November 19, 2024 • 44 mins
In this week’s episode, Jo Causon sits down with Chief Economist and Head of Research at Panmure Liberum, Simon French, to discuss how a focus on customer service can lead to long term economic growth for the UK.
Music copyright: Kevin MacLeod
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Episode Transcript
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(00:02):
Well, hello everyone and a warm welcome back to another episode of Corson and theCustomer.
Our weekly podcast discussing all things customer service and effective businessleadership was some of the most knowledgeable on the subject.
Last week I had a fantastic discussion with the Financial Times Consumer Editor ClaireBarrett where we discussed the current state of customer service and indeed customer
(00:28):
loyalty in the UK.
I'm very excited to introduce our guest this week, who has a very different and equallyfascinating angle on the value of service to the UK economy.
Simon French joins me this week.
He is chief economist at Panmure Gordon and a regular media commentator on internationalmarkets.
(00:50):
In fact, I first met Simon when we were guests together on the BBC's Wake Up To Money.
I hope you enjoy our conversation as much as I did.
And also that it gets you really thinking about the strong link between good service,business performance and the wider economic state of the UK.
(01:11):
So a very warm welcome this afternoon.
And I am absolutely delighted to be joined on today's podcast with Simon French.
And Simon, for those of you that may not know him, although I think in the economistworld, you're very well known, is chief economist at Panmure Gordon, which is a UK
investment bank.
And I'm particularly excited about having Simon join me today on this podcast.
(01:35):
Simon and I met actually a few months ago on Wake Up To Money.
And it was very refreshing to be able to hear from an economist who had so much to sayabout the importance of customer experience and customer service and how that actually has
a very intrinsic value to the bottom line of any organization.
So never want to miss an opportunity because I want to really grab that.
(01:57):
I wanted to really have the opportunity to talk to Simon today.
understand a little bit more about him, what makes him tick, but also from an economicpoint of view, how he believes the whole service economy is going, where we're driving and
the importance of it.
So Simon, a very warm welcome to today's podcast and thank you for being my guest today.
(02:17):
Tell us a little bit about you.
Well, Joe, thank you for the invite.
That's very, very kind and delighted to be chatting with you today.
So a bit of my background.
So you've introduced my current role, which is as chief economist and head of research atPameo Gordon, which is a UK investment bank seeking to support UK mid-sized companies
grow, raise capital, contribute to the UK economy.
(02:41):
But my history actually, or my sort of previous career was as an economic advisor withinthe UK Civil Service and the government.
one of the things I really enjoyed about the conversation where we met on BBC Wake Up ToMoney was I was part of the team that launched the biggest UK staff survey in existence,
which is the Civil Service People's Survey, where employee engagement was the key metricthat we would get out of that.
(03:06):
I really enjoyed...
pulling together the evidence as we did at the time to convince ministers to launch thatsurvey on the link between employee engagement and outcomes.
But as you mentioned in your intro, the bottom line for businesses, but also for publicservices.
Absolutely.
And, you know, we talk a lot about this, the link between employee engagement, customersatisfaction, and then finally the performance of an organization.
(03:33):
And it'd be that either in productivity terms or in terms of financial performance.
So, you know, it's a challenging old world at the moment, isn't it, Simon?
I mean, there's a lot of things that organizations are facing into, whether that'sgeopolitical, whether that's economic.
the whole kind of aspect around consumer and customer behavior.
(03:57):
And certainly when I talk to our members, some of the things that are keeping them awakeat night is how do you navigate through that?
So any advice or any views that you would have in terms of really trying to understand thelandscape that we're operating in, the importance of the customer experience, and how you
keep on proving that financial link.
(04:18):
between the customer.
Because many organizations might see customer service as a cost, whereas our conversationwas very much about seeing it as an investment.
Yeah, so how do I get this together with my sort of economic view and recent economicevents through customer service to the proposition of making really sustainable,
(04:39):
successful companies?
I think if anybody listening to this will have lived through the last two to three yearsof very high inflation, some of which for businesses was entirely, most of it for
businesses was entirely beyond their control.
and they had a judgment to make on how much they were going to absorb versus how much theywere going to pass on to the consumer.
(05:05):
And that is a debate that all businesses have throughout their life cycle, but becomesparticularly acute during a period of inflation, of shocks, where customers are used to a
set of pricing, a stability of pricing, and there's a real
challenge, I think any business leader listening to this will have said, is the degree towhich we have pricing power, but also want to maintain that relationship with our customer
(05:35):
base through this cycle and feel like we are to channel what is a of absolutelydiscredited phrase after the global financial crisis, but in it together.
And one of the things we've seen in terms of businesses that have been really successfulthrough this period
has been those that have absolutely recognized that it is a partnership with consumers.
(05:57):
Consumers and customers couldn't, in many cases, absorb all of the cost inflation of thelast few years.
So it's had to be shared.
And part of the offering is making it absolutely clear that there is a long-termrelationship between the company and the customer that means although prices in the short
(06:19):
term may be volatile.
actually we're giving you a degree of fairness.
The quality of service that you're prepared to pay for, even when the amount you'reprepared to pay for, has gone up, if you look at the overall price level, about 20 % in
the last three years.
So would you argue, Simon, that those organisations that I guess leant into that issue,outreached to their customers, really understood the pain that they might be in, had a
(06:47):
genuine conversation around that, do you think that's enabled them to fare better, or willfare better, as we come out of hopefully to a period of growth?
Do you think that will drive greater commitment, I guess, from customers?
Yeah, mean, look, let's choose one of perhaps is very close to being UK's biggestemployer, certainly one of its most high profile companies, Tesco.
(07:10):
Now Tesco went through quite a difficult period, it's fair to say, in the 2010s.
Different management strategies, their key tagline, every little helps, was struggling, itexpanded into new markets, it perhaps just took its eye off the ball on its core customer
and its core customer proposition.
(07:30):
But it's fair to say, not just investors looking at this, but the customer base would saythat supermarkets and particularly Tesco had a particularly good pandemic.
It recognized that it was a, there were key workers, it was a key service, it was part ofthe services based economy that we could still visit in those dark periods of the
(07:54):
pandemic.
And it absolutely recast its customer proposition.
as being back on the side of the customer.
And as it went out of the pandemic, the acute key worker, key service category, and had tomake some difficult decisions on price inflation, if you like, had banked some goodwill
(08:14):
from its customer base that could then utilize when inevitably had to pass through some ofthose costs of foodstuffs and staples, which mercifully are now showing signs of had the
recent data, the food inflation is down to close to 3%.
having peaked at almost 20%.
That's a very different environment for retailers.
The ones that have done well in Tesco at Exemplify is that had customer service at theheart of their proposition ahead of that really key difficult trading period.
(08:41):
And also Simon took a long-term approach to that too, which I think something in the UKwere very short-term.
Whereas what we can see is those organisations that have a long-term approach towardstheir customer experience balance all of this.
I was with a CEO recently and they were talking about the fact it's not customerexperience or customer service in asylum.
(09:03):
It's customer service and operational effectiveness.
It's customer service and operational effectiveness and investment.
You know, that ability to be able to see the customer experience as an integral part ofthe business strategy.
So why is it when you and I are nodding and we get that, so many organisations stillstruggle with that, Simon, to really see, I guess, the customer experience as a strategic
(09:30):
imperative for that business that's integral and intertwined, I guess, with the otherelements of it.
Look, I don't think it's a job that's ever done in terms of sharing the evidence.
For some people, and I saw firsthand when I was doing employee engagement surveys, someleaders get it straight away.
Some people, the entry point needs to be more qualitative than quantitative.
(09:55):
I think the proponents of high quality customer service proposition is core to how youdeliver your business.
recognize that if you look at a management team aboard structure, you can't have a onesize fits all approach to communicating, convincing, getting advocates around the board
table.
(10:15):
Because unfortunately, and I think this is to heart of the question of why it isn't doneuniversally, when the pressure comes on and different sectors at different times either
buffeted by sectoral challenges, personnel challenges, or big macro challenges, theeasiest thing perhaps first order.
to cut is some of the stuff that may, in pockets of the board, be seen as seen as non-coreto their survival.
(10:43):
I get it.
I understand it.
It doesn't mean that you and I need to agree with it.
But if you ask me to diagnose why that happens, I think it's because you have perhapsthere hasn't been enough time taken to advocate and advocate in a range of different ways.
So that means that really, quite frankly, those of us in customer experience need to bebetter, perhaps, in the language and the positioning and to your point, really
(11:07):
understanding the priorities that might be in that boardroom at that given time.
And you've got to keep doing it, haven't you?
It's not a quick fix.
You have to keep bringing that evidence, showcasing examples of organisations that havedone that and have really driven that.
So just on that point, Joe, I think maybe we'll come onto this.
The UK has in the recent years had a particularly poor productivity record.
(11:30):
And when you try and decompose why that is, actually what you find is you have a group ofhyperproductive, highly engaged managers and managerial processes at the very top end of
the productivity distribution.
And then unfortunately you have quite a long tail of fairly poor management practices,fairly poor productivity levels.
(11:58):
And so actually sometimes the mystery is not so much that these examples don't exist.
I think we could all think of companies that produce great customer service.
It's the fact that that dispersion of good practice hasn't been across, well, there'sabout...
two and a half, depending on measure, two and a half to three million companies across theUK.
(12:18):
There's a long tail of much smaller ones who, although aren't your household names, arereally integral to lots of the service-based economy and making sure that those practices
are in keeping with those hyperproductive ones is a really key part of economic policy,which I don't think gets, in my previous career, doesn't get much spoken about at the top
(12:40):
of government.
Yeah, I mean, we've talked about the service economy.
80 % of our GDP in the UK comes from services.
And I don't think that we necessarily understand the critical importance, therefore, ofservice in terms of delivering that.
And to your point, the supply chain, because so very many parts of those organizationsthat might be delivering aspects of that are delivering the overall supply chain to larger
(13:05):
organizations or to make sure that that whole customer experience, that whole journey fromone organization
to the other.
Now you've mentioned quite a bit about management, employee engagement and I would agreewith you the link is really critical.
What are the kind of the skills and the capabilities that you look for in terms of anorganization that is well run Simon?
(13:27):
You know what are the sorts of things that you know if I was putting you on the spot whatwould those be?
For me, know, look, I have a 25 person research department.
I'm about to inherit another 25, so about to double the size of our research team.
And some management practices are management by numbers and targets and dashboards.
For me, if you were to put me on the distribution, what I've found is more effective is onthe behavior side of things and the values side of things.
(13:55):
And particularly, and the watchword that I come back to again and again in my teammeetings is collaboration.
And what do I mean?
mean, it's somewhat of a sort of an abstract term unless you unpack it.
In my business, in investment banking, actually you have different functions across thebusiness from trading, through sales, through research, through corporate financing.
(14:19):
And collaboration means that when you're serving the end customer, which of course is UKbusinesses looking to raise capital, if you collaborate as a business,
you become that one-stop shop for all the insight and capability that our clients willneed.
(14:39):
The worst teams in my view are quite protectionist of their intellectual property, oftheir clients.
It's quite a closed shop.
Now, in the short term, that may be a good survival strategy for you as an individual, asyour franchise, but it's not the way in my considered opinion on how you build great
teams.
Because actually the really great teams actively want to bring people into theconversation and collaborate and leverage their skills rather than close those off.
(15:09):
for me, and I absolutely respect that some people in some circumstances is much more of aquantitative driven managerial process and that can have a role.
I guess my personal management style is much more driven by values and the key value ofthat being collaboration.
I think that's really interesting and I would agree, Simon, if I look at, you know, I'mvery blessed, I'll get to work with all sorts of organisations in different industry
(15:35):
sectors.
But if I look at leadership and I look at, you know, which organisations are doingparticularly well, I think they do measure the hard stuff, to your point, because we have
to.
I think they are consistent in their approach.
and they think about measurement from the point of view of what's important to theemployee and what's important to the customer.
(15:57):
But the point of that collaboration across those silos as well, I you've been very clearabout that, it's one, we have a phrase in the Institute that we call playing for club and
country, which is that you play for your director at your club because that's who you'reresponsible for.
But ultimately, we're playing for the team, we're playing for the whole country.
(16:17):
And I think too many organizations, often because of how they're rewarded or how they'reset up, play too much for the silo or the club element and not for the overall gain.
And if you're a customer or an employee, that's illogical to you because actually youdon't want to be in that stovepipe, do you?
You want to be across the whole of the organization.
(16:38):
I want to have aspects of all parts of that journey, not just one element.
So I think there's something that we really need to change in our psyche around how weview that.
So I think that is really interesting.
So one of the things that we touched on before we got onto the podcast was, I guess, whereare we in the UK?
You know, we've talked about the fact that we've in the doldrums, we've been in and out ofa mini recession, but we're just not growing.
(17:02):
And you mentioned productivity.
One of the things that I know is very dear to your heart is about how we approach risk.
As a country, do you think we become more risk averse?
Is that an issue or a challenge for us?
And what would you like to do to try and address that?
Joe, look, I'm really pleased you gave me the opportunity to talk about this because riskcan be a dirty word.
(17:24):
It can be something to avoid.
And I understand why, because in many walks of life, you absolutely do want to minimizerisk for obvious reasons, public safety, duty of care.
But there are also any part of a dynamic productive economy.
(17:45):
has to be comfortable with a degree of managed risk to try out new processes, new ways ofdoing things, because productivity, let's not forget, it's again, it's one of those words
which in an abstract sense might not be particularly meaningful to people, but let's putit into a real nuts and bolts.
(18:05):
It's being able to do more with the same or the same with less.
It's being more efficient.
And you have to take a degree of risk
in order you have to change your approach of how you go about doing things.
You have to recast your proposition.
You have to invest in new systems, bring in new people.
(18:26):
All of that comes with a financial risk, a reputational risk.
Business as usual is the easiest thing to sort of fall back on.
But actually, there's quite a lot of evidence.
I don't need to go into all of it.
The most productive companies
ones that grow the fastest, their profits, their sales, are the ones who are looking atthe competitive challenge from within as much as the competitive challenge externally, and
(18:54):
are constantly taking risks in terms of, is this the best in class process of doing it?
Do I think, before I come on to how we could solve this or some ideas, do I think we'vegone too far towards risk aversion in large parts of corporate UK?
I think that's right.
(19:14):
And I think to some extent that might be a legacy along the shadow cast by the globalfinancial crisis.
But also, you know, there are elements of a very mature economy like the UK with a lot ofquite sort of aging infrastructure that doesn't necessarily lend itself to being
particularly innovative and starting with a blank sheet of paper preparing to tear thingsup.
(19:39):
And so if you like,
Part of, if you like, addressing this is, as it perhaps always does at some points, comingback to this education piece, not just at school, but education in the workplace, about
being comfortable with taking managed risk and recognizing that there has to be a safespace to innovate.
(20:05):
Where do managers say, look, I really want to encourage you to come up with
potentially 10 ideas on how we improve the customer proposition, even if nine of them,excuse my French, are BS.
Actually, let them come up with a 10th one because the 10th might be a thing thatfundamentally changes the quality of your business.
(20:27):
Now, that means inviting risk, inviting risk, reputational risk on the individual to feelconfident in a shared forum coming up with 10 suggestions of which nine are going to be
rubbish.
But also, the business then being prepared to back things
which are changing the proposition for customers, changing their supply chains.
I think that managerial class to be able to say we're okay with that, we encourage that,is a big part of getting growth back into the economy.
(20:56):
I think it's really interesting, Simon, isn't it?
Because we've gone through COVID and I think during that time in COVID, we're probablysurviving.
You know, we were focusing on trying to get the stuff out the door, trying to managethings.
And I do look at the fact that whether organizations have got a bit stuck in that, a bitcomfortable in that kind of mantra and actually need to step outside of that to challenge
(21:20):
themselves to drive that forward.
You know, again,
Organizations in my mind are either going forwards or backwards, they're never standingstill.
So I think that need to constantly challenge.
But one side of risk that I do think is underestimated is the customer risk.
And what I mean by that from a reputational point, I mean, in the last 12 months, we'veseen some pretty awful examples of organizations maybe not thinking hard enough about what
(21:48):
the impact has been on that customer or that reputational risk from that.
Do you think organizations that you see really understand the importance, I guess, ofservice from a risk, know, minimizing the customer risk to their organizations?
We've seen a massive rise, for example, Simon in activism.
(22:09):
We've seen a massive rise in the voice of the customer.
All of that gives us huge data opportunity, but it also increases risk.
And do you think that makes organizations more risk averse because of that?
Or do you think we are, you know, focusing enough?
Probably not.
And what I guess I, when trying to calibrate my answer, the obvious risks that we'vespoken about earlier in the podcast is supply chain risk, intangibles, not just, well,
(22:39):
intangibles and intangibles.
So you've got availability of workers during the pandemic because of your socialdistancing, COVID restrictions, et cetera.
You had supply chain risks in terms of products.
know, shipped from overseas, disruption of those supply chains.
And did we perhaps as an economy take, because we're focusing on the supply side, this isclassical economics, it?
(23:03):
We're focusing on the supply side and not on the demand side.
And the demand ultimately being the customer, has the pendulum swung too far towards, youknow, a board level looking at supply risk, supply risk, supply risk, without recognizing
the risks on the demand side from an engaged and a
a well-partnered, well-supported custom base, yeah, I think that makes a lot of sense.
(23:28):
I guess the reason why I'm being slightly guarded in my answer is as these supplyrestrictions, it numbers of vacancies and therefore labor market constraints and supply
chain shipping rates coming down, food prices coming down, availability of goods beingpretty back to a level of normality, does that pendulum naturally swing back or does it
(23:51):
need sort of
if you like, more pump priming.
I guess that's where I sort of plead ignorance on the degree to which you get aself-rightening function and focus back towards the customer and the customer proposition
or whether actually that needs proactive action from leaders.
I guess it needs proactive action.
And I think if I thought about stuff...
(24:12):
And it's interesting what COVID has done, I think, from a consumer point of view is we'reless likely to buy more stuff.
We're much more interested in upcycling, recycling.
And that's not just an economic issue.
I think that's also been a behavior change.
And we're spending more money on events and perhaps more intangible things than things.
(24:35):
I've got enough pairs of shoes.
I've got enough items of clothing, certainly as far as my husband's concerned.
So that's whole...
kind of thing, but also about, and you mentioned this before, around outreach.
If an organization outreaches to me, emotionally connects to me, engages with me, muchmore likely to trust that organization, I'm much more likely to spend more money with that
(24:58):
organization, stay with that organization, recommend that organization.
Look, this has been thus far a really very positive and consensus podcast between two ofus.
Maybe I'll sort challenge, not just for the sake of it, but actually because you're askingsome of the industry trends I've seen.
One of the phrases the pre-pandemic was on the lips of every investors was ESG,environmental, social and governance.
(25:23):
And this comes to the heart of understanding, which is driven very much by the customersbeing much more conscious.
of environment, social and governance issues and demanding that of the companies for whomthey contract with.
Have I seen ESG somewhat take a backward seat in recent years because of two globallysignificant wars and an energy price spike that certainly on the environmental side has
(25:54):
meant perhaps a bit more
realism rather than idealism in terms of the environmental impact of energy and energysecurity, but also broader societal and governance things have been given perhaps more of
a pushback because whether we like it or not, and I suspect you and I violently dislikethese sort of cultural wars, sort of woke, there has been undoubtedly both sides of the
(26:22):
Atlantic
a bit of a strong pushback against that, which has a blowback to companies perceivedupside, and I talk about it as perceived upside, of being very, very strong in ESG.
So I'm slightly, if you like, reporting back what I see on a practical sense of some ofthe things that were very much driven by customer concerns have been perhaps diluted a
(26:47):
little bit in the last couple of years because of global events.
Yeah, and I think that probably is true, Simon.
I mean, what you're seeing too, the cost of living and the implications that we've seenacross that piece, that certainly the ESG agenda may not be at the front of all customers'
minds.
However, and I think this is interesting, know, from our research, what we find is one inthree customers have no longer bought something if the organisation is either not behaving
(27:18):
ethically.
or not behaving, looking after its employees.
You mentioned that before.
So I think there still is something around, you know, we will vote with our feet if wethink that the rhetoric is not matched to the actual activities that are going on in that
organisation.
and I'm really pleased to hear that because look you can pull the records I mean one ofthe privileges I have is writing in the Times newspaper every fortnight and a column I
(27:46):
wrote I think it's coming up to five years ago when ESG was possibly at its towards itsvery peak of its evangelical phase is I did say ESG would need to evolve it would need to
become ESG 2.0 because I thought there was too much if you excuse the
Orwellian reference, know, two legs bad, four legs good in the interpretation of ESG.
(28:09):
And actually, if this exercise of exogenous events, wars, energy crises means that ESG hasmore nuance, has more of a recognition that these are not binary, these are not black and
white issues, but they're quite complex, which
ultimately needs to recognize the conflicts that the customer base has.
(28:32):
They are cost sensitive, but they're ethics based.
It's not one or the other.
And see, if there's a maturity to that debate that comes out of this, great.
And I was advocating for that, I'll say almost five years ago, and I'm pleased to see thatwe are recasting it.
I just hope it's recast in a really sensible way.
Yeah, and I think that's again fair, Simon, because for me, you know, maybe it's moreabout the G of the ESG.
(28:57):
And I do think that consumers and customers are much more aware.
of an organization, how it shows up, whether it does the right thing.
And I think that does really worry them.
And because we've seen so many high profile, as we were saying before, organizations thathave got that so badly wrong, I think that is very much at the forefront of our thinking.
(29:19):
And I would say that, wouldn't I?
But I think my research demonstrates that.
And again, going back to what differentiates a brilliant organization, what differentiatesa leadership that really cares, is showing up.
doing the right thing, being very purpose-led, being very relevant to that audience andmaking sure that they're really clear about the impact or the legacy.
(29:41):
I think my biggest challenge, I was honest, Simon, which I'd love, if I had a pixie dustor a change that I'd like to see in the UK, is we're very short-term.
The investor community is very short-term.
Everything is, what's happening in terms of the next six weeks in terms of reporting or 12weeks in retail or whatever.
How do we, Simon?
(30:02):
maybe challenge that a little bit because I'm not sure that the continuous short-termapproach towards business actually gets the long-term requirements on these that we could
get.
So how do we make ourselves less short-term?
In terms of capital allocation, this is not something that there's lots of stuff thatthink regulators and policymakers are blind to.
(30:24):
I don't think they are blind to this.
Patient capital reviews, the idea that capital is there sustainably offered through thecycle provides security, stability on which to grow and build.
I think is an agenda that successive governments have tried to tackle.
The problem is they're sort of
(30:45):
walking into a hurricane, if you like, of technology, financial markets technology,looking ever more short-termist in terms of the ability to returns, generate alpha, be it
high-frequency trading, be it hedge funds as a principal source of liquidity, et cetera.
(31:06):
To steal your phrase from five minutes ago, you can't stand still.
You're either going forward or you're going backwards.
And I think...
When push comes to shove in terms of capital markets, have we become, as savers, asinvestors, too comfortable with instantaneous liquidity?
(31:27):
But I think it is key.
Instantaneous liquidity is maybe hugely attractive for savers who want to be able to,investors who want to be able to turn the six points.
But there is a blowback, an impact, and I think it is a negative impact.
on that stability, patience of capital, which if you're trying to grow businesses, ifyou're to make long-term decisions, it's very, very difficult.
(31:53):
So while I don't think it's particularly popular, what Oscar Wilde said, everything thatis popular is wrong, I think there is a degree of perhaps capital markets going forward
need to recognize that perhaps the level of instantaneous liquidity, which is hugely
attractive for one constituent, the same for the investor, may have a negative impact onthe ability to grow great businesses.
(32:23):
I think we see for me that's really interesting because if you look at what we're tryingto do, which is have a balanced scorecard or a balanced approach, then that means that we
will have to trade some of that.
And again, if I look at my data, a great customer experience does generate those returns,high levels of EBITDA, productivity, all of those things, and revenue, but only if it's
(32:47):
sustained over a longer period of time.
And that's the really interesting nub for me about how do we try and drive that kind ofapproach away from being so short-term.
Maybe it links to your point about risk and more risk averse if I think that actually Ineed to make sure that I get that return within that particular period of time.
So I do think if we can move, we're thinking about trying to grow to being far more...
(33:13):
longer term, not in everything, but you know for some kind of sectors we really need tothink longer term because that will hopefully give those returns and I think if we can do
anything to adjust that that would be good and of course that also requires government tothink about that, it requires the regulators to think about that too and one of things I
was going to ask you Simon is if you had a magic wand
(33:35):
What would you be asking of the next government, whoever that is in, in terms from aregulatory point of view?
What would you like to see a big change?
And that's a big question, but is there anything that you'd like to see?
Well, it is a big question, but I think if we look at the economy, the UK economy as it isconstituted today, and this is not a comment that is party political, but over the last 30
(33:59):
to 40 years, so governments of all colours have under-invested in the capital environment,and be that physical capital, roads, railways, buildings, or human capital.
skills.
We talked a lot in this podcast about management capability.
There's clearly an impact of skills development, at secondary and tertiary and alsoacquiring skills in occupation in work training.
(34:30):
I think that's a big focus or needs to be a big focus because the famous hammock there,get sort of two economists, get three opinions.
I think all economists
I actually agree on this point that we have under-invested through the cycle.
And so what would I like to see from a new government is a focus on, if you like,ring-fencing parts of the public purse towards investment.
(35:02):
Now, a series of fiscal rules have played around with 3 % public sector net investmenttargets, which I don't think is a bad approach.
But I also think there are
Back to your previous questions on the ecosystem, the financial markets ecosystem, thereare things around, know, tax relief is offered to savers and investors with the saver and
(35:26):
the investor solely in mind, rather than the excess of capital to companies.
And one of the things that I know the CBI are looking at at the moment, had a veryinteresting meeting with them last couple of weeks, is whether that tax element
should actually sit with one is an effective sovereign wealth fund where it provides thatstable funnel of capital that all of his own.
(35:51):
So we get an effect units of retirement savings accrued within an entity, a sovereignwealth fund that invests in the UK's capital stock.
And now I get it.
I speak to investors every day who just say, well, all I want is a bit more Nvidia stockor Apple stock or Amazon stock.
I get it.
Returns have been much better in US tech than UK infrastructure for many, many years.
(36:16):
But there is an impact on the UK economy, the ability of great businesses to grow.
And so if I was to look for something that enabled the UK economy to break out of this lowgrowth phase, I think it would be something in that space, a stable cost of capital that
allows companies with great customer propositions, great product propositions.
(36:40):
to have a more secure pathway of capital.
Yeah, you know, if you think about where we're trying to head, whether that's technology,whether that's the development of AI, whether that's building an infrastructure that
enables us to charge our electric cars, whether that is, you our infrastructure iscreaking.
So I think that is really interesting about being able to invest in some of those hardcorethings, which will help to jumpstart some of that development.
(37:09):
So I think, you know, wouldn't it be great to see a combination, know, some
Investors may be thinking not just about that short-term return, that longer-term return,and then that wider sense of that investing in the growth of UK PLC, which is what we're
talking about, and making sure we can do that.
And if I, if I can just sort of, you like, the position of having the mic and being ableto sort of have a second one and bringing a bit more back to sort of customer services.
(37:36):
A lot of the podcasts I listen to the moment they start the middle and the end is allabout AI.
And because you seem to get credits, don't you?
If you talk about AI at the moment, generative AI, I'm a little bit more cynical in termsof like mentioned if it's relevant, but don't mention it just because it's the buzz
phrase.
I think in terms of, if you look at.
the, and I think we spoke about this on the radio when we first met, is really goodadaptation of technology, be it AI or be it machine learning, recognizes the counterparty,
(38:09):
the person they're facing off to, the customer, the customer experience.
And I get that most of the AI use cases are cutting out cost, costly human cost, andreplace it with at least other.
a variable cost or a consistency cost, what is seen as a more stable resourcing in termsof technology.
(38:30):
But let's see if we do this really well, if we do implementation, if we do the use casesreally well, we don't lose sight.
In fact, we put it right at the very center.
The principal beneficiary of this has to be the customer who is facing off to that.
So AI usage, which is going to revolutionize
(38:52):
know, healthcare, it's going to revolutionize in insurance, financial services, almost nosector will be left untouched.
But the ability of that to augment the customer experience rather than leave the customerdisenfranchised and felt less powerful rather than more powerful, I think would be a
really crucial part of good AI governance.
(39:13):
Yeah, I couldn't agree more.
So if you think about this, I remember a very wise person saying to me years ago, you'reeither serving a customer yourself or you're serving somebody who is serving a customer
because otherwise you're of no use to my business.
And I think we have to remember that any technology, any AI is there to give a betterexperience, a better outcome.
(39:36):
And the future world, and we talk a lot about this at the Institute for me, is about ablended approach.
And many things which people think are customer service are not customer service.
So I'm in their processes.
And what I'm really hoping that tech will do is take a lot of that transactional activitythat is important because it means that I get something delivered on time in the way that
(39:57):
I expected.
Takes that heartache, that pain out of it, but then is augmented by that really specialinteraction with the human being when it matters, how it matters.
And at the moment, I'm not aware of any technology that can really understand where I'mgoing to go next, really understand that sentiment, that behavior, and really pick up on
(40:18):
all of those emotional cues.
It may come.
We tend to overestimate what technology can do for us in the short term and underestimatewhat it'll do in the longer term.
That's for sure.
But I think that brilliant blend of having the tech, but also that human intervention andknowing
when to deploy it and to deploy it well is what's going to be critical, as well as, whichis what you said, designing the journey around the customer.
(40:44):
So often we design around what our needs are as organizations.
We measure what we need, not what the customer needs, and we don't design around that.
And I know you're very passionate about that, Simon.
So it's always brilliant to talk to a fellow person that is really interested in thatservice experience.
I'm also really conscious that, can you believe it, we've been...
rambling on together for over 45 minutes.
(41:06):
And I know that we're nearly at the end of our podcast.
So can I just say a really big thank you?
been very generous with your time.
One final question I want to ask you is what is the one change, the one thing, Simon, thatyou think business leaders can implement today?
You we've been talking about where the future goes, new governments, all the rest of it,to really change the future of customer service.
(41:30):
What would that be?
I'll be really, really practical.
Go and see your customers.
Go and see them.
I say this to my analysts and the sort of equity research analysts are, you know, byalmost by sort of job description.
They're quite cerebral folk.
They can be a bit into looking at the data, look at their models, looking at theirresearch product.
(41:55):
But actually I keep saying, look, if you've got the
If you ever have a spare hour, a spare period of time where, shall I do?
Shall I write another chapter in my research note or shall I go and see my customer?
And we have a plurality of customers.
Sometimes it's the traders, sometimes it's the company we're representing, sometimes it'sthe institutional investor.
(42:18):
But go and see them because you will almost always get a level of insight that just simplyis not possible by looking downwards.
I think of my own economics research, I almost always get the best ideas on what to writeabout.
And I've got metrics.
I know you're a passionate advocate of let's link those decisions to the metric.
(42:41):
I know that my most read, my most impactful stuff is when I've spoken to a customer, oftenone of my salespeople, one of my institutional client investors who says,
I haven't seen anything interesting about this written.
And it's gold dust, isn't it?
And if you get that from a customer, God, the quality of your output to the other end.
(43:05):
Sometimes it's secure, sometimes it's direct.
It's so much improved.
And I think somewhere in the world where tech and data and information is so much moreavailable to us, the ability to look up and look out, I think has become even more
important.
And to have that dialogue with your customer and really understand what's keeping themawake at night and really what's driving them will help us far more than any set of
(43:33):
analogues of data or other information that we possibly can have.
Simon, I think we're going to have to draw our conversation to a close, but it's always anabsolute pleasure.
I should look forward to seeing you or being on Wake Up To Money with you again, I'm surevery soon.
But thank you.
And thank you also, I think, for really focusing on why the service agenda is so importantto the UK and to our economy and that real financial return.
(43:58):
So anything that you can do to help the investor community to realise that still further,then we would be very grateful to.
Simon, thank you.
Thank you for your time today.
It's been a huge enjoyment talking to you.
Brilliant, thank you.
Well, there you have it.
It's always heartening to find an economic expert to discuss how truly important gettingservice right is to the performance of UK PLC.
(44:23):
And join me next time when we're moving into the world of financial services to chat withAlison Rose, who has decades' experience and insight into leading financial institutions.
And as always, thank you for listening.
Well, hello everyone and a warm welcome back to another episode of Corson and theCustomer.
Our weekly podcast discussing all things customer service and effective businessleadership was some of the most knowledgeable on the subject.
Last week I had a fantastic discussion with the Financial Times Consumer Editor ClaireBarrett where we discussed the current state of customer service and indeed customer
(00:28):
loyalty in the UK.
I'm very excited to introduce our guest this week, who has a very different and equallyfascinating angle on the value of service to the UK economy.
Simon French joins me this week.
He is chief economist at Panmure Gordon and a regular media commentator on internationalmarkets.
(00:50):
In fact, I first met Simon when we were guests together on the BBC's Wake Up To Money.
I hope you enjoy our conversation as much as I did.
And also that it gets you really thinking about the strong link between good service,business performance and the wider economic state of the UK.
(01:11):
So a very warm welcome this afternoon.
And I am absolutely delighted to be joined on today's podcast with Simon French.
And Simon, for those of you that may not know him, although I think in the economistworld, you're very well known, is chief economist at Panmure Gordon, which is a UK
investment bank.
And I'm particularly excited about having Simon join me today on this podcast.
(01:35):
Simon and I met actually a few months ago on Wake Up To Money.
And it was very refreshing to be able to hear from an economist who had so much to sayabout the importance of customer experience and customer service and how that actually has
a very intrinsic value to the bottom line of any organization.
So never want to miss an opportunity because I want to really grab that.
(01:57):
I wanted to really have the opportunity to talk to Simon today.
understand a little bit more about him, what makes him tick, but also from an economicpoint of view, how he believes the whole service economy is going, where we're driving and
the importance of it.
So Simon, a very warm welcome to today's podcast and thank you for being my guest today.
(02:17):
Tell us a little bit about you.
Well, Joe, thank you for the invite.
That's very, very kind and delighted to be chatting with you today.
So a bit of my background.
So you've introduced my current role, which is as chief economist and head of research atPameo Gordon, which is a UK investment bank seeking to support UK mid-sized companies
grow, raise capital, contribute to the UK economy.
(02:41):
But my history actually, or my sort of previous career was as an economic advisor withinthe UK Civil Service and the government.
one of the things I really enjoyed about the conversation where we met on BBC Wake Up ToMoney was I was part of the team that launched the biggest UK staff survey in existence,
which is the Civil Service People's Survey, where employee engagement was the key metricthat we would get out of that.
(03:06):
I really enjoyed...
pulling together the evidence as we did at the time to convince ministers to launch thatsurvey on the link between employee engagement and outcomes.
But as you mentioned in your intro, the bottom line for businesses, but also for publicservices.
Absolutely.
And, you know, we talk a lot about this, the link between employee engagement, customersatisfaction, and then finally the performance of an organization.
(03:33):
And it'd be that either in productivity terms or in terms of financial performance.
So, you know, it's a challenging old world at the moment, isn't it, Simon?
I mean, there's a lot of things that organizations are facing into, whether that'sgeopolitical, whether that's economic.
the whole kind of aspect around consumer and customer behavior.
(03:57):
And certainly when I talk to our members, some of the things that are keeping them awakeat night is how do you navigate through that?
So any advice or any views that you would have in terms of really trying to understand thelandscape that we're operating in, the importance of the customer experience, and how you
keep on proving that financial link.
(04:18):
between the customer.
Because many organizations might see customer service as a cost, whereas our conversationwas very much about seeing it as an investment.
Yeah, so how do I get this together with my sort of economic view and recent economicevents through customer service to the proposition of making really sustainable,
(04:39):
successful companies?
I think if anybody listening to this will have lived through the last two to three yearsof very high inflation, some of which for businesses was entirely, most of it for
businesses was entirely beyond their control.
and they had a judgment to make on how much they were going to absorb versus how much theywere going to pass on to the consumer.
(05:05):
And that is a debate that all businesses have throughout their life cycle, but becomesparticularly acute during a period of inflation, of shocks, where customers are used to a
set of pricing, a stability of pricing, and there's a real
challenge, I think any business leader listening to this will have said, is the degree towhich we have pricing power, but also want to maintain that relationship with our customer
(05:35):
base through this cycle and feel like we are to channel what is a of absolutelydiscredited phrase after the global financial crisis, but in it together.
And one of the things we've seen in terms of businesses that have been really successfulthrough this period
has been those that have absolutely recognized that it is a partnership with consumers.
(05:57):
Consumers and customers couldn't, in many cases, absorb all of the cost inflation of thelast few years.
So it's had to be shared.
And part of the offering is making it absolutely clear that there is a long-termrelationship between the company and the customer that means although prices in the short
(06:19):
term may be volatile.
actually we're giving you a degree of fairness.
The quality of service that you're prepared to pay for, even when the amount you'reprepared to pay for, has gone up, if you look at the overall price level, about 20 % in
the last three years.
So would you argue, Simon, that those organisations that I guess leant into that issue,outreached to their customers, really understood the pain that they might be in, had a
(06:47):
genuine conversation around that, do you think that's enabled them to fare better, or willfare better, as we come out of hopefully to a period of growth?
Do you think that will drive greater commitment, I guess, from customers?
Yeah, mean, look, let's choose one of perhaps is very close to being UK's biggestemployer, certainly one of its most high profile companies, Tesco.
(07:10):
Now Tesco went through quite a difficult period, it's fair to say, in the 2010s.
Different management strategies, their key tagline, every little helps, was struggling, itexpanded into new markets, it perhaps just took its eye off the ball on its core customer
and its core customer proposition.
(07:30):
But it's fair to say, not just investors looking at this, but the customer base would saythat supermarkets and particularly Tesco had a particularly good pandemic.
It recognized that it was a, there were key workers, it was a key service, it was part ofthe services based economy that we could still visit in those dark periods of the
(07:54):
pandemic.
And it absolutely recast its customer proposition.
as being back on the side of the customer.
And as it went out of the pandemic, the acute key worker, key service category, and had tomake some difficult decisions on price inflation, if you like, had banked some goodwill
(08:14):
from its customer base that could then utilize when inevitably had to pass through some ofthose costs of foodstuffs and staples, which mercifully are now showing signs of had the
recent data, the food inflation is down to close to 3%.
having peaked at almost 20%.
That's a very different environment for retailers.
The ones that have done well in Tesco at Exemplify is that had customer service at theheart of their proposition ahead of that really key difficult trading period.
(08:41):
And also Simon took a long-term approach to that too, which I think something in the UKwere very short-term.
Whereas what we can see is those organisations that have a long-term approach towardstheir customer experience balance all of this.
I was with a CEO recently and they were talking about the fact it's not customerexperience or customer service in asylum.
(09:03):
It's customer service and operational effectiveness.
It's customer service and operational effectiveness and investment.
You know, that ability to be able to see the customer experience as an integral part ofthe business strategy.
So why is it when you and I are nodding and we get that, so many organisations stillstruggle with that, Simon, to really see, I guess, the customer experience as a strategic
(09:30):
imperative for that business that's integral and intertwined, I guess, with the otherelements of it.
Look, I don't think it's a job that's ever done in terms of sharing the evidence.
For some people, and I saw firsthand when I was doing employee engagement surveys, someleaders get it straight away.
Some people, the entry point needs to be more qualitative than quantitative.
(09:55):
I think the proponents of high quality customer service proposition is core to how youdeliver your business.
recognize that if you look at a management team aboard structure, you can't have a onesize fits all approach to communicating, convincing, getting advocates around the board
table.
(10:15):
Because unfortunately, and I think this is to heart of the question of why it isn't doneuniversally, when the pressure comes on and different sectors at different times either
buffeted by sectoral challenges, personnel challenges, or big macro challenges, theeasiest thing perhaps first order.
to cut is some of the stuff that may, in pockets of the board, be seen as seen as non-coreto their survival.
(10:43):
I get it.
I understand it.
It doesn't mean that you and I need to agree with it.
But if you ask me to diagnose why that happens, I think it's because you have perhapsthere hasn't been enough time taken to advocate and advocate in a range of different ways.
So that means that really, quite frankly, those of us in customer experience need to bebetter, perhaps, in the language and the positioning and to your point, really
(11:07):
understanding the priorities that might be in that boardroom at that given time.
And you've got to keep doing it, haven't you?
It's not a quick fix.
You have to keep bringing that evidence, showcasing examples of organisations that havedone that and have really driven that.
So just on that point, Joe, I think maybe we'll come onto this.
The UK has in the recent years had a particularly poor productivity record.
(11:30):
And when you try and decompose why that is, actually what you find is you have a group ofhyperproductive, highly engaged managers and managerial processes at the very top end of
the productivity distribution.
And then unfortunately you have quite a long tail of fairly poor management practices,fairly poor productivity levels.
(11:58):
And so actually sometimes the mystery is not so much that these examples don't exist.
I think we could all think of companies that produce great customer service.
It's the fact that that dispersion of good practice hasn't been across, well, there'sabout...
two and a half, depending on measure, two and a half to three million companies across theUK.
(12:18):
There's a long tail of much smaller ones who, although aren't your household names, arereally integral to lots of the service-based economy and making sure that those practices
are in keeping with those hyperproductive ones is a really key part of economic policy,which I don't think gets, in my previous career, doesn't get much spoken about at the top
(12:40):
of government.
Yeah, I mean, we've talked about the service economy.
80 % of our GDP in the UK comes from services.
And I don't think that we necessarily understand the critical importance, therefore, ofservice in terms of delivering that.
And to your point, the supply chain, because so very many parts of those organizationsthat might be delivering aspects of that are delivering the overall supply chain to larger
(13:05):
organizations or to make sure that that whole customer experience, that whole journey fromone organization
to the other.
Now you've mentioned quite a bit about management, employee engagement and I would agreewith you the link is really critical.
What are the kind of the skills and the capabilities that you look for in terms of anorganization that is well run Simon?
(13:27):
You know what are the sorts of things that you know if I was putting you on the spot whatwould those be?
For me, know, look, I have a 25 person research department.
I'm about to inherit another 25, so about to double the size of our research team.
And some management practices are management by numbers and targets and dashboards.
For me, if you were to put me on the distribution, what I've found is more effective is onthe behavior side of things and the values side of things.
(13:55):
And particularly, and the watchword that I come back to again and again in my teammeetings is collaboration.
And what do I mean?
mean, it's somewhat of a sort of an abstract term unless you unpack it.
In my business, in investment banking, actually you have different functions across thebusiness from trading, through sales, through research, through corporate financing.
(14:19):
And collaboration means that when you're serving the end customer, which of course is UKbusinesses looking to raise capital, if you collaborate as a business,
you become that one-stop shop for all the insight and capability that our clients willneed.
(14:39):
The worst teams in my view are quite protectionist of their intellectual property, oftheir clients.
It's quite a closed shop.
Now, in the short term, that may be a good survival strategy for you as an individual, asyour franchise, but it's not the way in my considered opinion on how you build great
teams.
Because actually the really great teams actively want to bring people into theconversation and collaborate and leverage their skills rather than close those off.
(15:09):
for me, and I absolutely respect that some people in some circumstances is much more of aquantitative driven managerial process and that can have a role.
I guess my personal management style is much more driven by values and the key value ofthat being collaboration.
I think that's really interesting and I would agree, Simon, if I look at, you know, I'mvery blessed, I'll get to work with all sorts of organisations in different industry
(15:35):
sectors.
But if I look at leadership and I look at, you know, which organisations are doingparticularly well, I think they do measure the hard stuff, to your point, because we have
to.
I think they are consistent in their approach.
and they think about measurement from the point of view of what's important to theemployee and what's important to the customer.
(15:57):
But the point of that collaboration across those silos as well, I you've been very clearabout that, it's one, we have a phrase in the Institute that we call playing for club and
country, which is that you play for your director at your club because that's who you'reresponsible for.
But ultimately, we're playing for the team, we're playing for the whole country.
(16:17):
And I think too many organizations, often because of how they're rewarded or how they'reset up, play too much for the silo or the club element and not for the overall gain.
And if you're a customer or an employee, that's illogical to you because actually youdon't want to be in that stovepipe, do you?
You want to be across the whole of the organization.
(16:38):
I want to have aspects of all parts of that journey, not just one element.
So I think there's something that we really need to change in our psyche around how weview that.
So I think that is really interesting.
So one of the things that we touched on before we got onto the podcast was, I guess, whereare we in the UK?
You know, we've talked about the fact that we've in the doldrums, we've been in and out ofa mini recession, but we're just not growing.
(17:02):
And you mentioned productivity.
One of the things that I know is very dear to your heart is about how we approach risk.
As a country, do you think we become more risk averse?
Is that an issue or a challenge for us?
And what would you like to do to try and address that?
Joe, look, I'm really pleased you gave me the opportunity to talk about this because riskcan be a dirty word.
(17:24):
It can be something to avoid.
And I understand why, because in many walks of life, you absolutely do want to minimizerisk for obvious reasons, public safety, duty of care.
But there are also any part of a dynamic productive economy.
(17:45):
has to be comfortable with a degree of managed risk to try out new processes, new ways ofdoing things, because productivity, let's not forget, it's again, it's one of those words
which in an abstract sense might not be particularly meaningful to people, but let's putit into a real nuts and bolts.
(18:05):
It's being able to do more with the same or the same with less.
It's being more efficient.
And you have to take a degree of risk
in order you have to change your approach of how you go about doing things.
You have to recast your proposition.
You have to invest in new systems, bring in new people.
(18:26):
All of that comes with a financial risk, a reputational risk.
Business as usual is the easiest thing to sort of fall back on.
But actually, there's quite a lot of evidence.
I don't need to go into all of it.
The most productive companies
ones that grow the fastest, their profits, their sales, are the ones who are looking atthe competitive challenge from within as much as the competitive challenge externally, and
(18:54):
are constantly taking risks in terms of, is this the best in class process of doing it?
Do I think, before I come on to how we could solve this or some ideas, do I think we'vegone too far towards risk aversion in large parts of corporate UK?
I think that's right.
(19:14):
And I think to some extent that might be a legacy along the shadow cast by the globalfinancial crisis.
But also, you know, there are elements of a very mature economy like the UK with a lot ofquite sort of aging infrastructure that doesn't necessarily lend itself to being
particularly innovative and starting with a blank sheet of paper preparing to tear thingsup.
(19:39):
And so if you like,
Part of, if you like, addressing this is, as it perhaps always does at some points, comingback to this education piece, not just at school, but education in the workplace, about
being comfortable with taking managed risk and recognizing that there has to be a safespace to innovate.
(20:05):
Where do managers say, look, I really want to encourage you to come up with
potentially 10 ideas on how we improve the customer proposition, even if nine of them,excuse my French, are BS.
Actually, let them come up with a 10th one because the 10th might be a thing thatfundamentally changes the quality of your business.
(20:27):
Now, that means inviting risk, inviting risk, reputational risk on the individual to feelconfident in a shared forum coming up with 10 suggestions of which nine are going to be
rubbish.
But also, the business then being prepared to back things
which are changing the proposition for customers, changing their supply chains.
I think that managerial class to be able to say we're okay with that, we encourage that,is a big part of getting growth back into the economy.
(20:56):
I think it's really interesting, Simon, isn't it?
Because we've gone through COVID and I think during that time in COVID, we're probablysurviving.
You know, we were focusing on trying to get the stuff out the door, trying to managethings.
And I do look at the fact that whether organizations have got a bit stuck in that, a bitcomfortable in that kind of mantra and actually need to step outside of that to challenge
(21:20):
themselves to drive that forward.
You know, again,
Organizations in my mind are either going forwards or backwards, they're never standingstill.
So I think that need to constantly challenge.
But one side of risk that I do think is underestimated is the customer risk.
And what I mean by that from a reputational point, I mean, in the last 12 months, we'veseen some pretty awful examples of organizations maybe not thinking hard enough about what
(21:48):
the impact has been on that customer or that reputational risk from that.
Do you think organizations that you see really understand the importance, I guess, ofservice from a risk, know, minimizing the customer risk to their organizations?
We've seen a massive rise, for example, Simon in activism.
(22:09):
We've seen a massive rise in the voice of the customer.
All of that gives us huge data opportunity, but it also increases risk.
And do you think that makes organizations more risk averse because of that?
Or do you think we are, you know, focusing enough?
Probably not.
And what I guess I, when trying to calibrate my answer, the obvious risks that we'vespoken about earlier in the podcast is supply chain risk, intangibles, not just, well,
(22:39):
intangibles and intangibles.
So you've got availability of workers during the pandemic because of your socialdistancing, COVID restrictions, et cetera.
You had supply chain risks in terms of products.
know, shipped from overseas, disruption of those supply chains.
And did we perhaps as an economy take, because we're focusing on the supply side, this isclassical economics, it?
(23:03):
We're focusing on the supply side and not on the demand side.
And the demand ultimately being the customer, has the pendulum swung too far towards, youknow, a board level looking at supply risk, supply risk, supply risk, without recognizing
the risks on the demand side from an engaged and a
a well-partnered, well-supported custom base, yeah, I think that makes a lot of sense.
(23:28):
I guess the reason why I'm being slightly guarded in my answer is as these supplyrestrictions, it numbers of vacancies and therefore labor market constraints and supply
chain shipping rates coming down, food prices coming down, availability of goods beingpretty back to a level of normality, does that pendulum naturally swing back or does it
(23:51):
need sort of
if you like, more pump priming.
I guess that's where I sort of plead ignorance on the degree to which you get aself-rightening function and focus back towards the customer and the customer proposition
or whether actually that needs proactive action from leaders.
I guess it needs proactive action.
And I think if I thought about stuff...
(24:12):
And it's interesting what COVID has done, I think, from a consumer point of view is we'reless likely to buy more stuff.
We're much more interested in upcycling, recycling.
And that's not just an economic issue.
I think that's also been a behavior change.
And we're spending more money on events and perhaps more intangible things than things.
(24:35):
I've got enough pairs of shoes.
I've got enough items of clothing, certainly as far as my husband's concerned.
So that's whole...
kind of thing, but also about, and you mentioned this before, around outreach.
If an organization outreaches to me, emotionally connects to me, engages with me, muchmore likely to trust that organization, I'm much more likely to spend more money with that
(24:58):
organization, stay with that organization, recommend that organization.
Look, this has been thus far a really very positive and consensus podcast between two ofus.
Maybe I'll sort challenge, not just for the sake of it, but actually because you're askingsome of the industry trends I've seen.
One of the phrases the pre-pandemic was on the lips of every investors was ESG,environmental, social and governance.
(25:23):
And this comes to the heart of understanding, which is driven very much by the customersbeing much more conscious.
of environment, social and governance issues and demanding that of the companies for whomthey contract with.
Have I seen ESG somewhat take a backward seat in recent years because of two globallysignificant wars and an energy price spike that certainly on the environmental side has
(25:54):
meant perhaps a bit more
realism rather than idealism in terms of the environmental impact of energy and energysecurity, but also broader societal and governance things have been given perhaps more of
a pushback because whether we like it or not, and I suspect you and I violently dislikethese sort of cultural wars, sort of woke, there has been undoubtedly both sides of the
(26:22):
Atlantic
a bit of a strong pushback against that, which has a blowback to companies perceivedupside, and I talk about it as perceived upside, of being very, very strong in ESG.
So I'm slightly, if you like, reporting back what I see on a practical sense of some ofthe things that were very much driven by customer concerns have been perhaps diluted a
(26:47):
little bit in the last couple of years because of global events.
Yeah, and I think that probably is true, Simon.
I mean, what you're seeing too, the cost of living and the implications that we've seenacross that piece, that certainly the ESG agenda may not be at the front of all customers'
minds.
However, and I think this is interesting, know, from our research, what we find is one inthree customers have no longer bought something if the organisation is either not behaving
(27:18):
ethically.
or not behaving, looking after its employees.
You mentioned that before.
So I think there still is something around, you know, we will vote with our feet if wethink that the rhetoric is not matched to the actual activities that are going on in that
organisation.
and I'm really pleased to hear that because look you can pull the records I mean one ofthe privileges I have is writing in the Times newspaper every fortnight and a column I
(27:46):
wrote I think it's coming up to five years ago when ESG was possibly at its towards itsvery peak of its evangelical phase is I did say ESG would need to evolve it would need to
become ESG 2.0 because I thought there was too much if you excuse the
Orwellian reference, know, two legs bad, four legs good in the interpretation of ESG.
(28:09):
And actually, if this exercise of exogenous events, wars, energy crises means that ESG hasmore nuance, has more of a recognition that these are not binary, these are not black and
white issues, but they're quite complex, which
ultimately needs to recognize the conflicts that the customer base has.
(28:32):
They are cost sensitive, but they're ethics based.
It's not one or the other.
And see, if there's a maturity to that debate that comes out of this, great.
And I was advocating for that, I'll say almost five years ago, and I'm pleased to see thatwe are recasting it.
I just hope it's recast in a really sensible way.
Yeah, and I think that's again fair, Simon, because for me, you know, maybe it's moreabout the G of the ESG.
(28:57):
And I do think that consumers and customers are much more aware.
of an organization, how it shows up, whether it does the right thing.
And I think that does really worry them.
And because we've seen so many high profile, as we were saying before, organizations thathave got that so badly wrong, I think that is very much at the forefront of our thinking.
(29:19):
And I would say that, wouldn't I?
But I think my research demonstrates that.
And again, going back to what differentiates a brilliant organization, what differentiatesa leadership that really cares, is showing up.
doing the right thing, being very purpose-led, being very relevant to that audience andmaking sure that they're really clear about the impact or the legacy.
(29:41):
I think my biggest challenge, I was honest, Simon, which I'd love, if I had a pixie dustor a change that I'd like to see in the UK, is we're very short-term.
The investor community is very short-term.
Everything is, what's happening in terms of the next six weeks in terms of reporting or 12weeks in retail or whatever.
How do we, Simon?
(30:02):
maybe challenge that a little bit because I'm not sure that the continuous short-termapproach towards business actually gets the long-term requirements on these that we could
get.
So how do we make ourselves less short-term?
In terms of capital allocation, this is not something that there's lots of stuff thatthink regulators and policymakers are blind to.
(30:24):
I don't think they are blind to this.
Patient capital reviews, the idea that capital is there sustainably offered through thecycle provides security, stability on which to grow and build.
I think is an agenda that successive governments have tried to tackle.
The problem is they're sort of
(30:45):
walking into a hurricane, if you like, of technology, financial markets technology,looking ever more short-termist in terms of the ability to returns, generate alpha, be it
high-frequency trading, be it hedge funds as a principal source of liquidity, et cetera.
(31:06):
To steal your phrase from five minutes ago, you can't stand still.
You're either going forward or you're going backwards.
And I think...
When push comes to shove in terms of capital markets, have we become, as savers, asinvestors, too comfortable with instantaneous liquidity?
(31:27):
But I think it is key.
Instantaneous liquidity is maybe hugely attractive for savers who want to be able to,investors who want to be able to turn the six points.
But there is a blowback, an impact, and I think it is a negative impact.
on that stability, patience of capital, which if you're trying to grow businesses, ifyou're to make long-term decisions, it's very, very difficult.
(31:53):
So while I don't think it's particularly popular, what Oscar Wilde said, everything thatis popular is wrong, I think there is a degree of perhaps capital markets going forward
need to recognize that perhaps the level of instantaneous liquidity, which is hugely
attractive for one constituent, the same for the investor, may have a negative impact onthe ability to grow great businesses.
(32:23):
I think we see for me that's really interesting because if you look at what we're tryingto do, which is have a balanced scorecard or a balanced approach, then that means that we
will have to trade some of that.
And again, if I look at my data, a great customer experience does generate those returns,high levels of EBITDA, productivity, all of those things, and revenue, but only if it's
(32:47):
sustained over a longer period of time.
And that's the really interesting nub for me about how do we try and drive that kind ofapproach away from being so short-term.
Maybe it links to your point about risk and more risk averse if I think that actually Ineed to make sure that I get that return within that particular period of time.
So I do think if we can move, we're thinking about trying to grow to being far more...
(33:13):
longer term, not in everything, but you know for some kind of sectors we really need tothink longer term because that will hopefully give those returns and I think if we can do
anything to adjust that that would be good and of course that also requires government tothink about that, it requires the regulators to think about that too and one of things I
was going to ask you Simon is if you had a magic wand
(33:35):
What would you be asking of the next government, whoever that is in, in terms from aregulatory point of view?
What would you like to see a big change?
And that's a big question, but is there anything that you'd like to see?
Well, it is a big question, but I think if we look at the economy, the UK economy as it isconstituted today, and this is not a comment that is party political, but over the last 30
(33:59):
to 40 years, so governments of all colours have under-invested in the capital environment,and be that physical capital, roads, railways, buildings, or human capital.
skills.
We talked a lot in this podcast about management capability.
There's clearly an impact of skills development, at secondary and tertiary and alsoacquiring skills in occupation in work training.
(34:30):
I think that's a big focus or needs to be a big focus because the famous hammock there,get sort of two economists, get three opinions.
I think all economists
I actually agree on this point that we have under-invested through the cycle.
And so what would I like to see from a new government is a focus on, if you like,ring-fencing parts of the public purse towards investment.
(35:02):
Now, a series of fiscal rules have played around with 3 % public sector net investmenttargets, which I don't think is a bad approach.
But I also think there are
Back to your previous questions on the ecosystem, the financial markets ecosystem, thereare things around, know, tax relief is offered to savers and investors with the saver and
(35:26):
the investor solely in mind, rather than the excess of capital to companies.
And one of the things that I know the CBI are looking at at the moment, had a veryinteresting meeting with them last couple of weeks, is whether that tax element
should actually sit with one is an effective sovereign wealth fund where it provides thatstable funnel of capital that all of his own.
(35:51):
So we get an effect units of retirement savings accrued within an entity, a sovereignwealth fund that invests in the UK's capital stock.
And now I get it.
I speak to investors every day who just say, well, all I want is a bit more Nvidia stockor Apple stock or Amazon stock.
I get it.
Returns have been much better in US tech than UK infrastructure for many, many years.
(36:16):
But there is an impact on the UK economy, the ability of great businesses to grow.
And so if I was to look for something that enabled the UK economy to break out of this lowgrowth phase, I think it would be something in that space, a stable cost of capital that
allows companies with great customer propositions, great product propositions.
(36:40):
to have a more secure pathway of capital.
Yeah, you know, if you think about where we're trying to head, whether that's technology,whether that's the development of AI, whether that's building an infrastructure that
enables us to charge our electric cars, whether that is, you our infrastructure iscreaking.
So I think that is really interesting about being able to invest in some of those hardcorethings, which will help to jumpstart some of that development.
(37:09):
So I think, you know, wouldn't it be great to see a combination, know, some
Investors may be thinking not just about that short-term return, that longer-term return,and then that wider sense of that investing in the growth of UK PLC, which is what we're
talking about, and making sure we can do that.
And if I, if I can just sort of, you like, the position of having the mic and being ableto sort of have a second one and bringing a bit more back to sort of customer services.
(37:36):
A lot of the podcasts I listen to the moment they start the middle and the end is allabout AI.
And because you seem to get credits, don't you?
If you talk about AI at the moment, generative AI, I'm a little bit more cynical in termsof like mentioned if it's relevant, but don't mention it just because it's the buzz
phrase.
I think in terms of, if you look at.
the, and I think we spoke about this on the radio when we first met, is really goodadaptation of technology, be it AI or be it machine learning, recognizes the counterparty,
(38:09):
the person they're facing off to, the customer, the customer experience.
And I get that most of the AI use cases are cutting out cost, costly human cost, andreplace it with at least other.
a variable cost or a consistency cost, what is seen as a more stable resourcing in termsof technology.
(38:30):
But let's see if we do this really well, if we do implementation, if we do the use casesreally well, we don't lose sight.
In fact, we put it right at the very center.
The principal beneficiary of this has to be the customer who is facing off to that.
So AI usage, which is going to revolutionize
(38:52):
know, healthcare, it's going to revolutionize in insurance, financial services, almost nosector will be left untouched.
But the ability of that to augment the customer experience rather than leave the customerdisenfranchised and felt less powerful rather than more powerful, I think would be a
really crucial part of good AI governance.
(39:13):
Yeah, I couldn't agree more.
So if you think about this, I remember a very wise person saying to me years ago, you'reeither serving a customer yourself or you're serving somebody who is serving a customer
because otherwise you're of no use to my business.
And I think we have to remember that any technology, any AI is there to give a betterexperience, a better outcome.
(39:36):
And the future world, and we talk a lot about this at the Institute for me, is about ablended approach.
And many things which people think are customer service are not customer service.
So I'm in their processes.
And what I'm really hoping that tech will do is take a lot of that transactional activitythat is important because it means that I get something delivered on time in the way that
(39:57):
I expected.
Takes that heartache, that pain out of it, but then is augmented by that really specialinteraction with the human being when it matters, how it matters.
And at the moment, I'm not aware of any technology that can really understand where I'mgoing to go next, really understand that sentiment, that behavior, and really pick up on
(40:18):
all of those emotional cues.
It may come.
We tend to overestimate what technology can do for us in the short term and underestimatewhat it'll do in the longer term.
That's for sure.
But I think that brilliant blend of having the tech, but also that human intervention andknowing
when to deploy it and to deploy it well is what's going to be critical, as well as, whichis what you said, designing the journey around the customer.
(40:44):
So often we design around what our needs are as organizations.
We measure what we need, not what the customer needs, and we don't design around that.
And I know you're very passionate about that, Simon.
So it's always brilliant to talk to a fellow person that is really interested in thatservice experience.
I'm also really conscious that, can you believe it, we've been...
rambling on together for over 45 minutes.
(41:06):
And I know that we're nearly at the end of our podcast.
So can I just say a really big thank you?
been very generous with your time.
One final question I want to ask you is what is the one change, the one thing, Simon, thatyou think business leaders can implement today?
You we've been talking about where the future goes, new governments, all the rest of it,to really change the future of customer service.
(41:30):
What would that be?
I'll be really, really practical.
Go and see your customers.
Go and see them.
I say this to my analysts and the sort of equity research analysts are, you know, byalmost by sort of job description.
They're quite cerebral folk.
They can be a bit into looking at the data, look at their models, looking at theirresearch product.
(41:55):
But actually I keep saying, look, if you've got the
If you ever have a spare hour, a spare period of time where, shall I do?
Shall I write another chapter in my research note or shall I go and see my customer?
And we have a plurality of customers.
Sometimes it's the traders, sometimes it's the company we're representing, sometimes it'sthe institutional investor.
(42:18):
But go and see them because you will almost always get a level of insight that just simplyis not possible by looking downwards.
I think of my own economics research, I almost always get the best ideas on what to writeabout.
And I've got metrics.
I know you're a passionate advocate of let's link those decisions to the metric.
(42:41):
I know that my most read, my most impactful stuff is when I've spoken to a customer, oftenone of my salespeople, one of my institutional client investors who says,
I haven't seen anything interesting about this written.
And it's gold dust, isn't it?
And if you get that from a customer, God, the quality of your output to the other end.
(43:05):
Sometimes it's secure, sometimes it's direct.
It's so much improved.
And I think somewhere in the world where tech and data and information is so much moreavailable to us, the ability to look up and look out, I think has become even more
important.
And to have that dialogue with your customer and really understand what's keeping themawake at night and really what's driving them will help us far more than any set of
(43:33):
analogues of data or other information that we possibly can have.
Simon, I think we're going to have to draw our conversation to a close, but it's always anabsolute pleasure.
I should look forward to seeing you or being on Wake Up To Money with you again, I'm surevery soon.
But thank you.
And thank you also, I think, for really focusing on why the service agenda is so importantto the UK and to our economy and that real financial return.
(43:58):
So anything that you can do to help the investor community to realise that still further,then we would be very grateful to.
Simon, thank you.
Thank you for your time today.
It's been a huge enjoyment talking to you.
Brilliant, thank you.
Well, there you have it.
It's always heartening to find an economic expert to discuss how truly important gettingservice right is to the performance of UK PLC.
(44:23):
And join me next time when we're moving into the world of financial services to chat withAlison Rose, who has decades' experience and insight into leading financial institutions.
And as always, thank you for listening.
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