Transcript
Speaker: Digitization of the customer experience. Are we there yet? Find out on the next episode of The Market That Moves America. Welcome to The Market That Moves America, a podcast from the National Center for the Middle Market, which will educate you about the challenges facing mid -sized companies and help you take advantage of new opportunities.
Speaker: Today's podcast is about customer experience, and in particular, about how middle market companies can use digital tools to transform the ways in which they connect with customers and beat their competitors. I'm Tom Stewart. I'm the executive director of the National Center for the Middle Market at the Ohio State University Fisher College of Business.
Speaker: We are the nation's leading research group studying mid -sized companies, which account for about a third of private sector employment and GDP, and the lion's share of economic growth. It is the market that moves America. The National Center for the Middle Market is a partnership between Ohio State and SunTrust Banks, Grant Thornton LLP, and Cisco Systems.
Speaker: And with me today is a special guest, Jeff Sherritts from Cisco Systems. He's a senior VP at Cisco, focuses on what Cisco calls the commercial business, which roughly maps to the middle market. He's also a member of NCMM's Oversight Board. Jeff, welcome.
Speaker: Thanks, Tom. It's great to be here. It's been a great partnership over the years with the National Center for the Mid Market. It's critical research that candidly hasn't existed for years for middle market companies. And I know we at Cisco are happy to be a part of the organization. And the research that we've done together is certainly providing a lot of value to our customers.
Speaker: At the same time, it's really important to me at Cisco because, you know, the part of business that I run within the company is really focused on our middle market customers. So obviously that research can play with my teams and with our customers and partners that we work with in that space. So it's so it's really great to be here. And, you know, hey, the added benefit is I'm an Ohio State graduate as well. So it's that's always an extra bonus. So oh, right. Yeah, that's right. I owe.
Speaker: You bet. So let me begin with a couple of points and maybe a little data to set the stage. And first, and also to thank you for that encomium. We really have enjoyed working with you guys. But as you're listening to this, we think about the digitization of the customer experience. And when you think about this just as a consumer, as an ordinary person walking or driving down the street, if you think about
Speaker: What has happened to the way in which you interact with companies? And you can think of like the biggest purchase that a person makes these, you know, in his or her lifetime, that of a house. Think about how the ways of buying a house have changed as, you know, Zillow and other things have come at Redfin and Zillow have become the way in which you look for houses, look inside houses and so on and so forth. And it's not just a matter of going down the main street and seeing all the pictures in the Realtors window, right?
Speaker: Or think about buying a car, and again, think about how the experience of that second -biggest consumer purchase has been transformed by digitization. And think about all these things, like buying shoes and so on and so forth, that can be done digitally now.
Speaker: You wouldn't have imagined being done digitally before. I mean, Jeff, from your standpoint, you look out at companies selling business to business, business to consumer. What do you see in the transformation of this landscape from a customer experience point of view?
Speaker: Yeah, Tom, as you stated, I don't think you have to be in the tech industry to see how things are changing from a customer experience perspective. All of us understand as consumers that this is going on, and the expectation about how we want to interact with companies is certainly changed and continues to change.
Speaker: I think what we see is all companies including middle market companies are being impacted by what we call kind of this digital transformation that's going on and customer experience is obviously a critical component of that overall transformation for most companies and i think you know in the research report that you guys put out i think fifty five percent
Speaker: of the companies say they aren't proactively focused on the customer experience aspect of their digital transformation, that most of the focus is really on the back office. And I think that's where companies like Cisco come to play. We've built our own digitization office to conduct research in this area, as well as we partner with organizations like yours at the National Center for the Mid Market to help our mid -sized companies accelerate
Speaker: their transformation to be more competitive in the marketplace and you know reality is we understand that building a secure digital foundation that support the back office all the way through to the customer facing parts of the business are critical to the future success of any company whether it's large or small what i like most about specifically in the mid market space is that
Speaker: The move to digitization actually presents a huge opportunity for smaller companies to disrupt the market. If they build these digital capabilities to make life easier for consumers and maybe I could just share with you a quick story and this is one I often tell when I'm out with clients, but if you look at a company like Dollar Shave Club.
Speaker: It's a great story. By the way, this isn't a Cisco example. This is just one that I think is very interesting. What they saw was an opportunity in the market to service consumers in a different way and a new way, basically selling razor blades. And they spun up this company back in 2011. They built a platform to service this opportunity. And what they did is they provided cost -effective and easy access
Speaker: For consumers to razor blades right and who would have thought to you know a long standing very successful industry for a lot of years. But as they entered the marketplace and created this new customer experience what they did is they were able to ramp the revenue to two hundred million dollars in just six months.
Speaker: They were only in business for five years and they had over $3 .2 million members in their portfolio. And after that five -year period of being in business, they took 15 points of market share from Gillette and Chick.
Speaker: And then in 2016, about a year ago, they actually sold the company after being in business for five years for a billion dollars to Unilever. So when you think about that customer experience, that transformation that they made and they created in the marketplace, and you see the market value, they were able to create a very short order in just five short years.
Speaker: you can see when you get this right it can have a significant impact on your business you know it's really interesting when you think about you know the old the classic to let business model which is raising raises and blades we sell the razor but we make the money selling the blades and what dollar shave club did is it basically used a digital platform to.
Speaker: pull the rug out from under that model and sort of said, you know, you can do this online. And one of the interesting things about razor blades is you've always got extras, right? I mean, if you go to the store and buy Gillette blades or whatever it is, you know, you're always sitting on a little bit of inventory, so it's not as if you need the
Speaker: You need it right now. You're always buying a little bit of extra, so it's perfectly suited to this. But you were making me thinking of something that is also one of my favorite digitization of the customer experience examples, because it's so counterintuitive, is Warby Parker. And who would have thought 10 years ago that people might start buying prescription eyeglasses
Speaker: And in fact, that's an interesting example because now they have a whole bunch of stores, but they created the stores almost by accident. Their intention had been to be 100 % digital. But the business took off so fast.
Speaker: that they were running out of sample eyeglass frames to mail to people. And so they invited people to come to their—I think it was at their apartment in Philadelphia at that point, and that gave them the idea of sort of, gee, let's create stores. So they went from digital to analog rather than analog to digital. But it's another one of those examples of taking something, and the experience of buying glasses from them is completely different from the experience of going to the optometrist.
Speaker: Yeah, Tom, it's another great example. And I think when you think about those two examples, what it just says to you that this transformation cuts across every industry, every product, big or small, you know, the market is being disrupted and the way in which you engage your consumers and customers is going to be critical to your long term success as an organization.
Speaker: It's not just disruption, too. It's also like—digital can be a really interesting way of solving pain points. And, you know, one of my favorite—some people like me are old enough to remember the pain point of bankers' hours when you couldn't get your money out of the bank after 3 o 'clock, and you could never get money out of the bank on a weekend.
Speaker: And the ATM, which is 50 years old this year, by the way, is an example of solving that pain point. And it's also interesting because it's basically the first time that consumers would actually interact directly with—you mentioned that back office IT. Now, suddenly, in the old days, the back office banking IT was only touched by a teller.
Speaker: but now the consumer would touch it. And so that created this whole question of what a user interface is like, which is interesting. But I'm intrigued also by solving this pain point. I know you guys worked with Panera, is it? On solving the pain point of what do you do when you've got a line and you're hungry and it's lunch? Yeah, it was actually one of our better working relationships and engagements we had. And I think it's interesting as we talk about, regardless of industry, companies,
Speaker: Are starting to say themselves okay at some point it doesn't matter if we have the best pizza or we have the best shoes or clothes or whatever whatever it might be if we aren't creating that enjoyable and easy to use experience for our customers that we're gonna you know really struggle from a business perspective and I think Panera Panera bread is an example of you know somebody has embraced
Speaker: that thought process and really transform the way they interact with their customers. They were seeing, to your point, Tom, they were seeing big traffic jams during peak hours in the restaurant chain that was having a negative impact on customer satisfaction and revenues. And in fact, when the leadership team at Panera found out that the long wait times often led the customer attrition, they really took a step back and said, we got to do something different.
Speaker: And here's what we realized it if they wanted to stay relevant in the marketplace they needed to transform that entire experience to the customers and so we work together and we were lucky enough to help them along with some of our ecosystem partners to really drive to their business model transformation which they call penera 2 .0 which was an investment in the customer enabled by technology and powered by operational excellence.
Speaker: And what this initiative did is it included things like rapid pickup so that you can place an order online and it's ready and waiting for you to take away when you get to the store. It had in store ordering via mobile devices. They had fast lane kiosks for dine in or to go orders.
Speaker: And when you think about all these digital features, what it allowed Panera to do was track and monitor customer analytics and therefore continually enhance that customer service and product development within the stores. And as a result thus far, since the introduction of Panera 2 .0,
Speaker: They've seen more seamless in -store traffic flow from dine -in and carry out customers and faster service for to -go customers. Digital sales now account for almost 24 % of their total sales. Wow. A company and their company -owned restaurants, which is pretty transformational when you think about it, and more than 40 % of Panera's catering business orders occur digitally now.
Speaker: And then when you think additionally, when they did some surveys after this process was in place for about a year, customer satisfaction at the restaurant chain showed that Panera topped the survey from a rankings perspective and attributed the company's Panera 2 .0 initiative to leading this survey, which was kind of a survey that was done across the entire industry.
Speaker: really transformational and really forced them to step back and really think about how they did things to really enhance that customer experience for what is a pretty
Speaker: you know, what used to be a pretty basic experience of going into a fast, quick service restaurant chain and ordering food and those kinds of things. You know, you said something really interesting at the beginning. Actually, you said something interesting throughout the Panera story. But at the beginning, you said you mentioned something fascinating. You said it's not necessarily
Speaker: Enough to have the best pizza or the best product and Panera doesn't sell pizza and actually the data that we have from this study on digitization of the customer experience I love the subtitle of the sites called digitization of the customer experience. Are we there yet? And one of the data points is that consumers
Speaker: rank product or service quality, number one. That's their number one concern. And their number two concern is experience. And price ranks third. And experience seems to be coming up.
Speaker: And I think that that's a stunning realization that, and indeed in many cases, experience is quality. You've got the quality of the bread, the quality of the meat, the quality of this, that, and the other. But the quality of the experience is absolutely critical when you're making that decision to turn left or turn right to go to this place or that place for lunch.
Speaker: But it's also, I mean, I'm just thinking also of a place of places where you have a more captive customers like medical care and health care, which is what, 16 percent of the economy where, again, really complex interactions. But experience is just about as important a medical consideration as the technical quality of the care. Yeah, I couldn't I couldn't agree more, Tom, and, you know,
Speaker: I think at the end of the day, it's important because it's your health, right? And it's kind of everything. And, you know, technology, I think, is truly revolutionized the health care industry and the way the health care is being delivered, the way health data is being processed across systems and providers. Let me let me share a quick example with you. You know, we were working with a company called Mercy Healthcare, which I think many, many may be familiar with. But what Mercy was trying to do is they wanted to reach more patients in more places.
Speaker: And they wanted to provide better care to those patients and provide more accessible care in some remote areas to those patients. And more specifically, some of the chronic patients, if you think about patients that require that ongoing care on a pretty regular basis. So I'm coming back. I've got diabetes. I'm coming back every month for checkups and so on and so forth. Yeah.
Speaker: Yeah, Tom, you know, you know, I mean, if I had diabetes. Yeah, right. Yeah, that's what I meant. Yes. But patients like that. Yeah. Turn to technology. And basically what they did is they engaged a number of different technology companies. And collectively, we created an initiative called Mercy Virtual. And what Mercy Virtual was is basically allowed the medical teams to have an always on view of their patients and an always on capability of transacting and interacting with those patients.
Speaker: And we work with them and also one of our technology partners worldwide technology to build a digital platform for Mercy to share that patient information and provide remote video access to those patients wherever they may exist.
Speaker: And one of the applications that they provided was kind of an engagement at home application. And what it allowed them to do is access those patients in real time, no matter where they were, and really accelerate the care and improve the care experience. It allowed those patients to have less trips back and forth to the hospital, let's say in remote areas where they had to drive three or four hours. And the result was just a better patient experience.
Speaker: Within one year of this Mercy Virtual System being launched, they saw a 50 % reduction in preventable readmissions from patients. They saw a 35 % reduction in the days spent in the hospital by those patients and thus improving care, improving the experience.
Speaker: and lowering costs so you can see a real transformational opportunity that took place at Mercy and really changing that patient experience, right? Jeff, dial down a little bit. Often when people think or when I think digital, I think Amazon, I think Facebook, I think Apple, I think these mega corporate, I think Cisco, right? I think about these mega corporations, but some of these stories that you've been telling, is there a unique
Speaker: or maybe a really critical opportunity that mid -sized companies need to seize or can seize. If I'm running a $100 million materials company or a $50 million retailer, when I think about digitizing the customer experience from the standpoint of being middle -sized,
Speaker: First of all, what's the opportunity I need to be thinking about? And second of all, do I need to be thinking about going at it differently from the way a Fortune 500 company might? I think the advantage in what we see with our middle market customers is, you know, they tend to be, number one, is most of our middle market customers tend to leverage technology to differentiate themselves from the much larger players in the marketplace.
Speaker: And then if you think about that, and then how do they leverage this digital transformation and these new capabilities that are starting to exist in the marketplace, whether it be applications or custom built software, those kinds of things to really change and transform that experience.
Speaker: I think the opportunity for mid -market companies is they can move quickly. They move much faster than some of the larger players. It allows them to enter markets much faster. They can enter markets leveraging some of these digital platforms globally. They can scale the business in a much, much faster way.
Speaker: And that's what we see i mean when i look at mid market and smaller companies it's just the speed to market and their ability to be nimble to really transform and disrupt the larger players in the marketplace is really the key opportunity as i see it right so i can be on your computer or your phone virtually.
Speaker: I don't have to build a storefront. Basically, I can build virtual scale that allows me to compete with the big guys without building physical scale or before I build physical scale.
Speaker: Yeah, I mean, just time to market and the cost to enter is certainly, you know, as technology becomes more pervasive, the cost and the investment of that technology certainly continues to come down as well, right? It's like Moore's Law. So, you know, time to get into the market, cost to get into the market and disrupt some of these areas is, you know, I think the mid market firms
Speaker: don't carry a lot of the legacy, so it allows them to really think differently and approach markets in a much different way, similar to what we talked about with Dollar Shave Club and some of the other examples I provided. Yeah. One of the things I know, we should probably wrap this up in a minute or two, but I'm thinking one of the things that the study shows is that B2C companies tend to be in advance of B2B companies in this digitization of the customer experience. But that opportunity is just as big in B2B, isn't it?
Speaker: Yeah, I mean, I think it is we obviously, you know, in the customers we support, we have a number that aren't, you know, directly to the consumer, but, but certainly are always thinking about how they digitize and improve their business, you know, and still really change the game. And I think some of some of you may be familiar with the company called Nusa yogurt.
Speaker: Nooses mission is to bring the highest quality yogurt to the marketplace. And I think Tom, they were featured in one of your mid market customers of the month. Yeah, companies a month. Yeah. Mm hmm. Good yogurt. Nooses. They're privately held production company that I think operates in Colorado. They've been around since 2010. So they've been in business about seven, eight years. They're one of the fastest growing yogurt companies in the country.
Speaker: And they operate out of a the morning fresh dairy out in colorado. So they actually own their own
Speaker: cows, they grow their own feed, which is one of the strategic advantages they have to bring that quality to the marketplace. And a few years ago, they'd been challenged as they tried to scale their business to maintain that quality, to improve the safety of their product from a food safety perspective, and also reduce the product loss as they were working through manufacturing. And what we did is we actually helped them
Speaker: Build the digital foundation in their plant environment that allow them to access data and add add value capabilities to that network from a video perspective to do things like reduce production loss increase uptime and ensure food safety as i described a little bit and by implementing that digital foundation throughout their plant.
Speaker: They were able to reduce their downtime pretty significantly from a processing perspective. They were able to reduce their loss during the processing. So they had situations where they were losing product and different components of the yogurt out during the manufacturing process. And by leveraging some of the video capabilities, they were able to catch that quickly, shut that down and reduce the overall loss, which was costing them thousands, hundreds of thousands of dollars.
Speaker: And then they were also able to ensure safety and ensure the quality of their product by the way they monitor their lines in their production facilities by leveraging this digital platform of sensors and video technology across the production facility. So an example of how a B2B company is transforming their process to ensure the quality is delivered to their customer, right? I'm going to make a bad pun about how this helped them improve their corporate culture with it being a yogurt company.
Speaker: but let me wrap this up and see if I can put a couple of, sort of underscore a couple of things. The study that we did, Emp pointed out a few things. One is that it's hard. One is that customer experience is really important. I mentioned that earlier. A second is that it's hard and that there are real challenges in managing the conflict between what you might call the digital and the analog parts of the business, the new business and the old or the different functions and silos. It's really hard to create
Speaker: an omni -channel or a whole length of the customer journey, digital experience, which is part of the Newsy yogurt experience, but also what we're talking about with Panera and how the multiple ways of getting a sandwich and also Mercy Healthcare. So the omni -channel is really hard. But one of the other things we found, and I just want to emphasize this, is that the companies that got it right, the one out of five companies that we call digitally strategic, were growing
Speaker: twice as fast as the others. So there's like this hockey stick of rewards from investing in the digitization of the customer experience. And that I think is one of the things that we learned from this study. Jeff Sherratt, it's been really great to have you here. Where can people learn more about digitization of the customer experience and the stuff that you guys do?
Speaker: If they want to learn more from a Cisco perspective, certainly they can go to cisco .com. And there's specific information on cisco .com that would share with them some of the stories that I described as well as a host of other information around digital transformation, kind of not only, like I said, customer stories, but just general information about the transformation that's taking place across all industries.
Speaker: And for those of you who want to learn more about the study that we've just released, the digitization of the customer experience, are we there yet? Please check us out at middlemarketcenter .org. I want to thank you very much for listening to The Market That Moves America.
Speaker: And thank you, Jeff, for joining us today. Never miss a new episode. You can subscribe to the podcast on iTunes, Stitcher, or Google Play, or wherever fine podcasts can be found. Or you can subscribe and learn more about us at our website, which is middlemarketcenter .org. Thanks very much.
