A short-term personal loans provider in the UK was doing brisk business and enjoying steady growth until late 2017. The firm provided personal loans through self-employed agents who worked door-to-door across some of the poorer areas of the North. The company was low-tech, agents carried their own note books for keeping track of loans and payments. Each agent had their own geographical patch and knew their customers personally. The business was so successful that the owner was reputedly able to take out £40 million in profits over a decade.
In 2017, with the intention of increasing efficiency, the company took the step of introducing tablet computers and smart phones to replace the old note books. They also introduced automated job allocation and used routing software to direct agents to customers. To take best advantage of the newly adopted technology the company sought to increase workforce flexibility, to this end agents were offered full-time salaried contracts. However, things soon began to go wrong. Loans which previously were previously renewed by existing customers (existing payments were simply rolled-over into a new loan) declined dramatically. Customers began walking away at the end of their existing loan terms and agents, also unhappy with the new arrangements, followed suit. By the end of 2017 the company was in financial melt-down – losing 70% of its stock market value.
So, what went wrong? Well, in this case technology, re-structuring and failure to grasp at the highest level what it was that the company was actually providing, was the root cause. What the company had not realized was that their business rested on the success of the personal one-one relationships that the agents built with their customers. What the agents understood, and that the company’s management clearly did not, was that customers where not just buying money, they were buying a series of interconnected experiences. I learned from an ex-consultant working with the firm prior to its re-structuring that this relationship, and the customer experience associated with it, was developed over-time through carefully managed face-to-face interactions. Consequently, customers borrowed money, not from a faceless corporation but from a person - ‘let’s call her Tracy’ my respondent suggested. One customer, she recounted, continually rolled over her loan, the smallest she could take out, not because she particularly needed the money, but as Tracy understood, because it provided regular social contact with another human being and was perhaps her only positive relationship with a ‘formal’ organization. The loan was a positive link with a world that otherwise had little interest in her. In other words, maintaining a loan gave her a more positive sense of self. For many customers the anticipation of another tranche of money ‘just around the corner’, money they would not otherwise have the discipline to save, was a brief escape from ‘just getting by’. This is no different, in form, of course, from the lure of upgrading your car when your existing car-lease payments are up. What Tracy was good at, in other words, was transforming the experience of a dept into a positive series of experiences – which included an evolving trust-based relationship. The company’s rationalization through technology destroyed both the customer’s and the agent’s positive experience of the engagement.
With technological change came the opportunity to rationalize working practices. Loan managers, now as employees, could be dispatched more efficiently to customers using routing software and data captured electronically on tablets. As a consequence, the agents lost their geographical ‘patch’, had to drive longer distances, work longer hours and lost personal contact and all-important relationships with ‘their’ customers. From the customer’s perspective, unfamiliar faces, carrying company tablets and recording their conversations (a new requirement of the company enabled by the technology) were an unfamiliar and unwelcome set of experiences. These new employees were also themselves subject to stringently monitored performance targets which in turn encouraged agents to push customers to take on unsustainable personal dept, damaging both trust and reputation – customers quickly figured out these new agents were not their friends.
Whatever we make of the ethics of short-term loans, this particular business was damaged by technology choices that failed to account for what it was that the business was actually providing. The owners assumed, perhaps, that they were simply entering into contractual and financial relationships – relationships that could be adequately represented on a spreadsheet. With the introduction of technology, and with it new more efficient working practices, a crucial leg of the service that the company was actuallyproviding, personal contact and a carefully managed customer experience, was lost.
So, the lesson here is that before engaging with technology that will alter working practices, however subtly, companies should be clear that they understand, not just ‘what business they are in’, but what it is that they presently deliver that their customer’s value – particularly if this sets them apart in the market. Digital technology is good at monitoring, good at measuring performance against targets and good at reducing both customers and employees to data. What it is not so good at is building and maintaining relationships. At least, not yet.
Professor Chris Ivory