Executive Thought Leadership

Building Effective Customer Interactions

A conversation with business thoughtleader and author Geoffrey Moore.

Businesses in maturing markets that are reaching commodity status must create new value propositions. One of the largest opportunities for these companies to distinguish themselves is by building more intimate and rewarding experiences for customers in order to foster loyalty and bond them to the business. I recently sat down with Geoffrey Moore, a well-known business consultant and author of Crossing the Chasm, Inside the Tornado, and Dealing with Darwin, to discuss trends in business innovation and the benefits of enhancing the customer experience. – Marsha Powell, Cisco Executive Thought Leadership

Cisco: How do great companies innovate at every phase of their evolution?

Moore: When companies start out, they’re typically in growth markets. They focus on product innovation. Then, as the markets begin to mature, innovation tends to shift—either to better customer relationships or a more effective one with the supply chain.

Cisco: Recent research from [global management-consulting firm] McKinsey & Company discovered that organizations are asking employees to interact more effectively with customers and suppliers. What’s behind this movement?

Moore: We have now enabled transactions to such a degree that [efficient transactions] are the table stakes for any relationship. We’re now looking at adaptive transactions, which often require human beings to participate. That means merging people and systems to serve the customer in real time, and that’s a whole new movement.

Cisco: So, if employees see themselves as simply order takers, they might miss the opportunity to create extra value in every exchange. How can businesses help employees deliver more valuable customer experiences?

Moore: They need to provide a customer- data system so that employees are armed with the information they need to be helpful and resourceful. The other piece is actually employees’ attitudes and approaches. It’s more effective for employees to be empowered to intervene and interact to help customers, rather than treating customers as merely transactions.

Cisco: How can executives measure whether they are improving business value and the impact that positive experiences are having on bottom-line growth?

Moore: It’s an interesting problem, because when we look at bottom-line growth, we tend to be a little self- centric. What the customer intimacy movement suggests is that people work backward from the customer experience, with the notion that if they create a differentiated experience, customers will reward them with purchase preference and premium price margins.

Cisco: You’ve spoken a lot about customer experiences and the diminishing returns that businesses are seeing as they focus on being a low-cost producer or on faster time to market. Are businesses aware of these problems?

Moore: I think businesses get the notion that you can, for a while, ride down a commoditizing market by essentially staying ahead of the cost curves. But there comes a time when you really do have to create customer preference. This is why there’s so much interest in customer intimacy as a value proposition; the cost of intimate interactions is not that much different than that of low-cost commodity interactions. But the value is so much greater.

Cisco: Interactions-intensive industries account for an increasing amount of the gross domestic product. Today, the interactions portion of the economy accounts for almost 41% of all employment activity. What do you think is going to be the economic impact of organizations moving toward more of this interactive culture?

Moore: The transactional jobs will, I think, increasingly go to lower-cost commodity sources, whether they are low-cost labor or automated systems. The interactive jobs, which really do celebrate human creativity and capability, are going to be the higher-paying jobs and the more profitable and productive ones.

Cisco: Would you agree that the network is no longer about just connectivity, but has become a secure platform for delivery of the total customer experience?

Moore: For all of my life in IT, prior to this decade, the network really was a connection medium. We thought of computers as the sources of value and the network as a pipe between them. Now we are, in fact, experiencing the world on the network. You see this particularly with young people interacting with instant messaging, cell phones, MySpace, and watching TV and YouTube on the Internet. The world is becoming a much more networked place, and the next phase of business differentiation relies on the network for the real-time information and services that will foster rewarding customer interactions.

Next Steps

To learn more about creating the total customer experience, go to cisco.com/go/tce . Geoffrey Moore discusses the ways in which Virgin Megastores is using technology to build a more meaningful relationship with its customers with Virgin’s CIO Robert Fort. Register at cioleadershipforum.com and search for “Virgin.”