“Stop Discussing and Start Doing”: McKinsey on Creating Exceptional Omnichannel Experiences

Rafaella Binachi
Posted: 05/25/2016

Omnichannel

Creating a seamless experience for your customers across all the different platforms – website, mobile app, social platforms, in-store, broker network, etc. - through which they interact with your company is not easy. Company cultures, departmental siloes, lack of digital skills, and IT backlogs top the list of challenges. But the benefits of getting it right are plentiful: better customer experience, lower cost to serve and acquire customers and improved operational efficiencies.

In this PEX Network interview, Michal Cermak, Partner with McKinsey in Prague and Raffaella Bianchi, Senior Expert in McKinsey’s Milan office share strategies on how to overcome the common pitfalls and why it’s important to “just get started” rather than trying to come up with the perfect strategy.

PEX Network: How would you define omnichannel and what does it really mean to create an exceptional omnichannel experience?

Michal Cermak: Omnichannel is a popular word and it gets bandied about. However, it is very important to really understand what it means. We define omnichannel as a set of journeys and the way customers are treated when they move between the channels. The customers can choose which channels they want to start in and in which they finish and the whole journey should be smooth. It should be well managed, and the customers should feel like they are interacting with one company instead of standalone and disconnected channels.

PEX Network: So examples of the different channels would be online, mobile, in-store, etc.?

Michal Cermak: Exactly. There are a variety of channels. In the digital space you may have the website, the mobile app, and the social platforms. In the physical channels, you may have stores, call centers, door to door, agents, dealers, etc. in some cases, you have more than ten channels to reach the customer and you need to orchestrate them to really create a seamless omnichannel experience.

PEX Network: Why should companies care about this? What’s the benefit to companies of doing this well?

Michal Cermak: Many companies think that the reason for doing this is only for the benefit of the customer. They believe that it’s all about the customer experience, that this is what customers want and therefore the company has to deliver. But, actually, there are many business benefits in addition to improving the customer experience. For instance, companies should be thinking about benefits of improved sales productivity as well as reduction of cost to serve the customers. What we often see in the omnichannel journey is that customers get lost and as a result they don’t complete the transaction and instead go to the competition or contact the company many times, hence increasing costs.

A great omnichannel experience can help increase sales by 20-30% simply because you actually follow up on the customers and make sure that they don’t get lost.  On the customer care side, meanwhile, you can steer your customers to the channels that are low cost for you and which provide the full experience such as mobile applications. This again gives a 20-30%, even a 40% cost reduction opportunity if you do it well.

PEX Network: Raffaella, could you take us through an example of a company that actually has done this well?

Raffaella Bianchi: There are some pure online players that started online and now they are moving into the offline world, creating an omnichannel experience in the process.

Traditional brick and mortar companies, on the other hand, have more problems moving from offline to an omni and digital world. But, while the majority are struggling, there are some good examples of some companies that are doing this well, especially in the retail sector. For example, when in the shop, they know everything about the customer, what the customer did on the web, if they placed a comment on social, if they called a call center, what they have in the basket. There are also some retailers that deliver a great digital experience in the traditional shops, complementing the digital world in their traditional outlets.

PEX Network: You have mentioned retail. Are there other industries that you can see are ripe for this sort of omnichannel thinking?

Michal Cermak: This topic is definitely relevant in financial services and telecommunications where customers are looking for services. These are typically contractual payments or contractual commitments that are much more difficult to deliver than just buying a camera and shipping it. This is where the customers are looking for a great omnichannel experience. The companies we know are working very hard, so they have actually put in place lots of the ideas and advice and now they are on the journey to improve.

Raffaella Bianchi: More broadly, this is a topic relevant for many companies because if we take all the products, we can see that already up to 40% of the customer base of selected sectors is having an omnichannel experience and one-fourth of them are having a digital one. So this is becoming an important topic for many industries regardless of the specific sectors, so sooner or later most companies will have to face this.

PEX Network: You’ve mentioned a few times that this is quite hard to do. Where do companies commonly go wrong and why do you think it is so difficult to do this well?

Raffaella Bianchi: There are a few common mistakes that we clearly see. The first one is when it is not a top-down transformation. Most of the time we see digital and omnichannel structured two or three layers below the CEO and this already gives the signal of not being important in a traditional bricks and mortar company. When a unit is further down in the organizational structure it is very difficult to orchestrate and synchronize with the other channels.

The second one comes from the siloed approach of traditional companies that are organized in units. Most of the time they even compete with each other and this does not help in coordinating an omnichannel seamless experience.

Then there are also problems in terms of capabilities and skills internally. Digital is something new also to many of the employees so speaking and understanding digital and therefore translating it into digital processes and digital solutions and products is even more complex. Additionally, IT is not making it easy because digital and omnichannel requires agility and speed, and the traditional way of implementing IT in multiple releases with feasibility evaluations takes longer than is needed.

Michal Cermak: The IT challenge is usually a trap for companies because they often think they need to buy new platforms, they need to replace the customer relationship management systems. So often when they do the digital omnichannel requirements, they end up with a big IT project and they realize it will take them two years to implement and migrate the customer and it will be expensive. Even if they complete the IT project, it might not be the right thing for them.

So our recommendation is that sometimes you should start working even with the current IT, with a couple of fixes, in a more incremental and agile way to develop the additional capabilities on top and then later make it an IT transformation and scale up.

Raffaella Bianchi: The very last problem we see is that companies think that there is one solution fitting all the customers. Instead, understanding individual client needs and starting from there to build the digital and omnichannel value proposition is going to be key.

PEX Network: I guess that means recognizing that different customers have different needs?

Raffaella Bianchi: Exactly. This effect is multiplied because the same customer across different journeys with the company can have different needs and different preferences. So this increases the complexity of getting it right.

PEX Network: So then to make it right, what are some of the strategies and tactics that you’ve found typically work?

Raffaella Bianchi: The first one is, as I mentioned before, to drive from the top-down. I think it’s important to have the CEO and the board members involved in this transformation and make it a company transformation, not a unit only transformation. The second one is understanding exactly what the strategy has to be and deciding the targets. So is it going to be a “digital” value proposition or an “omnichannel” one, and do we want to do it to optimize the cost, increase the revenue, increase the customer satisfaction, or a combination?

The next step is to redesign the target journey for a client from the top-down perspective. You redesign the ideal end state. Once you have that clear then you need to implement it. It’s really important to create a cross-company team because this is a cross-unit effort. You need to have agile processes and agile developments in place. You need to be really fact based, understand the key performance indicators and the customer reactions to what you are doing. Be very practical, so that you don’t do this ‘forever transformation’ before going live but instead, take practical steps and measure the results.

Michal Cermak: I also think it’s important to just get started. Nobody gets it right the first time, so if you take a long time to think and to discuss and nothing happens, you will not learn. So you should start small, identify one customer journey to tackle, for instance, and bring the right people together. You may not get it right but you will learn from this mistake and then on the second journey you will do better. Over time you will scale up. I think that companies should stop discussing and stop implementing the big plans and projects. They should start on something small, make it work - digital, omnichannel, end to end – then learn from that and go with it.

PEX Network: Who, ideally, in an organization should be driving this? Is this a Sales and Marketing initiative? Or IT? Or Operations? Who leads this?

Michal Cermak: In the end you need all of these functions on board.  I think the leader should be the person who is the specialist and who is the best change agent. But the leader cannot do it alone. He has to put together a cross-functional team. This is the biggest change the company will experience and for many companies this is a critical change. So I would even say that the most talented guy (after the CEO) and the one who is passionate to change the company, should lead it.

Raffaella Bianchi: Given that we want to stress the concept of taking a journey by journey approach, the ideal leader of digital and omnichannel transformation depends on the journey. in the case of I Join —the journey about becoming a client - it might be the marketing and sales lead because they have the higher interest there. For I Change – the journey about changing my product or service - or I Manage my account, it might be a customer operations person. For I Fix a problem, it can be the technical side because they are the ones dealing with this issue. The team is going to be cross-functional but the leader might be different in an orchestrated effort.

Rafaella Binachi
Posted: 05/25/2016

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