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Sunday, 7 February 2010

Systems thinking, Customer Experience and Business Schools

At business schools, knowledge is firmly discipline specific. Strategy, Marketing, Operations Management, OBHRM, Finance - each discipline is a component in the knowledge of business.

When businesses were making cereals, cars, computers and lamps, the disciplinary components and the domain knowledge embedded within them were quite amenable to being transferred to students (MBA etc.) in a component fashion. The old Porterian value chain, value stream and value mapping were reasonably effective in practice, and there were clear boundaries between customers and firms. So students could learn marketing, OBHRM, ops mgt, strategy etc. as discipline/component knowledge and then go out into the world and apply them. From a systems perspective, the interactions between components, even in practice, were sufficiently weak (although still there) and it allowed firms and business schools to construct departments and disciplines respectively to some degree of success.

As we move to service, my argument is that it all starts breaking down. Although we like to imagine there is still 'a service' delivered to a customer like there is a cup and a lamp, the truth is that this 'service' has very fluid boundaries. Customer 'touchpoints' are many and they are part of the co-creation process, indeed, that is the experience of the service. In the goods dominant world, our 'experience' with what we buy was private. How we use the TV, enjoy the oven or eat our cereal didn't have anything to do with samsung, belling or kelloggs. In the service world, our 'experience' such as banking, maintenance, telecommunication includes contact with the firm, whether directly or indirectly. As business schools, do we have the necessary knowledge to help practitioners deal with this?

As an illustration, I asked a provocative question in twitter, and asked the same of my colleagues in operations management. Who is responsible for the customer experience? In the case of tangible offerings (goods), customer experience is entirely in the customer's hands. For intangible offerings, customer experience, from a systems perspective, is an emergent property. So you think as a firm, we can make a very good TV, we should be able to 'make' a very good customer experience right? Think again. The knowledge to make a good TV profitably (six sigma, lean and all) is not the same knowledge as delivering a good restaurant experience profitably. The former is very much a 'click and play' integration of non-interactive component based knowledge. And a good TV is not an emergent property. It is a property of manufacturing and we can control it to such a great degree that we have terms such as six sigma to measure the logical value of the TV. Customer experience is an emergent property of a system of interactions with the firm, with other customers etc. etc.

So let's ask some rather basic questions about this emergent property.

Who is responsible for customer experience? The answer is, of course, everyone and every discipline, but we know what happens when we say everyone - it basically means no one. Just like public goods. No ownership means no one will do anything about it. Business Schools haven't even come round to discussing this yet - simply because no discipline owns the problem, the problem doesn't exist right? Ops discusses the process of delivery, but does not go anywhere near the psycho-social aspects of the customer experience. Marketing will discuss psycho-social aspects to death, but won't go near the actual delivery of what has been promised (seen as an ops domain). OBHRM still treat employees as though they are assets to the company, rather than valued by the customer. Strategy is still living in the Porterian world and has not even yet acknowledge that the new resource within the firm is that of the customer's. The best part is... here comes the punchline... if we had all the knowledge of marketing, ops, OBHRM, strategy and finance, we assume they would somehow all came together to have the knowledge to deliver a customer experience - plug and play right? (like the community example below?) No....... Sigh. You know what is scary? Customer experience is what the customer pays for, the source of firm's revenues.... we are in so much trouble...

How should the customer experience be designed? This is a tricky question. It is clearly not fully an adaptive system, unlike swarms of bees or other ecological systems. The firm clearly does design something. So we are looking at a system that has some aspect of deterministic structure, but- I will keep arguing this - the deterministic structures do not determine the emergent property of customer experience - it determines a secondary component that interacts with the customer to arrive at that emergent property. If any firm thinks they can design customer experience, they are dead wrong. What they can design, though, is how the system could be regulated, stabilized, and design interventions for better adaptation to customer consumption behaviors (for more on such tools, read up on cybernetics).

What is the knowledge required to design and deliver customer experience? Now this is interesting. If you've read my previous post, my criticism of component based understanding is that they implicitly assume elements of the whole are the same when examined independently of the whole as when they are examined as a whole. So if you take a service business as a system inclusive of the customer with the emergent property as customer experience, are business schools teaching the right thing by teaching component based knowledge as though they can be learnt without the interactions with other disciplines/functions in the system they need to function in? Is our disciplinary knowledge wrong as more offerings in the service economy become more integrated and more complex? I don't think I'm that much a heretic. To say that it is all wrong would be too drastic. There are some good tenets of component knowledge in there but disciplines have to get out of feeling too full of themselves and the 'legacy knowledge' they hold and start teaching component and interactive knowledge. Business schools are missing the parts of the component knowledge that really really need adapting for systems thinking to understand service.

And just in case you're thinking practice is where integration happens and what they (students) need to learn are the theories back in the business school, I would suggest you go back to my systems post again. Component level theories could be wrong if interactivity within a system is not factored in. In the old days, I would agree that disciplinary knowledge can be learnt in school and our students go into the firm and integrated all they knew with what they did and it helped. In the modern economy, some of the component knowledge could set them back. We are just simply not giving our students enough knowledge to operate in the modern economy.

I'm in the midst of writing a book on my learning development from practitioner to academic - a 14 year journey from a CEO running a cruise line with a turnover of USD250m to a Professor on research projects. Given that this rather autobiographical account is probably of interest to an audience of 1 (and I don't even count my husband), I'm doing it as a hobby. But I find it interesting as I write because I realize much of my transdisciplinarity comes from a practice legacy. I believe business schools have not developed enough pedagogical tools to harness practice experience into theoretical domains, particularly around business as systems. I believe, as baby boomers retire, many practitioners could help business school academics learn the art of transdisciplinarity - not in practice, but in theories - just as I have learnt it. But the politics of academia would most likely push them away (after all, they do come from 2 different power bases and each base is a threat to the other). Still, even as a lone voice, I will keep trying. Wish me luck.


  1. Hi Irene
    great article on customer experience. Do u have a methodology to design a customer experiece for internal and external audience.

  2. A methodology? Well, cybernetics give very good insights on the principles behind designing systems but when applied to customer experience, a rather advanced level of conceptual expertise is probably needed so that they can be translated into the context you want.

    In a few months, I am starting a project on metrics development of value co-creation (essentially the activity behind customer experience) and we would be using some of the tenets of systems thinking in creating a generic design for customer experience so follow my blog and I'll keep everyone posted!

  3. Chaltrav

    There are a number of CEx design methodolgies out there from, e.g. Smith & Co, Beyond Philosophy, GCCEM and Prophet to name but a few. None of then take an explicit value-in-use perspective.

    The best CEx designers today are almost certainly service designers like Designthinkers in NL, and LiveWork and Engine Service Design in the UK. These have used a combination of an understanding of customer value-in-use allied with a co-creative design thinking approach for CEX design for some time now.

    Take a look at the three service design agencies outlines above. I am sure you won't be disappointed.

    Graham Hill
    Customer-centric Innovator

  4. Irene, I really enjoyed this post - you raised some excellent questions and points. Btw, you can make it an audience of 2 for your book :-) -- as a transdisciplinarian myself (practitioner ->academic ->practioner) and a perpetual seeker of knowledge, I am definitely interested in hearing about your viewpoints (I myself have a couple of thoughts on this).

    Specific to the post, I just wanted to share some of my own thoughts around this. I am in complete agreement with you on (a) customer experience being an emergent property, and (b) the need for our business schools to get out of the "component mode" of teaching/thinking. The one area where I would slightly differ with you is the differentiation you made relative to the tangible/intangible offerings. I really think (my opinion) that it does not matter whether a firm is a manufacturing company (tangible goods) or a service firm (intangible goods) -- they have to worry about customer experience and take a broader look at their ecosystem. Even a firm producing a super product will eventually fall if they ignore the interactions, perceptions, reactions, and social behavior of their customers.

    In terms of the business schools learning the "art of transdisciplinarity", quite a few things need to fall into place.

    a) The schools need to rethink their Key Success Metrics. Many schools reward and promote the faculty based on how they did on certain institutional KPIs (enrollments, grants, publications etc.) and not what is really good for the students in the long run.

    b) Gone are the days where knowledge and its application were "limited". In today's world, there is an exponential flow of new knowledge everyday and so what you learn in school could be outdated by the time you get a chance to apply it. The schools therefore need to start building a structure around teaching the "process" of acquiring and linking knowledge than just the static content in the books. This will greatly benefit the student in their later life by allowing them to continuously learn, synthesize and apply new information to the task at hand.

    c) The schools need to get away from the insane focus on assessments -- what this does is to force many of the students into studying just enough to 'pass' the course. There has to be more creative ways of measuring/judging the learning.

    d) You talk about practioners helping business schools - totally agree. However, I would state this the other way around -- the future success of an educational institution will depend on how good it is at creating an ecosystem of colloboration & networking with multiple external influencers (practitioners being one; the departments within the school being another, alumni being another; government and other agencies being yet another...). As you allude to in your post, today's businesses need to understand more than just 'Marketing' or 'Operations' - one needs to leverage sociology, marketing,value delivery, consumer psychology etc.. to keep on top of understanding their customer's interactions and experience. So it is better for the students to get a 'feel' for this inter-discipliniary process while they are in school.

    And lastly, you talk about knowledge required for customer experience and ownership. These past few years I have been championing the use of Analytics to drive customer experience. All the data in the world is useless if you cannot make sense of it. A firm with a solid customer analytics department can (a) synthesize the data from multiple channels (sales, customer service, web, marketing, etc.), (b) provide valuable information on what worked and what did not, and (c) give guidance through valuable trends and ACTIONABLE insights. By extension, I have been telling my academic friends that the business schools need to give more focus on analytics as that can be a glue that brings things together.

    Again, a great post.

    Ned Kumar (@nedkumar)

  5. Hi Ned

    Thanks for your comments - totally agree about tangible/intangible - I usually say this so that those from the old era can see the disruption in thinking but yes, they should definitely have a broader view of the customer ecosystem!

    Thanks for 'following'! Nice to know this blog is being appreciated!


  6. Hi irene.

    As a former Exeter student, with modules such as pricing and revenue management, your blog is not only interesting on a 'that is my old lecturer-level', but also of value to my masters thesis focusing on the strategic development and control of experiences..

    Actually I remember asking you of how to pursue a career in brand management, when you said that it was all about services and the pricing thereof.. Somehow this must have made sense, as that would be the direction that I am headed now..


    As I have created an organisational experience foundation, of which experiences are strategically developed, implemented and controlled based on internal and external aspects, I now focus on the actual experience creation. This involves focusing on metrics - already covered - Touchpoints, and co-creation with an overall aim of customer value creation.

    Since you write about experiences and the confusion or lack of real thought within this area, I want to ask you which touchpoints you believe to be of importance when creating experiences, and how these should be controlled?

    I completely agree with your view on the creation of experiences, as the organisation can only do so much, making the consumer him/herself of importance, making it even more interesting to understand your thoughts on the creation and usage of touchpoints..


  7. A Good Customer Experience is when the customer feels that particular interaction happened as or better than they expected it to. Anyways, thanks for sharing this post!

  8. I've had both great and terrible experience with customer service. The difference was the tone of the individual and the ability to explain difficult things easily.