The Rise and Inevitable fall of the role of the COO

Back at the start of the 1980’s one of the least glamorous and under rated executive roles was that of the Chief Operating Officer.   The COOs of the 60’s and ‘70’s were the typically hard-nosed ex-engineers (almost always men) who were tasked with keeping the production lines running and the Unions in check.   Then along comes the computer and the world of work changes and the role of the COO is transformed – the rise has begun.

During the ‘80’s, at the dawn of “Thatcher’s Britain”, as the most technical of the Board functions, the COO is given the task of “overseeing” what this new technology (under the care of the newly emerging CIO function) is capable of doing.  In many cases IT and Ops merge and the COO finds themselves responsible for a growing empire as the newly unleashed computing power enables organisations to centralise, computerise and rationalise previously siloed functions.    Interestingly it is usually the “neutral” operations division that ends up managing the slimmed down entity as a central function providing service back to the divisions.

During the ‘90’s, as the breadth and depth of the “shared services” delivered by the COO functions grows, so too does the COOs power at Board level.   Now a major “owner” of resources the COO has the power to drastically influence the cost base and the overall P&L.  He (yes he is still a man) has become important.

During the ‘00’s, the ever increasing capabilities of web based technology opens up a yet greater world of possibilities for the COO.  Global sourcing is on the agenda and by the end of the decade the typical COO is poised magnificently over a global empire of efficient shared services providing support to the now very slim-line and somewhat denuded divisions.  No-one is now surprised when a COO is appointed CEO and even the CFO believes they have a powerful rival for the top spot.

However, if I may make a prediction, I suspect history will dictate that this current decade is the zenith for the power of the COO.  For whilst it has been technology that has been responsible for creating their empire it is inevitably the new digital technologies that will take it apart too.  Ironically just as the first wave of computing muscle bought the direct control of resources into the COO function the new digital wave will take them away again.  The availability of services from the cloud, the availability of “utility like” capabilities from outsourced providers and the ever present requirement to find lower cost alternatives will inevitably lead to a radical shrinking of the COO functions as the role of the COO changes from being that of master controller to that of master co-ordinator.

The “teens” will see the rise of COO’s who are capable of dismantling their own empires – focussing on the ability to scope, procure and manage the necessary operational services from outside the four walls of their own businesses and capable of coping with the subsequent reduction in their own power base.

Of course I could be wrong, and as of now the COO’s are more powerful than they have ever been and are still hoovering up organisational functions and responsibilities – but it won’t do us any harm to remind ourselves that what goes up will inevitably come down.

Is there a future for consultancy as we know it? - Re engineering the Advice Giving Industry – 1

In my blog of Tuesday, 31 May 2011 (see archive for details) I shared my personal conviction that the management consulting business model will be radically changed by “digitisation”.  Since then I have been keeping tabs on a number of “digital consulting solutions” in an attempt to spot trends and understand the developing market.  What I am learning is challenging me to deconstruct and rethink the processes for requesting and providing advice.   This short blog is the first in a series that will examine the future for the advice giving industry.

So first up, the big question is, should all consultants sleep safely in their beds and ignore the impact of the new digital capabilities?  Absolutely not.  Why?  Because of the growing wave of new digital service providers who are looking to link up those in need of advice or support with those capable of providing it.  These new providers are developing some unique and compelling propositions that could spell the beginning of the end for some of the traditional cosy consulting models by offering a potentially better quality of advice at a better price point than can be gained through the standard "request for proposal" avenues.  

New Models include:

1.       Ask your own digital network – (facebook, twitter, linkedin, google+ etc) – cheap as chips and can provide some good answers if the question is simple enough and straight forward enough e.g. – “Does anyone know of a good tool for doing process mapping?” – if your network is big enough the “wisdom of crowds” concept can come into play.  The challenge is being able to articulate a simple enough question - not as easy as it seems.

2.       Ask a specialist advice giving site – these come in a wide variety of shapes and sizes from the brilliant and addictive fivesquids http://www.fivesquids.co.uk/ where people will provide you with all manner of advice and services for just £5 to the much more sensible Know How Mart http://www.knowhowmart.com/ which hooks up business executives who want to chat through a challenge with a relevant global expert.  It’s a kind of cross between ebay and match.com. Sites such as Know How Mart are generally better able to provide better advice when the problem is ill defined and in need of refinement.   The big advantage of these sites is that they can make use of global experts who are keen to work on a portfolio basis rather than full-time.

Now the intriguing thing about these models is that through the use of digital media clients can now  access truly global experts and purchase their “expertise” in micro packets of time.  I can’t believe that this won’t become an increasingly popular way of purchasing advice giving services over the next 5 austere years.  So, going back to the big question, "how will the traditional consulting companies (who run the risk of being disintermediated by these new sites) respond?"  Watch this space

More in the next blog

Alex Matthews – Delivering an exceptional customer experience - 10 Reflections from 35 years of listening to customers.

      Just before Christmas, Alex Matthews (customer experience guru for HSBC, M&S and many others) decided to change the pace of his working life and stepped down from HSBC to pursue a portfolio of consulting projects.  Having spent the last 3 years getting to know Alex really well I can say without doubt that when he talks on the topic of “the customer” it’s time to sit up and take notes.  I am therefore delighted that Alex has been good enough to share with me his collected wisdom from 35 years of listening to customers and working to deliver an exceptional customer experience.  Collated below are his top 10 reflections for business leaders looking to get the customer experience spot on.

1.  Know Thy Customer – And I mean KNOW

A recent study showed that on any given day the front line were aware of 100% of the customers’ issues... the average UK CEO at the time could name only 4% of them.   The smart CEOs seek out real (as opposed to stage managed) opportunities to get in their stores, branches, call centres etc and actually talk to and serve their customers.  There is no substitute for this.

2. Know the difference between what the Customer Wants and what the Customer Expects

There are always elements of any product or service that customers just expect and there are some that can absolutely delight them.  Being able to distinguish between the “everyday” elements that tend to drive “satisfaction” and the handful of “wow” elements that enable a business to truly differentiate itself is essential. It enables the business to put its energy and resources into being better only where the customer needs it to be great. Don’t try and beat the competition on the everyday stuff.  It’s OK to be as good as the best of the rest on the everyday stuff.

3. Understand exactly how the customer makes you money

Understanding that whilst the overall interaction and impression the customer has of the organisation is important it is often how the customer is dealt with at one or two “moments of truth” that will determine the customers’ loyalty and advocacy.  Being able to identify what parts of the interaction you have with your customer are truly the “moments of truth” and then aligning your resources to deliver a phenomenal customer experience is essential to maintaining a profitable relationship with your customers

4. The BIG things are often the little things

The “wow” aspects of the customer experience, whilst not always easy to identify are often the easiest to implement by the individual e.g. acknowledging a customer by name, smiling at a customer and saying thank you to a customer in their own words; little things yes but the hardest things for the organisation to implement.  It requires a lot of effort to be expended on developing the culture of the organisation to the point where the “little things” are natural.

5. Talk about customers.  About what they would think, not what we think of them

Does the leadership at all levels, but especially the top, have conversations about customers?  Not high level strategic presentations about customer segment migration (important though these are) but just plain simple conversations. They might be about last week’s complaints or about last week’s store visits (M&S ‘s board would all be in stores at the weekend and those comments would form the early part of the Monday board meeting. Tesco used to have an empty chair at its trading meetings to represent the customer and what she, yes she, might think about what ever was being talked about).

6. It’s about people!

The most important cog in the machine is the person you speak to. I know, I know we can all have wonderful digital lives now but businesses that treat their employees as real human beings tend to find those human beings transferring that feeling to customers.  Are staff required to use a script or are they trusted to use their judgement? Are they empowered to make a decision on your behalf or does it have to go to a higher authority? Does the employee look like they enjoy being there??? Old fashioned stuff I know but amazing how often that really is all you need to know!!

7. Look after the middle managers

And of course there is now oodles of research to prove that happy employees deliver a better customer experience and the biggest factor in the creation of happy employees is the quality of their middle managers. They are the biggest influence on how those who serve customers feel about their life at work. How are branch managers, team leaders, etc assessed? Are those who get promoted the best examples of the brand values and are they rewarded on their ability to performance manage?  In Disney 50% of a leaders’ performance rating is generated by how they bring the Disney values to life... as judged by their direct reports!!

8. Make it easy

Customers don’t want complicated.  Life’s too busy for that already.  Numerous channels, numerous products, loads of small print…  Over the years, we’ve managed to make it all so complicated.  Customers just want it to work.  There has to be a cost and profit component to what we do, but we also need to ensure that it’s easy to use and easy to buy.  Metro and other new entrants are picking up on that, and building simplicity into their business.  The chef Gordon Ramsay is a stickler for a trimmed back menu at all his establishments – learn to think like Gordon

9. Bring the customer in – live transparently

The beauty (and horror) of our digital age is that the customers will be inside our organisations whether we like it or not – the smarter businesses have learnt that trying to keep them at arms’ length is pointless and have thrown wide the doors to invite them into improve all manner of processes including sales and service, product design, ethics and compliance, complaints handling and organisational governance.

10. Now and again, let people err on behalf of the customer

The people who interact with your customers, for all intents and purposes, tend to be the most junior in the business.  Yet it is what they do that wins or loses those customers.  You need to give clear guidelines and support for what decisions they can make – but in the end it’s their decision and they won’t always get it right.  Accept it.

What Derren Brown, the Nuremburg trials and Waco have to teach us about Risk Management

OK, so Derren Brown is a bit weird, but, I do find the “psychological illusions” he creates absolutely compelling, particularly when “ordinary people” are persuaded to behave in extraordinary ways.  For those not familiar with the work of Derren Brown (where have you been for the last 5 years) this includes such must see TV as “The Heist”.  In The Heist Derren works with a group of people who he appears to psychologically “re-programme” to such a level that they are actually prepared to hold-up a security van that they believe to be real.  Now to what extent the “re-programming” is real or illusory we will never know, however, what all of us are prepared to accept and what was illustrated time and time again (whether it be evidence from the Nuremburg trials, or the cults at Jonestown or Waco) is that ordinary people, under the right conditions, are prepared to do crazy and immoral things.

Given that this is a well known psychological contention what I find fascinating is how little, given the recent spate of disasters (economic and otherwise) we are being faced with, is being written about the cultures of our organisations.  We seem to be happy to believe that a few “rogue traders” or “maverick operators” are responsible for the economic and environmental woes we face, not the prevailing cultures.   Of course, it was a shock to the UK public that the evil monsters of Nuremburg actually turned out, more often than not, to be relatively sane (if desensitized), middle class people who were simply following orders.  In other words we need to be far more aware of the capability of the organisational culture to desensitize normal people.

So, as the politicians and industry regulators (on our behalf) attempt to ensure that our organisations are behaving in a probate manner my suggestion is that they concentrate less on trying to prevent the actions of mavericks and more on trying to ensure that the prevailing organisational cultures are not desensitizing “ordinary” people to the point where taking immoral actions seems normal.    This is certainly the approach our people and conduct risk teams are taking at Capgemini and it seems to be paying off.  So, if you’d like to know more about our innovative approach please do get in touch.

Saving the High Street – Is Mary Portas missing the point?

I must admit, as a consultant, I do love watching Mary Portas do her makeovers on the high street.  I find her smart, witty, insightful and passionate and usually right.  So I am delighted she has been given the job of saving our high streets by Mr Cameron.

However, having just read her article in the Telegraph I am a little worried that the very thing that has made her successful may make it difficult for her to find the right solutions.

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8526356/My-job-is-to-save-our-high-streets.html

In her article Mary already seems to be indicating that the solution to having a thriving high street is to generate a cadre of strong, talented, independent retailers freed from red tape, parking restrictions and planning legislation.  Now whilst I think that this would be an excellent idea and will work well in middle England, it seems to me to ignore the fact, that in our digital age, most people are not “going to the shops” anymore - they are buying online.  In a bargain centric, time poor, tech savvy world it’s just easier (and often cheaper) to buy online and no matter how attractive we make the high streets the working masses are unlikely to return as “shoppers” in the numbers required across the country to make the local retailers viable.  So in my view the solution to saving the high street is not to view the high street solely as a market place but to totally rethink it and repurpose it.   We do need the masses to return but it is unlikely to be shopping that draws them back.

My suspicion is that we need to repurpose the high street to specialise in offering service rather than sales.  We need banks that aren’t selling financial products but that are money advice centres.  We need business centres where independent businesses can find cheap office space and shared office infrastructures offering community and mutual support, we need community centres that are hosting meaningful activities for young people, we need entertainment complexes that engage and involve the local community and yes we do need a small number of those strong, competent independent retailers and coffee shops but they will not be enough on their own.

So best of luck Mary – we really need you to succeed – but can we think a bit more broadly than just retail.

Being Innovative – How to get started 3: Understand the level of innovation you are looking to drive

In this blog I want to cover one of the biggest challenges that CXOs face when driving innovation – namely being able to describe what innovation is and what innovation isn't.  This is not as easy as it may seem and this blog is certainly not long enough to rehearse all the arguments, so let me slide right to the point of providing you with a framework I use to help clarify the debate.  I am by nature inclusive so I have developed a broad framework through which to look at this thorny issue. 

To me innovation can be generated at four different levels.  Each level is fundamentally different from the others.  Each level requires different investment profiles, governance and disciplines to deliver its outcomes.

Level of Innovation - Business Enhancement

Key Features - Packaging and Sharing existing IP, Best Practices etc across an organisation.  Continuous improvement.

Infrastructure Required

·         Excellent internal knowledge management capability. 

·         Rewards given for knowledge management/sharing. 

·         Executives targeted on uplift/savings gained from demonstrable adoption of best practice

·         Local governance process required to manage release scheduling & change management

Expected RoI

In the range of X to 2X (year 1) and X to 4X (year 2 +) where X is the cost of delivering the infrastructure required

Good Hit Rate – 1:3

Who’s Good – Samsung, Tesco

Level of Innovation - Organic Market Expansion

Key Features - Using your own resource to develop new products, services and business models to expand the current market

Infrastructure Required

·         Substantive innovation governance model and process required

·         Access to ideation sources secured

·         Access to prototyping capability secured

·         Substantive seed funding secured

·         Executives targeted on uplift/savings gained from demonstrable adoption of new products, services, models etc

·         Agreement on “what does success look like” – i.e break even Year 1, 2 out of 10 ideas generates benefit Year 2 etc

Expected RoI

In the range of -Y to Y (year 1) and –Y to 10Y (year 2+) where Y is the cost of delivering the required infrastructure

Good Hit Rate – 1:8

Who’s Good - Philips, Unilever

Level of Innovation - Inorganic Market Expansion

Key Features - Partnering with 3^rd parties to develop new products, services and business models to expand the current market

Infrastructure Required

·         Substantive alliance governance model and process required

·         Effective collaboration culture –capability for creating and utilising partnerships and alliances (including legal support) secured

·         Substantive funding secured

·         Executives targeted on alliance benefits

·         Board level mandate secured

·         Agreement on what success looks like – e.g. revenue derived from partnerships and alliances = x% of total revenue by end year 2

·         Can require M&A capability

Expected RoI

In the range of -Z to Z (year 1) and –Z to 10Z (year 2+) where Z is the cost of delivering the required infrastructure

Good Hit Rate – 1:5

Who’s Good – Google, Microsoft

Level of Innovation – New Market Development

Key Features - Developing new products, services and businesses to create new markets

Infrastructure Required

·         World class innovation governance model and process required

·         Access to multiple ideation sources secured

·         Access to prototyping capability secured

·         Access to incubation capability secured

·         Substantive funding secured

·         Executives targeted on revenue/profit  generated from launch of new businesses

·         Agreement on “what does success look like” – i.e 2 new businesses launched by Year 3

Expected RoI

In the range of -Q to Q (year 1/2) and –2Q to 100Q (year 3+) where Q is the cost of delivering the required infrastructure

Good Hit Rate 1:10

Who’s Good: Apple, 3i, Google

As the above demonstrates Innovation comes in many shapes and sizes.  A first step is to figure out what outcome it is that you actually want.

More to come on Innovation in a future blog

How to stop people wrecking your business - the fine art of managing Conduct Risk

This week's guest blog is from the very excellent Sandra Quinn on the subject of getting a grip on managing Conduct Risk or to put it another way the risks arising from how your firm and your staff behave – no, no please don’t stop reading, I promise it will be interesting and it may just save you and your business from going to the wall.  Here are a few recent headline examples of how this can cost a few quid.

1.     During the 00’s the costs to firms of miss-selling of Payments Protection Insurance (PPI) is estimated at around £9bn,

2.     BP has made a provision of $41bn in its 2010 accounts to cover the costs for the Deepwater Horizon disaster

3.     Societe Generale and UBS rogue trader incidents are estimated to have cost more than $9bn

4.     In October the share price of Homeserve plunged 50% amid claims of misselling and the suspension of telephone sales.

As Sandra explains, managing this kind of risk to date has generally not been top priority. But now, with the “beefed up” regulators keen to ensure positive outcomes for customers and a public keen to ensure that firms are environmentally sensitive, socially responsible and ethically sound the challenge of managing conduct risks is now firmly on the agenda. If nothing else, the new Bribery Act brings the issue of managing conduct risk home to every firm and executive, with the potential for criminal sanctions and possibly gaol time if you get it wrong.

“Most organisations have a history of and a structure for managing their credit risk, their operational risk and their cash flows. To date though, very few businesses have systematically defined and managed the risks inherent in employing human beings and asking them to act with integrity in a complex and pressurised environment (Conduct Risk).   Regulators have been focusing for some time on the fair treatment of customers. Now increasingly they are pressing for firms not just to ensure they have decent processes but to go further and ensure they are getting fair outcomes for their customers. The problem for firms is that it's not just a proper process that defines the outcome. It's people who design and follow process and adding more process and more prescription doesn't necessarily mean you get a fair outcome. And what applies for financial services applies more broadly too. Think Bribery Act and the aggressive enforcement agenda of the SFO. Think data privacy. And more besides.

If we are to learn the lessons about how to manage this risk then we will need to look again at our enterprises through the lens of conduct risk and people.  Of specific interest and a good place to start will be to review how we treat our customers, how we set business targets, manage performance, reward and incentivise staff as well as deliver training and manage compliance to the front line.  After all, few, if any, people got up one morning and said “hey, I think I’ll go out and miss sell some PPI/endowment policies/pensions” or "I think I will cut a few corners in how I install or maintain that piece of kit". Most I bet did what they thought the organisation wanted or valued, constructively if not explicitly.

Much of the focus in financial services firms on this comes through compliance trying to ensure that regulatory obligations are met.   Other firms are starting to implement responsible business programmes, training, ethics and integrity seminars.  Compliance and trying to reboot ethics can only do so much.  But the reality for most organisations is that they run on business objectives, management information, financial and other incentives, and devolved decision-making.  These are the levers which make organisations and their people work  So, if we are going to really reduce Conduct risk we know that any successful solution for identifying, assessing and mitigating people and conduct risks has to get to grips with the DNA of organisations. After all, what gets measured and what gets valued, gets done.

Which leads me nicely to a major dilemma businesses are facing: the potential for firms to save money through better management of conduct risk is clear but ... with tight margins, pressures on costs, spans of control increasing and decreasing job security for staff in a tricky employment market, the conditions are arguably right for more not fewer conduct risk issues.

So the option is for an organisation either to bury its head in the sand or to take a good hard look at a lot of the ground breaking work that is being done in this field to construct solid, reliable Conduct Risk frameworks that allow businesses to seriously reduce and manage their exposure.

I hope for all our sakes they take the latter option”

Sandra Quinn is CEO of Quinnity Limited and is working with Capgemini to provide clients with real solutions to the myriad of Conduct Risk challenges they face.   Having worked for both the FSA and Lloyds Banking Group, where she set up a people risk framework, Sandra understands the challenges of both the regulator and the regulated. She is currently applying her learning from financial services with a client in multiple sectors.