Customer Knowledge Management.

By Alan Cooper

Every year seems to have its favourite theme topic. Over the last year, at an ever increasing frequency, I have noticed the subject of Knowledge Management appearing, and I suspect that the topic will continue to run through this year as well. Knowledge Management is invariably related to organisational knowledge. One can speculate why this is a hot subject.

Maybe it's a realisation that with the recent wave of rationalisation and delayering, much knowledge has simply walked out (or was booted out) of the door. As the economy once more enters a growth period, companies are reporting a shortage of people able to innovate, develop and launch new products and services, as well as the associated processes that will deliver customer delight.

Waiting in the wings, as the cavalry ready to come to the rescue, are the IT companies with software and systems to capture, analyse, and disseminate organisational knowledge. Likewise, service companies are ready with organisational improvement to develop and motivate staff to acquire, share and use appropriate knowledge. Not wanting to repeat past mistakes, one of the aims this time around is to capture and secure in a usable form, the knowledge that is embedded within the organisation.

Whilst companies may have lost knowledge when they "let their employees go", hopefully they have managed to retain most of their customers. These customers will have knowledge. Knowledge about how well or not so well the company's products and services meets their needs, what indeed are their needs and aspirations, how easy it is to interact with the company, and knowledge about how they (the customers) are coping with life's pressures. This last example highlights what I believe will come to be an increasingly important offering by companies. This is the provision of process to assist customers in particular circumstances, or indeed throughout their life. Processes for helping people to question, interpret, simulate, and adapt to all that life throws at them. Thus customer's processes will become integral with company processes.

A classic example within financial services is the search and acquisition of a house, plus the likely sale of the current home. Some company's web sites do indeed have checklists and help files, but I am thinking of something more proactive and integrated. For instance, a company could map out the whole process, from choosing an appropriate location with easy access to schools, right though the financial and legal steps, to eventually informing the utilities about the impending relocation. A customer could then select which steps he or she will undertake and which ones the company will handle. Companies could define a fee, no fee or discounts depending on the customers lifetime value. By integrating and co-ordinating the processes, customers only enter information once, at the appropriate time, and then it is shared amongst all the relevant parties.

Do companies have processes in place to capture and exploit such customer knowledge, even for the most basic of processes? My experience suggests not. I have a Premier Line service with my telecomms provider, a major provider who is suffering from customer attrition. A ripple now, but one forecast to grow into a flow with the spread of cable, wireless, and satellite transmission systems - one guess who it is! Recently I need to change my Friends and Family numbers. My first attempt was in the evening. A voice message asked me to confirm I had a tone 'phone, then to enter my telephone number, and then my account number. At this point I had to discontinue the call and find my latest bill and then try again. Then I received a message saying the service was closed and asking me to call in the daytime. (Now the system had my telephone number, why couldn't it call me at a preferred time?). Next day I repeated this boring process (doesn't the company use its own Called ID technology to determine the caller, with a "press 1 if you are calling from your home address" message?). Never mind, at last I get through to a customer service clerk. Then what am I asked for? You've guessed - my telephone number and my account number! On protesting that I had just provided this, he said the information was not available to him. When suggesting that the process or systems should be changed, and would he please pass on my suggestion, I was told that there was no process for passing on a customer's idea. With a professional interest in processes, I am increasingly making suggestions to companies, but the same "not possible" response is all too typical.

What I am proposing is that companies need to have knowledge capture processes that extend beyond the organisational boundary. Processes that extend to suppliers and distributors as well as customers. Increasing these interactions are being conducted electronically. First came EDI, with its emphasis on formal transactions between buyers and suppliers, such as purchase orders and invoices. More recently retailer's loyalty cards are capturing "softer" information such as buying behaviours and preferences.

Now the Internet is embracing product requests, needs assessments, purchases, credit assessments, service calls, and the like.

My recent research into insurance companies shows that they are far from ready with processes that integrate smoothly with their established non electronic processes, let alone with developing new processes such as capturing customer suggestions. I suspect many are terrified at a possible explosion of electronic communications because they are so ill equipped to handle it. Besides the Internet, there are other mediums that may well prove to be more of a mass market medium. Web TV and Interactive TV, public kiosk systems, mobile and fixed smart phones, with e-mail and fax facilities built-in, could well proliferate. In the future, customers or prospects will be able to respond to "click here" buttons on the TV ads in order to request product details or to have an agent call them back.

Telesales centres will need to handle sudden peaks of calls. Matrixx for example, can off-load UK 0800 telephone calls to their US centres who have access to the same scripts and product information.

Because these mediums are interactive, they provide an opportunity for continuous and regular dialogue that can provide a steady stream of quantitative and qualitative consumer data. R&D departments could monitor pre-sales and service inquiries, whether directed to humans or to the companies electronic catalogues. They could fire-back more probing questions to identify lead customers, seeking to embrace them into virtual panels and encouraging them to participate in interactive focus groups.

Some companies are using advanced systems. BroadVision's One-to-One application system can monitor and record each visit that a customer makes to a company's web site. So, for example, if a customer repeatedly looks at a particular product but makes no purchase, it can offer an instant discount. Similarly, to avoid customers being overwhelmed by 1,000s of products, the system can provide each customer with a personalised product list based on their individual profiles. The system determines an appropriate response through rules that are defined and changed by marketers, not technologists. With these type of systems, further integration is likely with links to customer service systems. It will also be possible for customers to switch from one interactive medium to another, as well as to customer service clerks, without ever having to repeat any facts.

With these proactive marketing and selling systems, by using advanced data mining and visualisation systems employing neural networks, the systems can generate personalised outbound messages and propositions. Barnes & Noble, Inc., the US Internet book-shop, is able to suggest books by matching lifestyle profiles to those of other similar readers and then looking up the books they have purchased. Capital One in the US is able to analyse 200 million customer credit records that in some instances go back to 1954.

Using proprietary algorithms, they are identifying customer behaviours as a means of developing thousands of different credit card product combinations. Capital One then mails these unique propositions only to the relevant low-risk, high-return customers. Capital One, in partnership with the Royal Bank of Scotland, is soon to open a centre in the UK.

Many readers will recognise elements of Don Peppers' and Martha Rogers' 1to 1 Marketing in the above. One of the inhibitors to 1 to 1 Marketing is its perceived cost. In part, this is a perception problem, particularly with marketers brought up in a mass market, short term culture. One of the most exciting developments is that of Mass Customisation, a concept first created by Stan Davis in Future Perfect, and then in 1993 developed by B. Joseph Pine II in his book Mass Customisation.

With Mass Customisation, companies are building unique custom products and services for the same cost as their mass market competitors. For example, a credit card with a choice of interest rates, pay-back periods, minimum amounts, cash withdrawals, reward schemes, charitable donations, insurance protection, geographical use, fixed fee or no fee, and so on. The availability of these new interactive mediums now provides an opportunity to put Pine's ideas into practice.

But besides technology, it needs other organisational changes. A key process change for realising Mass Customisation is to consolidate research, design and sales into a step prior to production. Customers then interact with a company's design system to build their own unique product, and even perhaps subject them to simulation under varying circumstances. They may do this directly by selecting product components, or through questions and answers dialogues. This interaction may be in one sitting or over an extended period of time. This Mass Customisation is a step beyond the frequent use of Mass Personalisation. With Mass Personalisation, customers simply select additional optional features to a core pre-manufactured product, for example, by embellishing a drinking mug with a their name.

Driving Mass Customisation systems are business rules that ensure the assembly of only valid combinations of components. The assembly process will need supporting by the now established techniques like zero inventories, Just-in-Time deliveries, logistics management, real-time credit approval, etc.. Short product development cycles are an instant by-product of Mass Customisation.

Once the customer has purchased his or her product or service, then a company needs to keep an exact record of the unique product so as to support later servicing, either by the head office or by field staff. Where a customer could at a later date sell such a product to another person, it might make sense to embed the build specification into the product itself. Further, if the product contained diagnostic and communications software, the service engineer can arrive with the right replacement parts.

To start with, only some customers may have the inclination to undertake this Mass Customisation process. Nether-the-less, this small group will form an important source of ideas that will be applicable to other customers and prospects. Products developed by these lead customers could be offered to others who have the same profile, perhaps through more traditional channels such as a sales force, direct mail, or the various media. These forward looking lead customers will also provide a useful source of ideas about the user dialogue of the design system.

Undoubtedly, in the coming year we shall read much about Knowledge Management. I look forward to learning about organisations who are taking a holistic approach. One that involves individual suppliers, distributors and customers all working together for their mutual benefit. I also expect to see more examples of mass customisation that are exploiting the flexibility, intimate dialogue and immediacy of the new interactive mediums.

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