It’s becoming harder for Private Equity to extract value in the current economic and competitive climate. Value creation by necessity has become more sophisticated, with an increasing focus on innovative and holistic approaches that address the need to grow brands, accelerate organic growth and find new opportunities.
In this blog we explore how private equity – and indeed businesses more broadly – can address these needs through purpose driven intelligent automation to differentiate and improve customer experience.
Customer experience as a lever for value creation
PE is increasingly the growth capital provider of choice as the number of companies listed on public exchanges continues to fall. But, high levels of activity are creating intense competition and higher demands on returns. According to Forbes, two thirds of Private Equity firms are pushing their portfolio companies to grow at over 10% a year to justify their price premiums. These rates are increasingly difficult to achieve– especially in sectors disrupted by technology and new entrants.
Clearly, funds will continue to drive their assets’ operational and financial metrics. But the focus is increasingly shifting towards incorporating a more transformative mindset that looks holistically at more sophisticated ways to drive top-line value.
We’re finding that customer experience, is a key differentiator in this environment. In most sectors, customers have access to a vast array of options and an unprecedented ability to compare pricing and products. Customer loyalty is harder to win, but nonetheless increasingly vital to create value. Research from WaterMark Consulting, shows that customer experience leaders outperformed the broader market, generating a total return 35 points higher than the S&P 500 Index.
In many industries, hyper competition has eroded traditional product and service advantages, making customer experience the new competitive battlefield
Jake Sorofman, research director, Gartner.
The increasing importance of customer experience in value creation means it is receiving increasing attention from PE funds. But they’re not alone. Three-quarters of organizations surveyed by Gartner have increased customer experience technology investment. Technological developments will increase customer expectations still further. So how can PE maximize their returns to outperform their peers?
Why intelligent automation?
We believe intelligent automation can be a clear value differentiator in meeting customers’ increasing expectation to engage in seamless, multi-channel 24-7 communication.
What is intelligent automation?
Innovation enabled by an integrated suite of digital tools, using existing applications and interfaces, leading to savings, improved customer experience and staff satisfaction
Nevertheless, intelligent automation is often adopted without realising its full potential. Despite the acknowledgement of the importance of customer experience as a brand gateway, vital portals like e-commerce sites are often built as an afterthought, tacked onto legacy IT systems without a clear understanding of customer needs or the importance of engaging staff and stakeholders in the process.
We see the best results if intelligent automation incorporates the 4 key important digital perspectives:
Indeed, automation should engage and enhance the whole organisation. For customer automation to be intelligent, it should improve the customer experience, increasing loyalty and sales, whilst bringing other financial paybacks, through improved efficiency and productivity. But, the process should also bring wider benefits.
Setting the foundation
Intelligent automation, with the customer in mind, should:
1. Create purpose: focus on purpose and business/ customer issues in a plan for organisation change
2. Consolidate and centralise: centralising common processes, services and functions across the organisation
3.Standardise: drive standards of process across the globe, enabling repeatability and rapid deployment of processes and services
4. Optimise: optimise processes and process improvements through lean and Six Sigma
5. Automate: apply intelligent automation technologies for process automation and consider solutions holistically using a balanced implementation approach
There are common pitfalls. Treating automation as a ‘tech’ only initiative, for example focusing on robotic process automation (RPA), without assessing the full solution potential, can lead to costly corrective actions later. RPA is a hammer, but not everything is a nail. A better way is to think about creating a virtual workforce- and managing it like your human colleagues. This means change management and building people skills to reduce resistance and create positive engagement to new ways of working.
Other problems range from getting the execution wrong and ineffective change management, to generally giving inadequate care and attention to chatbots once live. One of the biggest automation mistakes companies can make is dropping a system on top of an existing IT infrastructure and corporate culture, without preparing the ground or thinking about their ultimate aims or returns on investment.
To avoid these issues, it’s vital that companies lay the right cultural, data and technical foundations for any intelligent automation project. These include:
1. Creating a collaborative, agile culture
Intelligent automation should be a business-wide initiative. It needs collective management buy-in and a shared vision that engages all departments and stakeholders – especially employees. A lack of firm-wide support and training will ultimately thwart the project if it creates silos and leads to disengaged staff.
2. Putting the customer at the centre
The customer and their journey must be at the centre of the automation project.
It isn’t easy to train an organization to see the world through the customer’s eyes and to redesign functions to create value in a customer-centric way. But, there is no point creating something that isn’t focused on exceeding customer expectations.
When thinking about data and processes, organisations need to think about the customer persona’s, their path and the exceptions that will require human interaction.
3. Streamlining data and processes
Intelligent automation isn’t a panacea. The adage: bad data in, bad data out still holds. Before automation can begin, most organisations will need to conduct a significant data streamlining and process improvement.
To create a seamless customer service, they will also need to marry data from across the organisation and deliver process improvement, to cover the whole customer journey. Most organisations will have data silos and issues around compatibility and process, so this process shouldn’t be under-estimated.
4. Managing legacy IT
According to an IMIMobile survey, 92% of CIOs said that integrating fragmented legacy systems and new communication channels was a significant challenge to improving customer experience. More than half (52%) of CIOs admit they are unable to provide a truly connected and integrated customer communications experience across all channels and business systems.
It’s important to think about the value in existing systems and not rush to a solution too quickly. There may not be a simple technical answer. The solution should focus on the basics of the customer journey and how the organisation will need to capture and use data.
5. Valuing the human element
Successful automation should enhance, rather than replace human interaction. The balance between agent and automated response will vary by sector. For instance, insurance companies find that conversion increases significantly when they interact with customers through varied channels. Contact centres have a high conversion rate, but also high costs. A mixed chatbot and human solution allows them to trade off between cost and conversion, by fielding questions and harvesting information that enables their agents to close sales.
Taking too many humans out of the process risks increasing waiting times, puts staff under pressure and erodes customer satisfaction. Microsoft’s chatbot, Tay, is an instructive example of what can go wrong when bots are left to their own devices.
6. Measuring success
To monitor the transition and measure the overall success of the new processes, a KPI framework needs to provide management with the relevant key figures required to manage the business effectively. But it needs to be fully integrated. That way data requests are automatic and not painful.
The nucleus of value creation has shifted
Our historical mindset of creating sustainable competitive advantage from efficiency, scope and scale has shifted towards a transformative and value creation mindset, centred around the customer. As PE creates dynamic competitive advantage, through human centricity, technology at speed and business model reinvention, customer-centric intelligent automation will be an important part of this approach.