Embedding the Customer: Building a Customer-Focused Organization

1. Embedding the Customer How and why to build a customer-focused organisation February 2007

2. Contents • Context and background • The case for customer focus • What is a customer in the public sector? • What is customer insight? • Best practice in customer-focused organisations • Key success factors for customer-focused public sector organisations

3. Context and background • The case for customer focus • What is a ‘customer’ in the public sector? • What is customer insight? • Best practice in customer-focused organisations • Critical success factors for customer-focused public sector organisations • Annexes

4. Why do we need to do this? • The need to be customer-focused is starting to become widely accepted, driven by rising customer expectations and the need to design services which meet the needs of a broad population • The commercial sector has enthusiastically embraced the principles of customer focus, driven by competitive pressures and demand. Service levels have improved dramatically with round-the-clock availability and increased personalisation. The public sector has come under growing pressure to match these rising standards. • In his Review of Service Transformation published in December 2006, Sir David Varney stressed the importance of “finding ways of embedding processes across the public sector that will not simply bring the true voice of the customer into service design and delivery, but engage citizens and businesses as the focal point for services.”

5. Why do we need to do this / 2? The momentum is building across government, with a number of key stakeholders supporting the drive to put the customer at the heart of the business: We must be relentlessly customer-focused. Many people want a single point of contact for a range of services. The public are not interested in whether their needs are met by Department X or Agency Y, they just want a good, joined-up service where X and Y talk to each other and share the information the public have provided. We should strive to meet this demand. Sir Gus O’Donnell, Cabinet Secretary Citizens must be at the heart of everything we do…. I want us to move … from a process driven system to a people driven one….We know the next phase of public service reform … will work better if decisions are made closer to citizens…. Ruth Kelly, LGA Conference, 5 July 2006 Deep insight into customer needs, behaviours and motivations, plus the ability for citizens and businesses to have better information on the services on offer, are all important for the design of public services that support the Government’s desired policy outcomes. Sir David Varney, Service Transformation Review, December 2006

6. Context and background • The case for customer focus • What is a ‘customer’ in the public sector? • What is customer insight? • Best practice in customer-focused organisations • Critical success factors for customer-focused public sector organisations • Annexes

7. Changes in the environment and shifting attitudes mean that public service providers need to re-think their relationship with the citizen • Demographic changes brought about by shifts in the size and composition of family households and an ageing population have meant that service providers need to meet the needs of an increasingly diverse user base • As real incomes have grown and access to information has become easier, so people’s expectations of services have risen • Commercial and technological innovations in communications have opened up new channels of delivery, creating further challenges for public service providers • A progressive erosion in the relationship between the individual and the state has led to government activities being seen as increasingly irrelevant. Social disengagement has made large numbers of the public harder to reach. • Driven by global competition, the offerings of leading commercial players have raised the standard of what constitutes an acceptable level of service If we want our services to be used and our interventions to succeed, we need to meet the public on their terms and manage expectations more clearly along the way. Source: Customer Insight Forum Primer

8. If we make the effort to engage systematically in understanding the needs and behaviours of citizens, the rewards will be felt by everyone • A service which is designed to meet customer needs is likely to be efficient for government and save time and effort for the customer: • No one benefits from the call to the help-line made by the customer who simply does not trust us to deliver: It has been estimated that in the police forces, telecommunications and local authorities failure demand - essentially demand from the customer caused by the failure of the organisation to deliver - is as high as 50% - 80%. In service organisations – such as those representing the public sector - failure demand is often the greatest source of waste. The question we should be asking is not how to deal with the volume of work – calls, enquiries, letters – but how to reduce the volume. The answer lies in listening to the customer.[1] [1] John Seddon, The Vanguard Guide to Transforming Call Centre Operations

9. Context and background • The case for customer focus • What is a ‘customer’ in the public sector? • What is customer insight? • Best practice in customer-focused organisations • Critical success factors for customer-focused public sector organisations • Annexes

10. In the private sector, the nature and significance of the customer needs no explanation; in the public sector there are different factors at play: • Competition does not play the same role. The implications of customer choice are different: citizens can choose to ‘opt out’ (either entirely, or by failing to deal with requirements correctly), creating costs for government which has to enforce compliance, provide more help or address failed intervention. • Although people want their needs met as individuals, as citizens and taxpayers they still want a public sector that exists for the whole population and which provides services that are high quality as well as efficient. • Public sector organisations do not have the luxury of selecting and focusing on preferred and most profitable customers: they need to cater for the needs of the whole community. For many services, ’customers’ of greatest concern are those of least interest to most commercial service providers. • The aim of an intervention may be long term and reliant on a complex range of interrelated factors. Often, success will be years in coming and the conventional cost/benefit analysis used in the commercial world will not apply. The customer has a different relationship with public services than with the private sector. However, the need for public service providers to think of its audience as having rights and expectations that we must address, means that we need to treat them as ‘customers’ with a choice. Source: Customer Insight Forum Primer

11. Context and background • The case for customer focus • What is a ‘customer’ in the public sector • What is customer insight? • Best practice in customer-focused organisations • Critical success factors for customer-focussed public sector organisations • Annexes

12. There is no common language around ‘insight’ Customer Insights (1) • ‘Insight’ means different things to different people, its definition often dictated by people’s experiences and areas of comfort. • The term is used all the time in reference to ‘interesting bits of information’ • It is not necessarily clear how to recognise strong insight from weak • It is useful to draw a distinction between an insight and Insight as a discipline: • “ A deep ‘truth’ about the customer based on their behaviour, experiences, beliefs, needs or desires, that is relevant to the task or issue and ‘rings bells’ with target people.” • May be delivered by a single piece of research or ad-hoc project Customer Insight (the discipline) (2) • “Having a deep, embedded knowledge of the customers and the market around us that helps structure thinking and sound decision making” • Comes from a combination of multiple pieces of data, built into a joined-up “big picture” through strategic, business and political analysis A customer-focused organisation has customer insight and orientation embedded throughout Slide extracted from DH Health Insight Unit presentation to Board, January 2007 Source: (1) Government Communications Network: Engage Programme (2) Will, S. “The management and communication of customer insight”, Interactive Marketing, April/June 2005

13. Customer focus is the embedding of customer understanding and insight throughout the organisation and its behaviours “Getting closer to customers is not just a matter of installing a better CRM system or of finding a more effective way to measure and increase customer satisfaction levels. Tools and technology are important. But they’re not enough. That’s because getting close to customers is not so much a problem the IT or marketing department needs to solve as a journey that the whole organisation needs to make.” - Harvard Business Review (Based on 17 organisational case studies), April 2005 (1) Bringing the organisation with you Changing what you do and how you work “At a high level,… customer-focused companies embrace three concepts. First, they know they can become customer focused only if they learn everything about their customer’s needs; …second, they know this picture is useless if employees can’t or won’t share what they learn; …finally, they use this insight to guide not only their product and service decisions but their basic strategy and organisational structure as well.” - Harvard Business Review, April 2005 (1) Slide extracted from DH Health Insight Unit presentation to Board, January 2007 Source: (1) R. Gulati and J. Oldroyd, “The Quest for Customer Focus”, Harvard Business Review, April 2005

14. The case for customer focus • What is a ‘customer’ in the public sector • What is customer insight? • Best practice in customer-focused organisations • Critical success factors for customer-focussed public sector organisations • Annexes

15. Work in the Health Insight Unit, in the Department of Health, identified three key elements in successful customer-focused organisations Information about and relating to customers Evidence Capabilities, systems/infrastructure, capacity Enablers Culture of the organisation and its strategic vision Foundation None of these is individually sufficient for success Key both in centralised and decentralised organisations Apply both in the corporate centre and in the field Source: DH Health Insight Unit desk research and benchmarking

16. Evidence Enablers Foundation Best-practice customer-focus works across all 3 key elements • Data • Highly integrated datasets that underpin strategy / implementation • Common datasets and view of the market and customer used across the organisation • Information and insight • Data translated into usable information and insight • Collection, integration and dissemination • Strong understanding of what information is needed, who needs it, and in what format • Regular, consistent and timely information flowing to the relevant people • Variety of customer measures monitored and reinforced regularly • Processes and systems • Formal processes ensuring customer insight is part of strategy development and prioritisation • Formal processes to ensure customer-focus is part of business planning and implementation • Customer metrics to provide a feedback loop to business planning and implementation • Information and knowledge management • Awareness of data stores within organisation • Strong knowledge management system • Skills and capabilities • Expertise in ‘insight’ is actively managed and developed • Ongoing training and upskilling across organisation • Hubs of expertise (insight, market research procurement, etc.) • Vision and strategic process • Clear understanding of corporate vision and strategy which incorporates the customer (and individual/team role in this) • Culture • Openness / encouragement of questioning and challenge • Sharing of information and knowledge • Physical environment that reflects values (open, fun, collaborative, tolerant of challenge, encourages idea risk-taking) • Focus on putting end-users first • Decisions underpinned by sound information and analysis • Shared understanding of customers • Clear, commonly shared definitions of the ‘end customers’, ‘intermediate customers’ (if any*), and ‘stakeholders’ • Processes in place to ensure people stay close to the end-user • Common segmentation, narrative, and customer stories, where relevant Source: DoHHealth Insight Unit external interviews, benchmarking and best practice research

17. The case for customer focus • What is a ‘customer’ in the public sector • What is customer insight? • Best practice in customer-focused organisations • Critical success factors for customer-focused public sector organisations • Annexes

18. Establishing an effective customer insight capability is a key step in the journey towards establishing a customer-focused culture The work from the Department of Health demonstrates the importance of good customer data, as a key tool in building a customer-focused organisation. However, data must be translated into targeted and usable information or ‘insight’ which can be applied to make key strategic and business decisions and to inform service and policy design and delivery. Citizen or business insight is a starting point to answering (the) challenge……In many of the best performing companies, insight forms an integral part of the design and delivery of their goods and services. Sir David Varney, Service Transformation Review, December 2006

19. In public sector organisations, an effective customer insight capability ….. • has TOP LEVEL LEADERSHIP and sponsorship • draws on customer information from MULTIPLE SOURCES and turns it into stories which have BUSINESS VALUE • is INDEPENDENT but has traction across the organisation • values customer insight as a STRATEGIC ASSET informing policy, strategy, operations and communications • involves the right level and mix of SKILLS and EXPERIENCE

20. 1. Top level leadership and sponsorship • Support at the Ministerial level to set the vision • Accountability at Board level for insight and the customer view: one person with responsibility for the customer view, for clear governance – appointed from within existing structures where possible • A customer insight board or group below the main Board, drawn from members across the organisation, responsible for agreeing the work plan and setting priorities, overseeing progress on major insight projects, taking action based on the output of the insight work and ensuring results and impacts are fed back. Department for Transport: Board Level Accountability At the Department for Transport agency, VOSA, findings and recommended actions from all strategic research (such as customer satisfaction surveys) are presented to the Board. Once agreed, individual Directors take responsibility for driving forward the specific actions. These may cover areas such as staff training, operations or any aspect of customer service. Progress is monitored at VOSA Board level and the results are measured in ongoing research.

21. 2. draws on customer information from MULTIPLE SOURCES and turns it into stories which have BUSINESS VALUE • An insight capability is about pulling together customer information as required from many sources. It should optimise resources by collating and analysing data that already exists, and turning it into meaningful and actionable insight, relevant to specific business objectives. • The insight team not only gathers intelligence already available but also shapes the information that the organisation routinely collects – asking the right questions about the things that really matter and checking that the right things are being measured. • Sources of insight may include: • Customer surveys • ‘Policy’ and other social research • Communications research • Feedback from front line staff • Customer complaints (emails , letters, calls etc.) • Observation • Customer journey mapping • Analytical services (and database data, usage stats etc.) • Economics and statistics

22. 3. Independent but with traction across the organisation and beyond DWP and HMRC: Customer Insight – Closer working Historically, HMRC and DWP have had clearly defined, discrete sets of customers and have largely been dealing with different sections of the population at the points of service delivery. However with recent policy developments such as the creation of tax credits, the need to identify and understand the needs of customers who are common to both departments is set to grow. In addition, DWP’s remit in outcome terms is increasingly expanding to help and influence a broader range of customers and to intervene proactively to prevent dependency rather than simply reacting to critical needs. This will require a much deeper understanding of their common customers. A set of solutions is now being developed to address these needs. • The insight team has an independent customer advocacy role, supporting, disseminating, championing and managing major strands of insight and knowledge throughout the organisation, even if this means delivering unpalatable messages. • The team may often work horizontally, delivering customer insight across the organisation, not in service of, or prioritising, any specific unit. • The team is outward looking – drawing on information from other organisations and international experience, and spotting opportunities for synergy and joining up to improve customer experience across the board

23. 4. Valued as a strategic asset informing policy and business strategy • Effective customer insight is informed by and should inform strategic and policy priority areas, to ensure relevance and correct ownership • Policy and strategy development frameworks should include links at every stage to the relevant customer insight work-streams, showing where insight has been considered and incorporated into recommendations. • Generating insight is essentially a business process, aimed at creating something which has value to the organisation. Metrics are not an outcome of customer insight, nor is customer insight an end in itself. But customer insight should help to inform what those metrics should be.

24. 5. The right level and mix of skills and experience Customer insight is a discipline which requires specialist as well as generalist skills. The team should include a mix of professional backgrounds and experience to encourage innovation and stretch thinking, for example: • ‘Consultancy’ skills to clarify - and challenge if needed – business objectives which drive insight work, and to feed back results, ensuring that they are understood and actionable. • Strong communication and networking skills to work effectively with teams across the business and beyond, bringing in ideas from different sectors as appropriate • Direct links to the front line, to be as close to the customer as possible • Excellent marketing and strategy capability (understanding of insight, use of tools, application of insight in business planning process etc.) • The insight function needs to make linkages and be able to draw on the right skills elsewhere in the organisation – for example from economists, statisticians and researchers. Specific subject matter or policy specific expertise can be drawn in on a more flexible, project by project basis. Customer insight is a discipline which requires specialist as well as generalist skills.

25. Annex

26. The Customer Insight Forum The Customer Insight Forum supports the work of the Delivery Council in the implementation of the recommendations of Sir David Varney’s Service Transformation Review, around the use of customer insight. It is a small group of heads of insight in the public sector, working individually and collectively to help government at a central and local level to establish a customer-focused culture of continuous improvement. More information about the work of the Delivery Council and the Customer Insight Forum is available at www.cabinetoffice.gov.uk/public_service_reform/deliverycouncil