Illusion Series – Episode I: Everything will be OK
A consultant, a data architect and a call center manager walk into a bar in some Asian metropolis (figuratively speaking). The data architect says, “Can you help me figure out how to convince the business to invest in upgrading our data management environment?” The consultant says, “Sure, let me chat with your call center manager to understand his problems.” The call center manager quickly interjects, “We don’t have any data problems in telesales, we just call a name and number and out of 100 calls we close 1 and we retain about 40% of clients after one year.”
The consultant feels a cold shiver going down his spine and shutters, “You don’t see that as a problem?” The call center manager replies, “Not really, labor is cheap here and my team generates 80% of all revenue.” The consultant follows up with: “I don’t want to tell you how to run your business, especially as you have been doing it for so long but there is a reason why were asked to come here”. “Having cheap labor sounds great but….
“Consequently, your revenue per client is low too.”
“Also, your cost of acquisition is still proportionately high.”
“Your churn rate is high, especially because 25% of clients drop within three months because they can no longer afford your product.”
“Your conversion is low because you know as much about your prospect as a door-to-door salesman.”
“Then again, a door-to-door salesman knows at least that you live in a good neighborhood with average house prices around $x; there is a tricycle in the front yard; and you have a mid-sized, used minivan with the sticker of a local athletic footwear company on the back.”
The consultant adds, “Another firm analyzed your data and half the customer addresses are incomplete or incorrect and you said yesterday you do not seem to validate or monitor the financial viability of prospects.” The data architect interjects, “I see what you are saying but this is the way it works here and we have been doing just fine. Thank you for all your help.”
Does this sound bizarre, bipolar and right out of a parallel universe? Well, this happens to be a pretty regular occurrence these days. While this sounds extreme, I just had this experience a month ago. I call it the organizational “(D)illusion that everything will be OK.” Is that an illusion across the total organization or just in the ranks, which have to show “All in order here…move along” messaging to their superiors?
So what did you learn from this exchange if you are working in sales, service or marketing in any industry? Do you believe that you have a commercial issue, a process challenge or a data deluge problem? Do you think that IT can and should help you? Do you think you need any assistance at all?
What did you gain from this story if you are the CFO? Is this lack of concern around productivity and profitability something you want to dig deeper on?
What did you learn here if you are in IT? Better not rock the boat, let’s just developing code internally to work around these challenges or look for the right business leader to help with raising awareness?
What are you taking away from this dialogue if you are a consultant? Do you feel that too much frankness or creativity just was not the right avenue to pursue given the organizational maturity?
I am sure the answer varies by situation. The above discussion really only scratched the surface of this organization’s challenges. There were more such nuggets, like: duplicate customer and prospect data, inability to pull and link already available client information together across all channels, lack of gathering and maintaining additional parameters from existing client interaction processes and third party feeds, absence of triggering a real-time response to a client’s life event (move, birth, marriage, etc.) and an inability to share data based on sensible visibility settings.
What was the effect?
- Manual compliance and application data scrubbing
- Low research effectiveness and efficiency creating a client high-touch strategy
- Implicit, yet often disappointing, trust in client-provided legal and financial data
- Channel conflict and resulting CAC hike
- Excessive (up to 100% – no, this is not a typo) discounting
- Incorrect compliance risk assessments and resulting reserve provisioning and underpricing
- >1% prospect conversion?
- Above industry average churn rates across first-year benchmarks
Let’s do some back-of-the-envelope math to figure out the rough numbers at play here. 16..carry the 1…times 0.24%….factor in x….and voila: about $18 million annually. Let’s give it some sensitivity to a handful of variables and it comes to somewhere between $8 and $52 million depending on the distribution. You would think that this triggers some introspection. Well, most often than not it does. However, sometimes it just becomes such an overwhelming premise, thought exercise and uncomfortable self-realization, the corporate deer just freezes in the headlights.
Rather than the takeaway being “Wow, even if we have 10% of these issues, we still have a massive problem”, some folks go into bunker mentality with “hold on, this one variable should be half that amount” changing the overall result by $1M (out of the earlier range) and the ROI by less than 10% (from high triple digit).
So what do you do? You honk, gun it, hit the deer and drive on (from either of our earlier heroes’ POV) or you just come to a dead stop and admire this beautiful animal as it freezes within your high beam on the road.
What would Rosie do? What would you do?