Author Archives: Don Smith

About Don Smith

I believe that all business is shifting to co-creating value with employees, customers and partners within service ecosystems. My constellation of experts and I help leaders embrace this shift by excelling in FutureSmith’s Five Competencies of Co-Creation. By harnessing the power of co-creation, senior leaders will make their organizations more nimble, more responsive and best positioned to create long term value and ensure relevance into the future. I draw on a vast range of experience from Fortune 500 IT leadership to several successful entrepreneurial ventures, as well as running a non-profit. I’m a Certified Business Process Professional (CBPP) and Certified Process Expert (CPE) and hold a Bachelor of Arts in Management and Organizational Leadership from George Fox University. I speak, teach, and consult around the world.

The Moment of Truth: A Co-creation Perspective

The term “moment of truth” (MOT) is not new to me and I was happy to learn it was an integral part of the customer-experience community vocabulary.  As I have visited with many in the community, I’ve discovered there are various definitions for MOTs in relation to the customer journey. It is generally agreed that customer interactions are called “touchpoints,” and MOTs are the more significant touchpoints. However, the criteria for what’s “significant” depends on who you talk to. Some say the MOT is at the beginning when the customer decides to accept (or reject) the firm’s offer, while others point to the end of the transaction when they determine whether the whole experience was good or bad. Some identify various touchpoints where significant value is or is not realized. Yet another criteria is a touchpoint that shows the greatest likelihood the customer will “fall off”, or is most likely to end the business relationship. I contend there is too much ambiguity for the term to be useful in the context of a professional discussion.  At a minimum, the customer-experience community needs to agree on a more unified definition. I would go as far as to suggest a slightly different definition – one I think was intended by the first person to use the idiom in these contexts.

Richard Normann (1943-2003) is credited with the first use of the idiom “moment of truth” in a business context. Using the MOT concept, Normann was highly instrumental in the turnaround of Scandinavian Airlines (SAS) in the early 1980s. Jan Carlzon, SAS’s CEO during that time, recounts the turnaround in his book titled Moments of Truth (1987), attesting to the powerful perspective the MOT provides and Normann’s more significant contribution to the effort. By removing MOTs which provided little or no value to their customers, and enabling employees to deliver the best experience possible in those that remained, SAS became profitable again by more than three times the first year target.  They also earned the rank of “top Airline” the same year, and held that distinction for many years.

Normann’s book Service Management: Strategy and Leadership in Service Business, Third edition (2002) gives us the greatest insight to his thought process regarding MOTs. I find it fascinating and affirming that his first reference to MOTs is directly preceded by a discussion about co-creation. Normann says:

“…the customer is often more than just a customer – he is also a participant in the production of the service. A haircut, the cashing of a cheque, education – none of these can conceivably be produced without the participation of the consumer. Thus the service company not only has to get in contact with the consumers and to interact with them socially; it is also necessary to ‘manage’ them as part of the production force.”

Normann is clearly stating that a customer is integral to the value creation process. This is co-creation – the customer and the organization working together to create desired value.  If the customer is not involved, no value is ever created.  No customer, no value.

With this backdrop, Normann introduces the concept of MOTs. He states:

“Most services are the result of social acts which take place in direct contact between the customer and representatives of the service company. To take a metaphor from bullfighting, we could say that the perceived quality is realized at the moment of truth, when the service provider and the service customer confront one another in the arena. At that moment they are very much their own. What happens then can no longer be directly influenced by the company. It is the skill, the motivation and the tools employed by the firm’s representative and the expectations and behavior of the client which together will create the service delivery process. A large service company may well experience tens of thousands of ‘moments of truth’ every day.”

From the very first mention, Normann is clear that when a customer comes into contact with the organization, it is a MOT. The two have come together to accomplish something in relation to creating the value the customer seeks – their job-to-be-done. We know from experience there are often many interactions per customer journey depending on the size of the job-to-be-done.

We also know customers judge the experience of each and every interaction as to perceived quality in relation to its part of accomplishing “the service delivery process”.  Customers have some idea of how much time and effort they should be expending. They have some expectation of how they should feel at a particular point in the process, and they judge the interaction based on whether their expectations were met. The quality of each and every interaction is determined and (either consciously or subconsciously) scored in the mind of the customer. Think of this as a “running score.”

When Normann first introduced the MOT concept, most interactions were face-to-face; but don’t take this too literally.  As technology emerged and matured, Normann realized the potential for applying technology to MOTs.  He says, “…new communication and information technology clearly increase the possibilities to ‘store services’, and to make person-to-person interaction in their provision unnecessary.” Customers understand that automation is still designed and implemented by “faces” in the organization.

Normann also talked about the cumulative and/or knock-on effects of MOTs:

“There is a well-known dynamic in interpersonal interactions whereby positive action creates positive reactions, which in turn leads to mutually positive feelings which in turn leads to mutually positive interaction. Or the reverse can apply. A positive attitude and efficient action on the part of the service supplier will encourage the client to participate more, and more effectively, which in turn encourages the service supplier, and so on. A ‘virtuous circle’ has started.”

Normann continues at length to point out when the interactions are positive and customers feel the experience is valuable, a “virtuous circle” ensues.  Furthermore, the outcome of each interaction or MOT sets up the likelihood of a similar outcome at the next interaction. Good interactions tend to foster more good interactions, while poor interactions tend to lead to yet poorer interactions.

Perhaps Normann is the clearest in defining the MOT when he said:

“The quality experienced by the customer is created at the moment of truth, when the service provider and the client meet in a face-to-face interaction. The most perfectly designed and engineered service delivery system will fail until things work out then. Thus, any enquiry into quality must start from the microsituation of client interaction, the moment of truth (emphasis mine). The important question is: what mechanisms lead to and reinforce the client’s experience of quality and good value in that microsituation?”

In defining what Normann meant by the ‘moment of truth’, focus on the most consistent and defining vocabulary he used throughout: the words “interaction” (used consistently) and “microsituation” (used specifically), and more importantly, the juxtaposition of the two – “microsituation of client interaction.” From my reading of Normann, MOTs are each individual interaction with the customer – not high-value interactions, not high-risk interactions, not just the buy/no-buy interaction, and not the last interaction, which are all macrosituations.

The organization typically dictates the customer’s journey, and therefore, determines the time and effort required from customers. Unfortunately many organizations tend to think of some interactions as trivial and inconsequential. All too often, what the organization considers innocuous, the customer perceives as a waste of time and resources. Furthermore, the cumulative or knock-on effects of multiple or poorly executed interactions could culminate at a relatively innocuous one – the proverbial straw that broke the camel’s back.

From a co-creation perspective, each interaction either increases or reduces value to the customer. In other words, that running score really matters. Is every interaction equal to another? Absolutely not, but they are all weighty! We need to consider each and every interaction and what it contributes to customer value in relation to all other interactions.

Therefore, a co-creation perspective takes into account the value exchange of each and every interaction with a customer.  As the customers navigate their journey, moment by moment they are sizing up how they feel about the potential of achieving overall success, and with a few exceptions, they can drop out at any interaction in the journey. Though the organization may identify a particular interaction in which customers typically drop out of the journey, this doesn’t necessarily indicate that interaction is the culprit. The root problem is just as likely to be poor execution of one or more upstream interactions. The customer journey is part of the co-creation ecosystem and systems thinking needs to be applied.

Please keep in mind my purpose is first: to create a better and more common understanding in our terminology, and second: help us leverage the brilliance of Normann’s work. I’m not necessarily suggesting the customer-experience community change its vocabulary. However, I do recommend we at least apply Normann’s research and concepts to whatever the corresponding vocabulary is. Every organization’s success depends on creating Normann’s “virtuous circles”, yet these are only possible when we acknowledge the full significance of what he called the MOT with their cumulative, knock-on effect in the co-creation ecosystem. Call them what you will, interactions, touchpoints or MOTs, but for the good of the customer give every single one their due consideration.

Innovation – What it is, and is NOT

By Don Smith

“You keep using that word, I do not think it means what you think it means.”

Inigo Montoya’s famous line from The Princess Bride instinctively pops into my head (sometimes muttered under my breath) when I read yet another article on the thin, worn topic of “innovation”. In its often misunderstood overuse, the word has become diluted (even polluted) to the point of becoming ineffectual in portraying any clear and distinct meaning; perhaps in similar fashion to the misuse of the word “quality” in the last 50 years. First of all, innovation is not coterminous with invention and should never be used interchangeably. Secondly, innovation is not rooted in technology. And lastly, the pursuit of innovation is not in and of itself innovation. This severe dilution of the term creates confusion and hinders us from actually achieving real and reliable innovation.

In the early 70’s Peter Drucker wrote, “Above all, innovation is not invention.” Apparently the terms were being confused back then as well. Drucker then gives us an important clue about what innovation really is in the very next sentence saying, “Innovation is a term of economics rather than technology.” It’s probably obvious, but what he means is that innovation occurs because of the economic choices made by a society when they adopt some form of invention. This definition is backed up in the book The Medici Effect, where Frans Johansson says, “Innovations must not only be valuable, they must also be put to use by others in society. …It has to be ‘sold’ to others in the world, whether those people are peers who review scientific evidence, customers who buy new products, or readers of articles or books.” This definition also comes from a body of research on creativity and innovation done by Teresa Amabile, the Edsel Bryant Ford Professor of Business Administration at Harvard Business School.

To illustrate the difference, let’s consider one of the most renowned and prolific inventors of all time. Thomas Edison had 1084 patents; only two others in history have received more. Yet only 31 of those patents resulted in products which were widely adopted commercially. In other words, only 31 of his inventions were truly innovative. I’m not saying the other 1053 inventions weren’t clever or cool in some way. It’s simply that the majority of them were never found to be useful enough by society to be innovative. Innovation is proven when social adoption occurs and the invention is significantly adopted or utilized.

Drucker made a secondary point that needs to be understood as well. He said, “Nontechnological innovations – social or economic innovations – are at least as important as the technological ones.” Technology is not the only platform of invention and innovation. There are as many non-technical inventions as there are technological, if not more. We are constantly coming up with new methods about how we can do things and ways of thinking or perceiving the world. For instance, it can be innovative to simply reconfigure the revenue model by offering free or “freescription” products or services, where basic services are free of charge to the bulk of customers and premium services paid for by a few, which actually funds the business model. Many innovative connector platforms such as Lyft, Uber, and Airbnb are disrupting legacy services. Recent examples of social innovation are the Open Source movement, social media, Open University, Fair Trade, Microfinance, and companies forming for the “social good” (i.e. B Corporations). I recently learned of a for-profit company based in the Seattle area that funds projects in third world countries with no intention of making any profit. This is intentional and allows them to circumvent the governmental oversight imposed on contemporary non-profits and NGOs; not to mention the costs of graft and corruption often associated with international aid. While this cannot yet be confirmed as an innovative approach, when other organizations move to adopt, it may become so.

Another source of innovation is repurposing old technology for value creation in a new context. One recent example of an old technology applied in a new way is the flywheel, which was originally used to help maintain the consistency of the rotational speed of a shaft. This technology was ingeniously repurposed to maintain the consistency of electrical flow in the generation of electricity using wind and solar power generators because those sources do not produce consistently (i.e. wind dies, sun fades). As an old mainframe guy, I’m very keen to point out the concept of centralized computing, which came and went in the 20th century, has now returned in what is commonly known as Cloud Computing. Old technologies and concepts may have many new and innovative applications, if we can distance ourselves from the bonds of conventional utilization.

An issue of “The Economist” a couple of years ago focused on the debate about the perceived decline of real innovation in recent years. Whether or not the perceived decline is real, it begs the questions of why and what can be done to mitigate the perception. Could it be the pressure to innovate is itself killing innovation? One possible validation of this notion is the often seen phenomena that according to the measure of our intense desire for something, is the measure to which it eludes us. A more rational aspect points to a temptation to label something as innovative when, indeed, it hasn’t reached the level of adoption required for true innovation. While some invention may be massively clever and endearing to its small circle of fans, the bulk of the world remains indifferent. This shouldn’t, but often is, mislabeled as innovation. We lack innovation because most organizations don’t truly know what it is.

Why is the distinction between invention and innovation so critical? I would like to suggest that innovation is the desired outcome, while invention is one of the elements or prerequisites. On the path to innovation we must invent.  The process of invention begs failure, which increases learning and knowledge and is the investment in potential future innovation. Yet many organizations are failure averse. We need prolific invention from all possible sources, technological as well as non-technological. But invention alone isn’t enough.

While invention is the precursor to innovation, another critical ingredient is required. The value proposed in said invention must also be adopted by customers. I often wonder how many truly useful inventions never materialized because their value proposition was never effectively communicated to potential beneficiaries. The sad truth is, most inventors are really good at developing very useful inventions, but lack the skills to effectively communicate the value proposition. Therefore, an additional precursor to innovation is effectively and successfully marketing inventions. Inventors come up with really interesting and clever ideas. However, it’s the innovators who take a clever invention and effectively communicate the value proposition, which then drives significant adoption (i.e. lots of customers). I would like to suggest that the true measure of innovation is the rate of social adoption of some value proposition (social or technological) and thereby creating significant new demand.

Just like the challenges of the “fire swamp” in The Princess Bride, the journey to innovation is anything but easy. Nevertheless, we make the work possible when we have clarity about what innovation truly is, and is not.

___________________________

This article originally appeared on FutureSmith Blog and has been republished with permission.