Luxury Institute: The Most Critical Job in Today’s Luxury Goods and Services Industry Doesn’t Exist
NEW YORK, May 01, 2019 (GLOBE NEWSWIRE) — In today’s hyper-turbulent luxury goods and services industry, where the pressure to achieve high-performance is intense, and where few are actually delivering profitable growth, the Chief Customer Officer (CCO) will soon replace the Chief Operating Officer and the Chief Financial Officer as the most critical functional leader in the organization. Luxury Institute recently conducted research with its Global Luxury Expert Network (GLEN) members, a global elite research and consulting talent platform, as well as secondary research on the current and future state of the Chief Customer Officer in luxury and premium brands. The research is striking.
When surveyed, 67% of GLEN members across the globe state that, in today’s luxury industry, the Chief Customer Officer is, by far, the most critical job in the organization below the CEO. Looking across the landscape, most luxury and premium Boards and CEOs haven’t gotten the memo. The corporate dialogue is all about creating a customer-centric culture, and delivering an extraordinary customer experience. For most luxury brands, that is a cruel mirage. A forensic scan of the data shows that in most companies the CCO role doesn’t even exist. Where it does exist, the CCO role is treated as an add-on, or a hobby, at best. The position is a toothless staff job. Currently, the few CCOs who exist have all of the responsibility for optimizing the customer experience, and none of the authority or resources to execute the most critical business imperative of the 21st century.
The business literature that addresses the CCO role is vast. Most authors recommend that the CCO role be that of an analyst, advisor, and coach to their C-Level peers. They recommend that she, or he, should have a small department, and a budget to match. The current role is defined by experts as a C-level peer with a client-focused mindset and relationship building skills, whose job is to merely influence all the functional silos into cooperating to optimize the customer experience. Any expert who recommends that option in today’s disrupted marketplace has never held a senior operating job in a bureaucratic, sclerotic luxury or premium organization.
Today, most luxury goods and services organizations are structured for an obsolete business model where improving efficiency is the objective. This means that predictable, repeatable, robotic processes and cost controls dominate corporate activities. Like the New York subways, business performance is seen akin to keeping the trains running, no matter how miserable and uncomfortable passengers are. Even if the trains don’t get the passengers there in one piece, the efficiency team celebrates, because the trains run on time.
That is the expired experience operations view of business. It is the main reason why companies succeed at scaling process-driven efficiencies, yet are totally ineffective at achieving high-performance peer and customer relationships. Effective relationships, not efficient transactions, are the rocket fuel that drives long-term, sustainable revenues and profits in today’s luxury landscape. When it comes to optimal employee and customer relationships, most brands are dysfunctional. One of the largest, most successful luxury car dealership firms in the world, recently told the Luxury Institute that in order to deliver extraordinary experiences to their individual customers, they often do exactly the opposite of what the efficiency-oriented luxury brands require. For example, the service appointment schedule algorithm developed by one top luxury brand is coded to optimize short-term efficiencies and costs, while imposing major obstacles and inconveniences that kill customer loyalty.
The Luxury Institute and its Global Luxury Expert Network (GLEN) members believe that a deep lack of leadership in the execution of an optimal customer experience is a formula for extinction. With radical candor, below are five recommendations that will enable leaders to empower and enable customer-centric organizations to thrive.
1. Reorganize around a CCO with a proven track record of customer results and emotional intelligence
Luxury Institute CEO, Milton Pedraza, a former senior line-executive at Fortune 100 companies, has been through many successful and dismal transitions. He recommends that the company reorganize all its customer-facing resources and teams under the leadership of a Chief Customer Officer who reports directly to the CEO. This executive should be an insider with a solid track record of achieving major profitable revenue increases. This success may have been achieved through responsibility of the offline, online, or wholesale channels. It can also be through a successful line manager role, such as a divisional or regional manager. Non-negotiable requirements are that this executive be recognized as an emotionally intelligent, open-minded change agent, and a strong, confident relationship builder. While the temptation will be to look outside, the CCO must know the business and the players intimately, and be highly respected.
No one on the planet is an expert CCO today because the concept is so new, and so rare. Many existing CCOs don’t have operating experience. It is better to promote an adaptable, agile executive from within, and develop the executive and the organization with vigor. Most organizations have exceptional hidden talent, but tend to look outside because they want radical change. This is not an occasion to bet the farm on an outsider. The radical change must come from within and be orderly. Radical and orderly can co-exist brilliantly. Gucci, under the agile leadership of Marco Bizzarri, is the case study of radical, yet orderly transformation, all delivered by the incumbent talent.
2. Put the CCO in charge of all customer-facing functions
Once the CCO is in place, all of the customer-facing and support functions must report directly to this executive. No dotted lines or matrices. She, or he, leads all budgets. The functions that report directly include marketing, communications, third-party channels, offline and online channels. Internal or outsourced call centers, chat and service teams are included. Data, analytics, CRM and consumer insights teams must also report into this executive. Strategy, product development, innovation, human resource/training related to customer teams, and all customer-facing technology initiatives must report to the CCO too. This includes all agencies and consultancies that serve the customer initiatives.
Even if you are the world’s largest luxury conglomerate, not all the best people work for you, so the enterprise must be radically extended to include many external experts to help the brand achieve rapid, radical innovation. The brand must think of itself as a platform business model serving customers and employees, not a walled fortress. The simple rule is, if it touches the customer in any way, it must report to the CCO.
3. Align objectives, KPIs and incentives to serve the customer across the organization
Once the CCO and her organization are in place, a redefinition of objectives is in order. All the customer-facing teams must align, beyond dollars, on the customer outcome metrics of customer conversion, average purchase value, retention, and referrals. These can be transformed into revenue and profit metrics by finance to ensure that all initiatives create long-term value. Customer satisfaction and recommendation metrics are interesting proxies, yet they rarely correlate to real value creation. Most of the outcome metrics can be measured by individual customer, and by corresponding individual teams and/or associates.
In order to achieve the outcome metrics, brands must start measuring critical input metrics. These are the individual and team behaviors that achieve the outcomes. For example, in luxury retail, sales associates in stores cannot achieve high customer retention metrics if they do not achieve high results in inspiring and setting customer appointments, connecting in virtual dialogues, generating consignments, or generating referrals. To achieve these, associates must reach out to a large number of customers and prospects vigorously. All of these inputs can, and must be quantified, executed and measured by each associate and team on a daily basis. In addition, the CCO must implement a system to measure the daily emotional intelligence contributions of associates, such as deep empathy, trustworthiness, and generosity. Emotional metrics are hard to measure at first, but are absolutely necessary. A combination of daily behavioral and emotional metrics for all HQ team members, as well as front-line team members, is a radical change that must be implemented to succeed. This system drives double-digit sales improvements. Incentives should be redesigned to reward both team and individual achievements in customer inputs, not outcomes. If the input behavioral and emotional metrics are executed and measured rigorously, successful outcomes will take care of themselves.
4. Empower the front-line teams to execute permission-free innovation
Most executives reared in command-and-control organizations are oblivious to the fact that they are creating the customer journey on the underlying belief that the power of a brand experience is in mapping a customer journey that is predictable and repeatable. This is totally against human nature and is destined to fail. Effective CCOs know that the power of a brand is not in mapping a paint-by-numbers, robotic, customer journey. If that’s where the power of the customer experience lies, then a soulless robot can be programmed to do it better. But a robot has no human emotion. It does not have deep empathy, judgment, spontaneity, serendipity, innovation, creativity or kindness; not to mention, charm. Maybe someday robots will possess the magical beauty of a human. For now, train people to be their absolute best and deliver deeply human, unique customer experiences. To be their best, humans need core emotional intelligence principles, practice, coaching and metrics that empower them to unleash one-to-one experimentation with peers and clients. Teach them how to be experts, deeply empathic, trustworthy, and generous and kind in every interaction with deliberate intent. Then, free them to be creatively human, and watch as they transform into the highly aware, adaptive, and agile beings they are meant to be. It is these individual, creative bursts of human energy that deliver memorable and extraordinary customer experiences.
As a CCO, set employees free to innovate in the moment, to experiment without permission, and capture the best experiences to be shared so that other associates don’t just copy them, but are inspired to experiment and deliver unique and extraordinary peer and customer experiences, too.
5. Go beyond best practices to push the boundaries of organizational learning to improve performance
Most companies operate as if copying best practices is the end game in business. In manufacturing and operations that require relatively stable, repeatable processes executed with precision, this works well. However, humans and human relationships are complex adaptive systems that can operate and thrive on core values and principles. Each interaction is unique, which is what makes every human relationship so potentially special. Customer experiences are exceptional by nature; that is, they are full of creative, spontaneous human behaviors that emerge as a stream of immediate stimuli/responses that have the potential to bring joy to customers and associates. Brands can set great guidelines, but they need to know that customer needs and opportunities are constantly evolving. That learning only occurs at the extreme boundaries of the front-lines.
The new CCO must put in place multi-disciplinary, multi-level teams, comprised of a healthy mix of headquarters team members and front-line associates in order to learn from the continuous experimentation that captures and/or anticipates, even inspires, new customer needs, desires, and solutions. These continuous customer experience experiments create brand new knowledge that improves overall performance. The CCO must have the wisdom and courage to help her team operate, and innovate, at the sweet spot between rigidity and chaos in order to help the organization learn to adapt in real time.
The CCO position is a wonderful paradox. On the one hand, the customer-facing organization unites and collaborates under one capable leader. On the other hand, that enlightened leader sets the organization, especially the front-line teams, free to be deeply human with core human principles, not a playbook. This is difficult terrain to traverse, especially for leadership brains that were wired for a command-and-control world. “You cannot drive at 150 miles per hour on the autobahn while looking at your rear view mirror,” said Milton Pedraza, CEO of the Luxury Institute. “Luxury goods and services brands must move far beyond their siloed legacy organizational structures into a true CCO-led customer-centricity.”
The luxury goods and services industry is accelerating forward. There are no alternatives to customer-centricity in order to achieve radical success in the 21st century.
About Luxury Institute and the Global Luxury Expert Network (GLEN)
Today, we are the world’s most trusted luxury and premium research, training, and elite business solutions firm with the largest global network of luxury experts. Uniquely, Luxury Institute’s network of hundreds of elite experts includes current luxury brand C-Level, VP and Director executives, former executives, and independent experts. We have conducted more quantitative and qualitative research on affluent consumers than any other entity. This knowledge has led to the development of our scientifically proven high-performance, emotional intelligence-based education system that dramatically improves brand culture and financial performance. Over the last 16 years, we have served over 1,000 luxury and premium goods and services brands.
The Global Luxury Expert Network (GLEN) is comprised of hundreds of global luxury experts. Luxury Institute’s elite experts have a minimum of 12-years of operating experience with top-tier brands, most with over 20-years of experience, and are current and/or former C-level, VP or Director executives with proven track records of high-performance. The Global Luxury Expert Network offers members the ability to participate in remote or live on-demand, short-term, high-value projects and earn supplemental income, be the requesting client and have other GLEN members participate in their project or refer projects to the network. All members receive supplemental income for the projects in which they participate or refer. To become a member or learn more about the Global Luxury Expert Network (GLEN), please visit Luxury Institute.
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