Aug. 29, 2019
In most large businesses, companies are organized around financial control, with the responsibility defined as a profit-and-loss line item. And with that setup, a common question is asked: Who owns the revenue? But it’s not the right question. Instead, it should be: Who owns the customer experience?
Why? Focusing on revenue muddies the water in terms of corporate objectives and results. At the end of the day, businesses should be focused on adding value for their customers, with profit a natural result of that value creation. The more value you add for the customer, the easier it is to demand a share of that profit.
Why Functional Control Can be Dysfunctional
Does that mean most companies organize in the wrong way? No, for many types of businesses it makes sense to organize for control. Workflows are mostly driven by people, and by assigning a functional owner to those workflows it becomes easy to manage for the KPIs that matter. Sales on top line, Operations on efficiency and bottom line, and General and Administrative on costs. That works well for many organizations. As soon as the sale is closed, sales hands off to customer success or customer service, and if sales gets involved again it’s only at renewal of the contract, sometimes multiple years into the relationship. But for logistics services, it’s a different story.
When it comes to logistics and supply chain management, the customer experience and therefore the relationship is both strategic and transactional. In our experience, about 30% of transactions in the logistics industry have exceptions; therefore, logistics providers are more on the hook to deliver high quality service at every transaction or risk customer dissatisfaction and churn.
As a result, logistics providers that organize along the lines of traditional functional silos carry some baggage: a lack of focus on end-to-end value creation in the customer journey. And when that happens, a common set of complaints emerges from customers:
Organizing for the Customer Experience
Instead of thinking in P&L line items, business KPIs should be tied to customer value creation and satisfaction, measured in customer satisfaction (CSAT), net promoter (NPS) scores, and quality of service indicators (e.g. on-time performance, reliability, and landed cost per unit). In other words: metrics that indicate value creation for the customer.
By changing the method of measuring success — pegged to customer satisfaction instead of line items on a balance sheet — the vision of how to serve customers becomes much more crystalized.
What a Customer-Centric Approach Looks Like:
In organizations optimized for customer service, both Sales and Operations own account management and identify opportunities; Sales designs solutions to create value for the client; and together, Sales and Operations recommend new ways to deliver that improved experience. Both lose when the account is not satisfied and results in churn.
Because Sales and Operations are jointly responsible for customer satisfaction, Flexport believes in aligning them with the customer in cross functional teams. We call these customer service teams Squads — small, autonomous cross-functional business units with end-to-end responsibility for customer success.
Squads know the customer intimately, can act quickly through an empowered decision making model, acting in unity while remaining laser focused on their mission to satisfy the customer. Winning means delivering an excellent customer experience.
Conclusion: The Ripple Effect of a Customer-Centric Mindset
Studies from the World Trade Organization and the World Bank have shown, when global trade is healthy, the rate of poverty declines. Yet in an era of tariff uncertainty, businesses worldwide are feeling the impact of already-imposed tariffs — or bracing for the possibility of new ones, putting poverty at risk of rising. More than ever, it is incumbent on us in the logistics industry to take the lead to make global trade easier for everyone through services that put customers front and center.
Whether the model is organized by squads of professionals with discrete expertise or simply based on a model that makes satisfying customers its top priority, we must continue to find ways to introduce efficiencies and reduce complexity. Key to that will be technology and analytics that remove the barriers to global trade for a healthy, freer flowing ecosystem on which economies worldwide depend.
For Flexport, that means adding customer value by enabling
This model leads to an experience that significantly diminishes chaos, lowers overall costs, improves workflow, and supports timely and successful shipments — all of which lead to satisfaction — not just with the customers that are importing goods, but the customers who ultimately buy those goods.
To learn more about fresh approaches to the freight forwarding process, read From Chaos to Control: Optimizing Global Trade with Data.
Join Flexport at FORWARD 19, a special gathering of thought leaders and experts across logistics, shipping and supply chain management, discussing solutions and best practices to address today’s biggest industry challenges.
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