Eiu service on demand

A report from The Economist Intelligence Unit

SERVICE ON-DEMAND

The future of customer service

Sponsored by

1 © The Economist Intelligence Unit Limited 2016

Service on-demand: The future of customer service

Contents

About the report 2

Key points 4

1. Introduction 5

Definingthedisruption 5

Theaccesseconomywhirlwind 5

Companiesarestillfiguringoutwhatworks 6

Isthe‘Uberisation’ofcustomerservicecomingtoAsia? 6

2. A market eager for disruption 8

Thebuyersareready 8

It’saboutalotmorethancostreduction 9

3. Hesitant suppliers 11

What,worry,me? 11

Thecalmbeforethestorm 12

Experimenting at Mila 12

4. The on-demand customer service model 14

Stillverymuchaworkinprogress 14

Managingperformance 14

Conclusion 18

Next steps for on-demand leaders 19



About the report

Service on-demand: The future of customer service isareportfromTheEconomistIntelligenceUnit(EIU)sponsoredbyGenesys.ThereportwaswrittenbyPaulKielstraandeditedbyCharlesRoss.ItdrawsonasurveyconductedfromFebruarythroughApril2016of200seniorAsia-Pacificexecutivesinvolvedinmanagementoftheircompanies’customerservice(buyers)and75executivesfromcompanieswhichsupplycustomerserviceproductsandservices(providers).Almosthalfoftherespondents(44%)werefromretailing,21%fromgovernmentorganisationsand15%fromthetelecommunicationsindustry.Thesurveysamplecoversawiderangeofseniority,withaquarterofrespondentsC-suiteorabove,34%seniorexecutivesand41%managers.Participantswerefromavarietyofcompanies:56%hadannual

revenuesofunderUS$250mand20%morethan$1billion.

Thesurveyfindingsweresupplementedbyinterviewswith3opinionleaders,expertsandbusinessleaders.Ourthanksareduetothefollowingpeoplefortheirtimeandinsights(listedalphabeticallybysurname):

lMaxLoosen,co-founderandCEOofSendhelper

lAprilRinne,leaderoftheWorldEconomicForum’sYoungGlobalLeadersSharingEconomyWorkingGroup

lChristianViatte,CEOofMila

TheEIUbearssoleresponsibilityfortheeditorialcontentofthisreport.Thefindingsdonotnecessarilyreflecttheviewsofthesponsor.



(% of respondents)

Respondents by Country

Philippines

AustraliaTaiwan

Singapore

Japan

Korea

Malaysia

New Zealand China ex Hong Kong

Hong Kong

India

Indonesia

3%

3%

12%

12%

5%

15%

6%12%

11%

11%

6%

4%

(% of respondents)

Respondents by Industry

Retailing

Government/public sector

Telecommunications

Others

44%

21%

15%

19%

Thisstudymakesfrequentreferencetotwosub-groupsfromoursurveypanelwhotogetherarethecoreofthecustomerservicemarketplace.

Buyers:Inthisstudy,“buyers”arethe200respondentswhohaveinvolvement—usuallyagreatdeal—indecisionmakingaroundhowtheirorganisationmanagescustomerservice.Theyarebuyersinthesensethattheyeitherpurchasecustomerservicecapabilitiesfrom

thirdpartiesorneedtoallocateresourceswithintheirownorganisationssothatthesecapabilitiescanbeprovidedinhouse.

Providers:Inthisstudy,“providers”arethe75respondentswhosaythatthey“workfora3rdpartysupplierofcustomerserviceoffers,channelsorservices.”Someexamplesincludeoutsourcedprovidersofcallcentres,emailresponses,orsocialmediamonitoring.

An explanation of terminology: “Buyers” and “Providers”



Key points

• Theaccesseconomybusinessmodelhasalreadyrevolutionisedindustriessuchastaxiserviceandhotels,buthowfaritcanextend—towhatfunctionsandindustries—remainsanopenquestion.

• Thosewhosetaskisprovisionofcustomerserviceexpectthattheirfunctionshiftingtoanon-demandmodelwithinthenextthreeyearswillbeafundamentalpartoftheirabilitytocompete.

• Currentthird-partycustomerserviceprovidersareequivocalonthepotentialandlikelyimportanceofanon-demandmodel,suggestingtheindustrymayberipefordisruption.

• Transitioningtoanon-demandmodelwillnotbesimple:althoughtechnologyisstartingtobecomeavailable,keyskillsandprocessissuesremain;mostimportant,leadingstakeholders,notablycustomersandmanagement,needtobebroughtonboard.

• Whateverthebarriers,themomentumfortransformationisstrong:morethantwo-thirdsofcustomerservicebuyerssaytheircompanieswouldintroduceanon-demandmodelevenifitbroughtsignificantchangesinhowtheyoperate.



Introduction1Defining the disruption Asuresignofthenoveltyofsomethingiswhenit’sdifficulttoevennameit.Aneconomicphenomenoncurrentlytransformingnumerousindustrieshasjustthischaracteristic.Dubbed,amongotherthings,the“sharing,”“gig,”“on-demand,”and“peer-to-peereconomy,”eachoftheseadjectiveshasreceivedcriticismforbeingeitherincorrectorincomplete.AprilRinne—aconsultantinthefieldandleaderoftheWorldEconomicForum’sYoungGlobalLeadersSharingEconomyWorkingGroup—explains,“Thesetermsareindicativeoftheemerging,complexandoftenmessynatureofthespace’sevolution.Allofthemarevalidinsomeways,butnoneisperfect.”

“Sharingeconomy”isstillthemostcommonnametodescribethosefirmswhichrelyonatechnologyplatform—typicallymobilephone-based—toallowcommunitiesofsmallusersandproviderstoexchangethetemporaryuseofgoods,oraccesstoservices,formonetarypaymentorreciprocalaccess.Thisstudy,though,

looksinparticularatentirelycommercialactivity:howsuchamodelmightaffectthecustomerservicefunction.Accordingly,itreferseithertothe“accesseconomy”,atermcurrentlygainingfavour1,orusesthemorecommon“on-demandeconomy”becauseofthegreaterspeedwhichthisbusinessmodelcangivetocustomerservice.

The access economy whirlwindInrecentyears,severalcompanieshaveshownthepotentiallyhugeimpactofthiskindofbusiness.Uber,aseven-yearold,self-describedcar-ridesharingservicewhichhasturnedtheurbantaxiindustryonitshead,isthemostoften-citedaccesseconomyfirm.Itsrecentfundraisingeffortsindicatealikelyoverallvaluationofmorethan$60bn—alreadygreaterthanthatofFordorGM.AirBnB,ashort-termaccommodationplatform,hasexistedforayearlongerthanUberandreachedavaluationof$26bn,puttingitinthesameleagueasHiltonWorldwideHoldingsinmarketcapitalisation.(Figure1)

Disrupted industries: On-demand entrants overtake incumbents(estimated valuation, 2015, US$bn)

Figure 1

60%

68%

23%

26%

Sources: WSJ, Economist

1GianaEckhardtandFleuraBardhi,“TheSharingEconomyIsn’tAboutSharingatAll,”Harvard Business Review,January2015.



Aswithanynewtechnology-basedbusinessmodel,hypeandfrothhavenotbeenmissing.Uberisation,aphraselessthantwoyearsold,hasbecomethebuzzwordfortherapidtransformationofanindustryduetoentryofanaccesseconomycompany.

Experimentationiswidespreadaspotentialfundersfacecrowdsofhopefulstoutingthelatest“UberofX.”BeforeCompareandShare,aworldwidedirectoryaggregatingsharingeconomywebsites,shutinFebruary2016,ithadover8,000platformslisted.Similarly,inMarch2016,AngelList,aleadingonlinemarketplaceforstart-upinvestors,hadover5,700privateonlinemarketplacecompaniesforthosewithdeeppocketstochoosefrom.

Inadditiontohighprofilesuccesses,somuchactivityalsobringsfrequentfailures.Thisismorethantheinevitablehighchurnofsmallentrepreneurialefforts.Therehavealsobeensomelargecasualties:Quirky,asiteforcrowd-sourcinginventions,hadraised$181minseedcapital,andHomejoy,acleaningservicesplatform,nearly$40mbythetimebothshutin2015.

Companies are still figuring out what worksThehighlyunevensuccessofaccesseconomyfirmsisareminderofhowthistypeofactivityisstillpoorlyunderstood.MaxLoosen—co-founderandCEOofSingapore-basedSendhelper,anaccesseconomyplatformforcleaningandotherhouseholdtasks—notesthat“thisisstillnewterritoryforalotofpeople.”UberandAirBnBhavebeensuccessful,headds,butinmanysectorshowtousethismodelforbasicssuchasscreeningandmonitoringforquality,orautomatingkeyprocesses,isstillbeingfiguredout.Forsuccessfulcompanies,evensomethingasbasicasfromwhomtheyaredrawingbusiness,isnotalwaysclear:astudyofAirBnB’simpactinAustin,Texasfoundthatitwashavingthebiggest

effectonveryshortstaysatlow-endhotels,butoneinNewYorkCityinsteadindicatedthatmanycustomersuseditforstaysofseveralmonthslong.2

Moreover,itisfarfromclearwherethemodelwillwork.Indeed,anumberofassumptionshavequicklyturnedouttobeflawed.Anearlyargumentforthesharingeconomy,forexample,wasthatmostpeopledidnotactuallyusemanypossessions—powertoolswerethemostcommonexample—morethanahandfuloftimes.Itthereforemadesensetorentratherthanownthese.However,whileamarketforpeer-to-peeraccommodationrentalclearlyexists,numerousplatformswhichaimedtogaintheapparentlyobviousmarketforpeer-to-peertoolrentalquicklyfailed.3

Is the ‘Uberisation’ of customer service coming to Asia?Oneareawheretheaccesseconomy,oron-demand,modelhasyettohaveanoticeableimpactiscustomerservice.Thepotentialislargeasoutsourcinginthisareaisalreadyfrequent.AworldwidesurveyofcompaniespublishedbyDeloittein2014reportedthatoverhalfalreadyhadthirdpartieshandlingbasiccustomerenquiries.4Meanwhile,RadiantInsights,amarketresearchcompany,estimatesthattheglobalvalueofoutsourcedcustomerinteractionactivitywas$52bnin2014andexpectedtogrowto$69bnby2020.5

ForAsia-Pacificcompanies,thisisalsoanareawherechangeisexpected.A2016EconomistIntelligenceUnitsurveyofseniorexecutivesfromtheregioninretailandtelecomscompaniesaswellasstateorganisationsconductedforthisresearch,foundthat82%expectedon-demandcustomerservicetobeavailableintheirindustryinthenextthreeyears.Itseemsasafebetthatanynumberoffirmswillatleasttrytomeetthisexpectation:ahandfulworldwidehave

2IzabellaKaminska,“Sharingeconomydisruption,maybenotsodisruptive?”July2015,Financial Times;GeorgiosZervasetal.,“TheRiseoftheSharingEconomy:EstimatingtheImpactofAirbnbontheHotelIndustry,”2016,http://people.bu.edu/zg/publications/airbnb.pdf;

3SeeSarahKessler,“The‘SharingEconomy’IsDead,AndWeKilledIt.”Fast Company,September2015.

4 2014 Global Outsourcing and Insourcing Survey: 2014 and beyond,December2014.

5 Global Outsourced Customer Care Services Market Trends, Growth and Forecast Report Up To 2020,November2015.



targetedthissectorand,giventhehugenumberofon-demandeconomycompaniesstartingup,somewilljointhem.ThisEIUstudy,sponsoredbyGenesys,willlookatthepotentialforsuch

companiestogainacceptanceanddisturbtheexistingcustomerserviceindustry,aswellasconsideringcurrentbarrierstoon-demandcustomerservicedelivery.



A market eager for disruption2The buyers are ready Asiancustomerserviceprofessionalsinretailing,telecoms,andgovernmentorganisations—herereferredtoascustomerservicebuyers—donotsimplyexpecton-demandofferings:theyareurgentlylookingforchangeinafieldwhichtheyregardashavingsubstantialstrategicimportancetothebusinessoverall.Amajority(54%)oftheserespondentssaythat,whencomparedwithotherareas,customerserviceiscurrentlyaveryimportantinvestmentpriorityfortheentirecompany.Ifweaddinthosewhocallitsomewhatimportant,thisbringsthetotalfigureto90%.Lookingahead,thisdegreeofimportanceisexpectedtobethesameinthreeyears’time.

Viewsonthisquestionsetapartthosecompaniescurrentlydoingwellfromstragglers.Inoursurvey,respondentswereaskedtobenchmarktheprofitabilityoftheirfirmsagainstpeers.Amongthosewhichreportthehighestlevelsof

relativeprofitability(“profitleaders”),80%alsocallcustomerserviceaveryimportantpriority;amongthosewithaverageorweakerprofitability(“profitlaggards”),thefigureisjust35%.

Whileintentoninvestingincustomerservice,manyseecurrentofferingsasinsufficient.Fully58%ofdemand-siderespondentsbelievethatelementsofthecustomerservicefunctionareripefordisruptionandonly8%disagree.Thisisnotmerelytheopinionofover-demandingbuyers.Whenaskedthesamequestion,mostprovidersofthirdpartycustomerservicewereunsure(59%)butfarmorethoughttheopportunityfordisruptionexists(35%)thandisagreed(7%).(Figure2)ChristianViatte—CEOofMila,aplatformprovidingon-demandcrowdcustomerservicesfortelecoms,energycompaniesandretailers—isnotsurprised.Inhisindustry,henotes,“Manytelecomoperatorsknowthattheyhavetotransformtheircustomerserviceandneednewideaswheretheycanbemoreefficient.”

“Manytelecomoperatorsknowthattheyhavetotransformtheircustomerserviceandneednewideaswheretheycanbemoreefficient.”Christian Viatte—CEO of Mila

Elements of the customer service function are ripe for disruption(% of respondents)

Disagree

Neither agree or disagree

Agree

Figure 2

35%58%

59%35%

7%8%

Supply side Demand side

Source: Economist Intelligence Unit



Accordingly,headds,thepotentialofon-demandcustomerserviceisgrowingwithalargenumberoffirms“lookingforsuchasolution.”Thesurveynumbersstronglybackhimup.Amongcustomerservicebuyerssurveyed,80%saythattheirorganisationwillinvestinanon-demandofferingifitbecomesavailableintheirindustry,whileamere4%woulddefinitelynot.Thisismorethananice-to-have:itisamatterofurgency.Two-thirdsofcustomerservicebuyersgosofarastosaythat“managingthetransitiontoanon-demandcustomerserviceofferingwillseparatesuccessfulfirmsfromfailingonesintheneartomid-term;”amere6%disagree.

Again,thedatasetsapartprofitleadersandlaggards.Amongtheformer,93%reportthattheirbusinesswouldinvestinon-demandcustomerserviceifitbecomesavailableintheneartermandthesamehighnumberalsobelievethatasuccessfultransitioninthiswillsetapartsuccessfulandunsuccessfulfirmsverysoon.Theequivalentfigureforlaggards17%inbothcases.

It’s about a lot more than cost reductionThereasonforthehighstakesassignedtoon-demandcustomerserviceistheunderlyinghopeofwhatcompaniesexpecttogetfromsuchanoffering.

Theheadlinevaluepropositionofaccesseconomycompaniesistypicallysomecombinationoflowpriceandconvenience.MrViatteexplains,though,thatforthoselookingtousesome

formofon-demandcustomerservice“It’snotjustaboutcostsaving.Everybodywantstodifferentiatewithcustomerservice.Whatyougain[fromanon-demandmodel]isabettercustomerexperiencemaybeatthesamecostor,insomecases,alowerone.”Asfigure4shows,surveyrespondentsagree.Amongbuyers,lowercustomerservicespending,andevenreducedoveralloperatingcosts,arerelativelyminorattractions.Insteadbuyersexpectthebiggestgainfromon-demandservicetobeimprovedcustomersatisfaction(43%),improvedcustomerretention(32%),andbettercompetitivepositioning(28%).

MrLoosenwarnsthatthisapparentdifferencefromusersofotheraccesseconomyservicesshouldnotbeover-emphasised.“Attheendoftheday,”hesays,“nomatterhowpeoplegettoyourplatform,theyexpectquality.Qualityisthemostimportantthing,”notsimplylowprice.

Thestrongeremphasisonthepotentialforbettercustomersatisfaction,though,doespointtoaspecificunmetneed,whichcustomerservicebuyersarehopingon-demandmodelscanfinallyfulfil.MrViatteexplainsthat“thepressuretohavegoodserviceandafastreactiontimeishigh.”Foratelecomcompany,whereacustomer’sconnectionisakeyinfrastructureservice,thisisobviouslythecasebut,hesaysthattoday,forexample,someonemightequallyexpectspeedyactiontohelpassembleabarbequegrill.However,“customerservicethatcancommittoreactingtoeveryproblemwithin24hoursisnearlyimpossibleforasingle

Leaders are closely monitoring on-demand(% of respondents)

Would invest in on-demandcustomer service

On-demand customer servicewill separate successful and

unsuccessful firms

Figure 3

17%93%

17%93%

Profit laggards Profit leaders




company.Butifyouhaveacrowd,consistingofprivateindividuals,staffandexternalprofessionalserviceproviders,youcanreactfast,”headds.

Suchacapacitywouldexplaintheexpectedroleofon-demandserviceinwinnowingsuccessfulfromunsuccessfulcompaniesnotedearlier.Eightypercentofcustomerservicebuyerssaythatcustomerexperienceisimportantfor

Expected benefits of on-demand customer service(% of buyers)

Improved flexibility

Better competitive positioning

Improved customer retention

Improved customer satisfaction

Better customer journeys

Reduced operating costs

Increased revenue through betterchannel management

There are no perceived benefits ofon-demand customers service

Improved morale among employees

Fewer negative comments orreviews from customers

Lower cost of customer service

Figure 4

43%

32%

28%

25%

23%

22%

22%

19%

16%

16%

6%


differentiatingtheirbrandandtheelementsofthecustomerexperiencewhichplaythegreatestpartinsuchdifferentiationareeaseofaccess(41%)andspeedofresolution(36%).Improvementsintheseareas,whichanaccesseconomymodelmightprovidebutareimpossiblewithexistingprocesses,arewhatraiseson-demandcustomerservicefromaninterestingmethodofcostreductionto—especiallyforleadingcompanies—apotentiallykeystrategictool.



Hesitant suppliers3What, worry, me?Ifthoseresponsibleforcustomerserviceatorganisationsareeagertoembracetheaccesseconomy,currentthird-partyprovidersaremuchmoreambivalent.

Ontheonehand,surveyrespondentsfromthisgroup(“customerserviceproviders”)aresurprisinglyreadytoadmittheweaknessesintheircurrentoffering.Only12%calltheircompany’soverallofferingandchannels“verysuccessful.”Instead,45%saythattheyare,atbest,“neithersuccessfulnorunsuccessful.”(Figure5)

Thisstronglysuggestsanindustryreadyforashake-up.Insomeways,theindustryseemstoagree.Respondentsfromcustomerserviceprovidersreportthat40%oftheirworktimeiscurrentlyspentoncreatingnew,disruptivecustomerserviceproductsorofferings,afiguretheyexpecttorisetohalfinthreeyears.Similarly,35%ofthisgroupclaimtobeclosely

monitoringon-demanddevelopmentsinotherindustriesandareinterestedinhowtheycanapplythemtotheirown.

Acloserlookatthedata,though,indicatesthatthisactivitymasksalackoffocusonrealchange.Nearlytwiceasmanycustomerservicebuyers(67%)asprovidersaremonitoringon-demanddevelopmentselsewherewithaneyetochangingtheirownindustry.AsMsRinneputsit,“Sometimesexecutivesaresofocusedonthecorethattheyfailtoseewhatisontheperiphery—whichiswheretheforcesshapingthefutureoftenaretakingshape.”

Moreover,despitetheamountoftheworkdaydevotedtonewcustomerservicechannelsandofferings,only28%ofcustomerserviceproviderrespondentssaythattheseareveryimportanttotheircompanies,afigureexpectedtoseeverylittlechangeoverthenextthreeyears.Justasimportant,amajorityaresimplyunsurechangeisevenonthecards—59%neitheragreenordisagree

How suppliers characterise their customer service offering and channels(% of respondents)

Somewhat unsuccessful

Neither successful nor unsuccessful

Somewhat successful

Very successful

Not successful at all

Figure 5

12%

43%

29%

12%

4%




thatelementsofcustomerserviceareripefordisruption—letalonewhetheranon-demandmodelwouldbetheagentofsuchchange:53%areuncertainwhetheracompetitorofferingsuchaservicewouldbedisruptivetotheirowncompany.Finally,only24%believethatcallcentres—oneofthemostfrequentlyoutsourcedpartsofcustomerservice—areveryopentodisruptionfrominnovationorincreasedcompetition.

The calm before the stormInotherwords,eitherthecustomerservicebuyers,especiallythosefromleadingcompanies,areanxiousforaproductthatisunlikelytoworkanyway,orprovidersdonotseewhatisabouttohitthem.

Thehistoryofdisruption,andofaccesseconomycompaniesinothersectors,suggeststhatthelatterismorelikely.Ifcustomerserviceisdisrupted,

itwouldnotbethefirstindustrysupportingaspecificcorporatefunction.MsRinne,whoisalsoaqualifiedattorney,notesthatcompaniesareincreasinglyturningawayfromthepracticeofusinglargelawfirmsforexternalcounselinfavourofon-demandplatformssuchasUpCounselandPrioriLegal.“Traditionallegalservicesareverymuchonthechoppingblock,forbothsupply-anddemand-sidereasons,”shebelieves.

Suchanexample,though,maynotaffectexecutivesatincumbentcustomerservicefirms.MrLoosennotesthat,manycurrentleadersineveryindustry“arehesitantaboutchange.Tryingnewthingsmightnotmakesenseforaninstitutionthatalreadymakesmoney.Itisalsodifficulttogetthroughthebureaucracy.”Instead,headds,“Newmarketentrantsaredefinitelywheredisruptiveinnovationscomefromanoverwhelmingmajorityofthetime.Start-upsareusedtotakingrisks.”

Only 24% believe that call centres—one of the most frequently outsourced parts of customer service—are very open to disruption from innovation or increased competition

Theverypresenceofsomanyon-demandplayerswillalmostcertainlyleadtosomeexperimentingwiththecustomerservicearea.AgoodexampleisZurich-basedMila.In2013,itbeganasaplatformaimedatthosewishingforhelpwithsmalltasks,suchaspickingupgroceriesorassemblingflat-packfurniture—similartotheAmericancompanyTaskRabbit.Soon,though,itbeganco-operatingwiththeSwisstelephonecompanySwisscominthecreationofSwisscomFriends.Thisplatformallowsuserstogethelpfromneighbourswithtechnicalknow-howforIT-relatedtasks,suchassettingupanewpersonalcomputer.

MrViatte,whoatthetimewasheadofserviceexperienceandinnovationforSwisscom,recallsthatthetelecomcompany’sthinkingoriginallywasonlytangentiallyabouttraditionalcustomerserviceresources.Atthetime,“wewereoftenaskedforadvicewithproductswhichwerenotfromSwisscom.Wesawthatwehadpotentialforanadditionalcustomerservicechannel,inparticularapaidone.Customerswereveryhappywiththat.”

AlthoughtheoriginaldriverwastodealwithrequeststhatwerenotcoretoSwisscom’sbusiness,hecontinues,“wearenowbringinginsomecorebusinessthingstobeservicedbythecrowd.”Inparticular,thefirmisdisruptingitsownpaidservice

installation.NewSwisscomInternetcustomershavealwayshadtheoptionofinstallingtheservicethemselvesforfreeorpayingforaprofessionalfromthecompany.Now,SwisscomFriendsprovidesalowcostoption,makinganewconnectionmoreappealingtomoreprice-consciousconsumerswithoutthetechnologicalskillstodotheworkontheirown.

Thus,inlessthanthreeyears,MilahastravelledfromamodelsimilartoTaskRabbittoonewhichhasbegunprovidingelementsofcustomerserviceforalargetelecomsprovider.Indeed,itsimportancetoSwisscomissuchthatthecompanyhasboughtamajoritystake,althoughMila’splatformstillservicesothermajortechnologycompaniesinSwitzerland.Suchapivot,saysMrLoosen,happens“alotmoreoftenthanpeoplethink.Itisalmosttherule,nottheexception.”

Currentthirdpartyproviderswouldbeextremelyluckyifnoneoftheseon-demandexperimentersfoundabusinessmodeltodisruptanindustrywhichexecutivesadmitiscurrentlyonlysomewhatsuccessfulatmeetingmarketneeds.AsMsRinneputsit“wehaven’tseenmuchlikethis[on-demandcustomerservice],butitisinthebull’seyeofwherethingsmighthead.It’sabsolutelyfeasibleandinmyopinionamattermoreofmonthsratherthanyearsbeforeweseesignificantinroadsbeingmade.”

Experimenting at Mila





The on-demand customer service model4

Still very much a work in progressForcustomerservicebuyers,simplywishingforanon-demandsolutionwillnotmakeitso.Surveyrespondentsareundernoillusionthatlargebarriersremain.

Puttinginplaceappropriatetechnology,althoughstillanimportantconsideration,seemstobelessofachallengethanonemightexpect.Workinthisareaisstillclearlyrequired:62%ofrespondentssaythattoimplementon-demandcustomerservicetechnologywillneedtoimprove.Similarly,respondentsaresplitonwhethertoday’sofferingsaresufficient:45%repliedneworbettertechnologyisnecessaryforcustomerservicefunctionstobeabletotransitiontoanaccesseconomymodel,but54%saidnot.

Ontheotherhand,thesurveyalsoshowsreadinessforrapidadoptionofotherkindsofcuttingedgetechnologybythecustomerservicefunction:overhalf(55%)alreadyusedataanalyticsand30%artificialintelligence.Moreover,asnotedabove,67%ofcustomerservicebuyersaremonitoringon-demanddevelopmentsinotherindustriestoseewhichcanbeappliedintheirown.Moreover,inthecurrentperiodofrapidinnovation,appropriatehardwareandsoftwareisbeginningtoappear.Already,MrViattenotes,settingupthenecessarysoftwareandplatformisthemoststraightforwardpartofcreatingthistypeofcustomerservice—butitisalsoonlythebeginning,hewarns.

Theremainingproblemsarefundamentalones.Asinotherpartsoftheaccesseconomy,thebestoperatingmodelisstillunclear.Forty-onepercentofallrespondentsbelievenewrelevantproductofferingsorservicemodelsareneededbeforecustomerservicecanbecomeanon-demandoffering.Amongthemostsenior,decision-makingexecutives—theC-suite—thisrisesto60%.

Managing performance Aparticularcomplicationisthatthemostsuccessfulcurrentaccesseconomymodelsfacilitatetransactionsbetweensupplierandconsumer.Althoughcommercialrelationshipswithothersuppliers—suchashotelsortaxifirms—maybedisrupted,thecompanieslosingmoneyarenotinvolvedintheAirBnBorUbertransaction.

Withcustomerservice,thingsaremorecomplex.Howwellservicesuppliersperformreflectsbothonthemselvesandonthereputationofathirdparty—thecompanythatprovidedtheoriginalproductorservice.MrViatteexplainsthatMila,whenactingonbehalfofSwisscomorotherfirms,isprovidingaBtoBtoCservicewhichmayalsoendup,tosomedegree,disruptingthecontractingbusiness’ownexistingcustomerservice.MrLoosenaddsthat“addingextrasteps[toanaccesseconomymodel]likethisisabigchallenge,whichgenerallyrequiresmoremanualinterventionandmoreroomforhumanerror.Itisnicetohaveanentitythatcandirectcustomerstotherightpersonbutthatpersonhastogetpaid,bemanaged,anddeliveracertainstandardofquality.”

24% expect managing customer engagement to be a leading challenge



MsRinnepointsoutthat,consistentwithMila’sexperience,anyemergingmodelforon-demandcustomerserviceislikelytostartwithaspecificelementofthefunction.Shenotesthatoneofthefrequentreasonsforthefailureofaccesseconomystart-upsisanattempttobetoocomprehensive.“Tryingtobe‘everythingforeveryone’significantlyincreasestheeffortrequiredtobuildacriticalmassofsupplyanddemandtobematched,andincreasestheriskthatyou’llfallshortofexpectations.Rather,onceyouhaveprovenyourworthinnarrowverticals,thenyoubuildout.”Accordingly,sherecommendsthatentrantsstartwithoneorafewofthemostimportantelementsofcustomerserviceand,oncetheseareinplace,seektobecomemorecomprehensive.

Therelativenoveltyandlackofestablishedaccesseconomymodelsforcustomerservicemeanthatrespondentsalsofacesomekeypracticalrequirementsforsuccess.Themajority(57%)willneedimprovedcustomerserviceprocessesandnearlyaquarter(24%)expectmanagingcustomerengagementtobealeadingchallenge.(Figures6&7)Anevenbiggerissue,though,isskills.Thisisoneofthemostfrequentlymentionedkeyelementsforasuccessfultransitiontoanon-demandmodel(53%)anda

lackofskillsisthelargestsinglemajorbarriertosuchaswitch(27%).(Figure7)Notsurprisingly,62%ofcustomerservicebuyerssaythatimplementationofon-demandcustomerserviceattheirfirmwillnecessitatemoretraining.

Skillsfornewprocesseswillbeaconsiderationforinternalemployees,butthebiggerquestionwillbefindingandmanagingthoseabilitiesamongtheexternalindividualsbeingbroughtintoprovidecustomerserviceondemand.Thisneedstogobeyondsimplyhavingalistofindividualswiththerequisiteskills.MrViattesaysthatitisessentialto“lookintherightplacesforqualifiedpeopleandtomanageandbringthemtogetherinordertobuildupacommunity.”Oncethatcommunityisinplace,however,thesecondbiggestbarrierseenbyrespondents—qualitymanagementofexternalserviceproviders(24%)—turnsouttobelessofanissuethanmightbeexpected.(Figure7)AsMrViatteputsit,becauseofcustomerratingsystemsandthenon-employeerelationshipwithexternalproviders“Ifsomebodygivesbadserviceyoucanexcludethemfromtheplatform.Youhavecontrolofthequalityandcanmanageitverywell.Meanwhiletheproviders,becauseoftheratingandcompensationsystem,arereallymotivatedtogiveagoodservice.”

Key steps needed to implement on-demand customer service(% of respondents)

Hiring vendors/consultants

Improving processes

Training people

Improving technologies

Hiring new people

Figure 6

62%

62%

57%

33%

33%

Partnerships with other companies 31%




Simultaneousintroductionofanovelcustomerservicemodelwithuncertainprocessandskillsrequirementswillmakeanimmediate,complete

Main challenges in implementing on-demand customer service(% of respondents)

Limited funding for implementation

Managing engagement with the customer

Quality management of on-demandservice providers

Lack of skills among staff

Lack of on-demand products or services

Lack of technology skills

Training of on-demand service providers

On-demand customer service is unlikelyto ever be a viable option

Regulations limiting implementation

Managing an ecosystem of on-demandsuppliers

Lack of as yet proven model to attractpurchasers of service

Figure 7

27%

24%

24%

21%

14%

14%

13%

13%

12%

12%

8%


switchovertoon-demandtoodaunting.Instead,astheMilacaseagainshows,itisanidealcandidateforfieldexperimentationattheedgeof

Ingredients needed to transition to an on-demand offering(% of respondents)

Improved/new technologies

Management support

People, eg skill levels

Customer/client demand

New product offerings/models of service provision

Improved regulation of relationship between buyerand seller of third party customer service

Integration of existing technologies

Volatility or uncertainty of demand forcustomer service

Funding, eg required investment

Figure 8

53%

53%

50%

46%

41%

40%

32%

32%

25%




thecompany,allowingongoingadjustmentandimprovementbeforeitisrolledoutmorebroadly.

Beyondthesepracticalissues,though,loomtwobiggerconsiderationswhichareessentialforanylargebusinessmodelchangegettingcustomersandseniorleadershiponboard.Fifty-threepercentofrespondentsciteclientdemandasanecessaryingredientofthetransitiontoanon-demandcustomerservicefunctionand50%saythesameofmanagementsupport,makingthesethetopandthirdmostcommonanswerstothisquestion.(Figure8)

MrViatteexplainsthatneitherisstraightforward.Henotesthat,unlikeforhailingataxi,“customerswillnotnecessarilyrememberthe[on-demandcustomerservice]platformwhentheyneedit.Youcan’tjustsetupaplatform.

Youhavetogodirectlytotheplaceswherethecustomersarewhentheyneedtheservice.”Usinganalyticsandmultiplechannelstocommunicateandreachcustomersatpoint-of-needisthereforeessential.MsRinneaddsthattrustisjustasimportantasawareness:“Trustisthe essentiallubricantoftheentiresystem.Withouttrust,notonlywillitbehardertoscale,butyourentirebusinessmodelwillbeatrisk.”

Asfortheotherkeystakeholder,management,MrViattesaysthatthemostimportantlessonfromhisexperienceofcreatinganon-demandservicechannelis,“youneedareallygoodsponsorinthecompanybecausepeoplearescaredaboutthis.Somearenotevensureaboutwhatitis.”Withoutleadership,thischangewillsimplynothappen.



Thecustomerisstillking.Lastyear,inThe value of experience: How the C-suite values customer experience in the digital age,theEIUfoundthat89%ofAsia-Pacificcompaniesconsideredcustomerexperiencetobeavery,orsomewhatimportant,investmentpriority.Now,90%saythesameofcustomerservice.Thisexplainsonelastkeyfindingfromthesurvey.Theveryrealhurdlestoovercomeintheracetowardon-demandcustomerservicewillnotdampenenthusiasmforit:68%ofcustomerservicebuyerssaytheircompanieswouldintroduceanon-demandmodelevenifitbroughtsignificantchangesinhowtheyoperate.

Thecustomerservicefunctionandindustry,then,facesalmostinevitabledisruptionascurrentthirdpartyprovidersadmittoalackofserviceexcellenceandbuyersarekeenfornewmodels.Thishasimplicationsforboth.

Third-partyproviderscannotcontinuetowhistlepastthegraveyardwhichcouldpotentiallybetherestingplaceoftheirowncompaniesverysoon.Perhapsthemostimportantthingforthesectoristoshrugoffcurrentuncertaintyandeither,makeastrategicchoicetorejecttheon-demandmodelasinherentlyflawed,ortoacceptitslikelycomingandprepareforit.Attheveryleastthisshouldinvolvemoreattentiontohowtheaccesseconomyisaffectingothersectors—at

themomentonlyhalfasmanycustomerserviceproviderskeepacloseeyeonthisascustomerservicebuyers.Providersshouldalsobewareofon-demandcustomerservicestart-ups,aspossiblemodelstoemulateorevencompaniestoacquire.

Customerservicebuyers,meanwhile,mustbeginwrestlingwiththerealitiesoftheon-demandprovisiontheysoclearlywant.Thereisasyetnoclearroadmaptothisdestination.Thebestadviceistostartsmall,innarrowareas,andbuildfromthere.Thiscannot,however,behalf-heartedtinkering.SwisscomFriends’experienceindicatesthatleadershipcommitmenttoengagingisessential.

Evenwithcommitment,though,aclearroadmaptoon-demandcustomerserviceislacking.Companieswillhavetodevelopprocessesand—throughtrainingoroutsourcing—gainaccesstotheskillsthenatureofwhichwillonlybecomeapparentasimplementationproceeds.Thismakesthefieldanaturaloneforexperimentationbeforescalingup.

Somewillfindthisnerve-wracking,butthatispartofsuccessfullynegotiatingatransitionthattwothirdsofexecutivescurrentlybelievewillmeanthedifferencebetweencommercialsuccessandfailureinthecomingyears.

Conclusion

68% of companies would introduce an on-demand model even if it brought significant changes in how they operate



1. Embrace disruption:On-demandcustomerservicecanbringabettercustomerexperiencewithcostsavings—theproductsaren’tavailableyet,butbereadywhentheyare

2. Get management on-board:Transitioningtoanewon-demandbusinessmodelwillrequirefullsupportofmanagement,becausefailuretomanagethechangemightseparatewinnersandlosers

3. Train people:Anon-demandcustomerservicemodelwillrequireachangeinprocessesandtechnologies—staffwillneedtobetrainedtomanagethesechanges

4. Improve technology:InvestmentinnewcuttingedgetechnologiessuchasbigdataandAIwillbeneededtotransitiontoanon-demandmodel

Next steps for on-demand leaders

Cover image - David Simonds

While every effort has been taken to verify the accuracy of this information, The Economist Intelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in this report.

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