Friday, September 15, 2006

The Path to Customer Optimization

One of the topics that has always fascinated me is how innovations spread through an industry. At the risk of admitting an embarrassing truth, most of the concepts that customer management thought leaders discuss have been around for a long time. I don’t mean the ancient “corner shop keeper” analogy, but the specific vision of linking customer touch points to a central management system that can optimize each interaction. I’ve been talking about it for at least five years and know other people who were talking about it before then. It’s a sound idea and, yes, part of the reason it’s taken so long to catch on has been the need for technology to advance to the point where it’s possible. The technology still isn’t quite there yet, but it’s getting close. So, assuming the technology issue will soon be solved, what will it take for the concept to be deployed in many businesses?

I can envision two starting points. One is a broad but crude deployment of the concept throughout an organization, and the other is a narrow but sophisticated deployment for particular applications. Conventional wisdom suggests the narrow version is more plausible: it’s easier to deploy and should show immediate benefits. You could argue that many of the interaction optimization systems already in place are examples of this. I have in mind automated systems to select appropriate offers on Web sites or in call centers based on individual customer history.

But these applications have been around for quite some time and not led to broader deployment of the concept. So maybe they are an evolutionary dead end: they lead to more sophisticated versions of themselves within their original environment, but don’t spread to other areas. Think of a long-necked dinosaur that is superbly adapted to grazing at the tops of tall trees, but dies out when the trees are no longer available. The survivors in that case were the primitive little mammals that didn’t do anything particularly well, but were very adaptable.

A crude enterprise-wide deployment might be the equivalent of that primitive mammal. It’s not very impressive to start, but has the right configuration to grow more powerful over time. For interaction management systems, the key is the ability to measure customer behavior across departments. This lets them balance immediate results in one area against future results somewhere else. Departmental systems can’t do that, less because of technical constraints than because department managers have little motivation to consider results outside their domains.

If this theory is correct, the short-cut of starting with departmental systems and working up from there is really a dead end street. Industry thought leaders will have to take the long way around, first convincing managers of the need for an enterprise perspective and then getting them, largely on faith, to make the substantial investment needed for even a simple enterprise-wide project. This will take some time and the initial results may be meager. But they will improve over time and, once the potential becomes clear, managers will be eager to expand the project into something approaching the grand integrated interaction optimization mechanism we have been talking about for so long.

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