October 2001
 

Focusing On The Edge

BY KARL A. WALDER

Working the edge of your business is an outward-focused activity and must be the primary driver of any business growth strategy. The edge is the point of interaction with all of the entities in your business ecosystem that enables growth, collaboration, and expression of corporate brand. Think about it; in nature, it is the edge of our beings that allow us to interact and survive. The interaction with our environment and other beings within our ecosystem enable us feed, clothe, shelter, and adapt to changing conditions in our environment. Darwinian theory still holds. What happens to organisms that only focus on what they know and fail to recognize changes on the edge of their existence? They become extinct. Businesses that have their most talented resources working on internal perspective will also become extinct. While those that focus on the edge will adapt, grow, and prosper -- even in an economic slowdown.

INCREASING INTERACTION POINTS
The edge for business in today's world is characterized by an ever-increasing number of interaction points with customers, partners, and suppliers. Successful companies will adapt faster to their business environment and thereby create a competitive advantage if they properly leverage their touch points and adopt to the increasing and ever-evolving proliferation of interaction channels that technology is introducing. If businesses ignore the edge, they too will become extinct just like organisms in the real world.

To work the edge, companies must be able to leverage the emerging customer interaction management touch points of Web portals, messaging devices, e-mail, Web chat, and telephony in an organized and constructive way. So how do your organize your business to optimize the edge? Companies must look at the fundamentals of their value and supply chain and categorize them as follows:

• Identify the internal organizations that manage the sensors with the external world. Typically these are in the value chain areas of sales, marketing, customer service, distribution, and accounts receivable.
   
• Communication intensive business processes that require external touch points. These span the contact center, Web portals, sales and distribution, and suppliers.
   
• Organize these processes and associate them to your customers, partners, suppliers, and employees.
   
• Identify the processes that directly or indirectly add to the accounts receivable and revenue stream, as well as those that provide a measurable or tangible value to your customers, suppliers, and partners.
   
• Identify the processes that affect internal operations only, like resource management and cost accounting.

This task can be difficult. First, one must look at quarterly and annual strategic objectives and try to narrow down that list. Working the edge does not always involve the sexy business processes of sales, marketing, and distribution. These are easier to work. Therefore, let's use an example that does not garner so much attention, but still demonstrates how working the edge using interaction management and a multi-channel contact strategy adds directly to the bottom line.

Let's focus on an accounts receivable situation. All companies have to manage their accounts receivables in a way that is cost effective, assures customers are treated fairly and, most important, helps grow the relationship with customers. A typical global finance company needs hundreds of agents to help customers that have fallen behind in their payments. Even high value customers have tendencies to fall behind. For example, many professionals that travel for weeks at a time can fall behind and activate a collections process.

Here is a typical situation associated with an accounts receivable department. The company is rolling out an enterprise-wide CRM initiative that incorporates customer profiling and ranking. The current implementation plan is focused on the edge processes of cross selling during the customer service and marketing business processes. Accounts receivable processes will not have these indicators for at least two years based on the schedule. The business processes fall into two categories: pre-charge off and post-charge off. In pre-charge off situations, customers fall into three buckets: 30 days late, 60 days late, and 90 days late. After 90 days they tend to be classified as post charge off. A post charge off status initiates more aggressive collections tactics and credit counseling processes. This business case will focus on the pre-charge off processes.

The typical accounts receivable or collections department has optimized the telephony channel over the last five years by employing a blended inbound/outbound solution for handling customer payments. The current business process for handling this process is as follows:

• If the customer payment is 30 days late, they notify the customer by mail with a friendly reminder to send in their payment.
   
• The mailer has an inbound 800-number that can be called to make payment arrangements, or provides a return address envelope.
   
• If the payment is not received within the 30-day period, an outbound dialing campaign is initiated to contact the customer and request payment.

HIGH VALUE CUSTOMERS
It is imperative to ensure that collections processes do not offend customers that represent a high customer lifetime value. Let's say that over the last 30 days, a customer returns home from a rather long, extensive business trip. He uses his credit card for multiple business purposes, has been loyal over a 10-year period, and represents a high value to the company. Even though he is a high value customer, he has been placed in the 30-day category that warrants the outbound phone call.

As is typical in most call centers, the agent pool has a high turnover rate and staff is paid just over minimum wage. This customer is contacted by the outbound call at dinnertime to discuss his account. As it turns out, this is the agent's first day on the job and he has not been trained very well. The agent gets on the phone with this loyal customer and is actually rude and overly aggressive in his zeal to indicate that the payment is late. The agent insists that the loyal customer pay immediately using a debit system that enables the agent to take the customer's account information to conduct a direct funds transfer. In this illustration, the agent got his man and collected the money to bring the account current.

Unfortunately for the business, the untrained agent without a customer value indicator, caused the customer to miss dinner and immediately make the decision to cancel that card. This caused the company to lose a high customer lifetime value customer due to the low priority of the CRM integration project with the accounts receivable business process. So, by working the edge improperly the company lost a high value customer.

From a cost accounting perspective, a typical large, global financial institution account receivable contact center department handles 300,000 inbound calls per month from customers that want to settle their account and make payment. This same center also generates up to 120,000 outbound calls per month for the accounts receivable process. Let's say that a typical call to handle the accounts receivable costs the company $7.50. This is pretty typical if you factor in the costs of facilities, labor, payment processing, and telephone charges. So this edge process using a two dimensional contact strategy cost the company $1.5 million dollars per month.

MULTI-DIMENTIONAL STRATEGY
A multi-dimensional contact strategy enables the business to create a payment interaction process, for both notification and response, between the customer and the business. Let's extend the payment notification options to include:

• Mail notification -- This reuses the existing billing and notification process using print and postal mail options.
   
• Messaging posting -- Messages posted to the customer's personal account Web portal and cell phone.
   
• E-mail -- E-mail sent to the customer's personal and business addresses.
   
• Outbound telephony -- Automated recorded messages.

Each of these messages contains return addressing information to new payment response options. The primary goal of the strategy is to reduce the number of inbound calls by encouraging customers to utilize self-service payment options of a Web site or IVR application. The return addressing information contains the following addressing information:

• The traditional phone number.
   
• Postal mail return address information.
   
• SMS message return address.
   
• E-mail address for replies indicating payments have been made.
   
• IVR payment application.
   
• URL to this self-service Web site.

All outbound notifications emphasizes using a self-service option by including a URL as the primary response channel and an 800-number with an IVR application for making payments and replies. All other options are also included in the response addressing options. This multi-dimensional contact strategy has a number of advantages:

• The business has multiple options for notifying the customer. This enables the customer to receive an e-mail and reply while on the road.
   
• The customer has multiple options for replying at their own convenience. So, while in an airport, he can walk over to a Internet terminal (these are located throughout Europe and in many frequent flyer rooms), read his e-mail and take care of the payment processing;
   
• The cost of self-service is negligible compared to an assisted service transaction; and.
   
• Demand for real agent resources are greatly reduced. This strategy also prevents the untrained agent of pushing a high CLV customer away form the business.

The use of a multi-channel strategy as part of an edge-focused company also adds directly to the bottom line for the accounts receivable process. This strategy has been statistically tested in an inbound payment center. The statistical analysis indicates that 25 percent of customers would utilize the Web or IVR payment application to make their payments. The cost of a payment made using the self-service option on average is 50 cents per transaction.

Additional revenues are also possible using this accounts receivable business process. If direct deduction monthly payment opt-in options are added to the self-service applications, the customer can sign up to always make a minimum payment per month to prevent the collections process in the future. This drives the upside revenue as the busy consumer may pay the minimum payment over a few month period contributing to increased interest revenues.

In conclusion, companies must focus on the edge of their business and view all business processes from an external perspective. By focusing on the edge perspective, companies will enjoy significant bottom line results though both cost savings and potential revenue generation. Each process in a company's value chain should be edge-focused and incorporate a multidimensional contact strategy for each outward facing business process in the value chain. Marketing, distribution, and other cost accounting areas of the value chain should be investigated. It is through this multidimensional contact strategy that will transform a company into an edge-focused business resulting in significant improvements to the bottom line and substantial return on investment.

Karl A. Walder is director of eBusiness Product and Service Strategies for eshare communications.

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