Mind the Gaps

 Concerns over technological disruption, globalization, growing inequality, and the environment are ubiquitous. Despite these challenges, we believe businesses can sustain growth at an affordable cost, not just to the business but to society and the planet as well if the (growth) gaps are closed.

Our motto: Profit can be meaningful, provided that it serves a purpose.

ROUNDMAP™ IS A CREATION OF EDWIN KORVER, CEO OF CROSS-SILO BV, THE NETHERLANDS

2.1 - CLOSING THE GAPS

Studies show that 80% of organizations fail to achieve their desired growth targets in terms of revenue and profitability. Closing the growth gap ─ the gap between growth aspirations and growth activation ─ is one of the applications of the ROUNDMAP.

A growth gap may occur due to:

• Inadequate considerations of the opportunities for growth, i.e., the attainability of growth.
• The limited capacity of the organizational infrastructure to support successful execution, i.e., the serviceability of growth.
• Adversarial forces inside or outside the organization ─ think of Porter’s Five Forces.
• So-called growth traps ─ deeply embedded assumptions that can lead firms into misconceptions about growth opportunities.
• Fleeting competitive advantages ─ reducing the growth cycle, forcing firms to rotate through the cycle much more quickly.

2.2 - GROWTH PROJECTIONS

Let’s have a look at a typical growth cycle (bell curve) of a single line of business:

To appreciate a level of growth that is both attainable as well as serviceable, we’ll have to make sure that any misconceptions about growth, the growth traps, often caused by inadequate market research, are removed from the equation. This will give us the green line. If current growth does not match the green line, we’ll need to consider what causes the growth gaps (the misconfigurations).

By assessing the operation, ROUNDMAP Certified Professionals will be able to reveal what causes these gaps. This brings forth an actionable plan which may include changes to be made to the infrastructure, business strategy, business model, market segmentation, partnerships, revenue streams, marketing strategy, cross-functional collaboration, individual mindsets, or the customer development process.

2.3 - STANDING AT THE EDGE OF A CLIFF

Additionally, we need to account for disruption, whether due to fleeting competitive advantages, gradual changes in demand, or even shock effects like a virus outbreak, as it makes no sense to work toward a discontinuous future.

While the Corona crisis may be a once in a lifetime occurrence, shock effects are far from exceptional. During one of our assignments, we identified a single point of failure (SPoF) in our customer’s value chain: the company sold 90% of its merchandise via one channel. We were able to convince the CEO to mitigate the risk and offered to transform the out of date website into a fully integrated webshop. When the SPoF gave way, revenue dropped by 90% and everyone panicked. But we came prepared and sales rebounded within days.

About 10 years before the event, we had to deal with a similar shock effect ourselves. As a serviceprovider, we rented a large number of server racks in a datacenter, some IP-space, and an internet uplink; all from one supplier. When we received a call from the datacenter that our supplier had filed for bankruptcy, all hell broke loose. It took five days and nights of relentless efforts and a lot of capital, to untangle our operation and make it out of this trap alive. It was a tough lesson to learn but since then, SPoF’s are a red alert on our radar.

2.4 - EQUITABLE GROWTH

As forementioned, ROUNDMAP is designed to drive sustainable growth. The difference between sustaining and sustainable growth is that sustaining growth means to keep growth at a certain rate, regardless of the costs, while sustainable growth is the ability to sustain growth at a rate that doesn’t require the firm to sell its stakeholders short ─ we prefer to call this EQuitable Growth.

EQuitable Growth aims to:

• Identify and develop growth opportunities,
• Identify and mitigate threats/risks,
• Close growth gaps (misconfigurations),
• Elimate growth traps (misconceptions),
• Account for interruptions (scenario planning and simulation),
• Uncover what makes a brand or product relevant (now) and significant (future),
• Increase awareness of a firm’s Corporate Social Responsibility,

by means of:

• Encouraging experimentation with active senior-level sponsorship,
• Assuring a growth mindset with steadfast cross-company alignment,
• Reskilling the workforce to match the rules of the digital economy,
• Rethinking the business model to create a better future for all stakeholders,
• Repurposing resources to allow idle capacity to be put to good use,
• Replicating succcessful business models to create new lines of business,
• Designing nimble and agile operating lines.

By encouraging frequent experimentation in small groups, companies deemed ‘excellent’ by Peters and Waterman, authors of In Search of Excellence, managed to create an abundance of opportunities while mitigating threats before becoming manifest.

2.5 - HORIZON MODEL

Both McKinsey and IFF* encourage senior executives to pay equal attention to ‘Three Horizons of Growth’ (Horizon model):

1. Horizon 1 = ‘Keeping the lights on‘ ─ driven by optimization and sustaining innovation (change).
2. Horizon 2 = ‘Building future ventures‘ ─ driven by disruptive innovation, operating in known markets.
3. Horizon 3 = ‘Imagining the future‘ ─ driven by disruptive innovation, entering uncharted waters.

See image below:

(*) The Three Horizons of Growth framework has two sources. One is a collaborative effort by the IFF (International Futures Forum), published in the book Three Horizons by Bill Sharpe. The other source points to McKinsey, published in the book The Alchemy of Growth by Mehrdad Baghai et al.

2.6 - SITUATIONAL GROWTH™

Our perception of growth is slightly different. We believe growth should be perceived as ‘situational’ ─ given the internal and external forces ─ which has led to the belief that Situational Growth™ (compare: Situational Leadership) has four ways of manifesting itself:

1. EXPLORATION ─ Discover new product-market fits and business models
2. EXPLOITATION ─ Scale the operation, benefit from economies of scale, and increase market share
3. EXPANSION/EXTENSION ─ Find new markets while optimizing performance and reducing costs
4. EXPIRATION ─ Delay expiration for as long as possible while looking for new opportunities for growth

During each of these manifestations, a gap may occur: we may overlook profitable revenue streams, try to expand the wrong ones, or start change-initiatives while we should initiate transformation, and so on.

While the primary concern of management is to operate existing product-market centers as cost-effective as possible, ensuring predictable outcomes (high quality, a responsive customer service, etc.), revenue may suddenly turn south, changing the situation we’re in. During Expiration phase, it is the responsibility of leadership, besides defending existing revenue streams, to encourage creatives and fund innovators, operating at the edges (Red Monkey by Jef Staes) of the organization, to explore new opportunities for growth.

Mastering Situational Growth™ or Situational Mastery™ focuses on developing transactional and situational awareness to drive corporate Performance Readiness, while Situational Leadership®, developed in the eighties by Paul Hersey and Ken Blanchard, focuses on the relationship between leaders and followers, to increase individual Performance Readiness.

To select the most effective style of corporate leadership, we’re using the term Conditional Leadership™. It suggests that to lead a company in a certain timeframe, and given the internal and external conditions that may influence the business, the style of leadership needs to adapt.

These two frameworks, Conditional Leadership™ and Situational Leadership®, will greatly determine a firm’s capacity for Growth Activation™ *.

(*) We’ve derived the term Growth Activation™ from the term Marketing Activation (the execution of the marketing mix as part of the marketing process) and Customer Activation (motivating customers to move to the next stage of their lifecycle faster than they would on their own).

2.7 - MIND THE GAPS

Growth gaps are often the result of a series of misconfigurations. We’ve addressed some of these gaps in more detail here: Mind the Growth Gaps. It is important to realize that every gap has an adverse effect on the desired outcome that will not go away until it’s identified and dealt with. Compare: Growth traps are misconceptions about growth opportunities.

m

2.8 - VENTURE DESIGN

Even if you are not familiar with the (eight) principles of excellence, mentioned in In Search of Excellence by Peters and Waterman (1982), you shouldn’t be surprised to learn that the way successful companies operate today resembles those that were researched by the authors. Indeed, as the renown economists, Schumpeter and Kondratieff uncovered, history tends to repeat itself in so-called business cycles.

The organizations that were deemed ‘excellent’, such as Texas Instruments, IBM, McDonald’s, and Hewlett-Packard, were extremely nimble and entrepreneurial, had a strong culture, were customer-driven and human-centric, highly disruptive, and often very effective ─ they were true frontrunners; much like their present counterparts, Microsoft, Google, eBay, Amazon, Netflix, and Tencent.

Today, we’re seeing a similar approach, driven by fleeting competitive advantages, which is now referred to a Venture Design (VX):

The VX-approach is to intentionally set out to conquer a market, based on opportunities for growth that have not been explored before ─ by anyone. It doesn’t perceive the core competences as a holy grail. On the contrary, employees are allowed to explore any opportunity, as long as it serves a real customer need and is highly scalable.

Compared to the Horizon Model: these brave companies choose to ignore Horizon 2 and jump straight in Horizon 3, with Agility, Creativity, Determination, and Courage (AC/DC).

In Systems Theory: “A system is said to be in a transient state when a process variable or variables have been changed and the system has not yet reached a steady state.” In other words: a system is in a transient state as long as it is in a change state.

Before you jump on the VX-bandwagon, consider the fact that a multi-core operation does increase complexity dramatically. More on this subject can be found here: Where to find future growth?

"Fast and roughly-right decision-making will replace deliberations that are precise but slow."

~ Rita McGrath, Harvard Business Review

https://bit.ly/3wM9OTS

The Customer Service Gap Model

Today’s consumer has become increasingly demanding. They not only want high quality products but they also expect high quality customer service. Even manufactured products such as cars, mobile phones and computers cannot gain a strategic competitive advantage through the physical products alone.  From a consumer’s point of view, customer service is considered very much part of the product. Listen to Nick Coster – Head of Training Services discuss the Customer Service Gap Model with Phil Dobbie.

Delivering superior value to the customer is an ongoing concern of Product Managers. This not only includes the actual physical product but customer service as well. Products that do not offer good quality customer service that meets the expectations of consumers are difficult to sustain in a competitive market. SERVQUAL (service quality gap model) is a gap method in service quality measurement, a tool that can be used by Product Manager across all industries. The aim of this model is to:

• Identify the gaps between customer expectation and the actual services provided at different stages of service delivery
• Close the gap and  improve the customer service

This model developed by Parasuraman, Zeithalm and Berry in 1985 identifies five different gaps:

The Customer Gap: The Gap between Customer Expectations and Customer Perceptions

The customer gap is the difference between customer expectations and customer perceptions. Customer expectation is what the customer expects according to available resources and is influenced by cultural background, family lifestyle, personality, demographics, advertising, experience with similar products and information available online. Customer perception is totally subjective and is based on the customer’s interaction with the product or service. Perception is derived from the customer’s satisfaction of the specific product or service and the quality of service delivery. The customer gap is the most important gap and in an ideal world the customer’s expectation would be almost identical to the customer’s perception. In a customer orientated strategy, delivering a quality service for a specific product should be based on a clear understanding of the target market. Understanding customer needs and knowing customer expectations could be the best way to close the gap.

The Knowledge Gap: The Gap between Consumer Expectation and Management Perception

The knowledge gap is the difference between the customer’s expectations of the service provided and the company’s provision of the service.  In this case, managers are not aware or have not correctly interpreted the customer’s expectation in relation to the company’s services or products. If a knowledge gap exists, it may mean companies are trying to meet wrong or non-existing consumer needs. In a customer-orientated business, it is important to have a clear understanding of the consumer’s need for service. To close the gap between the consumer’s expectations for service and management’s perception of service delivery will require comprehensive market research.

The Policy Gap: The Gap between Management Perception and Service Quality Specification

According to Kasper et al, this gap reflects management’s incorrect translation of the service policy into rules and guidelines for employees. Some companies experience difficulties translating consumer expectation into specific service quality delivery. This can include poor service design, failure to maintain and continually update their provision of good customer service or simply a lack of standardisation. This gap may see consumers seek a similar product with better service elsewhere.

The Delivery Gap: The Gap between Service Quality Specification and Service Delivery

This gap exposes the weakness in employee performance. Organisations with a Delivery Gap may specify the service required to support consumers but have subsequently failed to train their employees, put good processes and guidelines in action. As a result, employees are ill equipped to manage consumer’s needs. Some of the problems experienced if there is a delivery gap are:

• Employees lack of product knowledge and have difficulty managing customer questions and issues
• Organisations have poor human resource policies
• Lack of cohesive teams and the inability to deliver

The Communication Gap: The Gap between Service Delivery and External Communications

In some cases, promises made by companies through advertising media and communication raise customer expectations. When over-promising in advertising does not match the actual service delivery, it creates a communication gap. Consumers are disappointed because the promised service does not match the expected service and consequently may seek alternative product sources.

Case Study: Amazon.com

Amazon.com provides books, movies, music and games along with electronics, toys, apparel, sports, tools, groceries and general home and garden items. Amazon is a good example of an online business that tries to close the service gaps in order to thoroughly meet consumer expectations.

Understanding Customer Needs

From the time the consumer starts to shop at Amazon’s online store, Amazon will attempt to understand their expectations. From when a customer first makes a product selection Amazon creates a consumer profile and attempts to offer alternative goods and services that may delight the consumer. The longer the consumer shops at Amazon, the more the company attempts to identify their preferences and needs.

Customer Defined Standards

When a consumer buys a product from Amazon they selects the mode of delivery and the company tells them the expected number of days it will take to receive their merchandise. For example: standard shipping is three to five days but shipping in one or two days is also available. The company has set standards for how quickly customers are informed when a product is unavailable (immediately), how quickly customers are notified whether an out of print book can be located (three weeks), how long customers are able to return items (30 days) and whether they pay return shipping costs. These standards exist for many activities at Amazon from delivery to communication to service recovery.

Service Performance

Apart from defining their service delivery, Amazon goes one step further and delivers on its promises. Amazon performs! Orders often arrive ahead of the promised dates; orders are accurate and are in excellent condition because of careful shipping practice. Customers can track packages and review previous orders at any time. Amazon also makes sure that all its partners who sell used and new books and other related items meet Amazon’s high standards. The company verifies the performance of each purchase by surveying the customer and posting scores that are visible to other customers. Managing promises is handled by clear and careful communication on the website. Every page is very easy to understand and to navigate. For example the page dealing with returns eliminates customer misunderstanding by clearly spelling out what can be returned. The page describes how to repack items and when refunds are given. The customer account page shows all previous purchases and exactly where every ordered item is in the shipping process Amazon strategy has been well received by its customers and the Amazon brand is known worldwide.

Conclusion

Effective product management is a complex undertaking which includes many different strategies, skills and tasks. Product managers plan for creating the best products and operational excellence to maximize customer satisfaction, loyalty and retention. Recognising and closing gaps offers high quality customer service to the consumer and helps them to achieve their goal whilst maximising market position, market share and financial results through customer satisfaction. It also helps managers to identify areas of weakness and make improvements to a company’s service delivery. Check out our blog post on “The Value Curve: visualising the value proposition”. This tool allows product managers to take information gleaned from gap analysis to develop or refine products that are both compelling to customers and distinct from competitors.

The Gap Model

Created by Boundless

Customers compare the service they 'experience' with what they 'expect' and when it does not match the expectation, a gap arises.

LEARNING OBJECTIVE

• List the GAP Model's five contributory factors of unsuccessful customer service

---

KEY POINTS

• GAP 1: Gap between consumer expectation and management perception: arises when the management or service provider does not correctly perceive what the customers wants or needs.
• GAP 2 : Gap between management perception and service quality specification: this is when the management or service provider might correctly perceive what the customer wants, but may not set a performance standard.
• GAP 3: Gap between service quality specification and service delivery: may arise pertaining to the service personnel. This could arise due to there being poor training, incapability or unwillingness to meet the set service standard.
• GAP 4 : Gap between service delivery and external communication: consumer expectations are highly influenced by statements made by company representatives and advertisements. The gap arises when these assumed expectations are not fulfilled at the time of service delivery.
• GAP 5: Gap between expected service and experienced service: this gap arises when the consumer misinterprets the service quality.

---

TERMS

• Service quality model
  Highlights the main requirements for delivering high service quality; it identifies five ‘gaps' that cause unsuccessful delivery.
• Service Quality
  A term which describes a comparison of a customer's expectations as it relates to a company's performance.

EXAMPLE

• An example of GAP #4: the hospital printed on the brochure may have clean and furnished rooms, but in reality, it may be poorly maintained – in this case the patient's expectations are not met.

The GAP Model

The Service Quality Model, also known as the GAP Model, was developed in 1985. It highlights the main requirements for delivering a high level of service quality by identifying five ‘gaps' that can lead to unsuccessful delivery of service.

The Gap Model

The diagram shows the different gaps in the model, including the Knowledge Gap discussed here.

Customers generally have a tendency to compare the service they 'experience' with the service they 'expect' to receive; thus, when the experience does not match the expectation, a gap arises.

GAP 1:

Gap between consumer expectation and management perception: This gap arises when the management or service provider does not correctly perceive what the customer wants or needs. For instance – hotel administrators may think guests want better food or in-house restaurant facilities, but guests may be more concerned with the responsiveness of the staff or the cleanliness of their rooms.

Consumer Expectations

Hotel administrators may think guests want better food or in-house restaurant facilities, but guests may be more concerned with the responsiveness of the staff.

Factors that affect the size of the knowledge gap include:

Market research

• Before introducing a new product or service into the market, a company must conduct market research to understand whether there would be any demand for the product, and what features should be incorporated. The better this process is conducted, the smaller the knowledge gap will be.
• There are methods of ensuring that customer desires are taken on board. These include: comprehensive studies, gauging satisfaction after individual transactions (surveys immediately after a purchase is made), customer panels and interviews, and through customer complaints.

Communication channels

• The fewer the layers between management and customer contact personnel, the more likely that customer preferences will be incorporated into higher-level decision making on the product.

GAP 2 :

Gap between management perception and service quality specification: This is when the management or service provider might correctly perceive what the customer wants, but may not set a performance standard. An example here would be that hospital administrators may tell the nurse to respond to a request ‘fast', but may not specify ‘how fast'.

GAP 3:

Gap between service quality specification and service delivery: This gap may arise in situations pertaining to the service personnel. It could happen due to poor training, incapability or unwillingness to meet the set service standard. An example would be when a doctor's office has very specific standards of hygiene communicated but the hired staff may have been poorly trained on the need to follow these strict protocols.

GAP 4 :

Gap between service delivery and external communication: Consumer expectations are highly influenced by statements made by company representatives and advertisements. The gap arises when these assumed expectations are not fulfilled at the time of delivery of the service. For example – a hospital printed on its brochure may have clean and furnished rooms but in reality, it may be poorly maintained – in this case the patient's expectations are not met.

GAP 5:

Gap between expected service and experienced service: This gap arises when the consumer misinterprets the service quality. The physician may keep visiting the patient to show and ensure care, but the patient may interpret this as an indication that something is really wrong.