The Business Logic Path to Customer Experience

By Roy Barnes, Bob Kelleher

Focusing only on finances misses the point of customer experience. This view that only finances matter, often referred to as “short-termism,” was the subject of an article in the Washington Post by journalist Neil Irwin, titled “How the Cult of Shareholder Value Wrecked American Business.” Irwin writes:

The imperative to boost near-term profits and share prices is a self-reinforcing cycle in which corporate time horizons have become shorter and shorter . . . And the willingness of executives to sacrifice short-term profits to make long-term investments is rapidly disappearing . . . A recent study by the consultants at McKinsey & Co. and Canada’s public pension board found alarming levels of short-termism in the corporate executive suite. They reported that nearly 80 percent of top executives and directors reported feeling most pressured to demonstrate a strong financial performance over a period of two years or less, with only 7 percent feeling pressure to deliver a strong performance over a period of five years or more. They also found that 55 percent of chief financial officers would forgo an attractive investment project today if it would cause the company to even marginally miss its quarterly earnings target.

Translation: No one wants to think long-term. But if all you’re concerned about is appeasing shareholders on a quarterly basis, then you won’t be able to focus on anything but the financials. It’s a little like focusing on the tip of a dog’s tail but overlooking his overall health.

Keep an eye on the entire value chain that produces the financial results your organization is seeking. Financial results don’t just happen — they’re the result of a logical set of interactions among your employees, the business processes they operate, the technology that enables their work, and your customers’ outcomes.

At the very end of this synergist path are the financial results. The business logic path isn’t rocket science. It’s more like cooking. You need all of these ingredients in place to make sure the recipe comes out right. The business logic path is illustrated here.

[Credit: Illustration courtesy of Roy Barnes.]

Credit: Illustration courtesy of Roy Barnes.

No one disputes the logic of this diagram. No one. So why don’t leaders pay more attention to all the inputs, like customer experience, instead of just focusing on financial results? The likely reason is that improving inputs is boring. Worse, making real progress improving them takes substantive and detailed effort over a fairly long period of time.

Unfortunately, sustained and substantive work — even when proven to substantially move the financial needle — is not the forte of most CEOs. Nevertheless, someone in senior leadership has to pay attention to these inputs, including customer experience. Otherwise, it will never become a priority. But who?