Booz&co a strategic-approach to self service. Capture the value, avoid the pitfalls


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Publish Date:
August 22, 2011

Chatterjee, Arindam; Pötscher, Florian; Alewine, Ralph; Swartz, Joshua

: Self-service offers operational efficiencies, enables transformative business models, and enhances customer experiences. A strategic approach to self-service adoption and implementation requires an analysis of a company’s core capabilities and its “way to play” in the market, industry trends, the proper mix of self-service and human interaction, and customer value propositions, as well as the development of six self-service capabilities.

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Consumer Products, Financial Services, Media & Entertainment, Retail, Technology, Telecommunications, Transportation

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Booz&co a strategic-approach to self service. Capture the value, avoid the pitfalls

  1. 1. Perspective Ralph Alewine Arindam Chatterjee Florian Pötscher Joshua SwartzA Strategic Approachto Self-ServiceCapture the Value,Avoid the Pitfalls
  2. 2. Contact InformationAtlanta ChicagoRalph Alewine Bret SchroederPartner Principal+1-404-519-0184 bret.schroeder@booz.comMarjorie Taglieri FrankfurtPrincipal Olaf Acker+1-412-956-4747 +49-69-97167-453 olaf.acker@booz.comArindam ChatterjeeSenior Associate New York+1-952-994-0980 Joshua Associate +1-212-551-6245Berlin joshua.swartz@booz.comDr. Florian GrönePrincipal Vienna+49-30-88705-844 Florian Pö Senior Associate +43-1-518-22-902 florian.poetscher@booz.comMarjorie Taglieri also contributed to this Perspective. Booz & Company
  3. 3. EXECUTIVE Self-service offers operational efficiencies, enables transformative business models, and enhances customerSUMMARY experiences. But if self-service channels and applications are not thoughtfully planned, they can also lead to customer dissatisfaction and attrition, loss of market share, and brand erosion. For this reason, companies should take a strategic approach to self-service adoption and implementation. Such an approach requires an analysis of a company’s core capabilities and its “way to play” in the market, industry trends, the proper mix of self-service and human interaction, and customer value propositions, as well as the development of six self-service capabilities.Booz & Company 1
  4. 4. SELF-SERVICE First American Financial Corporation recorded a 20 percent Netflix’s self-service business model has transformed the movie rentalCREATES VALUE reduction in call volume after market. It has also overjoyed its implementing an online self-service owners, whose stock has appreciated solution for policyholders with at a compound annual growth rate of billing, claims management, and 45 percent over the past five years. policy inquiries. According to Forrester Research, every 20,000 As the examples above suggest, self- calls shifted online generates a cost service has significant benefits. It savings of US$150,000 to $200,000. can be used to reduce costs, improve the customer experience (enhancing In 2000, Wells Fargo became the stickiness and retention), and power first major financial institution new business models. But self-service to launch online self-service for does not always create value. If it is corporate and commercial customers. applied improperly or in the wrong Today, more than 330,000 of context, it can drive customers them use the bank’s Commercial away, causing losses in market share Electronic Office (CEO) portal. and brand equity. To avoid this, companies should take a strategic approach to self-service. Self-service can be used to reduce costs, improve the customer experience, and power new business models.2 Booz & Company
  5. 5. SELF-SERVICE pioneer new channels and applica- tions. Usage is less widely adopted gain the greater value that accompa- nies these efforts. For example, some TRENDS but still commonplace in telecom and telecommunications companies are consumer packaged goods (CPG)/ currently leveraging social media by retail. But others are early in the creating moderated forums in which journey, even though they will likely their customers can get free support The benefits of self-service are driv- adopt self-service at an accelerating from one another. They are encourag- ing its adoption, and more and more rate going forward. Healthcare is a ing customers to provide support by customers are embracing its use. The notable example in that last category: offering status, such as expert badges, usage trends in self-service channels, Currently it requires a higher-touch and incentives, such as points that can such as interactive voice response service experience, but as the pressure be traded for goods. (IVR), social networking, video, to reduce costs and expand access kiosks, and mobile are all on the rise grows among healthcare payors and Wells Fargo’s CEO portal is a good (see Exhibit 1). providers, their interest in self-service example of this trend. When the channels is sure to rise. bank launched the portal more than Of course, the implementation of a decade ago, the handful of transac- self-service by companies is not There is also a trend toward higher tions it supported were of relatively uniform across channels or industries. complexity in self-service channels. low complexity. The first transac- Some channels, such as IVR, which Less complex applications, such as tion conducted over the portal was a has been widely implemented for using IVR to check account balances foreign currency exchange, according decades, are well established; others, and tracking orders online, have been to Steve Ellis, the bank’s executive vice such as mobile, are less mature, but the low-hanging fruit in self-service, president of wholesale services. Today, have made early inroads in specific and many companies have already however, the portal provides access industries. Likewise, some industries, plucked them. Increasingly, however, to more than 60 types of transac- such as financial services, are already they are seeking to apply self-service tions, many of them complex, such as using self-service extensively and often to more complex transactions and Treasury swaps. Exhibit 1 Self-Service Channels, Monthly Unique Users (in Millions), 2007-2011 203 2007 2009 2011 129 135 127 128 120 121 90 92 95 75 82 67 60 59 43 30 32 Channel IVR1 Portals2 Social Networking2 Video2 Kiosks Mobile Examples U.S. IVRs Google, MSN, Twitter, MySpace, YouTube, Hulu U.S. Retail U.S. Mobile Yahoo Facebook CAGR (2007-2011) 4% 1% 34% 13% 13% 16% 1 Includes inbound and outbound touch-tone and speech IVRs. 2 U.S. online users. Source: Quantcast; Forrester Interactive Advertising Outlook; eMarketer; FCC reports for large incumbent local exchange carriers; Booz & Company analysiseting Booz & Company 3kei
  6. 6. THERE ARE Although the benefits of self-service are compelling, it can cause more service. Grocery chains have been implementing self-checkouts for moreRISKS TOO harm than good if improperly than a decade, but in July 2011, applied. There are three reasons Albertsons, which operates 217 stores companies should not try to imple- in the U.S., announced that it was ment self-service on an ad hoc basis eliminating them in all of its stores or without thorough consideration of because the lack of human contact its strategic ramifications. hampered the development of cus- tomer loyalty. At least two other U.S. First, self-service may detract grocery chains, Kroger and Publix, from the customer experience. For are reportedly also reconsidering the instance, a Forrester Research study use of self-checkouts. of customer service channels found that 57 percent of online customers in Third, self-service may not support the U.S. are “very likely” to abandon the corporate strategy; in some cases, an online purchase if they can’t reach it might actually conflict with it. For customer service while shopping. example, one of Goldman Sachs’s dif- Further, if self-service transactions ferentiating capabilities is the strong, are too difficult to execute or require personal relationships its partners expertise that customers do not have, build with their clients. Self-service they can create frustration and lead applications could limit the number to loss of business. of opportunities for the one-to-one interaction on which such relation- Second, there are applications that ships depend and thus undermine may not be appropriate for self- the company’s success.4 Booz & Company
  7. 7. FOUR To mitigate the risks and capture the benefits of self-service, companies and accordingly, the company has developed it as a differentiatingSTRATEGIC should use a measured, top-down capability.1CONSIDERATIONS approach to adoption. This approach should include four considerations: Industry Trends the fit with the company’s strategy; The second consideration in the self-service trends within the evaluating self-service channels industry; the appropriate level of is the level of use and acceptance self-service in the application; and within the company’s industry. In the customer value proposition. some cases, one or more self-service channels may be considered basic Strategic Fit options that every company must Before adopting self-service, offer; in others, self-service may executives should assess whether and represent a viable opportunity to how it fits with the three principal gain competitive advantage. components of a comprehensive corporate strategy: the company’s The most value-laden self-service way to play (its business model), with applications tend to be those that particular regard to the relationship customers have already accepted it desires to have with customers; (and, indeed, are coming to expect) the select set of capabilities that and toward which industries are enables it to differentiate itself in the currently moving. In financial marketplace; and its product and services, significant self-service service portfolio. opportunities exist in sales and service. In healthcare, online They should also consider the insurance exchanges for retail place that self-service will occupy customers (as mandated by the in the corporate strategy. At First Affordable Care Act in the U.S.) and American, where IVR is used to online discussion boards for patients handle common customer queries are emerging as key self-service more efficiently, self-service may opportunities. In the CPG/retail be only one tool among many used sector, online shopping capabilities to help reduce costs and streamline have matured in the past decade, but service. Conversely, self-service is the significant opportunities still exist basis for the way to play at Netflix, for self-service at the store level— In some industries, self-service may represent a viable opportunity to gain competitive advantage.Booz & Company 5
  8. 8. notwithstanding the actions of for each of the company’s major the Internet era, tend to favorAlbertsons, self-checkout is expected customer segments. channels such as IVR and kiosks forto grow 15 percent annually, self-service and online channels foraccording to NCR Corporation. The expectations and ability of research; and senior citizens favorIn telecom, product and service customers vis-à-vis self-service offline channels and expect a highercustomization has emerged as a technologies are widely varied. level of human priority for self-service (see For example, companies that useExhibit 2). a demographic segmentation will Thus, a financial services company usually find significant generational that provides 401(k) retirement plansThe Service Mix differences in customer expectations: would probably want to offer a mixNext, a company should consider Generation X and Y customers tend of service channels based on the agethe proper place of self-service in its to be very familiar with online and of its plan members. Its youngestservice channel mix. Typically, this mobile channels for both self-service members may want to manage theirrequires determining the right mix and information gathering; baby own accounts and trade online, andof self-service and human interaction boomers, who came of age before utilize social media channels forExhibit 2Self-Service Opportunities Across the Value Chain, Selected Industries CUSTOMER & SERVICE & MARKETING SALES MARKET INSIGHT OPERATIONS - User review on - Marketing program utilizing - Lead and referral - Bill payment and claim product/service outlets like social generation by customer filing Financial - Social monitoring for brand networking for users to - Retail product purchase - Balance check Services - Personal info updates spread and share content and cross-selling - Product/service renewal and modification - Inquiry management - Product and network - Marketing program - Online shops for new - Bill payment reviews and feedback on integration with social handsets, contracts, etc. - Balance check Telecom social networks, blogs, etc. networks and campaigning - Self-service for member - Customer inquiry programs (points) - Contract changes and amendment Industry - Product reviews on blogs - Marketing program utilizing - Online retailing and - Inquiry management and social media outlets like social cross-selling - Self-service return CPG/Retail networking for users to - Self pickup and checkout management spread and share content (at store) - Store navigation using - Lead generation through kiosk service user recommendation - Health product/service - Marketing of wellness - Retail online shopping as - Crowdsourcing disease usage preference programs managed exchanges emerge and management through mobile devices introduce new markets - Online bill payment and Healthcare and online venues account updates - Online claim tracking Significant OpportunitySource: Booz & Company6 Booz & Company
  9. 9. service or product research. Middle- expect customers to use self-service customer acceptance and use ofaged customers may place a higher channels, they should consider and online self-service have soared.value on their time and expect be able to articulate what is in it forthe services of personal financial the customer. Like the service mix, customerplanners. And retirees may want value propositions should also befewer, more conservative investment The airline industry provides a customized by customer segmentchoices and automatic withdrawals. notable example. In recent years, the in order to maximize the use of airlines have adopted an extensive self-service options. This requiresAdditionally, the right mix of array of online self-service choices that companies understand theself-service will vary based on the for booking flights, selecting seats, preferences of customers in eachcomplexity of the transactions and checking in, obtaining boarding segment and, to the extent feasible,the desired customer experience. passes, and accessing and managing design the look, feel, and capabilitiesFor example, when Capital One incentive and loyalty programs. The of each self-service application byFinancial Corporation adopted airlines have done a good job of segment. In marketing applications,an IVR system to automate many communicating the customer value this might include opt-in e-mailcustomer calls, it did not use the proposition of online channels— newsletters that offer customerssystem for calls regarding fraud. benefits such as “one-stop” online a convenient way to learn aboutThe complexity and urgency of these shopping for air travel, 24/7 products and services, while savingcalls and the emotional state of the flexibility for bookings and check- the company printing costs. Incallers, who are often upset and ins, and time savings, especially sales, it may include automatedstressed, precluded it. in avoiding queues at kiosks and recommendations based on previous counters. They have promoted purchases that add value to theThe Customer Value Proposition online self-service channels through shopping experience and drive newIt is abundantly clear that companies online and traditional advertising sales. In service, it may include acan gain operational synergies campaigns and have incentivized variety of self-service options thatand reduce costs with self-service usage by adding fees for using enable customers to choose the mosttechnologies, but the value of self- more traditional channels, such as convenient means of contact, whileservice is not always so obvious to booking flights via call centers and still allowing companies to reducecustomers. As a result, if companies delivery of paper tickets. As a result, their support costs. If companies expect customers to use self-service channels, they should consider and be able to articulate what is in it for the customer.Booz & Company 7
  10. 10. SIX CAPABILITIES among them based on their needs. Esurance’s tagline—“People deductibles to reward consistent online self-service users.FOR SELF-SERVICE when you want them, technologySUCCESS when you don’t”—communicates how the company aligns service • Analytics enable companies to segment customers based on their channels to customers. behaviors, such as preference and choice. An example is using • Education ensures that customers business intelligence tools toThere are six capabilities that learn how to use self-service better understand customersupport self-service strategy channels. Good examples include data and to surface insightsformulation and implementation: interactive educational programs, into customers’ behavior inuser experience; customization; like those that E-Trade uses to self-service channels and theireducation; promotions; analytics; teach new investors how to open propensity to use self-service.and execution planning. and manage their accounts and Analytics are particularly useful use the company’s investing tools, in understanding IVR usage and• User experience encourages and streaming videos, which adjusting IVR paths to facilitate self-service adoption and use providers such as Google embed the customer experience. by customers. Examples include into new services when they are the design of easily navigated introduced. • Execution planning ensures interfaces, such as the simple, that self-service applications three-step movie rental process • Promotions ensure that are implemented effectively and at Redbox’s 27,000 kiosks, and customers become self-service integrated as needed. Examples technologies, such as the iPhone loyalists. Examples include include a focus on delivering an keypad, that are intuitive and providing incentives for the use optimal customer experience, familiar to customers and can be of a self-service channel (for rather than just efficiency, and used for multiple applications. example, Bank of America has integrating self-service channels added a small fee for making loan for faster response—for instance,• Customization ensures that payments over the phone that redirecting inbound callers to self-service is relevant for the its customers can avoid if they the company’s website if an IVR customers by providing a mix pay online) and finding different channel is not optimal to address of traditional service channels ways to incentivize customers their needs. Customer safety and emerging channels, such where regulations limit or and security, such as two-factor as mobile or social media, and prohibit promotional discounts, authentication customer log-in, allowing customers to select such as a reduction in insurance must also be considered.8 Booz & Company
  11. 11. Endnote1 For more information on capabilities-driven strategy and its threecomponents, see The Essential Advantage: How to Win with aCapabilities-Driven Strategy, by Booz & Company’s Paul Leinwand About the Authorsand Cesare Mainardi (Harvard Business Review Press, 2011). Ralph Alewine is a partner with Booz & Company based in Atlanta. He leads the healthcare-IT customer solutions practice for North America. Arindam Chatterjee is a senior associate with Booz & Company based in Atlanta. He focuses on marketing, sales, and service CRM capability development, innovation, and IT strategy in the financial services, retail, and healthcare industries. Florian Pötscher is a senior associate with Booz & Company based in Vienna. He assists clients in consumer-oriented industries, such as telecom, high tech, and media, to develop new businessIMPLEMENTATION identifying the best opportunities for self-service and ensuring and enhance their customer service capabilities.AND that they are aligned with its Joshua Swartz is an associate in theMANAGEMENT capabilities and its way to play. In the second step—testing self-service Booz & Company IT practice based in New York. He focuses on sales and marketing capabilities and channels—the automation, provider network and data application is piloted on a limited management, and operational efficiency in basis to ensure that it achieves the the healthcare industry.Finally, companies should use a intended goals. The third step,measured and proven approach to growing and sustaining self-self-service implementation and service capabilities and channels,management. Successful initiatives encompasses the full-scale rollouttypically follow a three-stage of the application and its ongoingprocess. management and refinement.In the first step, which encompasses This approach can go a long way tothe work described in this ensuring that a company capturesPerspective, a company establishes all of the benefits of self-service,the self-service strategy by while avoiding the common pitfalls.Booz & Company 9
  12. 12. The most recent Worldwide Officeslist of our officesand affiliates, with Asia Middle Eastaddresses and Beijing Brisbane Helsinki Abu Dhabi Detroittelephone numbers, Delhi Canberra Istanbul Beirut Florham Parkcan be found on Hong Kong Jakarta London Cairo Houstonour website, Mumbai Kuala Lumpur Madrid Doha Los Seoul Melbourne Milan Dubai Mexico City Shanghai Sydney Moscow Riyadh New York City Taipei Munich Parsippany Tokyo Europe Paris North America San Francisco Amsterdam Rome Atlanta Australia, Berlin Stockholm Boston South America New Zealand & Copenhagen Stuttgart Chicago Buenos Aires Southeast Asia Dublin Vienna Cleveland Rio de Janeiro Auckland Düsseldorf Warsaw Dallas Santiago Bangkok Frankfurt Zurich DC São PauloBooz & Company is a leading global managementconsulting firm, helping the world’s top businesses,governments, and organizations. Our founder,Edwin Booz, defined the profession when he estab-lished the first management consulting firm in 1914.Today, with more than 3,300 people in 60 officesaround the world, we bring foresight and knowledge,deep functional expertise, and a practical approachto building capabilities and delivering real impact.We work closely with our clients to create and deliveressential advantage. The independent White Spacereport ranked Booz & Company #1 among consult-ing firms for “the best thought leadership” in 2010.For our management magazine strategy+business,visit to learn more aboutBooz & Company.©2011 Booz & Company Inc.