PeopleShock: The Path to Profits When Customers Rule

— INTRODUCTION —

Win by being more ordinary, more standard and cheaper, or win by being faster, more remarkable, and more human.

Seth Godin, Linchpin

What Computers Can’t Replace: The Secret to Success in Our Digitized World

My first job, when I was 15, was helping out at a clothing store during a deep discount sale. I loved the idea of earning some money, but was less keen on having to stand in high heels for eight hours a day guarding the change rooms. (I still don’t understand why they make the attendants stand instead of sit. And stiletto heels — really?!) So when things slowed down, I wandered toward the nearby racks of clothes and started organizing them. One rack per color, and within each color, by size. Made sense to me: if you are shopping for a pair of pants, you probably know what color you need, right? My mother, however, was appalled. To her, the logical arrangement was to have the racks by size, and then within each size, by color or style.

I’m not sure if it was my decision to rearrange things without permission or just that the sale wasn’t as busy as predicted, but I was let go after three days. To this day, I don’t know if there is any definitive research showing which arrangement leads to more sales. I suspect it has a lot to do with your target customer. Are they likely to be coming just to browse and see what’s new? Or are they on a mission: get that pair of navy pants and get out!

Thanks to digitization, the answer to that question is becoming irrelevant. Soon your phone will know exactly what’s in your wardrobe, what types of events you have coming up and what clothing items you might need and not have yet. It will direct you to a relevant website (or websites), and automatically show you the most relevant clothes, taking into account style, color and size. Even if you want to go to a retail store to try a few outfits on, your phone will have signaled to the store exactly what you are most likely to be interested in, and those clothes will be set out and waiting for you when you walk in.

So what is the role of humans in all of this? Do we even need them anymore?

As we enter the era of the Internet of Things, with wristbands or watches telling us when to sleep, what to eat, and how many more steps to take today, and with fridges sending orders to the grocery store to deliver milk when we are almost out, it seems that less and less depends on humans. And yet that is precisely what makes humans so critically important now.

As more becomes automated, more becomes standardized. People are the only way you can really differentiate your offerings. The only way you can stand out in a sea of sameness. This book is about how you can leverage the people factor to survive and thrive in our increasingly automated era.

People are complex. So far computers haven’t been able to fully replicate the subtleties of human learning, communications and behavior, although they are getting closer very quickly. In his book, Rise of the Robots, Martin Ford gives many examples of jobs we once thought of as skilled, knowledge-based work that could never be replaced by computers becoming fully automated. In many cases the machines do better than humans: no doctor can be as thorough a diagnostician as a computer that quickly reviews all the medical studies ever published, the symptoms of thousands of diseases and the likelihood that a collection of symptoms in a person of a specific age, weight, gender, family history and personal medical history would be one specific disease.

Physically, computers are also becoming much more capable. They now perform surgeries, guided remotely by experts. Robots are set to replace most workers in fast food restaurants. The technology exists; so far its advance has mainly been slowed by a political backlash, but it won’t be long before most McJobs are no longer done by humans.

Part of the temptation to switch to robots is that they are more predictable than humans. Ask any entrepreneur, and odds are they’ll tell you the part of the business they like least is dealing with people issues. Despite the best efforts of people like Frederick Winslow Taylor, father of time and motion studies aimed at getting the maximum production levels out of factory workers, humans do not perform the same way that machines do. Simple, repetitive tasks are almost always better handled by machines. Humans get bored, lose focus, get tired and suffer repetitive strain injuries that take longer to heal than it takes to fix a worn-out machine part.

Of course, staff are not the only people businesses need to worry about. Far from it. They have to be equally concerned about the people who work for their suppliers, their prospects and customers, investors and the public at large. Thanks to social media, the number of people whose views and comments can be relevant has expanded exponentially. All of these people can be irrational, emotional and impulsive.

Think about all the possible permutations and combinations of these human elements that can affect your business results. It quickly becomes obvious that it is impossible to control. It is also impossible to completely predict and program. As a leader, you need to be thinking now about how you can best leverage the robots to do what they do best and the humans to use their strengths.

When we get to the point where we no longer need the teenager in the stiletto heels guarding the changing room, we will still need humans. They will be the ones who understand the subtleties of what your customers are likely to want. They will be the customers themselves. And they will still be needed to provide the experiences and human connections that we so crave. I call this increasingly important role of the human element PeopleShock™.

This book is about PeopleShock: why getting the human side right is crucial, and how to use it to your advantage so you can compete successfully in the digital era.

Who Will Benefit from This Book?

This book is for CEOs and other leaders who are looking for better results. As automation takes over more jobs, the companies that survive and thrive will be those that are best not only at optimizing their automation, but also at leveraging the people factor.

It will give you the ammunition you need to resist the short-term horizon of quarterly reports and instead invest in customer experience. Ultimately, you will reap the rewards in terms of profits, prestige and personal satisfaction.

It will give you a common frame of reference to get your marketing, sales, systems and operations people all talking and working together. Executives in these areas often see themselves as competitors for resources, but they must collaborate to meet the multi-channel challenge presented by today’s prospects and customers, who no longer limit themselves to dealing with one sales rep or store. They research online before they even talk to you. They expect your organization to work seamlessly as they move among the web, phones, stores, sales meetings, email and live chat. They don’t want to have to fight through your bureaucracy. This book includes advice about how to break down silos and win support from other departments so you can meet those customer expectations.

You may be feeling pressure and unease from digital marketing and social media. You’ve heard horror stories about companies doing the wrong thing on social media and you’re worried about becoming the latest online disaster story (or, as they say in Twitterland, #fail). Your head may be spinning from the pace of change in online technologies. You know digital media are important, you’ve heard that even business customers are looking for a seamless experience where they can interact with you whenever and however they want, but you aren’t sure what that means for your business and how you can minimize the risks and maximize the benefits. We’ll discuss that too.

You may be feeling pushed by young employees who feel less loyalty to their employers and are demanding new ways of doing things. You are worried about how your employees’ online activities might reflect on your organization. But like it or not, this is the new workforce reality you have to deal with. If your workers are not happy, your customers won’t be either.

Fundamentally, this book is about three things:

Survival. Without understanding customer experience and the people and processes behind creating consistently great ones, you are doomed. (Sorry to start with the bad news.)

Profits. This is a moment of great opportunity for companies that really come to grips with PeopleShock. The people factor is hard. As my trainer says, If it were easy, everybody would be doing it! But that very difficulty is why, if you can get it right, you’ll come out on top.

Satisfaction. I’m not just talking about your customers and your staff here, although those are what the book focuses on. I’m talking about you. If you have happy staff, customers, suppliers and investors, you’ll be a happier person too.

Why Listen to Me?

My first memory of bad customer service was on my 10th birthday. My parents had dropped me off at a local bowling alley and pizzeria with four of my best friends. They had given me money to pay for the outing and told me to call my dad to come get us when we were done. (This was back in the old days when parents didn’t hover over their kids at birthday parties.)

The bowling was fun, and then we sat down for our pizza. Maybe the server had too much experience with rowdy kids’ birthday parties. Maybe she was just having a bad day. I don’t know. Whatever the reason, she was downright rude to us. It was clear she wasn’t happy about having to serve this gaggle of girls. Our giggles may have been a bit noisy, but we were not badly behaved. We were actually trying to be very grown up. It took forever for her to come take our order. She was gruff in answering questions.

When the bill came, I knew I was supposed to leave a tip, but I had no idea how much. Since her service had been bad, I left 10 cents. Yes, this was a long time ago, but even then, as my father explained to me that evening, 10 cents was an insult — kind of like leaving a penny. I felt guilty, which is probably why I still remember this incident. But at the same time, I felt that she deserved it. Why should she get a good tip when she had been rude to us?

In the decades since then, I’ve thought a lot about customer experience, and my work has always had a customer element to it. I worked as a teacher to kids who had all dropped out of school and were now back. They were challenging customers, but I discovered not to pre-judge their capabilities.

In my next job, I spent time writing speeches and solving voter problems for elected officials, whose re-election depended on providing excellent citizen service. After that I became a lobbyist, and a bank marketer. You’ll hear more about the bank marketing experience later.

After a decade spent having children, freelance writing, consulting and putting out my first best-selling book, Canada’s Best Employers for Women: A Guide for Job Hunters, Employees and Employers, I launched Web Mystery Shoppers in 2001. From what I can tell, Web Mystery Shoppers was the world’s first company to assess what we now call omnichannel customer service: messages and behavior that were consistent no matter how and where a customer dealt with an organization. We’d have 30 to 300 people who were a demographic match for our client’s target market give detailed feedback, using their own computers, on what they experienced on the client’s website. They would also call the customer service number, test live chat if it was offered, and for some clients we also tested the experience in their real-world locations.

Using social media techniques in the days before social media existed, I built a database of 75,000 testers worldwide. Our clients included several of the world’s largest banks and insurance companies, travel and tourism agencies, government departments, and smaller companies. Our research technique and results were featured in the Wall Street Journal, Quirk’s Marketing Research Review¹, the Journal of Interactive Marketing², and presented at global usability, technology and marketing conferences. Although many challenged our concept of remote usability testing in the early days, it has now become standard and accepted as a particularly valuable form of input.

In 2012 I started a podcast, interviewing companies and experts about their paths to growth and best ways to handle customer experience issues. Originally called the Frank Online Marketing Show, it is now Frank Reactions, and can be found on iTunes, Stitcher and at http://frankreactions.com/show. I have interviewed over 150 executives, entrepreneurs and experts, whose wisdom has gone into this book.

Now it is time to share what I’ve learned from this 30+ year journey with you.

PART ONE

PeopleShock

PeopleShock™: The power of a people-focus in an era of increasing competition, social media missteps, an overwhelming pace of technological change, and pressures to replace workers with automation.

Prognosis: Used correctly, PeopleShock can increase customer satisfaction, market share and sales while decreasing costs and employee disengagement.

Directions for Use: The new 3P Profit Formula of Promise + People + Process = Profit

— CHAPTER 1 —

Is This Your Kodak Moment?

There will still be things that machines cannot do. They will not produce great art or great literature or great philosophy; they will not be able to discover the secret springs of happiness in the human heart; they will know nothing of love and friendship.

Bertrand Russell, philosopher

In 1974, 24-year-old Steven Sasson invented the world’s first digital camera. He had been quietly working away on a research project no one thought was very interesting for two years, in a corner of the massive film and camera empire, Kodak.

Once he came up with the idea of capturing digital images, Sasson realized he needed a device to view them on, so he created that too. He believed his invention had the potential to compete with the mass-market film cameras of the day and tried to sell the idea to Kodak executives. The idea did not go over well.

They were convinced that no one would ever want to look at their pictures on a television set, he said. Print had been with us for over 100 years, no one was complaining about prints, they were very inexpensive, and so why would anyone want to look at their picture on a television set?³ he told New York Times reporter, James Estrin, in a 2015 interview. Kodak buried Sasson’s invention. He wasn’t allowed to share it with anyone, for fear it would destroy the company’s massively profitable film business. They couldn’t accept that the world was changing.

By the time Kodak executives realized the business could be about preserving memories, rather than just producing prints, it was too late. The company filed for bankruptcy in 2012. It probably would have done so sooner had it not made millions from the patent it filed on Sasson’s invention — the same one it refused to make and sell.

Kodak is just one of many companies to have been wiped out in recent years by a major technological change. The pace of changes, and new inventions, keeps increasing. As I write, Uber is threatening the world’s taxi industries with extinction, but it too may be extinct soon, as driverless cars become commonplace.

The world is littered with the corpses of once-great corporations that failed to appreciate major changes in the competitive landscape. It is easy to fall prey to corporate blindness: you believe that what has worked for you in the past will continue to work. When business slows, you blame it on short-term factors, like a recession, or a bad leader, without thinking that there may actually be a fundamental shift in consumer behavior happening. And you want to defend your turf at all costs.

We’ve seen it in the music industry. The industry lobbied to increase taxes on cassettes and CDs when those technologies were introduced; it went to court to force the closure of services like Napster that were letting consumers share music without paying for it. The industry is still struggling to come to terms with the seismic change in business models, but most of the artists have figured it out: the big bucks will no longer come from music sales but from live performances. It’s hard on the aging rockers who have to stay on the road, but there’s no going back.

We’ve also seen it with travel agencies. The masses of agencies that were the gatekeepers for booking travel are gone. Most did little other than look up flight schedules and hotels and then book them. Often their interests weren’t even aligned with those of their customers — because they earned a commission, it was in their interest to book you the most expensive services they could. Those few that have survived have done so by researching and booking complex trips and offering a great customer experience.

Even industries that aren’t on the verge of extinction are undergoing massive, radical changes brought about by automation, the Internet and continually expanding computing power. This is a mixed blessing. Our ever-increasing computational and automation capabilities can help businesses in many ways:

We can gain new insights into what prospective and current customers want.

We can track customer behavior in both the digital and physical world.

We can customize and personalize what we offer them, and offer it when they are most likely to want it.

We can optimize our supply chains so that we restock just in time.

We can optimize our production and operations internally to lower costs and operate more efficiently.

This all sounds wonderful and exciting. It is. But not nearly enough companies are reaping the benefits of these new-found powers. There are many reasons for this, but underlying them all is one huge limiting factor: humans. We can only cope with so much. We can only learn so quickly. We can only adapt to change at a certain pace.

Even the programmers who create these new possibilities are limited by their human weaknesses: small errors in code can cause big software bugs, and programmers’ very expertise makes it difficult for them to anticipate problems inexpert users may have.

In the early days of Web Mystery Shoppers, the website usability testing firm I created in 2001, we found that many applicants were abandoning partway through the sign-up process. We finally realized that most non-techies saw pressing enter as the way to submit or save their work and move to the next paragraph, so applicants thought that pressing enter on our form would move them to the next question. But to the programmers it was obvious that you press tab to move to the next form field; enter meant moving to the next page. Users were getting incredibly frustrated because they were trying to fill in the form and, in their minds, the system kept crashing on them.

This type of mistake is bound to happen when developing something new, especially software, because our brains are unique and do not all think in the same way. We do not have the same experiences and backgrounds to allow us to interpret signals identically. Those signals apply to all sorts of business-related interactions, not just software.

What this all boils down to is that using your systems, processes and people interactions to create consistently great customer experiences, regardless of when and how your customers deal with you, is your best chance for long-term survival.

The changes described above are shaking up the role of people in the business world. Power is shifting quickly from sellers to buyers, from employers to employees, and from privacy to transparency. Organizations everywhere are being PeopleShocked. Those that don’t adapt well to these changes are doomed, even if their entire industry’s business model isn’t broken.

In a classic 1965 paper, Gordon Moore, co-founder of Intel, noted that the amount of computing power that could be built into a circuit was doubling every year, and that this would continue for at least a decade. It did, and in 1975 he recognized it was slowing down a bit, but still doubling every two years. This came to be known as Moore’s Law, and was applied to technology and computing power generally.

Moore’s Law still holds true: computing power is doubling roughly every two years. Not doubling from what it was 20 years ago, though. Every two years, what computers were capable of doing just a few months earlier doubles. Then that doubles again. And so on.

Part of the challenge is that technology, and what it enables, is changing so quickly that it is impossible for humans and our systems to keep up. As soon as you come to grips with one new platform, piece of software, or technology, there are several new ones competing for your attention. (And getting attention from your competitors.) The choices become overwhelming.

By the time you commit to using a new system, it has already been leapfrogged by other products. So unless you have the staff and deep pockets of Google or Facebook, you have no hope of trying it all and finding the best products or services for your business.

This is gloomy news. No wonder many businesses keep their heads buried in the sand and convince themselves they’re doing well enough. Change brings risk. Change brings stress.

Why Mess with Success?

Unfortunately, failure to change can be an even bigger risk, as Kodak and others have discovered.

Your Competitors Are Changing

Maybe not all of them, but those who do will become the market leaders. The rest, like your organization if you ignore the changes happening around you, will die.

Your Customers Are Changing

They now have access to the best of what the world has to offer. They see how things can be better. They are coming to expect it of you. That is why, even though 74 percent of business leaders say improving customer experience is a high or critical priority,⁴ customer satisfaction is actually dropping.⁵ Influenced heavily by organizations like Amazon, customer standards and expectations are increasing faster than most companies can keep up. I call this the "Amazon Effect," and it‘s hitting organizations of all sizes, in all industries, including governments and business-to-business sellers.

Your Staff Are Changing

2015 marks the first year that Millennials (people born 1980-1996) are the largest single cohort in the US workforce.⁶ Their expectations and demands are different from previous generations. They grew up in a participative environment: their parents didn’t tell them that children are to be seen and not heard. Their teachers encouraged them to question the world around them. They voted on classroom rules. They worked in teams, not quietly at their own desks. And they grew up with technologies in their pockets that let them communicate with anyone at any time. They do not accept the rigid structures and rules of their parents’ workplaces, especially since many of them saw their parents get laid off despite following the corporate rules.

This is actually a good thing, although it may take some adjustment inside your company. The same forces that are disrupting the business world give Millennials a level of comfort with technology and with change much greater than that of previous generations. It gives them the flexibility and creativity to find new and better ways of doing things. But to leverage their skills, your organization needs to change how it is structured and how its workers interact with each other.

Even better news is that it is not just the Millennials who are capable of creativity. Most workers want their employers to succeed. They want to help make things better for themselves, their coworkers and your customers. It’s just that in so many organizations they haven’t been given a chance. In Part 3 of this book we will discuss some new ways of organizing your workforce that may be better suited to the social media era.

Shopping Patterns Have Changed

Customer experience has always been important, but several forces have made it more important now than ever before:

We have more options.

Competing on price is no longer sustainable.

We can easily find out about bad (and good) service.

It is easier to switch.

Subscription models mean companies need to keep earning our business.

Sales cycles are changing.

Millennials are taking control, and they think different.

Let’s look at each of these in more detail.

We have more options

When I was a child there was a rite of passage that happened around age seven. That was when most of our parents would trust us enough to walk to the corner store to buy our parents cigarettes or milk or other emergency supplies. (I never did smoke, but I still remember fondly the candy cigarettes we’d buy with the change!)

The store could charge a hefty premium over what it would have cost our parents to buy the same things a mile away at the grocery store. This was in the 1960s and most families in our middle-class neighborhood had many