sources: WSJ, Economist
1GianaEckhardtandFleuraBardhi,“TheSharingEconomyIsn’tAboutSharingatAll,”Harvard Business Review,January2015.
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Aswithanynewtechnology-basedbusinessmodel,hypeandfrothhavenotbeenmissing.Uberisation,aphraselessthantwoyearsold,hasbecomethebuzzwordfortherapidtransformationofanindustryduetoentryofanaccesseconomycompany.
Experimentationiswidespreadaspotentialfundersfacecrowdsofhopefulstoutingthelatest“UberofX.”BeforeCompareandShare,aworldwidedirectoryaggregatingsharingeconomywebsites,shutinFebruary2016,ithadover8,000platformslisted.Similarly,inMarch2016,AngelList,aleadingonlinemarketplaceforstart-upinvestors,hadover5,700privateonlinemarketplacecompaniesforthosewithdeeppocketstochoosefrom.
Inadditiontohighprofilesuccesses,somuchactivityalsobringsfrequentfailures.Thisismorethantheinevitablehighchurnofsmallentrepreneurialefforts.Therehavealsobeensomelargecasualties:Quirky,asiteforcrowd-sourcinginventions,hadraised$181minseedcapital,andHomejoy,acleaningservicesplatform,nearly$40mbythetimebothshutin2015.
Companies are still figuring out what worksThehighlyunevensuccessofaccesseconomyfirmsisareminderofhowthistypeofactivityisstillpoorlyunderstood.MaxLoosen—co-founderandCEOofSingapore-basedSendhelper,anaccesseconomyplatformforcleaningandotherhouseholdtasks—notesthat“thisisstillnewterritoryforalotofpeople.”UberandAirBnBhavebeensuccessful,headds,butinmanysectorshowtousethismodelforbasicssuchasscreeningandmonitoringforquality,orautomatingkeyprocesses,isstillbeingfiguredout.Forsuccessfulcompanies,evensomethingasbasicasfromwhomtheyaredrawingbusiness,isnotalwaysclear:astudyofAirBnB’simpactinAustin,Texasfoundthatitwashavingthebiggest
effectonveryshortstaysatlow-endhotels,butoneinNewYorkCityinsteadindicatedthatmanycustomersuseditforstaysofseveralmonthslong.2
Moreover,itisfarfromclearwherethemodelwillwork.Indeed,anumberofassumptionshavequicklyturnedouttobeflawed.Anearlyargumentforthesharingeconomy,forexample,wasthatmostpeopledidnotactuallyusemanypossessions—powertoolswerethemostcommonexample—morethanahandfuloftimes.Itthereforemadesensetorentratherthanownthese.However,whileamarketforpeer-to-peeraccommodationrentalclearlyexists,numerousplatformswhichaimedtogaintheapparentlyobviousmarketforpeer-to-peertoolrentalquicklyfailed.3
Is the ‘Uberisation’ of customer service coming to Asia?Oneareawheretheaccesseconomy,oron-demand,modelhasyettohaveanoticeableimpactiscustomerservice.Thepotentialislargeasoutsourcinginthisareaisalreadyfrequent.AworldwidesurveyofcompaniespublishedbyDeloittein2014reportedthatoverhalfalreadyhadthirdpartieshandlingbasiccustomerenquiries.4Meanwhile,RadiantInsights,amarketresearchcompany,estimatesthattheglobalvalueofoutsourcedcustomerinteractionactivitywas$52bnin2014andexpectedtogrowto$69bnby2020.5
ForAsia-Pacificcompanies,thisisalsoanareawherechangeisexpected.A2016EconomistIntelligenceUnitsurveyofseniorexecutivesfromtheregioninretailandtelecomscompaniesaswellasstateorganisationsconductedforthisresearch,foundthat82%expectedon-demandcustomerservicetobeavailableintheirindustryinthenextthreeyears.Itseemsasafebetthatanynumberoffirmswillatleasttrytomeetthisexpectation:ahandfulworldwidehave
2IzabellaKaminska,“Sharingeconomydisruption,maybenotsodisruptive?”July2015,Financial Times;GeorgiosZervasetal.,“TheRiseoftheSharingEconomy:EstimatingtheImpactofAirbnbontheHotelIndustry,”2016,http://people.bu.edu/zg/publications/airbnb.pdf;
3SeeSarahKessler,“The‘SharingEconomy’IsDead,AndWeKilledIt.”Fast Company,September2015.
4 2014 Global Outsourcing and Insourcing Survey: 2014 and beyond,December2014.
5 Global Outsourced Customer Care Services Market Trends, Growth and Forecast Report Up To 2020,November2015.
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Service on-demand: The future of customer service
targetedthissectorand,giventhehugenumberofon-demandeconomycompaniesstartingup,somewilljointhem.ThisEIUstudy,sponsoredbyGenesys,willlookatthepotentialforsuch
companiestogainacceptanceanddisturbtheexistingcustomerserviceindustry,aswellasconsideringcurrentbarrierstoon-demandcustomerservicedelivery.
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Service on-demand: The future of customer service
A market eager for disruption2The buyers are ready Asiancustomerserviceprofessionalsinretailing,telecoms,andgovernmentorganisations—herereferredtoascustomerservicebuyers—donotsimplyexpecton-demandofferings:theyareurgentlylookingforchangeinafieldwhichtheyregardashavingsubstantialstrategicimportancetothebusinessoverall.Amajority(54%)oftheserespondentssaythat,whencomparedwithotherareas,customerserviceiscurrentlyaveryimportantinvestmentpriorityfortheentirecompany.Ifweaddinthosewhocallitsomewhatimportant,thisbringsthetotalfigureto90%.Lookingahead,thisdegreeofimportanceisexpectedtobethesameinthreeyears’time.
Viewsonthisquestionsetapartthosecompaniescurrentlydoingwellfromstragglers.Inoursurvey,respondentswereaskedtobenchmarktheprofitabilityoftheirfirmsagainstpeers.Amongthosewhichreportthehighestlevelsof
relativeprofitability(“profitleaders”),80%alsocallcustomerserviceaveryimportantpriority;amongthosewithaverageorweakerprofitability(“profitlaggards”),thefigureisjust35%.
Whileintentoninvestingincustomerservice,manyseecurrentofferingsasinsufficient.Fully58%ofdemand-siderespondentsbelievethatelementsofthecustomerservicefunctionareripefordisruptionandonly8%disagree.Thisisnotmerelytheopinionofover-demandingbuyers.Whenaskedthesamequestion,mostprovidersofthirdpartycustomerservicewereunsure(59%)butfarmorethoughttheopportunityfordisruptionexists(35%)thandisagreed(7%).(Figure2)ChristianViatte—CEOofMila,aplatformprovidingon-demandcrowdcustomerservicesfortelecoms,energycompaniesandretailers—isnotsurprised.Inhisindustry,henotes,“Manytelecomoperatorsknowthattheyhavetotransformtheircustomerserviceandneednewideaswheretheycanbemoreefficient.”
“Manytelecomoperatorsknowthattheyhavetotransformtheircustomerserviceandneednewideaswheretheycanbemoreefficient.”Christian Viatte—CEO of Mila
Elements of the customer service function are ripe for disruption(% of respondents)
Disagree
Neither agree or disagree
Agree
Figure 2
35%58%
59%35%
7%8%
Supply side Demand side
Source: Economist Intelligence Unit
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Service on-demand: The future of customer service
Accordingly,headds,thepotentialofon-demandcustomerserviceisgrowingwithalargenumberoffirms“lookingforsuchasolution.”Thesurveynumbersstronglybackhimup.Amongcustomerservicebuyerssurveyed,80%saythattheirorganisationwillinvestinanon-demandofferingifitbecomesavailableintheirindustry,whileamere4%woulddefinitelynot.Thisismorethananice-to-have:itisamatterofurgency.Two-thirdsofcustomerservicebuyersgosofarastosaythat“managingthetransitiontoanon-demandcustomerserviceofferingwillseparatesuccessfulfirmsfromfailingonesintheneartomid-term;”amere6%disagree.
Again,thedatasetsapartprofitleadersandlaggards.Amongtheformer,93%reportthattheirbusinesswouldinvestinon-demandcustomerserviceifitbecomesavailableintheneartermandthesamehighnumberalsobelievethatasuccessfultransitioninthiswillsetapartsuccessfulandunsuccessfulfirmsverysoon.Theequivalentfigureforlaggards17%inbothcases.
It’s about a lot more than cost reductionThereasonforthehighstakesassignedtoon-demandcustomerserviceistheunderlyinghopeofwhatcompaniesexpecttogetfromsuchanoffering.
Theheadlinevaluepropositionofaccesseconomycompaniesistypicallysomecombinationoflowpriceandconvenience.MrViatteexplains,though,thatforthoselookingtousesome
formofon-demandcustomerservice“It’snotjustaboutcostsaving.Everybodywantstodifferentiatewithcustomerservice.Whatyougain[fromanon-demandmodel]isabettercustomerexperiencemaybeatthesamecostor,insomecases,alowerone.”Asfigure4shows,surveyrespondentsagree.Amongbuyers,lowercustomerservicespending,andevenreducedoveralloperatingcosts,arerelativelyminorattractions.Insteadbuyersexpectthebiggestgainfromon-demandservicetobeimprovedcustomersatisfaction(43%),improvedcustomerretention(32%),andbettercompetitivepositioning(28%).
MrLoosenwarnsthatthisapparentdifferencefromusersofotheraccesseconomyservicesshouldnotbeover-emphasised.“Attheendoftheday,”hesays,“nomatterhowpeoplegettoyourplatform,theyexpectquality.Qualityisthemostimportantthing,”notsimplylowprice.
Thestrongeremphasisonthepotentialforbettercustomersatisfaction,though,doespointtoaspecificunmetneed,whichcustomerservicebuyersarehopingon-demandmodelscanfinallyfulfil.MrViatteexplainsthat“thepressuretohavegoodserviceandafastreactiontimeishigh.”Foratelecomcompany,whereacustomer’sconnectionisakeyinfrastructureservice,thisisobviouslythecasebut,hesaysthattoday,forexample,someonemightequallyexpectspeedyactiontohelpassembleabarbequegrill.However,“customerservicethatcancommittoreactingtoeveryproblemwithin24hoursisnearlyimpossibleforasingle
Leaders are closely monitoring on-demand(% of respondents)
Would invest in on-demandcustomer service
On-demand customer servicewill separate successful and
unsuccessful firms
Figure 3
17%93%
17%93%
Profit laggards Profit leaders
Source: Economist Intelligence Unit
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Service on-demand: The future of customer service
company.Butifyouhaveacrowd,consistingofprivateindividuals,staffandexternalprofessionalserviceproviders,youcanreactfast,”headds.
Suchacapacitywouldexplaintheexpectedroleofon-demandserviceinwinnowingsuccessfulfromunsuccessfulcompaniesnotedearlier.Eightypercentofcustomerservicebuyerssaythatcustomerexperienceisimportantfor
Expected benefits of on-demand customer service(% of buyers)
Improved flexibility
Better competitive positioning
Improved customer retention
Improved customer satisfaction
Better customer journeys
Reduced operating costs
Increased revenue through betterchannel management
There are no perceived benefits ofon-demand customers service
Improved morale among employees
Fewer negative comments orreviews from customers
Lower cost of customer service
Figure 4
43%
32%
28%
25%
23%
22%
22%
19%
16%
16%
6%
Source: Economist Intelligence Unit
differentiatingtheirbrandandtheelementsofthecustomerexperiencewhichplaythegreatestpartinsuchdifferentiationareeaseofaccess(41%)andspeedofresolution(36%).Improvementsintheseareas,whichanaccesseconomymodelmightprovidebutareimpossiblewithexistingprocesses,arewhatraiseson-demandcustomerservicefromaninterestingmethodofcostreductionto—especiallyforleadingcompanies—apotentiallykeystrategictool.
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Service on-demand: The future of customer service
Hesitant suppliers3What, worry, me?Ifthoseresponsibleforcustomerserviceatorganisationsareeagertoembracetheaccesseconomy,currentthird-partyprovidersaremuchmoreambivalent.
Ontheonehand,surveyrespondentsfromthisgroup(“customerserviceproviders”)aresurprisinglyreadytoadmittheweaknessesintheircurrentoffering.Only12%calltheircompany’soverallofferingandchannels“verysuccessful.”Instead,45%saythattheyare,atbest,“neithersuccessfulnorunsuccessful.”(Figure5)
Thisstronglysuggestsanindustryreadyforashake-up.Insomeways,theindustryseemstoagree.Respondentsfromcustomerserviceprovidersreportthat40%oftheirworktimeiscurrentlyspentoncreatingnew,disruptivecustomerserviceproductsorofferings,afiguretheyexpecttorisetohalfinthreeyears.Similarly,35%ofthisgroupclaimtobeclosely
monitoringon-demanddevelopmentsinotherindustriesandareinterestedinhowtheycanapplythemtotheirown.
Acloserlookatthedata,though,indicatesthatthisactivitymasksalackoffocusonrealchange.Nearlytwiceasmanycustomerservicebuyers(67%)asprovidersaremonitoringon-demanddevelopmentselsewherewithaneyetochangingtheirownindustry.AsMsRinneputsit,“Sometimesexecutivesaresofocusedonthecorethattheyfailtoseewhatisontheperiphery—whichiswheretheforcesshapingthefutureoftenaretakingshape.”
Moreover,despitetheamountoftheworkdaydevotedtonewcustomerservicechannelsandofferings,only28%ofcustomerserviceproviderrespondentssaythattheseareveryimportanttotheircompanies,afigureexpectedtoseeverylittlechangeoverthenextthreeyears.Justasimportant,amajorityaresimplyunsurechangeisevenonthecards—59%neitheragreenordisagree
How suppliers characterise their customer service offering and channels(% of respondents)
Somewhat unsuccessful
Neither successful nor unsuccessful
Somewhat successful
Very successful
Not successful at all
Figure 5
12%
43%
29%
12%
4%
Source: Economist Intelligence Unit
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Service on-demand: The future of customer service
thatelementsofcustomerserviceareripefordisruption—letalonewhetheranon-demandmodelwouldbetheagentofsuchchange:53%areuncertainwhetheracompetitorofferingsuchaservicewouldbedisruptivetotheirowncompany.Finally,only24%believethatcallcentres—oneofthemostfrequentlyoutsourcedpartsofcustomerservice—areveryopentodisruptionfrominnovationorincreasedcompetition.
The calm before the stormInotherwords,eitherthecustomerservicebuyers,especiallythosefromleadingcompanies,areanxiousforaproductthatisunlikelytoworkanyway,orprovidersdonotseewhatisabouttohitthem.
Thehistoryofdisruption,andofaccesseconomycompaniesinothersectors,suggeststhatthelatterismorelikely.Ifcustomerserviceisdisrupted,
itwouldnotbethefirstindustrysupportingaspecificcorporatefunction.MsRinne,whoisalsoaqualifiedattorney,notesthatcompaniesareincreasinglyturningawayfromthepracticeofusinglargelawfirmsforexternalcounselinfavourofon-demandplatformssuchasUpCounselandPrioriLegal.“Traditionallegalservicesareverymuchonthechoppingblock,forbothsupply-anddemand-sidereasons,”shebelieves.
Suchanexample,though,maynotaffectexecutivesatincumbentcustomerservicefirms.MrLoosennotesthat,manycurrentleadersineveryindustry“arehesitantaboutchange.Tryingnewthingsmightnotmakesenseforaninstitutionthatalreadymakesmoney.Itisalsodifficulttogetthroughthebureaucracy.”Instead,headds,“Newmarketentrantsaredefinitelywheredisruptiveinnovationscomefromanoverwhelmingmajorityofthetime.Start-upsareusedtotakingrisks.”
Only 24% believe that call centres—one of the most frequently outsourced parts of customer service—are very open to disruption from innovation or increased competition
Theverypresenceofsomanyon-demandplayerswillalmostcertainlyleadtosomeexperimentingwiththecustomerservicearea.AgoodexampleisZurich-basedMila.In2013,itbeganasaplatformaimedatthosewishingforhelpwithsmalltasks,suchaspickingupgroceriesorassemblingflat-packfurniture—similartotheAmericancompanyTaskRabbit.Soon,though,itbeganco-operatingwiththeSwisstelephonecompanySwisscominthecreationofSwisscomFriends.Thisplatformallowsuserstogethelpfromneighbourswithtechnicalknow-howforIT-relatedtasks,suchassettingupanewpersonalcomputer.
MrViatte,whoatthetimewasheadofserviceexperienceandinnovationforSwisscom,recallsthatthetelecomcompany’sthinkingoriginallywasonlytangentiallyabouttraditionalcustomerserviceresources.Atthetime,“wewereoftenaskedforadvicewithproductswhichwerenotfromSwisscom.Wesawthatwehadpotentialforanadditionalcustomerservicechannel,inparticularapaidone.Customerswereveryhappywiththat.”
AlthoughtheoriginaldriverwastodealwithrequeststhatwerenotcoretoSwisscom’sbusiness,hecontinues,“wearenowbringinginsomecorebusinessthingstobeservicedbythecrowd.”Inparticular,thefirmisdisruptingitsownpaidservice
installation.NewSwisscomInternetcustomershavealwayshadtheoptionofinstallingtheservicethemselvesforfreeorpayingforaprofessionalfromthecompany.Now,SwisscomFriendsprovidesalowcostoption,makinganewconnectionmoreappealingtomoreprice-consciousconsumerswithoutthetechnologicalskillstodotheworkontheirown.
Thus,inlessthanthreeyears,MilahastravelledfromamodelsimilartoTaskRabbittoonewhichhasbegunprovidingelementsofcustomerserviceforalargetelecomsprovider.Indeed,itsimportancetoSwisscomissuchthatthecompanyhasboughtamajoritystake,althoughMila’splatformstillservicesothermajortechnologycompaniesinSwitzerland.Suchapivot,saysMrLoosen,happens“alotmoreoftenthanpeoplethink.Itisalmosttherule,nottheexception.”
Currentthirdpartyproviderswouldbeextremelyluckyifnoneoftheseon-demandexperimentersfoundabusinessmodeltodisruptanindustrywhichexecutivesadmitiscurrentlyonlysomewhatsuccessfulatmeetingmarketneeds.AsMsRinneputsit“wehaven’tseenmuchlikethis[on-demandcustomerservice],butitisinthebull’seyeofwherethingsmighthead.It’sabsolutelyfeasibleandinmyopinionamattermoreofmonthsratherthanyearsbeforeweseesignificantinroadsbeingmade.”
Experimenting at Mila
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Service on-demand: The future of customer service
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Service on-demand: The future of customer service
The on-demand customer service model4
Still very much a work in progressForcustomerservicebuyers,simplywishingforanon-demandsolutionwillnotmakeitso.Surveyrespondentsareundernoillusionthatlargebarriersremain.
Puttinginplaceappropriatetechnology,althoughstillanimportantconsideration,seemstobelessofachallengethanonemightexpect.Workinthisareaisstillclearlyrequired:62%ofrespondentssaythattoimplementon-demandcustomerservicetechnologywillneedtoimprove.Similarly,respondentsaresplitonwhethertoday’sofferingsaresufficient:45%repliedneworbettertechnologyisnecessaryforcustomerservicefunctionstobeabletotransitiontoanaccesseconomymodel,but54%saidnot.
Ontheotherhand,thesurveyalsoshowsreadinessforrapidadoptionofotherkindsofcuttingedgetechnologybythecustomerservicefunction:overhalf(55%)alreadyusedataanalyticsand30%artificialintelligence.Moreover,asnotedabove,67%ofcustomerservicebuyersaremonitoringon-demanddevelopmentsinotherindustriestoseewhichcanbeappliedintheirown.Moreover,inthecurrentperiodofrapidinnovation,appropriatehardwareandsoftwareisbeginningtoappear.Already,MrViattenotes,settingupthenecessarysoftwareandplatformisthemoststraightforwardpartofcreatingthistypeofcustomerservice—butitisalsoonlythebeginning,hewarns.
Theremainingproblemsarefundamentalones.Asinotherpartsoftheaccesseconomy,thebestoperatingmodelisstillunclear.Forty-onepercentofallrespondentsbelievenewrelevantproductofferingsorservicemodelsareneededbeforecustomerservicecanbecomeanon-demandoffering.Amongthemostsenior,decision-makingexecutives—theC-suite—thisrisesto60%.
Managing performance Aparticularcomplicationisthatthemostsuccessfulcurrentaccesseconomymodelsfacilitatetransactionsbetweensupplierandconsumer.Althoughcommercialrelationshipswithothersuppliers—suchashotelsortaxifirms—maybedisrupted,thecompanieslosingmoneyarenotinvolvedintheAirBnBorUbertransaction.
Withcustomerservice,thingsaremorecomplex.Howwellservicesuppliersperformreflectsbothonthemselvesandonthereputationofathirdparty—thecompanythatprovidedtheoriginalproductorservice.MrViatteexplainsthatMila,whenactingonbehalfofSwisscomorotherfirms,isprovidingaBtoBtoCservicewhichmayalsoendup,tosomedegree,disruptingthecontractingbusiness’ownexistingcustomerservice.MrLoosenaddsthat“addingextrasteps[toanaccesseconomymodel]likethisisabigchallenge,whichgenerallyrequiresmoremanualinterventionandmoreroomforhumanerror.Itisnicetohaveanentitythatcandirectcustomerstotherightpersonbutthatpersonhastogetpaid,bemanaged,anddeliveracertainstandardofquality.”
24% expect managing customer engagement to be a leading challenge
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Service on-demand: The future of customer service
MsRinnepointsoutthat,consistentwithMila’sexperience,anyemergingmodelforon-demandcustomerserviceislikelytostartwithaspecificelementofthefunction.Shenotesthatoneofthefrequentreasonsforthefailureofaccesseconomystart-upsisanattempttobetoocomprehensive.“Tryingtobe‘everythingforeveryone’significantlyincreasestheeffortrequiredtobuildacriticalmassofsupplyanddemandtobematched,andincreasestheriskthatyou’llfallshortofexpectations.Rather,onceyouhaveprovenyourworthinnarrowverticals,thenyoubuildout.”Accordingly,sherecommendsthatentrantsstartwithoneorafewofthemostimportantelementsofcustomerserviceand,oncetheseareinplace,seektobecomemorecomprehensive.
Therelativenoveltyandlackofestablishedaccesseconomymodelsforcustomerservicemeanthatrespondentsalsofacesomekeypracticalrequirementsforsuccess.Themajority(57%)willneedimprovedcustomerserviceprocessesandnearlyaquarter(24%)expectmanagingcustomerengagementtobealeadingchallenge.(Figures6&7)Anevenbiggerissue,though,isskills.Thisisoneofthemostfrequentlymentionedkeyelementsforasuccessfultransitiontoanon-demandmodel(53%)anda
lackofskillsisthelargestsinglemajorbarriertosuchaswitch(27%).(Figure7)Notsurprisingly,62%ofcustomerservicebuyerssaythatimplementationofon-demandcustomerserviceattheirfirmwillnecessitatemoretraining.
Skillsfornewprocesseswillbeaconsiderationforinternalemployees,butthebiggerquestionwillbefindingandmanagingthoseabilitiesamongtheexternalindividualsbeingbroughtintoprovidecustomerserviceondemand.Thisneedstogobeyondsimplyhavingalistofindividualswiththerequisiteskills.MrViattesaysthatitisessentialto“lookintherightplacesforqualifiedpeopleandtomanageandbringthemtogetherinordertobuildupacommunity.”Oncethatcommunityisinplace,however,thesecondbiggestbarrierseenbyrespondents—qualitymanagementofexternalserviceproviders(24%)—turnsouttobelessofanissuethanmightbeexpected.(Figure7)AsMrViatteputsit,becauseofcustomerratingsystemsandthenon-employeerelationshipwithexternalproviders“Ifsomebodygivesbadserviceyoucanexcludethemfromtheplatform.Youhavecontrolofthequalityandcanmanageitverywell.Meanwhiletheproviders,becauseoftheratingandcompensationsystem,arereallymotivatedtogiveagoodservice.”
Key steps needed to implement on-demand customer service(% of respondents)
Hiring vendors/consultants
Improving processes
Training people
Improving technologies
Hiring new people
Figure 6
62%
62%
57%
33%
33%
Partnerships with other companies 31%
Source: Economist Intelligence Unit
16 © The Economist Intelligence Unit Limited 2016
Service on-demand: The future of customer service
Simultaneousintroductionofanovelcustomerservicemodelwithuncertainprocessandskillsrequirementswillmakeanimmediate,complete
Main challenges in implementing on-demand customer service(% of respondents)
Limited funding for implementation
Managing engagement with the customer
Quality management of on-demandservice providers
Lack of skills among staff
Lack of on-demand products or services
Lack of technology skills
Training of on-demand service providers
On-demand customer service is unlikelyto ever be a viable option
Regulations limiting implementation
Managing an ecosystem of on-demandsuppliers
Lack of as yet proven model to attractpurchasers of service
Figure 7
27%
24%
24%
21%
14%
14%
13%
13%
12%
12%
8%
Source: Economist Intelligence Unit
switchovertoon-demandtoodaunting.Instead,astheMilacaseagainshows,itisanidealcandidateforfieldexperimentationattheedgeof
Ingredients needed to transition to an on-demand offering(% of respondents)
Improved/new technologies
Management support
People, eg skill levels
Customer/client demand
New product offerings/models of service provision
Improved regulation of relationship between buyerand seller of third party customer service
Integration of existing technologies
Volatility or uncertainty of demand forcustomer service
Funding, eg required investment
Figure 8
53%
53%
50%
46%
41%
40%
32%
32%
25%
Source: Economist Intelligence Unit
17 © The Economist Intelligence Unit Limited 2016
Service on-demand: The future of customer service
thecompany,allowingongoingadjustmentandimprovementbeforeitisrolledoutmorebroadly.
Beyondthesepracticalissues,though,loomtwobiggerconsiderationswhichareessentialforanylargebusinessmodelchangegettingcustomersandseniorleadershiponboard.Fifty-threepercentofrespondentsciteclientdemandasanecessaryingredientofthetransitiontoanon-demandcustomerservicefunctionand50%saythesameofmanagementsupport,makingthesethetopandthirdmostcommonanswerstothisquestion.(Figure8)
MrViatteexplainsthatneitherisstraightforward.Henotesthat,unlikeforhailingataxi,“customerswillnotnecessarilyrememberthe[on-demandcustomerservice]platformwhentheyneedit.Youcan’tjustsetupaplatform.
Youhavetogodirectlytotheplaceswherethecustomersarewhentheyneedtheservice.”Usinganalyticsandmultiplechannelstocommunicateandreachcustomersatpoint-of-needisthereforeessential.MsRinneaddsthattrustisjustasimportantasawareness:“Trustisthe essentiallubricantoftheentiresystem.Withouttrust,notonlywillitbehardertoscale,butyourentirebusinessmodelwillbeatrisk.”
Asfortheotherkeystakeholder,management,MrViattesaysthatthemostimportantlessonfromhisexperienceofcreatinganon-demandservicechannelis,“youneedareallygoodsponsorinthecompanybecausepeoplearescaredaboutthis.Somearenotevensureaboutwhatitis.”Withoutleadership,thischangewillsimplynothappen.
18 © The Economist Intelligence Unit Limited 2016
Service on-demand: The future of customer service
Thecustomerisstillking.Lastyear,inThe value of experience: How the C-suite values customer experience in the digital age,theEIUfoundthat89%ofAsia-Pacificcompaniesconsideredcustomerexperiencetobeavery,orsomewhatimportant,investmentpriority.Now,90%saythesameofcustomerservice.Thisexplainsonelastkeyfindingfromthesurvey.Theveryrealhurdlestoovercomeintheracetowardon-demandcustomerservicewillnotdampenenthusiasmforit:68%ofcustomerservicebuyerssaytheircompanieswouldintroduceanon-demandmodelevenifitbroughtsignificantchangesinhowtheyoperate.
Thecustomerservicefunctionandindustry,then,facesalmostinevitabledisruptionascurrentthirdpartyprovidersadmittoalackofserviceexcellenceandbuyersarekeenfornewmodels.Thishasimplicationsforboth.
Third-partyproviderscannotcontinuetowhistlepastthegraveyardwhichcouldpotentiallybetherestingplaceoftheirowncompaniesverysoon.Perhapsthemostimportantthingforthesectoristoshrugoffcurrentuncertaintyandeither,makeastrategicchoicetorejecttheon-demandmodelasinherentlyflawed,ortoacceptitslikelycomingandprepareforit.Attheveryleastthisshouldinvolvemoreattentiontohowtheaccesseconomyisaffectingothersectors—at
themomentonlyhalfasmanycustomerserviceproviderskeepacloseeyeonthisascustomerservicebuyers.Providersshouldalsobewareofon-demandcustomerservicestart-ups,aspossiblemodelstoemulateorevencompaniestoacquire.
Customerservicebuyers,meanwhile,mustbeginwrestlingwiththerealitiesoftheon-demandprovisiontheysoclearlywant.Thereisasyetnoclearroadmaptothisdestination.Thebestadviceistostartsmall,innarrowareas,andbuildfromthere.Thiscannot,however,behalf-heartedtinkering.SwisscomFriends’experienceindicatesthatleadershipcommitmenttoengagingisessential.
Evenwithcommitment,though,aclearroadmaptoon-demandcustomerserviceislacking.Companieswillhavetodevelopprocessesand—throughtrainingoroutsourcing—gainaccesstotheskillsthenatureofwhichwillonlybecomeapparentasimplementationproceeds.Thismakesthefieldanaturaloneforexperimentationbeforescalingup.
Somewillfindthisnerve-wracking,butthatispartofsuccessfullynegotiatingatransitionthattwothirdsofexecutivescurrentlybelievewillmeanthedifferencebetweencommercialsuccessandfailureinthecomingyears.
Conclusion
68% of companies would introduce an on-demand model even if it brought significant changes in how they operate
19 © The Economist Intelligence Unit Limited 2016
Service on-demand: The future of customer service
1. Embrace disruption:On-demandcustomerservicecanbringabettercustomerexperiencewithcostsavings—theproductsaren’tavailableyet,butbereadywhentheyare
2. Get management on-board:Transitioningtoanewon-demandbusinessmodelwillrequirefullsupportofmanagement,becausefailuretomanagethechangemightseparatewinnersandlosers
3. Train people:Anon-demandcustomerservicemodelwillrequireachangeinprocessesandtechnologies—staffwillneedtobetrainedtomanagethesechanges
4. Improve technology:InvestmentinnewcuttingedgetechnologiessuchasbigdataandAIwillbeneededtotransitiontoanon-demandmodel
Next steps for on-demand leaders
Cover image - David Simonds
While every effort has been taken to verify the accuracy of this information, The Economist Intelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in this report.
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