The Cure for Service Complacency

September 1, 2009

The NYT described how the post office is responding to reduced demand as customers increasingly turn to alternatives for exchanging letters.  The action is late, arguably decades late, and not at all uncommon.  When organizations face limited competition (in the case of the post office, it was literally no competition), they often suffer from what I like to call service complacency.  Service complacency is the malaise that infects a culture when good service feels like a choice rather than a business necessity.

While this conclusion may seem reasonable on its surface — you have nowhere else to go, dear customer, so delighting you needn’t be my goal today — it denies an important truth.  Even if your competition is not visible today, your increasingly dissatisfied customers are a beacon for them.  And the new entrants that you can’t yet see often don’t show up in the form of direct competitors, but rather as enablers of the workarounds your customers have already resorted to using.  This is a much more serious threat since the rules of engagement aren’t immediately obvious.

In the case of the post office, customer dissatisfaction had been brewing for decades, but regulation literally gave customers no alternative.  This mix of high retention but low satisfaction was the perfect breeding ground for service complacency.  The post office’s most demanding customers started to get creative, which is often a red flag.   They started using fax machines, then e-mail, then e-mail with attachments.  When FedEx finally entered to deliver original documents quickly and reliably, the dynamics of the entire industry had already changed.  At this point, FedEx was not the post office’s biggest problem.

On the one hand, you could say this is just the march of technological innovation, and the post office could do nothing about it.  I think there’s more to the story than that.  Customers are typically slow to embrace innovation when existing solutions meet their needs.  But when an existing solution disappoints and disrespects them, which was the service experience that many post offices were delivering, then adoption of alternatives can happen at lightening speed.

How should the incumbent respond?  The are two enormous hurdles standing in its way.  First, it has to learn how to treat customers as if they have a choice.  And, second, it has to create an operational culture where controlling costs is a matter of survival.  Neither of these steps will be easy for the post office.  Competition has not forced the post office to care deeply about cost or service, and it’s hard to develop these muscles simply because Congress decides it’s time to start using them.

Today, the post office relies heavily on sending junk mail and packages that we order online.  This will not be enough to sustain it.  Unless the organization recognizes the intensity and range of its competitive threats, a fear that should show up in every single line item and every single customer interaction, then I’m not optimistic it will overcome its service complacency.


Self-Service Innovation at USAA

August 13, 2009

The NYT recently described an innovative new iPhone “app” that allows customers to use their phones to deposit a check.  Take pictures of the front and back of the check with the phone’s camera, and then use its email function to send the pictures to USAA.  Now discard the check.  No trip to the bank necessary. 

The application is a great model for self-service innovation.  USAA customers get a solution they prefer to the existing alternatives.  Instead of going to an ATM, they can now deposit a check from anywhere.  Customers get the enhanced convenience of mobile banking without having to sacrifice functionality.  In fact, the mobile deposit service increased the functionality of the traditional online banking experience, essentially overcoming the classic tradeoff between functionality and convenience.

USAA didn’t just transport the same services to a new channel — it designed new services for a new channel.  Bank of America, in contrast, created an iPhone application that only performs a limited set of transactions, all of which can be performed through its online banking program.  This type of solution is far more common and creates far less value for customers, a concession to the tradeoff between convenience and service.  USAA reminds us that great service innovation occurs when we challenge our employees (and often customers) to overcome persistent assumptions.


Feed Our Need for Control

February 16, 2009

Americans are shaken, some of us to the core. We thought we were rich, and now we’re poor. We thought the future was ours, and now we wonder, for the first time in decades. We thought our lives were capable and in control, the operational equivalent of a competent system, and now the foundation of our identity is under attack.

We are changed people in the marketplace for goods and services, and not just because we have less discretionary income and less “consumer confidence” to upgrade the washing machine. We define value differently now, and the companies that understand that difference will prevail in this environment.

We’re still getting over the shocks to our individual economics, but I believe we’re ready for the reaction to the action, ready to be coaxed out of the fetal position with news of our autonomy. We’re ready to be reminded that we are in charge of what happens now.

The shift is a clear opportunity for firms that are already in the business of control. Financial control is the natural starting place – financial services are well positioned to compete on consumer empowerment – but it doesn’t end there. Any product or service that helps us design our own destiny can have a new conversation with customers. That includes healthcare and fitness (control over body), education and training (control over mind), travel and entertainment (control over spirit). The more interesting opportunities will appear in the less obvious industries.

I spent a bit of time with Walt Whitman over the weekend. His defiance fed my own hunger to shed the anxiety – and reminded me of the genius and passion that built this country. I’m convinced that Americans are ready to be large again, to sing songs of ourselves for the next chapter of our experiment in self-determination. We will come together where we have always come together, in the marketplace, and we will disproportionately reward anyone who helps us compose that song together.