What should CEO's focus on when they are trying to turnaround a business?

Intro

Before diving in, a quick thank you for sharing your ideas about what CEO's should focus on when building or turning around a business. I'll be adding some of those ideas to the comments section after this article.

Whether you agree or disagree with the opinions I'm about to share, do let's continue the debate. There are still too many examples of poorly run organisations, so you never know. Perhaps your comments might inspire a few more CEO's to do what's right for their customers and staff and in so doing, generate some decent returns for their shareholders too.

I also want to highlight this won't be a 'perfect' post. There will be more grammatical errors than normal. The 'story' may not flow as I'd normally like it too. I'd have preferred to take a couple of weeks to tighten up the dialogue, but as so many of you are pressing for the answer, it feels only right to share.

So...,what should CEO's focus on when they are trying turnaround a business?

This is the question I recently posed to one of South Africa's most respected business leaders, Stephen Van Coller, Group CEO of EOH. 

And what was his answer?

"Colin.., you have to manage and reduce friction".

So what did Stephen mean by this, how is he using this approach at EOH and can such a simple statement really be a guide for CEO's who are running complex businesses?

Reducing Friction Explained

Let's start by digging a bit deeper in to what Stephen meant.

I asked him to expand his statement, to make sure I wouldn't misunderstand his point.

He said...

'If you want your product or service to become a market leader, it has to remove friction from your customer's life. If you want to create a culture that allows for innovation and experimentation, you have to remove friction from your staff's life'.

It's difficult to fault the logic here.

Take a moment to think about the companies and brands you love the most. Then consider the ones you hate with a passion.

I'd be surprised if 'friction' isn't a key determinant in shaping your opinion.

Here are some examples of brands I love to use because they not only solve a need, but they do so frictionlessly.

Uber, which removes friction because it's much easier to pick up a ride than the metered taxi model its replaced.

Amazon, which removes friction by helping me find, order and receive products seamlessly, without expending the effort of going to a shop.

Netflix, which removes friction by delivering quality, bingable content, without delaying my gratification with adverts or timetables.

Google (frictionless search), LinkedIn (frictionless networking), Whatsapp (frictionless messaging), Transferwise (frictionless x-border payments) and so on.

On the other hand, the brands I love to hate are the ones that waste my time, or resources.

In this photo I'm trying to collect a car from Bidvest. Why despite having booked online, am I still faced with unnecessary queues, form filling, deposit taking and licence checking?

Hiring a car, at least in this case is still a long way from being frictionless

Another personal example comes from my experiences with Telkom's call centre. I'd hate to think how many hours I've wasted either on hold or talking to operators who haven't been empowered to resolve the issues being raised.

In the world of financial services, the majority of the large institutions still offer there customers plenty of pointless form filling opportunities, to learn things they should already know or which they don't need to know to provide the requested service.

And in the world of online booking agents, like TravelStart, they claim to help find cheaper flights but can become an administrative nightmare when you want to cancel or amend that booking.

It's incredulous to me how many CEO's seem unable to guide their organisations towards reducing these friction points for their customers.

Government agencies, like home affairs and police services, can probably get away with it.

Businesses, however, cannot if they want to survive, especially in a world where technology is opening so many more opportunities to reduce customers friction points.

Can CEO's turnaround a Companies Fortunes by Just Focusing on Reducing Friction?

I believe the answer is absolutely they can.

Not only does it make sense intuitively, but there are great examples of companies that have transformed, by focusing on reducing friction.

Take DBS Bank. They transformed from being one of the most hated banks in Singapore to one of the most loved in just a few short years.

According to Paul Cobban, who is credited with turning around the bank, Singaporeans used to use DBS as an acronym for 'Damn Bloody Slow'.

Cobban, therefore, focused on transforming the bank's fortunes by trying to improve just one metric.

“The metric was the customer hour,” Cobban says. “We took out 250 million customer hours of waste per year.”( Forbes Magazine).

By reducing the amount of time customers wasted dealing with DBS, 250 millions hours to be specific, they were able to go from last to first in all customer satisfaction surveys within the space of 12 months.

Reducing wasted customer hours is just another way of saying they removed friction from the customers experiences.

Reducing Friction - The Missing Metric?

Based on my experiences advising CEO's, they don't seem to have 'friction' as a decision metric.

There just appear to be too many businesses, where their product or service, is tolerated rather than loved.

These are the businesses that will go out of business fastest as new entrants solve the customers needs and wants in ways that minimise the time and effort required to enjoy the benefits.

So is 'friction' a metric that CEO's should be using along with margins and return on assets and cost income ratios?

I believe so.

Let's use the example of a call centre to explore why not taking a holistic view of customer frictional points can lead to false positives in day to day reporting.

Take Joe's case. He has a problem with his phone/account/bill/ and decides to call the call centre.

He is quickly patched through to an operator. The operator is efficient and quickly provides Joe with the correct advice to resolve his problem.

Call centres typically will measure things like call abandonment, queuing times, handling times and first call resolution and in Joe's case everything looked great.

The fact that Joe is incredibly frustrated with the process is not picked up though. What the metrics failed to capture was that the advice Joe received means, 'he will have to visit a branch next week to resolve the problem' and/or 'unknown to the operator Joe has called three times already but been unable to get through' and/or 'Joe's issue was predictable or observable by the company and they could have fixed it without Joe needing to call the call centre in the first place'.

The metrics didn't explore the full story of how the organisation has created friction in Joe's life.

So how would the call centre operate if they set a bolder metric? Perhaps just one metric that focused on friction?

How can we reduce the time we steal from our customers lives?

Imagine having that as the key metric to determine your bonus and promotion prospects?

Minds would be sharpened, especially if you took it a level further and compensated customers for every hour that your company stole from them.

Perhaps you'd employ more experienced and qualified staff? Maybe you'd grant more autonomy to the staff to take on the fly financial decisions with their customers? Maybe the call centres would work more closely with the product and sales teams to find ways to avoid needing the calls to start with?

Reducing Friction for Staff

The primary goal should be to reduce friction for your customers, but you'll improve your chances of achieving this by removing friction from your staff's lives too.

Unfortunately, large companies easily create friction for their teams and fail to place enough effort in removing it.

Multi-layered approvals, more and more policies and procedures and enhanced governance frameworks make getting anything done more akin to wading through thick mud.

And for organisations where the shareholders have become accustomed to regular dividends, the mud just gets thicker still, as CEO's try to protect the franchise by focusing on managing financial outcomes, rather than customer requirements.

In Joe's call centre case, the goal of financially motivated CEO's isn't to reduce friction for their customers. It is too 'service' customers in the cheapest, most economical way possible.

Therefore it makes perfect sense to the financially motivated CEO to treat call centres as an 'operational' unit and look to outsource to 3rd parties to efficiently run it on their behalf.

This 'cookie cutter approach' kills any opportunity for the call centre employee's to innovate or take their own day to day decisions as they are forced to follow the prescribed operational procedures.

Yet, when you look at the attributes of the most successful companies in the world, you'll typically find their CEO's have found ways to reduce friction for their staff.

For example, Zappos, one of the worlds' most loved online retailers, doesn't give its call centre teams scripts. They don't pressure their agents to limit the times they can spend on a call. Staff are instead given the power and autonomy to build personalised relationships with their customers. This could mean chatting with a customer for hours or deciding to add an extra gift to the order. Whatever the agent believes will improve that customers life and love the Zappos experience.

Another example of removing friction from staff's lives comes from Netflix. When staff complained about the holiday policies, they scrapped the policy in totality. Staff now self determine how they split their time between delivering on their objectives and spending time outside of the organisation.

Google removes friction in innovation, by encouraging their teams to spend 20% of their time on their own projects. Gmail and Google Maps are two examples of new products that were curated from these sidebar initiatives.

So CEO's that want to develop a client-first, collaborative and innovative culture, where teams are empowered to experiment and fail and develop the new set of products and services should consistently think of how to remove the frictional points from their teams day to day working lives.

How is Stephen Reducing Friction at EOH

First some history to give context.

Stephen was brought in to EOH to implement a turnaround strategy.

He knew a large part of the initial focus would be around improving corporate governance and repairing the brand's image, which had become tainted due to allegations of corruption and involvement in state capture.

EOH's share price had been in free-fall mode since the end of 2016. And the bad news kept rolling-in when, in early 2019, Microsoft announced they'd be cutting business ties because of reputational risk concerns.

Stephen knew he'd have to investigate the various allegations. But he took a very different approach than the secretive, introspective methods that KPMG, Bain and McKinsey used when they had faced similar allegations.

He decided to remove friction to accelerate the process.

Perhaps the most visible example was the creation of a purpose-built whistleblowing app, that was not only made available for staff, but was prominently displayed on their main website, encouraging anyone with information to come forward.

This is a brilliantly simple way to essentially 'crowdsource' information from anyone who is able to help the investigation.

Where other organisations tried to protect themselves through quiet introspection, with the hope the fuss will die down, Stephen decided to loudly seek help from the public, to expedite the investigation.

And that required the removal of friction.

Stephen's approach will, I'm certain, not only improve the speed and quality of the forensic audits, but ultimately rebuild trust in the brand faster.

Managing Friction Needs to be A Board Conversation

I'm not suggesting that CEO's should solely try to run their business by focusing on how to remove friction.

Setting a clear purpose to build the company around and developing products and services that align to that purpose has always to come first.

But Boards and CEO's need to elevate the importance of 'removing friction' in their day to day decision making.

The friction that companies create for their staff and customers, is like a weed. It grows quickly. Effortlessly. Everywhere.

And because there is so much friction we accept it.

As is the case when removing a weed, it requires deliberate, dedicated and consistent effort.

So organisations that really want to remove the friction their staff and customers face every day will have to make this a board and c-suite discussion.

Because the CEO is the only person with the necessary mandate to push for removing friction to become a primary focus, with the appropriate allocation of capital and resources.

The question of friction should also become a key decision point.

Will this project, this policy, this hire, this position, this product, this approach, this incentive, this technology or this spend reduce or create friction?

And if it creates it, will we be able to remove it or manage it some time in the future?

And for the CEO's that don't focus on removing friction, remember this.

Someone, somewhere is.

And they will win.

Because I don't know anyone that wants to waste their time hiring a car, opening an account, booking a flight or sorting out a phone bill.

And Finally.

If you'd like help in transforming your leadership teams thinking, let's chat.

You can find out more about me by visiting www.coliniles.com or emailing me at [email protected].

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