August 27, 2007

Focusing on the Customer

Excerpt from The McKinsey Quarterly

Merrill Lynch has combined operations with IT in a single unit. Diane Schueneman, the head of the company’s Global Infrastructure Solutions, explains how she is changing both to focus on the customer.

The Quarterly: You’re in a somewhat unique position, with technology and operations both reporting to you. Why is it better to have technology and operations together than apart? What does this structure enable you to do?
Diane Schueneman: I try to remember that we’re not a technology company; we’re a financial-services company that supplies solutions to our customers around their financial needs—simple as that. Customers don’t say, “You do a really great job creating an equity product.” They ask, “How well do you deliver it to me?” and “Does it meet my needs?”

So the whole reason to combine technology and operations rests on the customer’s needs. And to deliver against those needs requires the best operational processes and the best technology. But you can’t start with one and graft on the other. It’s the integration of technology and operations, from beginning to end, that really allows you to serve customers effectively, anywhere in the world. It’s one example of how we’re transforming our organization to think differently from the ways that financial-services companies have thought in the past—which is to say you have to move beyond an individual silo mentality.

The Quarterly: So you’re saying that when you redraw the organizational chart from a customer perspective, it looks very different?
Diane Schueneman: That’s the guiding principle: don’t connect the dots according to your whims but around the interests of the one who pays the bills. After all, customers are not buying technology or process from us; they’re buying a solution.

To do that, you have to ask your customers what they want and then listen carefully to the answer. You also have to be able to dissect what a customer says and know how to put that into action. For example, everyone hears that customers want one-stop shopping. And some companies interpret that as, “Give clients just one person to talk to.” But we asked ourselves, “Does that mean that with all of the intellectual capacity generated by 50,000 people at the firm, the customer only wants to draw on the talent of one person?” No. What the customers are really saying is that they want consistency; they want a common way to access all of their information with us. And they want simplification. When they want to open a relationship across five products, they want to be treated like one customer, not five. Can we do the paperwork once, instead of five times? In other words, they want the power of all 50,000 people, but organized in such a way that we deliver their service in a simple way.

The Quarterly: Has this reorientation to the customer viewpoint been more challenging than you would have thought as far as changing people’s perspectives?
Diane Schueneman: No question. I think anytime you ask people to change, they wonder if they’ve done something wrong. To move past that, you explain the rationale and the vision of where you want to go—in our case, moving from an internal focus to an external one centered on the customer’s perspective. Once you get people excited about change and give them the freedom to think, you unleash their intellectual capabilities. They do amazing things, and that’s how you get innovation.

We have told our people, “Go out and invent a better way of doing things.” To empower them, we have supplied resources and management support. That combination of ideas and follow-through is how you create new possibilities.

The Quarterly: So it sounds as though innovation requires more than just smart people with good ideas; it also requires an environment in which it can flourish.
Diane Schueneman: Right. You have to encourage innovation. People often focus on the potential for problems, but people are willing to try new things if you show the way forward, provide the right environments, and make resources available for pilot projects. Change like this doesn’t happen overnight; it happens in small steps.

Another thing that I focus on very heavily is creating learning and development opportunities for employees, because if you don’t do that, then you can’t ask them to take risks. All of our training programs are supported by our technology career framework, which shows people the skills required to advance in our company. Specifically, it describes the competencies required for success, illustrates different career roles and paths, and shows how individuals can develop the skills critical to success.

The Quarterly: What skills will institutions need if they are to thrive in coming years?
Diane Schueneman: I believe over the next ten years there will be a couple of characteristics and skill sets that, if you don’t have as a company, you probably are going to be in big trouble. There’s no question you’ll need collaboration and teamwork skills. Data-management skills will also be essential, since the ability to understand and integrate information into your organization is critical.

Successful partnerships will also be important as financial-services companies learn they can no longer be all things to all people. They’ll learn from other industries that have gone through economic crunches that they have to become more effective in their delivery of services. We can’t produce everything ourselves.

As a team, we came up with some ambitious goals that we aim to deliver over the next three years. One goal is to increase client satisfaction. Not a surprise, but we wanted to make it measurable so that we are in the top tier of client satisfaction as measured by external means, such as reports on the timeliness and accuracy of our confirmations, benchmark tracking for collateral and valuations, and surveys that measure us against competitors.

We also want to be best-in-class with our e-channels. There’s no question the business is going that way, but we have to continue to ask ourselves whether we’re serving our customers the way they want to be served. Here, we’re working closely with other parts of the organization—marketing, research, strategy—because this touches so many things within our business: transactions, our financial content, customer service, and our proprietary information that gives us a competitive edge. And there are several ways to provide these things—through a Web portal, a direct link, or software. In this case, technology and operations are the glue that holds all these efforts together, providing the capabilities to deliver what the rest of the organization wants to do.

The Quarterly: You’ve talked about the pathway you’re providing for the people below you, but how do you see your role evolving?
Diane Schueneman: I think any CIO role has to evolve to become an integral part of the business’s fabric. There’s a lot of talk about whether CIOs have a seat at the table, but in a way that misses the point. You don’t get the seat at the table and then suddenly succeed; you have to drive a capability in a company, and then you get a seat at the table. Ask yourself what are you doing that is transformational? What are you doing that’s a differentiator? Are you thinking differently or are you an order taker?

That aspiration, I find, is lacking in some CIOs. But the opportunity is there for them to think like CEOs and to use the power of the organization to achieve greatness. To do that, they have to work broadly across the company—with the CFO, the head of sales, and other functional leaders. They have to understand these different roles and be very involved in bringing new ideas to them.

I believe that’s what is expected of me and I certainly am not waiting for somebody to tell me what to do. I see my role as leading people through significant change, to focus on the client.