End-to-end Value Chain Management focused on the Customer Journey

Author: René Eduardo Ortiz González

In a highly competitive and undifferentiated business environment, driven by socially empowered customers with ever-increasing expectations amid digital transformation, success or failure no longer depends on the product, price, or service, but rather on the customer experience at every channel and touchpoint with the brand. A report by Salesforce published in May 2022 (source: https://www.salesforce.com/news/stories/customer-engagement-research/) supports this statement, revealing that an astonishing 88% of respondents acknowledged that the experience a company provides is as important to the customer as its products or services.

However, acknowledging the importance of the customer experience and delivering an outstanding experience are two different things. According to Forrester, the CX Index scores of 19% of brands in the United States regressed in 2022 to levels similar to early 2020, which is attributed to a loss of customer focus (source: https://www.forrester.com/press-newsroom/forrester-us-2022-customer-experience-index/).

Several research studies suggest that management based on "vertical silos" is one of the main obstacles to achieving a memorable customer experience. Therefore, one of the key business challenges is to adopt an end-to-end value chain management approach focused on the customer journey.

Impact of Processes and Behavior on the Customer Experience

An excellent experience is often easier to promise than to deliver. Providing memorable and consistent experiences over time requires impeccable processes and remarkable behaviors at every touchpoint with the brand (see illustration 1).

What images come to mind when you think of a memorable customer experience? For many, it is synonymous with professional and friendly employees willing to go "above and beyond" to delight the customer. However, the kindness and professionalism of employees are necessary but not sufficient conditions to ensure a "five-star" experience. A company may have excellent employees, but if its processes are unable to meet the needs and expectations of its customers with minimal effort, sooner or later their body language will show signs of frustration and helplessness.

According to Gartner, to enhance the customer experience, companies need to shift from an "inside-out" customer-centric approach to an "outside-in" process model based on the customer journey (source: https://www.gartner.com/doc/3168223/connecting-process-customer-customer-journey).

Relationship between Customer Journey Map and Value Stream Map: Case of a Retail Distributor of Oils and Lubricants

A retail distributor of oils and lubricants expects to receive an order within three business days, but after ten days, their supplier has not delivered it, despite being contacted three times. What good are kindness and smiles in that case?

Wait time is often a critical quality requirement for customers, and its extension adds dissatisfaction rather than value. The customer response time largely depends on the Cycle Time of the delivery process, and it is estimated that 90% or more is often consumed by activities that do not add value but contribute significant time and cost to the process.

The relationship between the customer's Wait Time and the Cycle Time of the order delivery process becomes apparent when the customer's Customer Journey Map is interrelated with the supplier's Value Stream Map (see illustration 2).

The quality of the customer's experience (the retail distributor) depends on the effectiveness of various processes that are part of the supplier's Value Stream Map (Order to Cash), such as sales, invoicing, collections, and dispatch.

As the percentage of Complete and On-Time Deliveries increases, Customer Effort tends to decrease, leading to higher satisfaction and a willingness to recommend the brand to friends and colleagues.

Figure 2: Customer Journey Map and Value Stream Map of the Order to Cash Process

The Effectiveness of a process defines the extent to which its outcomes add value and meet the needs and expectations of customers, as well as the objectives of shareholders and other business stakeholders.

A highly effective process has three characteristics:

1. The outputs meet or exceed the customer's quality requirements.

2. The outputs of each subprocess meet the quality requirements of the next subprocess (internal customer).

3. The inputs from suppliers meet the quality requirements of the process (ensuring quality at the source).

Efforts to maximize value and minimize waste based on the principles, systems, and tools of Lean Methodology have a direct influence on optimizing the customer experience, making them components of a comprehensive change methodology that I refer to as "Lean Customer Experience Management."

From this perspective, the impact on the customer experience can be visualized in processes preceding the Order to Cash, including sales forecasting, demand planning, procurement, supplier payment, importation, storage, inventory management, marketing, and sales, among others. Furthermore, it is crucial to recognize the impact of process effectiveness and efficiency on the financials of the business, especially on cash flow (see illustration 3).

Figure 3: Extended Version of the Value Stream Map of the Wholesale Lubricant Distributor

How long does it take to recover the money we pay to Suppliers?

According to the benchmarking standards from the American Productivity and Quality Center (APQC) based on information from 3,879 organizations (American Productivity and Quality Center (APQC). 6 Ways to Improve Cash-to-Cash Cycle Time. January 25, 2018), the average time between paying and receiving payment (Cash-to-Cash Cycle Time) for the worst-performing companies is 80 days or more, while the best-performing companies achieve 30 days or less. The median is 45 days. This means that the best-performing companies "recover" their money in half the time or less compared to the worst-performing ones, and this has a significant impact on the financial health of these organizations.

Efficiency measures the process's ability to meet the needs and expectations of customers with minimal waste and the highest productivity and/or performance in utilizing all the resources employed to generate those results. In general, efficiency is the output obtained per unit of input.

The goal of a "Lean Process" is to "do more with less" (maximizing value while minimizing waste). Unfortunately, many processes are still far from achieving this. The efficiency of a typical process is often below 10%, which means that more than 90% of the process cycle time involves some form of waste.

Process-Based Customer Experience Management Dashboard

We often use a process-based customer experience management dashboard that links the customer's experience at each stage of their journey with the performance of key processes behind each channel and touchpoints with the brand (see illustration 4).

Figure 4: Process-Based Customer Experience Management Dashboard

The Dashboard considers factors such as:

1. Critical actions or interactions in the customer journey.

2. Quality requirements as perceived by the customer.

3. Customer perception at each interaction.

4. Critical business processes that ensure customer quality requirements are met at each interaction.

5. Key indicators to measure and control the performance of each critical process.

6. Indicator behavior is based on pre-defined value ranges in the business indicator traffic light.

In the example I shared in Illustration No. 4, I have selected a key action for the Customer: Order Receipt and Invoicing. After researching the customer's needs and expectations, it was determined that they expect a complete and timely order receipt, free of defects, and with an impeccable invoice to meet their needs. The supplier identified four key processes to meet the customer's needs and expectations upon receiving the shipment: demand forecasting, manufacturing, distribution, and invoicing. Performance indicators were defined to assess these processes' ability to meet the customer's needs, such as Forecast Accuracy and Service Level (% of complete orders delivered on time with a perfect invoice). The Voice of the Customer has listened to understand how they perceive their experience at each interaction with the supplier. This revealed the customer's emotional curve, which has two pain points: waiting for the shipment and order receipt. After measuring the process indicators, their performance was evaluated based on the performance thresholds defined by the corporate traffic light. The color scheme of the traffic light is also used with customer perceptions, transforming the dashboard into a kind of "Color Map" with clearly interpretable visible signals that help identify opportunities to improve the customer experience.

Promoting behaviors based on principles and relationships based on trust.

An optimal customer experience depends not only on processes but also on the behaviors of employees and the quality of relationships with customers, suppliers, shareholders, and communities, as well as among departments, leaders, managers, and front-line and back-end employees, among other business stakeholders. Various studies confirm that "vertical silos" represent the main obstacle to achieving an optimal customer experience. "World-class" organizations are abandoning the traditional functional management style focused on the organization and transitioning to a new end-to-end process management approach centered on the customer. One of the most used strategies to achieve this is through the creation of Value Stream Teams, led by the figure of the Value Stream Manager.

Figure 5: Value Stream Team (e.g., Order to Cash Process)

A Value Stream Team is a multidisciplinary group of individuals who collaborate to optimize a specific value stream. Its members come from the functional areas involved in creating and delivering a tangible outcome for the customer within the boundaries of the corresponding value chain.

The functioning of Value Stream Teams promotes cross-functional collaboration, facilitating the identification and joint resolution of problems. These teams provide a comprehensive vision and holistic understanding of the value stream, which helps optimize processes and generate sustainable improvements in the customer experience.

A Value Stream Team is coordinated and led by a Value Stream Manager, who is responsible for the design, deployment, analysis, and optimization of the value chains under their responsibility throughout their lifecycle. The Value Stream Manager takes responsibility for the effectiveness and efficiency of the value chain, as well as its costs, risks, and level of maturity. Their main role is to manage the value chain from start to finish and coordinate each team member's contribution to problem-solving and continuous process improvement.

Among the functions of the Value Stream Manager are:

1. Coordinate the Value Stream Team: They are responsible for forming and leading the Value Stream Team, ensuring the representation of key stakeholders throughout the process, and promoting effective collaboration among team members.

2. Map and analyze the value stream: Create visual representations of the current and future state of the value stream to identify inefficiencies and improvement opportunities.

3. Reduce waste: Identify and eliminate activities that do not add real value to the customer but generate unnecessary time and costs in the process, such as overproduction, unnecessary movements or transportation, excessive inventory, waiting times, defects, and unnecessary processing.

4. Establish goals and metrics: Define clear objectives for the team and establish key performance indicators (KPIs) to measure the performance of the value stream. Track progress before and after improvements and identify areas for future enhancements.

5. Implement improvements and changes: Based on the analysis of the value stream, guide the team in designing strategies and action plans to implement selected solutions. Manage resistance to change intelligently and ensure proper implementation.

6. Interdepartmental collaboration: Communicate and collaborate with all stakeholders to align efforts, solve problems, and ensure smooth value delivery.

7. Monitoring and follow-up: Constantly monitor the KPIs of the value chain, ensuring compliance with established objectives and adjusting or corrections when necessary.

8. Continuous learning: Promote a culture of constant improvement and learning that fosters innovation and keeps the organization updated with industry best practices.

Summary

In a highly competitive business environment, the customer experience is crucial. However, many brands fail to deliver outstanding experiences due to a lack of customer focus. To optimize the customer journey, companies must adopt a customer-centric, end-to-end process management approach. The efficiency and effectiveness of processes play an important role in the quality of the customer experience. The use of Lean principles, systems, and tools can help minimize waste and maximize customer value. The customer experience can be improved by analyzing the Customer Journey and aligning it with the Value Stream Map. A process-based customer experience management dashboard can help monitor and control critical processes and reveal opportunities for improvement. Value Stream Teams, led by a Value Stream Manager, facilitate cross-functional collaboration and process optimization. The Value Stream Manager coordinates the team, maps the value stream, reduces waste, sets goals and metrics, implements improvements, collaborates with stakeholders, monitors performance, and promotes continuous learning.