Take a look at the diagram in the SMR article an assess your firm on the capabilities listed below each of the three capabilities on the diagram. This will give you a case for action and a place to start
I think it starts by acknowledging that customers, employees, and business partners are the most critical pieces of the puzzle -- they buy your products, and help you make your products. Once everyone in the company gets that, you can start asking the question about how to infuse passion in these relationships and build the emotional connections.
I wanted to ask just one last question and wrap up -- unless anybody lurking out there has any questions to toss in (now's the time!). The question is, where does a company even get started in thinking about data more empathetically? Any suggestions?
Beth, I wouldn't say big data makes it easier -- just that it provides the nessary but not sufficient condition for growth. Big data will reveal patterns and help you make predictions -- then you apply a later of empathy on top of that to interpret and contextualize results. Softscaling includes a set of value and beliefs in the company about how to use big data.
Isilay, Yes, employee loyalty is a big part of the emotional connection. Given weak labor markets US companies may not care right now -- but as things pick up, the war for talent will heat up.
Beth, yes, financial organizations have a great opportunity because they already have "big data!" the challenge is to figure out how to use it well -- instead of simply identifying more products that their customers might want to buy.
Ah Peter. You mention a "culture of debate, informed by data." I was thinking, too, that these companies must have what we hear call the analytics culture -- one in which everybody understands the importance of data and making informed decisions based on it. Would you agree?
But Ritu, financial institutions are at least well aware that they must become more customer friendly. They've got great opportunity, I would think, given the amount of data they amass about their customers
Softscaling requires requires certain capabilities. Companies like Tata Motors, HDFC Bharti Airtel and USAA have strong visions, identities and missions. When there are difficult tradeoffs to make these firms rely on their mission – to empathize with and serve the customer. They also have – despite organizational hierarchies – nurtured a culture of debate – informed with data. USAA is proablably the best SoftScaling company in the US
We believe US companies have to develop their own version of softscaling. Isilay, you are absolutely right. Customer loyalty is a function of the human touch -- and while data provides us with lot's of insights into how customers behave, it will not reveal the explanations for that behavior. That's where the interpretation with empathy comes in.
So what can US companies learn from the research? How can they go about shifting their focus and becoming more empathetic -- or is that even possible with the high levels of automation we see at many US companies today?
When going in for the research we simply wanted to understand what was driving the success of a handful of Indian companies that had become global contendors across a variety of sectors: automobiles, telecommunications, healthcare, etc. So we hand-picked the companies we wanted to study. We did not know then that we would discover "softscaling" -- we were looking for best practice but did not know what we would find
Beth, Tata has outstanding personnel management systems that keep track of all employees and their families. In addition, their HR functions are tasked with using these data to build relationships with employees. So that's the data+empathy connection
My favorite one is about the young man that Tata looked after when his father passed away. I have met him -- he is brilliant, and could go work for anyone in the world. But his loyatly to the Tata company is unwavering.
Absolutely, but scale without a emotional connection creates automated voice response systems and worse. Interestingly we found that Softscaling companies in India spend about 25% less on technology but get 10% more value than the average firms elsewhere.
I would say evolutionary. I believe that losing empathy completely in analyzing and responding to what the data tell you is a losing strategy for the long run. Volatility is bound to occur sooner or later -- as we have seen even in purpotedly stable economies in the Western world.
So what happens then as markets stabilize in places like India? Will companies start optimizing and automating and, therefore, lose that empathy? And, if so, is that necessarily a bad thing? Or more of an evolutionary thing?
My hunch is that they will try to develop their own version of softscaling. We are witnessing soem level of consumer frustration with the intense automation and the lack of human interaction. It is somewhat inevitable.
In volatile environments you need both scale and massive responsivness. Relying predominately on scale doesn't link you to the all the changing trends. Responsiveness does and we found the best way to achieve resposiveness was through an emotional connection to the customer.
If you are in a stable setting, you can afford to swing more towards the optimization side because you face fewer threats. And of course stuff is more predictable -- so, for example, you may have a pretty good sense for what custimers want
I remember a few years back talking to a company -- a big US publisher I think it was -- that was transitioning from a product-centric view to a customer-centric view. The realization it went through sounds sort of similar to the softscaling idea. As US companies become more customer-centric, do you see them embrace softscaling -- whether by that name or other?
In volatile environments customer needs and preferences change very quickly. New segments emerge. The regulatory environment is also in a state of flux. Competition is intense. You need to grow and grow fast -- but at the same time you need to be responsive to market needs. You do that by finding the softscaling balance of optimization and emotion.
India is a country that has experienced phenomenal growth and an opening up of the economy. In some sense that provided the right opportunity for a handful of firms to capitalize on the growth by making the right strategic moves. We had an intution that these companies would teach us something new about managing.....
Sorry. NPS = net promoter score. NPS and similar metrics are incrasingly used by firms to see how their customers feel about their company - are they net promotors or net detractors when they talk about the company. And NPS correlated with future financial performannce
Peter and I thought very hard about an evocative phrase that would describe what these successful Indian companies were doing. Softscaling exemplifies rapid and profitable growth and extensive use of data that is "contextualized" with empathy
Siftscaling. What we saw in these top performing companies was an extraordinary ability to combine optimized process (particularly back end processes) with emotional connection to the customer. And data was the link that gave the left brain analytics and right brain emotives common ground. We called it sofscaling because it combines scale and the softness of the emotional connection.
One of the most compelling statements I heard from a CEO in one of the companies we studied "We love the smell of the customer." This company has outsourced virtually everything except their relationship with the customer. That summarizes it!
Ritu & Peter, a starting point for a data analytics project is "understand the business need." I would imagine more times than not that's "grow profits" or "win business" or somethign along those lines, and not necessarily "think about our customers." No?
Noreen, the answer is no. But the ones who are successful I believe are....data drives profits, but equally data creates better relationships with customers (the warm fuzzies and social value). And it also builds relationships with other partners that is such a critical aspect of social value
The lack of an emotional connection between companies and their customers is very common. Consider how many firms require callers to navigate voice recognition telephone systems. While these automated processes are intended to increase efficiency, they often leave callers frustrated when their voices aren't understood or it takes too many steps to speak with a real person. We feel this focus on optimized systems at the expense of emotional connections can be a dangerous strategy, especially in today's volatile business environment when customers' needs and preferences are changing faster than ever.
I grew up in India and spent the last 25 years in the US -- working with lots of large and small corporations. And of course teaching! I truly believe that India has soem unique insights to offer -- and I wanted the world to hear the story!
I am an Aussie and love MIT. My work centers on the role, value, and governance of digitization in enterprises. Peter joined the Sloan faculty in 2000 to become director of MIT Sloan's Center for Information Systems Research (CISR). MIT CISR is funded by 80 corporate sponsors and patrons, and undertakes practical research on how firms generate business value from IT. Peter is now Chairman of MIT CISR and focuses on globalizing MIT CISR research and delivery.
I am a professor who is keenly interested in understanding how data and information technologies can be used to create economic and social value. Economic value for governments and businesses and social value for individuals and societies!
In a recent MIT Sloan Management Review article, authors Ritu Agarwal and Peter Weill discuss the benefits of combining data with empathy to optimize business results. "The empathic use of data enables companies to be, in effect, left-brained and right-brained simultaneously," they wrote.
It's a fascinating topic that we'll explore with Agarwal and Weill during an e-chat here on Wed., Nov. 14, at 3:00 p.m. ET.
Please join us in the conversation with Agarwal, who is a professor and the Robert H. Smith Dean's Chair of Information Systems at the University of Maryland's Robert H. Smith School of Business, as well as the founder of its Center for Health Information and Decision Systems; and Weill, who is a senior research scientist and chair of the MIT Sloan School of Management's Center for Information Systems Research.
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