The team (three members) was tasked to investigate Direct Line Insurance. The investigations focus was the decision to cease writing their own bespoke software in favor of purchasing an off the shelf CRM (Customer Relation Management) solution. As part of the investigation the team considered the situation prior to the purchase of the software, the effects or influences of kaizen on any solution, Direct Line Insurance acquisitions’ and the customer experience.
The task was broken down into a number of parts:
* Initial investigation of Direct Line Insurance
* Investigate Kaizen
* Investigate Chordiant and CRM software
* Produce a CRM diagram
* Produce individual reports
An initial meeting to delegate responsibilities was held and the report author was designated as project manager. It was agreed that as individuals we would investigate all the major components of the task (this would facilitate individual learning). Following the initial investigation, further meetings would then take place as necessary to correlate information, agree further investigation and decide the report format including the CRM diagram. (Appendix)
Direct Line Group is one of the success stories of Britain’s new economy. Wholly owned by The Royal Bank of Scotland it has been selling insurance since 1985. Direct Line did away with the indirect insurance sales model, with its high street branch broker network, exorbitant commission fees and customer unfriendly attitudes, and set out to offer low-cost motor insurance direct to the consumer via the telephone.
Focusing on achieving customer satisfaction at all costs, the company quickly became known for its helpful, accessible and easy-to-understand approach. From its origins in Corydon with 63 staff selling motor insurance over the phone, the company has expanded steadily over the last 15 years. It now services three million customer accounts and its six call centres in England and Scotland handle around 1.5 million calls per month. The Direct Line product range has also grown to include home insurance, personal loans, mortgages, ISAs, savings accounts, life insurance, roadside recovery (Green Flag) and a credit card.
The following case study, describes how Direct Line moved from in-house bespoke software to Customer Relations Management software to improve the company’s acquisition and retention of its customer base.
Direct Line History
The Direct Line story is short but eventful. In less than two decades Direct Line has built an organisation of over 9,000 employees, offering six products to more than five million customers across the UK and Europe. On 2nd April 1985, Direct Line became the first UK insurance company to use the telephone as its main channel of communication. It was a revolutionary event. Out went the middlemen, the fat commissions, the forms and the jargon. In came speed, simplicity and a common-sense human touch.
But the revolution didn’t end there. Next came claims by phone… then the launch of home, travel and pet insurance, loans, mortgages and pensions… and the list goes on.
Every year since 1985, the number of policies in force has grown, as has the range of products on offer. For instance:
* December 1993, Direct line had become the UK’s largest insurer of privately-owned motor vehicles
* October 1995, Direct Line opened its first Accident Management Centre in Wakefield
* In September 1999 it launched directline.com, the UK’s fastest quote-and-buy Internet service, which offered instant online decisions on car, home and breakdown insurance.
* April 1999, Direct Line launched the first ever credit card to be applied for, and granted, over the telephone.
Along with the organic growth came acquisitions.
* In 1999 Direct Line bought Green Flag, the UK’s third largest roadside recovery service.
* In 2001 Direct Line acquired the German and Italian motoring insurance businesses of US insurance company, Allstate.
* January 1990 saw the first television adverts featuring the red telephone on wheels.
* By 1995, the red telephone was trading in Spain under the name, LineaDirecta Aseguradora. Three years later, Lï¿½neaDirecta had become the country’s leading direct motor insurer.
* 2001, Direct Line was making waves in the German and Italian motor insurance markets by acquiring the motor insurance businesses of the American insurer, Allstate.
Customer relations within Direct Line, were originally based on Kaizen’s philosophy and method. Prior to the involvement of Chordiant, Direct Line customer relations software was produced in house by a team of their own writers.
History of Kaizen
Kaizen is a management philosophy with roots in both US and Japanese management practices. Two renowned American statisticians and quality experts, W. Edwards Deming and Joseph Juran, spent several years helping the Japanese rebuild their manufacturing industry after World War II by educating them in statistical quality control and quality management techniques. The Japanese took this education to heart and went on to develop the concept of total quality management, commonly known as TQM. The philosophy of TQM goes beyond quality on the shop floor to embrace quality throughout the entire enterprise, including manufacturing, engineering, marketing, administration, sales, after-sales support, procurement, and, most importantly, business planning. The foundation for their TQM strategy was a concept called kaizen.
Kaizen comes from two words: kai, which means “to change,” and zen, which means “good or for the better.” Together, the words mean continuous change for the better, which many readers will recognize as continuous improvement. The philosophy of kaizen is straightforward. It requires that everyone in the organization be involved in the improvement process-executives, management, supervisors, and workers. This process has been immortalized in Deming’s plan-do-check-act cycle of continuous improvement, which is the backbone of many quality systems in use today.
The Kaizen philosophy is based on its literal meaning of “good change” or improvement” and the foundation of the Kiazen method consists of 5 founding elements
2. personal discipline
3. improved morale
4. quality circles
5. suggestions for improvement
The goals of Kaizen include
* elimination of waste
* just-in-time delivery
* standardised work
* paced moving lines
* right-sized equipment & more
A closer definition of the Japanese usage of Kaizen is “to take it apart and put back together in a better way. ” What is taken apart is usually a process, system, product, or service.
Well known companies such as Toyota are known for Kaizen, where all line personnel are expected to stop their moving production line in the case of any abnormality, and suggestions for improvement are rewarded.
Kaizen often takes place one small step at a time, hence the English translation “continuous improvement,” or “continual improvement.” Yet radical changes for the sake of goals such as just in time, and moving lines also gain the full support of upper level management.
The cycle of Kaizen activity can be defined as:
* standardize an operation
* measure the standardized operation
* gauge measurements against requirements
* innovate to meet requirements and increase productivity
* standardize the new, improved operations
* continue cycle ad infinitum. (also known as the Shewhart cycle)
Emiliani, M.L., with Stec, D., Grasso, L. and Stodder, J. (2003)
The “zen” in Kaizen emphasizes the learn-by-doing aspect of improving production. This philosophy is focused in a different direction from the “command-and-control” improvement programs of the mid-20th century. Kaizen methodology includes making changes and looking at the results, then adjusting. Large-scale preplanning and extensive project scheduling are replaced by smaller experiments in improvement, which can be rapidly adapted as new improvements are suggested.
Imai, Masaaki (1986)
Changing face of Direct Line
Faced with an expanding portfolio of products and the need to think hard about how customer interactions were handled, in 1999 Direct Line broke with the tradition of developing in house software and purchased a suite of software from Chordiant, a US Customer Relations Management programme supplier. The need for a simple, convenient and speedy service led to a strategic review of the company’s IT systems. This resulted in the decision to implement a multi-channel operational business process architecture based on front-end e-Business applications and an integration framework.
Customer Relation Management (CRM)
Customer Relationship Management began as a business practice after early Mesopotamian’s learned to farm their land. These early framers realised the food they produced was more than they could eat and so the need for trade developed.
Although a recent acronym for Customer Relationship Management, CRM software systems have been in use since the first millennium BC. Early merchants and scribes kept accurate business records on clay tablets to keep track of what products were sold to which customers, by what quantities and when.
In the 1990s, CRM transformed from a mere Web based Contact Management and information tool, to a real customer oriented strategy that enhanced customer experience and automated processes easily and efficiently for the first time in the history of small business.
Direct Line CRM Solution
The strategic goal of this particular CRM software was cross selling. At the time of development and purchase, Direct Line had expanded dramatically. It needed the ability to spot a customer application, for example a loan, and investigate if the customer would benefit from a credit card (Figure 1). The system also needed to be non-technology dependent, in other words applications could be processed via the web or on the telephone. The system also has to be able to assist customers in a live environment, for example, if a customer starts to fill out a loan application online, but decides halfway through that he would prefer to speak to someone and phones the call centre, there is no need for him or her to start again from scratch. The operator can instantly view the data that the customer has already entered on the web site, and complete the transaction over the phone.
Chordiant Business Challenge
Direct Line’s emphases are on a simple, personalized experience for the consumer and sophisticated transactional technology providing a streamlined service behind the scenes.
* In September 1999 Direct Line launched directline.com
* December 1999 Managing Director of e-commerce appointed
* May 2000, directline.com was handling 150,000 quotes a month on its web site and could claim to be the UK’s leading Web insurer
The Chordiant implementation is a major project that integrates all of Direct Line’s existing and future channels to market for its entire range of products and services.
The first priority was to integrate existing call centre operations with the new Web channel. Phase one began in January 2000 at Direct Line’s Financial Services arm (DLFS) in Glasgow, where Chordiant was to be used to support customer access via the Internet for DLFS’ personal loan products. The object-oriented design also had to be capable of reducing the implementation cycle whenever a new product, service, process or channel is to be introduced.
“The beauty of the Chordiant application is that every time we want to change a business process, we don’t need to do it across multiple channels. So if we have a customer value analysis component for example, we can re-use that in the call centre, and extend across contact channels such as interactive TV, wireless phone or kiosk. Whichever channel we want, we only have to develop one set of components.”
Delivering a Single Customer View
“The problem with a lot of software is that the web and call centre transactions are not fully integrated,”
Once the Chordiant implementation is complete, all customer interactions with Direct Line will be available to call centre operators as a single history. It will also be possible for customers to switch seamlessly between communications channels. Customers will receive a fast, flexible service and a choice of ways to buy Direct Line products.
Another key feature of the Chordiant software is that it can dynamically retrieve data from multiple sources and present it in real time to the customer on the web or the agent in the call centre. At Direct Line Financial Services, the online loan application service can retrieve customer history information from the company’s S/390 mainframe, and simultaneously request external credit data from credit scoring agencies such as Equifax. The Chordiant solution combines data from both sources in real time, so that all customer information is centrally accessible.
Using Processes for Effectiveness and Efficiency in Customer Targeting
A single customer view will allow Direct Line to understand its customers better and target them more effectively. The Chordiant application will enable users to use this information better and enrich Direct Lines systems with additional information at the point of sale.
A customer who has applied for a mortgage, for example, will have supplied all the necessary information for Direct Line to assess whether they are eligible for a credit card. Direct Line can then mail qualifying customers directly with news of its credit card offer, reducing the size and cost of its direct mail campaigns while still reaching the desired target audience.
Rolling Out New Products and Channels
Direct Line Financial Services is to use Chordiant to establish an “ideal sales” process for call centre operators selling Direct Line’s many products. This will provide operators with flexible, detailed sales processes and prompt information, including competitor information, enabling product cross selling and up selling, and allowing new products to be introduced quickly and effectively. The objective is to increase conversion rates and customer retention rates while reducing costs.
Looking further ahead, Direct Line plans to extend its channels to market its product offerings while managing all customer interactions within the Chordiant process-driven environment.
“We are moving into the next phase of customer relationship management, as a “direct-to-the-consumer” company, we want to offer all direct channels as they become viable options for customers. The Chordiant solution enables us to deliver the full range of sales and customer service channels including interactive digital TV and WAP-enabled mobile devices”
Ultimately, Direct Line’s decision to use Chordiant is about providing better customer service. With the company’s latest move into discounted online car sales in addition to financial services, its customer base can only grow larger and more diverse. With the combination of Chordiant solution based software and the Kaizen cycle activity of standardised operations, measure the standardized operation, gauge measurements against requirements, innovate to meet requirements, increase productivity, standardise the new improved operations and continue cycle. As Direct Line’s operations grow on the web, through its call centres, and into new electronic channels, its customers will continue to receive the same fast, personalised and knowledgeable service consistently across its e-Business channels that Direct Line has offered for the past fifteen years on the humble telephone.