Simplify First—Then

Digitize
AUGUST 08, 2019 By Reinhard Messenböck, Yves Morieux, Jaap Backx, Jens Jahn, Francisco
Martin-Rayo, and Neeraja Ramjee
 
    

A global bank knew it had to digitize—and fast. The bank was struggling to
keep up with rising customer expectations and stiffening competition,
including new players from outside the financial services industry. 

To begin a digital transformation, the bank analyzed customer and employee

journeys. It identified the steps in critical end-to-end business processes to
automate first. It even launched pilot projects on deep learning and robotic
process automation.

The bank also pushed the digitization team to conduct a sprint session on a
critical customer journey. That effort led to 20,000 new lines of code and an
implementation plan that called for piloting a new customer journey in
stages. But eight weeks later, less than half of the stages had been completed.

Why did the effort stall despite a commitment from top leaders? The answer
is complicatedness. It extended throughout the organization. The symptoms
included blurred accountabilities, vague IT requirements and governance,
unclear ownership of cost centers, and high administrative hurdles. These
issues hindered the bank’s ability to respond effectively to customers’
demands and competitors’ moves.

In a world where being a digital organization is vital for survival, companies

can’t afford to fail in this way. To successfully transform, companies must
understand what causes complicatedness and then adopt a disciplined
approach to combating it. Results from our Annual Complicatedness Survey
 suggest that organizations that have addressed complicatedness stand the best
chance of successfully implementing their digital initiatives.

Equally important, additional research shows that companies that address

complicatedness achieve valuable bottom-line benefits. Indeed, when we
compared organizations that are in the top quartile for simplicity with their
peers in the bottom quartile, we found that the simpler organizations are more
likely to have share price growth of 20% or more, higher rates of revenue
growth and larger profit margins, and employees who are three-and-a-half
times happier, three times prouder, and two-and-a-half times more likely to
stay.

WHERE DOES COMPLICATEDNESS COME FROM?

In BCG’s view, complicatedness arises from what a company does internally.

It contrasts with complexity, which stems from external developments in the
business environment that an organization can’t control. We
define complicatedness as the increase in the number of organizational
structures, processes, procedures, decision rights, metrics, scorecards, and
committees that companies impose to manage escalating complexity in their
external business environment. By taking such steps, companies think they
are being proactive and meeting external complexity head-on, but they are
exacerbating their complicatedness. The resulting changes slow reaction time
and erode productivity. For instance, if a company seeks to tackle the
problem of declining product quality by adding a dedicated organization unit
to monitor production, it may introduce yet more rules, governance
mechanisms, and meetings. In other words, complicatedness takes root in the
context of the organization.
Excessive complicatedness can be found in one or more of the following
eight areas that are related to context:

 Leadership, including how managers lead by example, act as role models,

and adhere to rules and procedures
 Strategy and the transformation agenda, including the overall vision,
processes for executing initiatives and cascading them throughout the
organization, and values 
 Organization structure, including management layers, reporting lines, and
spans of control
 Activities and roles, including the roles and responsibilities of units and
employees
 Processes, systems, and IT, including the rules and policies for business
processes as well as the supporting IT systems and infrastructure
 Decision making, including the hierarchy of decision-making authority and
the way decisions are escalated through the organization
 Performance management, including the processes, KPIs, and rewards
 People and interactions, including staff development, career paths,
engagement, and meeting culture
Reducing complicatedness must begin with changes in the leadership area,
which binds together and affects the other areas.

When combating complicatedness, the perceptions of leadership can

hamstring any efforts. Most notably, many senior leaders don’t realize how
complicated their organization really is. Our research shows that top
executives in an organization often see it as less complicated than
nonmanagerial employees see it. The reason for this difference in perceptions
is that senior executives can often bypass the rules in the interest of “getting
things done,” while junior staff are expected to follow all the rules.

When upper-level executives aren’t affected by their organization’s

complicatedness, they don’t support initiatives to combat it. And if top
leaders don’t sponsor efforts aimed at eliminating sources of
complicatedness, the problem persists—and can even get worse.

COMPLICATEDNESS AND CULTURE

Digital transformation is not so much about technology as it is about culture.

Leaders generally recognize that technology is only one ingredient in a
successful digital transformation and that cultural change is equally if not
more important. But all too often, even if executives recognize the need for
cultural change, this awareness leads to neither a successful digital
transformation nor effective changes in the organization’s culture.
Why? In some cases, leaders unwittingly introduce even more
complicatedness into organization structures while seeking to implement
digital programs. For instance, leaders may set up independent
multidisciplinary teams responsible for various digital initiatives, but then
leaders maintain the company’s traditional reporting hierarchies. This creates
confusion over who reports to whom and who will handle which tasks.
Layers of complicatedness are added on because people must now deal with
both the old and new constructs.

In other cases, leaders of initiatives aimed at changing the culture fall into the
trap of trying to modify behavior directly by telling people to change.
Influencing mentalities, mindsets, values, and attitudes—and thereby,
behaviors—solely through bold communication campaigns is nearly
impossible. Leaders will be much more effective if they change the context of
the organization. By doing so, they can foster the behaviors that will create
the new culture that they aspire to have.

SIMPLIFYING FOR A DIGITAL TRANSFORMATION: FOUR STEPS

Understanding what’s driving an organization’s complicatedness is vital for

implementing a successful digital transformation. But it’s not enough.
Leaders must also take a disciplined approach to eradicating its root causes
and preventing them from taking hold again.

To that end, BCG has designed a four-step approach called Smart Simplicity.

We have used this approach to help companies in an array of industries

launch digitization efforts. By deploying this approach, the companies
successfully eliminated the complicatedness that was hindering their efforts
to turn their digital vision into reality, and they generated measurable
business value. Let’s look at each step in turn.
1. Get off to a smart start. To start smartly, companies should identify the
digital transformation problems that have arisen from complicatedness. They
should prioritize problems that take up significant resources, account for
large chunks of operating costs, hinder innovation, or create delays in
important business processes. Such problems are causing measurable harm to
the business and would unlock the most value if they were solved.   
Next, companies should quantify the benefits of addressing each problem.
For example, if the organization shortened the average development cycle for
new mobile apps, could it get products to market twice as quickly?

Take a close look at each of the eight context areas and identify the
symptoms and levels of complicatedness in each. Consider benchmarking the
organization’s complicatedness against that of other organizations to
establish a baseline for the company.

Ultimately, an organization’s leaders should arrive at an agreed-upon answer

to this question: “What are the most important ways in which
complicatedness is hindering our digital transformation?”
2. Diagnose what’s behind the complicatedness. Determining the root
causes of complicatedness in an organization requires analyzing problematic
behavior on the part of executives, managers, and employees. It also requires
identifying which areas of the organization’s context are causing that
behavior.
Use socio-organizational interviews to drill down to the root causes of the
behavior. Though such behavior creates difficulties, it arises for rationale
reasons; people have an incentive to behave in certain ways. The interviews
are particularly in-depth, responsive to individuals’ feedback, and interactive.
As such, they’re especially valuable for creating a detailed understanding of
the system that’s at work in the organization.

Drawing on findings from these interviews and from the context diagnosis,
look for links between the organization’s context and people’s problematic
behavior. Those links will point to the areas of the company’s context that
need simplifying to eradicate those problems.

Here’s an example: A company’s IT staff members get bonuses and

promotions if they keep total IT costs down. Given this incentive system, the
staff denies new ad hoc IT resource requests coming from the business units.
As a result, the business units start building their own shadow IT teams to get
their work done. Though the behavior of the IT staff and the business unit
 employees makes sense for their respective organizations, it ends up costing
the enterprise far more than if the groups collaborated.

3. Craft targeted solutions. Leaders should ask themselves, “How could we

modify the organization’s context to reduce or eliminate the sources of
complicatedness and the value-destroying behaviors that hinder our
digitization transformation?” The answer lies in identifying new behaviors to
encourage. Then consider which areas should be adjusted to foster those
behaviors. Using the earlier example, the company could eliminate the
problem behavior by making IT and the business units jointly responsible for
keeping costs down. That would align the incentives for the organizations
and benefit the company overall.
Here are some additional examples of solutions that leaders can apply in each
context area to tackle complicatedness in their organizations:

 Leadership. Hire, fire, and promote people in ways that reward cooperation

and transparency.
 Strategy and the Transformation Agenda. Translate the company’s
strategy into required initiatives to ensure alignment.
 Organization Structure. Remove unnecessary layers to streamline top-down
communication while empowering lower-management levels.
 Activities and Roles. Eliminate duplicate activities to reduce work that
doesn’t add value and to make navigating the organization easier.
 Processes, Systems, and IT. Abolish handoffs between departments to boost
end-to-end responsibility and simplify interactions between units.
 Decision Making. Clarify the mandates of managers and committees to
avoid escalating decisions through multiple layers and to promote
cooperation.
 Performance Management. Introduce KPIs that foster collaboration to help
managers encourage teamwork and to ensure recognition for cooperative
employees.
 People and Interactions. Eradicate silos and structure career management
programs to reduce the importance of personal connections in promotions.
4. Implement the solutions. After crafting solutions, establish a program
management office (PMO) to prioritize the solutions that will best harness the
company’s competitive strengths and deliver on its strategic priorities. The
PMO can create an implementation roadmap for each priority, drive the
change process, and monitor progress.
SUSTAINING DIGITAL CHANGE

This disciplined four-step approach to Smart Simplicity lies at the heart of

our approach for implementing and sustaining a digital transformation and
securing a competitive advantage. It enables leaders—and the overall
management team—to take greater ownership of change, remain engaged,
and cooperate on actions to successfully manage the changes that come with
digital transformation programs. It does this by identifying the interventions
required to foster the desired behaviors and by providing transparency into
priorities, program plans, and progress, as well as into impediments and the
plans to remove them.  

In the case of the global bank, management used the Smart Simplicity
approach to set up an integrated team of journey members, tech employees,
and program experts. The new team was charged with continuously
monitoring the program’s implementation progress, fixing issues as they
arose across project teams, and overcoming administrative hurdles that would
have stymied progress. The team led a focused effort that had clear goals,
continuous improvement cycles, the support of leadership, and optimized
business-as-usual processes—setting themselves up for a more agile and
sustainable implementation. To ensure this wasn’t a one-off success, the team
used these learnings and the Smart Simplicity framework to make changes
across the organization—and to set the stage for achieving a step change in
overall performance. 

NEXT STEPS

Digitization programs—whether for a single process or a global

transformation—are more common than ever. But most organizations haven’t
tackled the complicatedness that causes all too many of these programs to
fail. Before embarking on a digital journey, target complicatedness. By
starting off with the right mindset—simplify first, then digitize—companies
can set the stage for a successful digital transformation.
Why Aren’t Banks Getting
More from Digital?
DECEMBER 13, 2017 By Aymen Saleh, Nadjia Yousif, Christophe Duthoit, Emma Bunnell, Ralf
Dreischmeier, and Roman Regelman
   
    

It is a truism in banking that digitalization has the potential to transform the

business model, cut costs, and reduce time to market. This assumption is
supported by evidence showing that retail banks that digitalize can achieve a
20% increase in revenues and a 30% decline in expenditures. And wholesale-
banking digitalization programs can deliver a 12% reduction in cost-to-
income ratios. (See “How Digitized Customer Journeys Can Help Banks Win
Hearts, Minds, and Profits,” BCG article, June 2016, and “Digital in
Corporate Banking Reaches the Tipping Point: Is Everyone Ready?” BCG
article, November 2015.)
The numbers are impressive, but they represent the exception rather than the
rule. Despite significant investment and effort, many banks struggle to make
digitalization pay. To understand why, we surveyed digitalization programs
at 12 international institutions. Our research revealed a range of organization
structures, technology frameworks, and funding models that support
digitalization, but in the majority of cases—at least one in three—
implementation results are disappointing. The pace of delivery is slower than
initially expected, it is difficult to scale digital solutions across the bank and
end-to-end, or the impact on the bottom line is insufficient.

Of the three areas of concern, slow delivery is the problem most widely cited:
almost two-thirds of the banks in our survey reported that delivery was not as
fast as they’d anticipated, one-quarter said that scaling up is the primary
issue, and 15% reported that they are most disappointed in the impact on the
bottom line. (See Exhibit 1.)
 Our research highlights four key causes of failure to deliver:

 Complex legacy IT that hinders progress



 Data architecture that is inadequate to support digital propositions and

journeys


 Key talent gaps in, for example, the digital customer experience, data, and
analytics teams 


 Organizational resistance to changes that threaten the status quo 



In addition, many banks’ strategic approach to digitalization fails to consider

potential pitfalls or how to address unexpected problems. Many projects are
characterized by initial bursts of enthusiasm that are followed by a long tail
of diminishing interest. The result is that their investment delivers limited
returns, creating and catching banks in a “digital value trap.”

THE DIGITAL VALUE TRAP

The failure of banks to execute their digital rollout in line with their
ambitions suggests that they have fallen into a value trap: the upside fails to
compensate for the level of their investment. There is also a problem of
comprehension. Not even half of the respondents to BCG’s survey said that
they have a clear understanding of the benefits of digitalization or that they
are achieving those benefits. Respondents said that programs lack delivery
speed, the scale expected, or bottom-line impact.

Banks with stretched project timelines cited such challenges as problems

attracting appropriate talent to the right locations and the operational
difficulties of implementing across multiple locations. Talent deficits are seen
 as a reason for scaling challenges too—for example, in relation to customer
journeys. One bank reported that shareholder pressure for short-term
performance militates against effective long-term investment. Another said
that patchy resource prioritization had led to a failure to achieve certain
financial targets.

In fact, few banks are able to execute digital transformation across all
potential use cases, and in many cases, distribution channels take precedence
over back-end capabilities such as systems and data architecture. For
example, nearly 80% of the banks in our survey acknowledged that their data
architecture is relatively immature. 

In assessing the reasons for the digital value trap problem, banks highlight a
number of challenges. Exhibit 2 shows those challenges, which include the
following:

 Legacy IT Systems. Banks cited existing IT systems as the number one

reason for failure to achieve digital transformation. In many cases, this was a
result of difficulties in enabling current systems to speak to new digital
applications, as well as the faulty business logic embedded in legacy systems.
One bank executive said that some 80% of the technology effort in the bank’s
digital program was spent on integration, which meant it struggled to execute
within the scheduled time frame.


 Organizational Resistance to Change. Inertia is a key reason for a digital

program’s low return on investment. And many banks reported that they were
unable to break down silos or had failed to identify the right governance
structure for projects. Digitalization affects employee tasks and processes,
and some employees are naturally concerned about the potential impact on
their jobs. (See “Spotlight on Two Banks”.)


SPOTLIGHT ON TWO BANKS



 Talent Gaps. The lack of technology expertise was cited as a significant

threat to successful delivery because many banks fail to attract and retain
tech-savvy employees, who may envisage more exciting opportunities in less
formal environments or with startups. Furthermore, because banks are
perceived as lacking vision, they may have trouble recruiting highly qualified
employees who can help build capabilities over time. 


 Complex Data Architecture. Inefficient data architecture can significantly

undermine the speed and progress of a digital rollout. Poor architecture slows
systems and perpetuates operational and product silos. Strong data
architecture, on the other hand, creates value by supporting data quality and
increasing standardization and cross-asset capabilities. It also enables
advanced analytics and a range of applications that can boost efficiency and
employee effectiveness.


THREE DIGITAL DELIVERY MODELS

Across the industry, there is considerable variability in the ways that banks
have approached the transformation process. Some have chosen to launch
new digital solutions alongside existing interfaces, while others have built
entirely new lines of business or companies. The following three delivery
models stand out:

 Digital as BAU+, or Business-as-Usual Plus. Digitalization is driven by the

existing business and management team, and the new approach makes
incremental and bite-sized advances.


 Digital as a New Line of Business. The bank creates a new business unit,

typically led by a head of digital, to deliver digital transformation with
separate support functions, including parts of legacy IT systems. 

 The Digital Native Approach. The organization acquires or builds an
entirely new digital bank with its own P&L and technology stack.


The three models can be seen as design blueprints, and many banks run all
three approaches in some combination across markets, regions, and business
lines. Some digital leaders have other layers to coordinate, for example, in
different regions or relating to individual lines of business. Each model offers
advantages and disadvantages that are related to the bank’s status, position,
and needs.
BAU+
Using the BAU+ model, banks define and execute their digital strategy with
the existing processes, organization, and governance, typically adding
digitalization to an executive’s responsibilities and assigning new personnel
to help. Funding is generally provided through the change budget for the
P&L of the specific market or line of business. Existing reporting lines and
P&L accountability remain unchanged.

Advantages. Such models launch quickly and offer early progress. Change

can be driven through customer journeys, delivering cost savings and higher
revenues. 
Disadvantages. In many cases, it is difficult to change the fundamental
business model, which may be contained within a particular line of business.
This makes it tough to run cross-asset programs and customer journeys,
especially in a product-led organization whose P&L sits with the product
owner.
Use Case. Large banks with significant digital war chests have adopted this
approach. One bank earmarked $2 billion to push its digital agenda, which it
developed through existing entities in each market. 
A New Line of Business
Using this model, the bank creates a new digital division, which, in many
cases, is led by a head of digital who reports directly to the CEO and has
authority in line with other business unit heads. In addition to running the
new unit, the head of digital may be responsible for other digital offerings. In
the retail context, the head of digital might be responsible for such nonbranch
customer concerns as mobile, call center, and online channels. The digital
division typically owns digital projects, but it relies on shared services in
areas including IT, risk, and HR. The head of digital controls the budget and
roadmap for the new business.

Advantages. This model allows for the radical reimagination of customer

journeys and propositions. There is more accountability because the head of
digital owns the budget and is responsible for delivery. Scale can be achieved
by rolling out initiatives across the organization.
Disadvantages. The new line of business may add to organizational
complexity and compete with existing businesses for, say, internal IT
services. However, it does not resolve legacy IT and data issues. 
Use Case. One large European bank has created a separate business unit for
its retail digital initiative. The head of the digital unit sits on the executive
committee and has a veto over investments. The unit is organized into a
series of labs, each responsible for specific programs, and each lab has a
product owner who drives the customer experience roadmap, a delivery
director who helps coordinate technology, and design teams who execute the
roadmap. The labs enable rapid delivery to the end customer. 
The Digital Native Approach
The digital native approach calls for acquiring or building a digital bank with
its own P&L for a given market or line of business. Unlike other approaches,
the digital native design is made from scratch, avoiding the complexity
associated with existing architecture, and the digital roadmap is heavily
focused on acquiring new customers. The digital native is independent of the
parent, meaning that they share no services, including IT. The digital targets
sit with the CEO of the new digital native bank. 

Advantages. The digital native model allows for fundamentally different

economics and capabilities, offers the potential for rapid impact, and obviates
the need for legacy IT modernization. Using an approach that is pretty much
off-the-shelf, a digital bank can get to market quickly and be highly
competitive, because there’s no need to take the time to modernize or
improve legacy systems.
Disadvantages. By definition, the model does not change the existing bank,
so it’s rarely possible to execute as the only delivery model and difficult to
migrate legacy customers and products to the new architecture. 
Use Case. A European retail bank successfully built a digital native bank,
which was initially designed to deliver mobile and Internet-based services.
 The bank was powered by advanced analytics, which permitted it to provide
highly tailored offerings, and it was built on top of a new core banking
platform with the cooperation of a number of fintech providers. A key reason
for its success was that the bank had planned—from the start—for how it
would deal with the legacy bank and had developed a realistic five- to seven-
year roadmap to manage legacy migration.
RESPONDING TO THE DIGITAL CHALLENGE

Banks that fail to address the key challenges associated with digital rollout—
clunky legacy systems, organizational resistance, talent gaps, and weak data
architecture—are liable to find themselves caught in a digital value trap, in
which the return on investment does not reflect the cost of transformation.  

To recalibrate the ROI equation, banks must take concerted action that is
based on a view of digital as a solution to fundamental business problems and
that also meets customer needs. As leaders consider strategies for effective
implementation, they should consider several guiding principles that we
believe may provide a foundation for progress:

 The customer must be the focus of all digital activity. Banks should prioritize
investment on the basis of real business value generation—higher revenues
and lower costs—and ROI. In too many cases, this pragmatic commercial
lens is missing. 


 Small, empowered, colocated cross-functional teams should straddle

organizational silos. As digital maturity evolves, the teams should evolve
from project teams to permanent teams.


 Leaders must focus on identifying and resolving resource bottlenecks and

conflicts as early as possible, using, for example, individual subject matter
experts or system code release schedules on legacy applications.

 Banks should define an end-to-end target state architecture, and digital
development must be anchored in the journey toward that target. 


Flowing from the general principles, we recommend five key strategic

actions:
Identify the right delivery model. Each bank must determine which digital
delivery model, or combination of models, is appropriate for its strategic
purposes. Banks just embarking on the transformation journey or wishing to
test and learn on a small scale are likely to see BAU+ as the preferred
approach. BAU+ can energize teams in the early stages of digital
transformation and help generate critical early wins and proofs of concept. 
For banks that have already made progress, the new line of business or digital
native model is likely to be more appropriate. The new line of business model
has the potential to transform the organization, but it requires adaptations of
existing processes, policies, and governance—and, inevitably, cultural
change. If that approach seems likely to present insurmountable challenges,
then the digital native model will probably work better. With either of these
models, transformation of the legacy business still needs to be tackled at
some point. 

For some banks, a combination of delivery models will work best, with
different iterations across locations and types of business.

Update legacy technology. Banks must employ one-speed—rather than two-

speed—IT that is grounded in an agile methodology. Core banking
replacement is not always (or even often) necessary for modernization.
Instead, change leaders should focus on creating an application programming
interface (API) architecture that enables legacy applications to communicate
with digital applications. One caveat: don’t try to build everything at once;
prioritize APIs on the basis of their business benefit and value. 
Foster buy-in across the organization. A key challenge may be a prisoner’s
dilemma in which digitalization is the right answer for the bank but not for
individual executives, who, for example, might lose headcount or influence.
Solving this requires the creation of winning scenarios for those executives,
perhaps by expanding their mandate in a new operating model. Bank
executives must be aware of the potential for wider internal resistance and
should communicate necessary changes early, openly, and transparently.
Nurture and acquire talent. Banks should plan for big shifts in the delivery
model and hire digital talent early and with sufficient scale to make a
fundamental difference to the proposition. Typically, a bank needs to expand
its advanced analytics resources by a factor of ten. Executives must
determine what needs to change for the bank to focus intensely on the
customer, and they should foster a culture of creativity and
entrepreneurialism that encourages talented employees to stay. For example,
existing delivery processes, stage gates, and authorizations and sign-offs are
unlikely to suit agile project delivery. Digital engineers should be authorized
to access the latest open-source tool sets rather than having to use
standardized internal versions.
Every bank’s strategy for hiring digital talent should be based on the delivery
model it has chosen and the scale of talent ramp-up. With a BAU+ model, the
optimal approach involves retraining current staff and adding infusions of
external talent. Under the new line of business approach, the hiring strategy is
similar—but on a much larger scale—and involves new physical spaces
designed to foster innovation and digital delivery. The digital native model
creates a blank canvas for hiring individuals and teams, depending on the
desired scale and ramp-up speed. Talent retention is generally more
successful under the digital native model, because the organizational
construct is tailored and uninhibited by existing processes and policies. For
example, ten years ago, a credit card provider, seeing how important data and
analytics capabilities would become, started to build an analytics team. Over
the past decade that team has grown twentyfold. The many banks that lag
behind that company must ensure that their recruitment strategy complements
a forward-looking digital vision.

Address weakness in the data architecture. Banks must understand the

strengths and weaknesses of their current data architecture. For example, data
lake projects may struggle to deliver because of a lack of use cases or
insufficient planning for operationalization. Analytics, meanwhile, may be
boosted with the processing power of the cloud. However, banks may be
required to determine how existing processes and procedures inhibit the use
of cloud environments. One European bank spent two years improving the
quality of its data before it was able to launch a workable digital program.
In managing a digital transformation, bank executives must work to mobilize
the entire organization around a strategy tailored to the commercial
opportunities available. Ultimately, the banks that adapt their organization to
the digital age and replace or integrate legacy IT systems and data
repositories by digitalizing end-to-end will be the most likely to both avoid
the digital value trap and cut costs and boost revenues.

Authors

Don’t Let Digital Transformation Make

You Less Human
We all understand that customers and colleagues should be treated with respect — and
we all know, too, that digital technologies can get in the way of that happening.
Whatever the “job to be done,” key communications tend to become less direct and more
impersonal when the job’s digitized. That’s just the nature of the beast: Apps and other
technologies are doing a lot of the work that people used to do — and you can’t train an
app to have empathy. It doesn’t help that engineers tend to optimize efficiency, rather
than user experience, when they redesign work flows.

This isn’t a straightforward problem; it’s not possible or desirable to turn back the clock
on digital transformation, of course, and it’s not always easy to re-engineer operations
without losing the personal touch. That said, this is a particularly good moment to
remember that efficiency won’t get you anywhere if emotional intelligence isn’t built
into your operations. Because of Covid-19, your employees and customers are working
under extraordinarily stressful conditions.  Many of them are isolated and forced to
work with new technologies, fast.  They’re worried about their jobs, their health, and
their loved ones. You need your employees to work harder and smarter than ever before,
and you need your customers to be patient and loyal — and none of those things will
happen if they don’t feel valued, respected, and heard.

Fortunately, there are common-sense ways to keep the importance of human experience
front-and-center even as you update your operations.

Keep an eye on incentives – especially if you centralize services.

Maersk, the giant container ship company, has long operated with a high degree of
rationality; it has unusually advanced IT systems.  Several years ago, the company set up
a Global Shared Services department with the goal of boosting efficiency via digital
oversight of all the scattered logistics operations supporting shipments, including the
call centers.

The new department wanted to improve call center performance and, with that in mind,
introduced key performance indicators (KPIs) and standardized online forms.  Instead
of a general mandate to help customers, call center staff had a “tick-the-box” approach,
where they could offer certain kinds of help only if the customer’s situation met certain
criteria.  Staff also had a four- to five-page form to fill out after every call, so the
company could learn from customer complaints. Bonuses were tied mainly to the KPI
for the number of calls an agent covered each day.

This well-intentioned plan fell flat, however, as many agents felt pressured by their
remote taskmaster. They started to check off a heretofore rare explanation for a
shipping problem —“force majeure” — meaning that something outside the company’s
control had delayed or damaged a shipment.  For force majeure cases, agents had to fill
out only a single-page form, so they could move quickly to the next caller – i.e.,  they
didn’t need to spend time understanding the customer’s problem or looking for
solutions. Customers, needless to say, were not happy. The agents were gaming the
system, but the company had essentially created incentives for them to do that.

After a sharp fall in the stock price and a $2 billion loss in 2016, Maersk eliminated
Global Shared Services and gave each region autonomy in how it ran logistics.  Most call
center employees now got common-sense metrics that yielded much better information
about customer problems.  Customers were happier, too: The company’s worldwide Net
Promoter Score doubled in a single year.  Local autonomy undoubtedly introduced some
inefficiencies, and the regions now had to negotiate with each other over common
challenges rather than rely on the central department. But the greater connection to
customers made that worth it.

The same thing happened on a wider level in 2017, when a devastating cyberattack
forced the company’s entire IT system offline for a week. To keep shipments on track,
employees had to leave their screens and call customers and dock managers, and in
some cases even drive over to the port.  It was absurdly inefficient, and profits took a
short-term hit. But managers say morale and productivity rose substantially once
everything was back online. People suddenly got to see and hear the people they were
working with; they weren’t just entries on a screen. The newly energized organization
went on to eliminate a variety of nonsensical policies, and earnings more than doubled
in the year after the attack.

Find the right tool for the job.

The Dorchester Collection is a group of nine world-class, elegant hotels, and it wants to
stay that way.  To ensure excellent service, back in 2017 it gave its hotel staff detailed
digital checklists with such items as “Ask guests about newspaper delivery —but don’t
show a religious or political preference,” and “Mention the option of room service.”
Some of the items  were focused on getting the staff to relate to customers in a human
way, for example: “Look the guest in the eye for three seconds as they approach the
counter for the first time.” The company used mystery guests to grade the staff, and
those whose eye contact was too short — or too long — saw their pay docked.

The elaborate guidance left the staff anxious, focused on the checklists rather than on
how their guests were actually doing.  They stopped truly seeing the guests as
individuals, and instead treated everyone the same. The Dorchester tried a different
tack. It dropped the checklists, and encouraged the staff to use their judgment when
interacting with individual customers.  Then it launched an internal initiative, “If Walls
Could Talk,” with stories about interacting with famous guests: The house piano player
who grudgingly allowed someone to sing along — who turned out to be Whitney
Houston. The staff member who told Frank Sinatra on December 7, 1941, that Pearl
Harbor had just been hit. This kind of story encouraged staff members to see their
guests as real people — and to see the hotel as an institution with a glorious past.
Checklists can be a powerful tool, of course, but not when you’re aiming for highly
personalized service.

Change the presentation culture.

People have been making fun of slide presentations for years, yet companies seem to be
using them as much as ever.  Slides are so efficient at displaying information quickly
that we can’t resist.

But we can. London-based Standard Chartered is one of the world’s largest retail banks,
with extensive operations in Asia and Africa. At some point leaders realized that
PowerPoint presentations were cutting down on the most important kinds of
communication. At meetings, people focused on the slides and paid little attention to the
presenters. So the bank substantially reduced slide usage in 2018. People no longer
focused on the detailed information (which could, of course, be communicated in other
forms). They started to make eye contact and to treat the presenter’s talk as just the
starting point for discussion.  The sheer volume of information fell, but nuanced
discussion and collaboration shot up.

Remember that digital communication sometimes works better than

traditional communication. 

When the Baltic Sea froze over in 2015, it really was a case of force majeure, but
Maersk’s customers still complained.  The call center agents tried to explain, often
without success.  But then the company had its ship captains take photos of the
difficulty of navigating through the ice.  It posted the photos on a Twitter account,
“WinterMaersk,” and cell agents pointed people to the account.  Many customers
suddenly appreciated what it took to deliver their cargo and weren’t so upset over
delays.  The company gave that newfound sympathy partial credit for securing an uptick
in orders the following year.

Most companies appreciate the importance of relating to colleagues and customers in a

human way. They offer training courses in emotional intelligence and communication
skills. But when it comes to designing their operations, they too often default to what
looks to be the most efficient, digitally-advanced approach. Fortunately, we can gain
many of the efficiency benefits of technology without sacrificing the human touch, so
long as we stay focused on customer satisfaction and employee engagement.