Initiatives for a business turnaround should not begin when the company is already in the hospital bed. We are sick not only when we visit doctors, but sickness becomes unbearable and then we visit doctors. Not on medication doesn’t mean we are healthy.
We go to a gymnasium to prevent health problem and maintain the health. It is not a compulsion, but a good practice. Good hygiene is a good practice be it individual or an enterprise. Likewise, a business turnaround can very well start when the business is still making money.
There are financial ratios which indicate the health of the business. Closely monitoring and interpreting the same can be of great use to take timely action to prevent sickness and even course correction for higher margins.
There are financial wizards who are experts in financial management and financial turnaround. When the patient is bleeding band aid or stitches stop bleeding, but healing of the cut requires different treatment. Both are necessary and both are important. But only band-aid without the healing treatment cannot solve the problem permanently.
Financial measures to stop leakage are immediate cure but for permanent long term solution and sustenance healing program is necessary.
This permanent cure can be in most of the cases could be focusing on CUSTOMERS and bettering their experience. Yes, bettering the customer experience can be a cause of business turnaround.
Financial ratios like EBIDTA, ROCE & EPS all are largely dependent on NPS, CES and ES. Yes, better customer experience has a direct impact on financial performance of the company.
There is a research on the impact of better customer experience and call centre profitability. In his article Customer experience and profitability, authors found:
Empirical research using data from the ERIC Programme™ of Harding & Yorke and financial data from the AMADEUS database identifies that there is a strong relationship between certain dimensions of the customer experience and profitability.
There are various elements of better customer experience the above research has explored and studied and what they found was;
A positive relationship exists between Empathy and ROCE. Empathy, in particular, had the largest positive beta coefficient (0.97), implying that it makes the strongest contribution to explaining profitability. Furthermore, every point increase on empathy projects a 16.4 per cent impact on ROCE if the other variables are held constant. This finding suggests that empathy is not only a good measure for assessing customer experience with call centres, but is also one of the key performance indicators for managing profitability.’
Empathy with the customer stands out in overall customer experience. This is the reason UK based consulting company
Beyond Philosophy is helping companies in designing emotionally filled positive customer experience.
The point we were discussing was the importance of customer experience in business turnaround. When better CX can improve ROCE it certainly can help in business turnaround. Even non-sick companies are reaping benefits of offering a better customer experience. Their market valuation is always better than companies that are not offering a better customer experience.
A study by Watermark Consulting about the ROI of better customer experience found;
8-Year Stock Performance of Customer Experience Leaders vs. Laggards vs. S&P 500 (2007-2014):
• Cumulative ROI of CX Leaders was 107.50%
• S & P Index gave ROI of 72.30%
• CX Laggards was 27.60%
Both the studies stated above suggest ROI and ROCE of companies offering better customer experience are better than companies not offering a better customer experience. Yes, focus on better customer experience can offer companies a chance to create sustainable competitive advantage while business turnaround is under action. While immediate band aid is working on to stop further cash bleeding, customer focus will make the company healthy once bleeding stops.
Forbes magazine reports, CEOs Dan Hesse of Sprint, while discussing about their business turnaround says:
We have 3 priorities: number one is improving the customer experience. Number two is strengthening the brand. Number three is generating cash.
In 2007 Sprint had among the poorest scores in service. By focusing on employees and customers, Sprint became The American Customer Satisfaction Index #1 most improved U.S. company in customer satisfaction over the past 5 years in their evaluation of 47 industries.
Frank Capek, CEO of Customer Innovation even says;
The linchpin of an effective recessionary strategy is aggressive customer focus!
Whether it’s about business turnaround or bettering ROI and ROCE or building a lovable brand or struggling with recession or even looking to achieve sustainable competitive advantage, better customer experience is the panacea.
Customer experience is all the more critical in sharing economy, we are living in. Find out more: Preorder my new book on the subject – The Bread is Moving.