IT'S THE great paradox of the information age: companies - indeed, organisations of all kinds - are drowning in customer data but starved of useful knowledge. The consequence, says John Orsmond of Data Vantage, a database specialist, 'is corporate amnesia on a grand scale'.
Every customer contact generates data. But the more companies fall over themselves to invest in contact centres and accompanying customer relationship management (CRM) and other expensive and complex database 'solutions' to collect and store it, the less they seem to have in the way of 'answers'. 'Companies are forever forgetting what's happened many times before,' Orsmond says.
Despite the hype of the computer vendors, most companies are forgetting rather than learning organisations. While the amount spent per customer on CRM goes up, the yield on their data assets goes inexorably down. Never in the history of commerce has so much been known about so little, to such small effect.
In fact, the effect is not just negligible, it is negative. Instead of being an 'enabler' (like 'solution', a word that should make managers pull a gun on anyone who utters it) IT has become a disabler, a screen that effectively distances consumer from company. Think of the on-hold music, the interactive voice response ('press one for...'), the codes and passwords you have to negotiate before actually being able to talk to anyone.
These are barriers. 'Behind all the data, customers are becoming invisible - and more and more alienated,' Orsmond says.
Because of these failings, companies are unable to make even the most elementary distinctions between callers and types of call. One glaring gap is that all the measures and responses are geared to the company's idea of the existing buyer. It's as if the non-buyer didn't exist.
As a result, 'there's no whole-market view,' complains Orsmond. If, for example, the IT is driven by orders rather than, say, marketing, it won't allow call-centre agents to spend the extra few seconds finding out about callers who might have made a purchase but in the end didn't.
Look no further for the reason why call centres, which ought to be the eyes and ears of the company, are so often barriers rather than contributors to corporate knowledge.
The consequence of patchy integration, badly designed measures and poor processes is that there is a yawning gap between company and customer expectations.
'There's huge undetected customer dissatisfaction and very large concealed defection in all sectors,' Orsmond says. Financial services are particularly bad. As evidence: telemarketing results are plummeting, as are customer- satisfaction levels all over the spectrum. Meanwhile, call-centre traffic - aka complaints - is going through the roof (necessitating the building of more call centres, thus negating the cost-cutting rationale for these establishments in the first place).
Perhaps equally interesting is the take-off of online transactions. According to Interactive Media in Retail Group, UK online retail sales growth is now 40 times that of bricks-and-mortar retailers - e-tail was 36 per cent up year-on-year in May at pounds 1.5 billion, while the physical high street is at its lowest since 1947. This, remember, is before the July bombs.
The significance of internet shopping, of course, is that a half-decent website makes it easy, or less hard, for customers to 'pull' the service they require, which, at least in the case of relatively simple products, is a substantial improvement on what is otherwise on offer.
The success of eBay in providing a market place not only for individuals but also, increasingly, for companies to sell their wares direct to consumers, is eloquent testimony to the same thing.
At Warwick Business School, Professor Harry Scarbrough, director of a research programme on business knowledge, notes that companies can hardly be surprised if customers feel alienated: 'They want you to be data, because it's more cost-effective. They don't want you to be a person. For vast numbers of people, they want to commoditise service: that's been the banks' strategy, for example, for the past 20 years.'
The snag comes when, as now, people begin to revolt against the simplistic versions of human behaviour on the IT model. 'When people fall through the net, when the data doesn't match the dataset incorporated in the software, they can bounce around the system for ages,' Scarbrough says.
The error is to think that these problems can be resolved at the same level they were created - by throwing yet more computer power at it. But it's a systems, rather than IT system, issue. Put simply, it's the wrong kind of data.
Most service industries are in much the same situation as manufacturing before the shakeout of the 1980s, Orsmond believes. The early service adopters of the new technology then on offer simply applied it to the old processes.
Just as manufacturing had done so earlier, services (particularly financial services) proudly reinvented themselves as mass-producers, driven by economies of scale, specialised production factories and standard products. That's a good description of most modern call centres. They may be selling mortgages or mobile phone contracts rather than the Model T, but the logic is exactly the same: 'You can have any model so long as it's what we want to sell you and it takes no more than two minutes to explain and close.'
With technology plunging in price and soaring in capability, it is all too easy, says Orsmond, for firms to persuade themselves that what they need is 'go-faster boxes and pipes, forgetting that there are all kinds of switches, taps and gauges between them, with people opening and shutting off the flow.'
The result is still the same old data leaks, explosions and blockages in short, confusion and complexity and little clean knowledge. Instead, the greatest value will come from a system with the shortest pipes and smallest number of moving parts, through which data can flow quickly and without hindrance to create real knowledge that people can act on. As Orsmond points out, this is often actually cheaper, requiring little in the way of capital expenditure, and the results drop straight to the bottom line.
So far, the underlying effect of IT in service industries has been to depersonalise the relationship between company and customer almost completely - the customer as data, in Scarbrough's terms.
The key question is whether it can also be used to swing the pendulum back. Consumers are crying out for dealings that treat them as people, and there is growing evidence, says Orsmond, that they will reward companies that make the effort to do so. But just 12 per cent of UK companies are currently able to recognise even the most basic differences between them, so 'you could say that there's 80 or 90 per cent headroom for improvement.'
The Observer, 14 August 2005