Apple to Oil: Improving the customer experience

Quality in a service or product is not what you put into it. It is what the customer or client gets out of it.
Peter Drucker

How does an organization build a simple customer-centric message? They gather around the scope and richness of the customer experience.

Apple, whose shares have risen more than 400% since the early 1990s, has dominated this market approach. Expanding the reach of an organization’s solutions and continually enhancing the wealth of experience will deliver sustainable results.

In Blown to Bits, Philip Evans and Thomas S. Wurster introduced the rich, rich model for managing information in an organization. Bringing their model to other industries gives managers a strategy to communicate change and manage daily operations in a simple, easy-to-share context with employees. Getting employees to buy into any initiative or change in workflow is a huge challenge for every company. Framing corporate initiatives as expanding reach and enhancing wealth simplifies the message.

Definition of the opportunity

Logistics clearly has an opportunity to adopt this model. Scope is a defining characteristic of a logistics company. Defining how to profitably improve reach will go hand in hand with rich customer experience. Since customers set the price, the wealth will have to be worth it.

One example is to take a seemingly simple logistics model, such as transporting oil in a tanker truck from a storage unit to a refinery. The oil hauling business model is as follows:

Transport dangerous cargo:
or precisely
or safely
oPunctual
or profitable
or repeatable

The scope is extensive. Finding and working on lease sites in remote off-road locations in vast and remote rural areas 24 hours a day, 365 days a year with a tractor and 80,000 pound tank or trailer is a challenge in perfect weather conditions in dry roads. This is not the case for many months when the territory stretches from the Arctic Circle to the Gulf of Mexico.

Defining the richness of experience for an oil transportation company is less glamorous than an iPhone, but it has sophisticated metrics that any observer can appreciate once explained.

To understand how wealth is identified for a client, in this case a refiner, there are KPIs (key productivity indicators) that they have shared that essentially reduce their risk in transactions. Therefore, building operational metrics that reduce customer risk is a key differentiator in this highly competitive market.

The customer experience is one in which all key KPIs are met or exceeded. Once a sustained experience exists, the barriers to entry for competitors rise. There is uncertainty and risk when contracting new suppliers.

Apple’s brand has been central to its presence. Consumers accept new Apple products and consider them low risk. Apple is able to maintain high margins and steady growth in loyal customers. Keeping the relationship low risk allows Apple to introduce radical new products and create new markets.

For an oil delivery company, reducing risk protects the refinery’s brand, keeps costs down and significantly reduces operating costs. For example, an oil tanker capsize and spill will cost more than $1 million without considering lost production and lost oil. Although the carrier will bear the cost burden, the refiner is threatened by any publicity that negatively affects their brand. Consumers can instantly switch brands if the refiner is perceived negatively. BP’s network of station owners suffered when BP had its advertising nightmare in the summer of 2010.

Some of the KPIs for oil delivery include

• Deliver crude with known chemical composition: water, sand, gas removed
• Oil volume
• Heat and weight
• Number of charges
• Punctuality of delivery
• Safety
or no smoking
or do not climb
or no phones
or speed limits
or routing
o Seat belt/lights on
o Up-to-date, legible posters
o Brakes, maintenance
or drugs/alcohol
o Vehicle weight requirements

The management of KPI’s is a source of wealth for the client. Better documentation, tighter tolerances, higher reliability will add to the richness of the relationship just like iTunes on a cell phone adds value to the unit.

Focusing on wealth and reach will create a competitive advantage. Increased reach and wealth creates a more competitive position and the company will gain more opportunities.

The simplified message about reach and wealth is also effective internally. Each member of the team can quickly grasp this message. Improving reach while meeting expectations for richness of experience will also maintain a quality focus. Managers can share considerations about the cost and benefit of extending a service. Non-management employees will easily understand the “why” of situations such as not taking on business if it cannot meet the reach and wealth expectations associated with the company’s brand.

As attitudes about servicing a phone or 200 barrels of oil change, the importance of quality expectations, timeliness, documentation and related items become more important than they might otherwise be.

On the other hand, too many rules, too much useless information will take away from the richness of the experience and diminish the scope.

When implementing a new ERP system for a global electronic parts distribution company, this was a hard lesson to learn.

An order entry system that required 4 three-inch folders to explain it didn’t sit well with inside and outside sales people. They left en masse. The POS system required 6 months to learn and 2 years to learn with confidence. The back office experienced a significant increase in rework and transaction research to ensure cash flow and inventories were properly updated. As the rework load increased, the opportunity to turn around reworked transactions suffered. All this chaos leads to internal conflicts. Famously, the system spat out lean notices to cash customers and there were other relationship tragedies.

Reach was considered a driver, wealth was an internal metric. Customer experience was not a high priority. Customers and vendors aggressively searched for alternative distributors. Trade magazines ridiculed the company. The quality and change control metrics were wrong and the results were a 50% loss in North American sales and over $100 million invested before the system was scrapped. The lesson is that decisions must be framed in a cost-benefit analysis and customer scope. Creating quality relationships with customers is the reason for a company’s existence. The reach and richness model is innovative and initiatives must be built around improving client adherence.

Resume

Centering KPIs and attitudes in a reach-and-rich model focused on the customer experience shifts a company’s emphasis from simple transactions to delighting the customer. The benefits include increasing brand awareness, increasing market awareness, and increasing competitive advantage.

Getting the metrics right is critical and constantly changing.

Making a distributor’s end customer more competitive as they respond to offers is a paradigm of reach and richness. For a dealer, a strong inventory system and an effective credit management system create a more competitive end customer. The time it takes to turn around an end customer’s transaction is critical. Since workers are on the clock when they purchase materials, a highly effective POS will quickly get them out the door in a single visit. These are important wealth KPIs.

For an oil logistics company, metrics may include most effective routes that reduce handling time, bypass sensitive areas, and help locate remote loading sites; comply with safety regulations; better management of state and federal DOT and EPA compliance; training programs that reduce errors and increase efficiency. All of these KPIs reduce risk and increase the scope and richness of the experience. It is not as attractive as an iPad but it is music to the ears of an end customer.

The scope and richness model will provide an easy to communicate and understand basis for managing business strategy and change control. Competitive advantage is the expected result as customers become delighted.