Improving Customer Service Through Organizational Learning – A Case Study
*Jason C.H. Chen
School of Business Administration
Gonzaga University
502 E. Boone, Spokane, WA 99258
(509) 323-3421;
P. Pete Chong
Department of Finance, Accounting, and CIS
College of Business
University of Huston-Downtown
One Main Street, Houston, TX 77002
(713) 221-8920;
Kip Gering
Product Manager
Itron Inc.
Spokane, WA 99216
Phone: (509)891-3637
Email:
Ta-Tao Chuang
School of Business Administration
Gonzaga University
502 E. Boone, Spokane, WA 99258
(509) 323-3431;
*corresponding author
Submitted to International Journal of Innovation and Learning
Improving Customer Service Through Organizational Learning – A Case Study
Abstract
As a result of deregulation, utility companies are focusing more on products and services that increase their operational efficiency when providing energy and water to customers. Businesses have to go through constant innovation on management, and innovation principles must be acquired through constant learning. The proper management of knowledge can create an organizational learning environment that creates a competitive advantage for a business organization as it responds to today’s business demands in a much more dynamic environment. This paper focuses on knowledge management and examines how it can be used to foster “Organizational Learning” within Itron, Inc, a company that provides better products and quality services to utilities and thereby enhances its competitive advantage within the marketplace.
Keywords: Itron, Knowledge Management, Organizational Learning, Innovation, Customer Service
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Improving Customer Service Through Organizational Learning – A Case Study
Introduction
In the past, corporate information systems focused on the inherent ability to create and manage information. Businesses implementing these information systems enjoyed a significant competitive advantage, specifically in the realm of customer relationship management. Information overload is a perennial problem for knowledge workers in the electronic age, and one that is unlikely to diminish (Martin and Metcalfe, 2001), therefore, information management is not a significant competitive advantage due to its evolution and the information technology that supports it. The competitive advantage is created more by the ability to use information to create knowledge. Knowledge and its successful management can create a significant advantage over the competition and create a product (or service) differentiator in the marketplace. Businesses have to go through constant innovation on management, and innovation principles must be acquired through constant learning (Hong and Kuo, 1999). Furthermore, the proper management of knowledge can create an organizational learning environment that creates a competitive advantage for a business organization as it responds to today’s business demands in a much more dynamic environment. Knowledge management can be viewed as the enabler while organizational learning sustains the corporate competitive advantage.
This paper focuses on knowledge management and examines how it can be used to foster “Organizational Learning” within Itron, Inc, a company that provides products and quality services to utilities. Organizational learning would initially be targeted towards Itron’s customer service business system. This would allow Itron’s Client Services Group to create customer service standards that create a barrier to the competitions’ products and services within the marketplace.
What is Knowledge Management?
To understand knowledge management, one must understand knowledge. Knowledge is defined by Webster’s Dictionary as the “act or state of knowing; clear perception of fact, truth, or duty; certain apprehension; familiar cognizance; cognition.” Management is defined as “the manner of treating, directing, carrying on, or using, for a purpose; conduct; administration; guidance; control” (Webster, 1916). Despite very discrete definitions of knowledge and management, there are many different definitions and views of knowledge management (knowinc.com, 2002).
“People do not manage knowledge; knowledge manages people.” - Alvin Toffler
“It is the art of creating value by leveraging the intangible assets. To be able to do that, you have to be able to visualize your organization as consisting of nothing but knowledge and knowledge flows.”- Karl Erik Sveiby
“Knowledge is information that changes something or somebody – either by becoming grounds for actions, or by making an individual (or an institution) capable of different or more effective action.” – Pete Drucker
At the most basic level knowledge management is processing data, creating information (who, what, when), and ultimately providing understanding (why) within an organization. Malhotra (2000) defines knowledge management as the “embodiment of organizational processes that seek synergistic combination of data and information-processing capacity of information technologies, and the creative and innovative capacity of human beings.” These work in concert to streamline and enhance the capture and flow of an organization's data, information, and knowledge and to deliver it to individuals and groups engaged in accomplishing specific tasks.
Knowledge Management in Business Environments
Knowledge management is first and foremost a management discipline that treats intellectual capital as a managed asset. The primary goal of knowledge management is to deliver the intellectual capacity of the firm to the knowledge workers who make the day-to-day decisions that in aggregate determine the success or failure of a business. Knowledge management is not about turning knowledge workers into interchangeable components by plugging them into some corporate knowledge base. It is about partnering technology with a corporate culture and business processes, and using it as the vehicle to manage and deliver the business information and the expertise of fellow workers to the most fundamental driver of business growth: the knowledge worker.
The Business Environment
The traditional business strategy was based on a very predictable business environment. As a result, companies could gain an advantage by using information systems and information technology to improve operationally efficiency. In the customer service arena, companies focused on eliminating bottlenecks within their internal business processes to improve response time to customer inquiries and problems.
Knowledge management systems to support this predictable behavior were based on the notion of data providing information to improve these processes and create more operational efficiencies. The evolution of the information-processing paradigm over the last four decades to build intelligence (wisdom) and manage change in business functions has progressed over three phases (Malhotra, 2000).
▪Automation: increased efficiency of operations
▪Rationalization of procedures: streamlining of procedures and eliminating obvious bottlenecks that are revealed by automation for enhanced efficiency
▪Re-engineering: radical redesign of business processes that depends upon IT intensive radical redesign of workflows and processes
Today’s business strategy is based on succeeding in a very dynamic business environment. Unfortunately, today’s businesses and the organizational systems that support them have not readily adapted to the new environment. For businesses to compete in the global competitive market and adapt to their environment, they must address the outside forces by constantly creating value throughout a firm’s value chain. By creating value, a corporation can address the five competitive (external) forces of Michael Porter “Competitive Forces” model as shown in Figure 1 (Porter, 1980) and five internal forces: customer focus; communication; core competencies; complexity; and quality (Reeside and Walker, 1999).
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Knowledge Management Considerations
One fundamental misconception corporations have made over the past decade with respect to knowledge management is the observation that it is created and can be inherent in some combination of information technology. As Charles West Churchman, whose work is referred to by many other scholars researching information systems and their development, wrote back in the 1970s, "To conceive of knowledge as a collection of information seems to rob the concept of all of its life... Knowledge resides in the user and not in the collection. It is how the user reacts to a collection of information that matters" (Harris, 1999). As a result of this fundamental conception, three myths of knowledge management have developed (Malhotra, 2000).
Myth 1: Knowledge management technologies can deliver the right information to the right person at the right time.
Myth 2: Knowledge management technologies can store human intelligence and experience.
Myth 3: Knowledge management technologies can distribute human intelligence.
It is important to remember these myths when evaluating organizational business processes, resources and information technology and their applicability to knowledge management within an organization. One avenue of knowledge management to explore is the role of organizational learning in the creation and manifestation of knowledge.
Organizational Learning
Definition of Organizational Learning
Argyris defines organizational learning as the process of “detection and correction of errors” (Malhotra, 1998). There are four constructs that are linked to organizational learning: knowledge acquisition, knowledge transfer, information interpretation, and organizational memory (Mystakidis, 1998). Organizational learning is hampered by today’s organizational structure and business processes, which is based on a predictable business environment and inputs. Weick states, “Perhaps organizations are not built to learn. Instead, they are patterns of means-ends relations deliberately designed to make the same routine response to different stimuli, a pattern which is antithetical to learning in the traditional sense.” As a result, according to Weick, “organizational learning occurs when groups of people give the same response to different stimuli” (Mystakidis, 1998). In today’s industry, with demands created in a very dynamic environment, an organization’s goal would be to have their knowledge workers respond to different stimulus the same way, while still providing value added products or services to the customers.
Organizational Learning and Knowledge
The success does not necessarily go to the firms that know the most, but to the firms that can make the best use of what they know and know what is strategically most important to the firm and to the society at large (Bierly et al. 2000). Therefore, firms should become “learning organizations” to maximize their knowledge base. There are some key relationships with knowledge one must understand when trying to create and foster organizational learning. As stated earlier, knowledge is more than data and information, but rather the embodiment of organizational processes that seek synergistic combination of data and information-processing capacity of information technologies, and the creative and innovative capacity of human beings (Malhotra, 2000). The creation of knowledge that embodies organizational learning can be expressed in the relationship between tacit knowledge and explicit knowledge. “Tacit knowledge is personal, context-specific, and therefore hard to formalize and communicate, while explicit knowledge is transmittable in formal, systematic language” (Nonaka, 1995).
Nonaka’s assumptions about the creation of human knowledge are grounded in the relationship between tacit and explicit knowledge. The resulting conversion is a social process between individuals and not confined within an individual. Knowledge is created by human interaction when knowledge is transformed within a type or between types of knowledge. The process, as described by Nonaka and Takeuchi (1995), is a spiral through the four quadrants described in the Figure 2.
By managing this spiral within an organization effectively with the appropriate systems in place, an organization can foster organizational learning through effective knowledge management.
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For an organization to be successful in today’s rapidly changing environment, its capacity to learn must exceed the rate of change imposed on it. Hence, a learning process model is essential to facilitate continuous improvement and innovation in business processes. According to Buckler (1996), three ingredients are needed for this process to be effective: 1) focus to plot a course for the learning effort; 2) an environment which facilitates learning; and 3) techniques which enable learning to be efficient. Buckler also proposed a learning process model and he suggested that it should be developed as a tool for systematically applying the various concepts which have been outline to achieve improvement of business processes (Figure 3). Four major components are central to this model: 1) the learning support system that provides the environment in which learning will be facilitated, and its success will depend heavily on the quality of leadership provided by managers and team leaders; 2) the process by which the company develops, communicates, and implements the strategies and policies necessary to meet its business objectives; 3) learning needs diagnosis should be directly related to the company’s strategy via its policy deployment process; and 4) the most important feature of the model, the progress review process, however, it will only be truly effective in an environment where “challenge” and “criticism” are not perceived as “threat”, and where the views and considered opinions of everyone working in the business process are valued by managers at all levels (Buckler, 1996).
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A Business Example: Itron Inc.
Background
Itron Inc. is a global solutions provider for collecting, analyzing and applying electric, gas and water usage data. Itron’s customers are electric, gas, and water utilities. Itron solutions allow utilities to provide value added services and increase their operational efficiencies to better serve their industrial, commercial, and residential customers. Itron began in 1977. Their first systems consisted of handheld computers and software that were developed to replace the manual, paper-intensive process used by most utilities at that time to read meters. In the early 1990s, Itron offered solutions that collected usage information from meters using Automatic Meter Reading (AMR) technology. In 1996, Itron expanded further into advanced energy usage data collection and analysis with the acquisition of technologies for commercial and industrial customers.
Vision
Itron’s vision centers on the delivery of knowledge to their clients enabling them to meet their operational and strategic objectives in the new deregulated marketplace. That means transforming the data that Itron systems collect into valuable knowledge that will enable our clients to optimize energy and water delivery, increase operational efficiency, strengthen customer relationships, drive new business development, and increase shareholder value (Itron.com, 2002).
Itron’s Client Services Group plays an important role in helping its clients achieve their vision. Client Services offer an array of services that provide value by reducing a client’s financial and operational risks, improving system performance and reliability and improving customer service. Because of the amount of customer interaction that occurs through service, much of Itron’s customer operational and product knowledge is created and fostered within Client Services.
Creating Knowledge for Itron Clients
The Value Chain
Client Services plays a key role in providing customer service and in other areas within Itron’s corporate value chain as shown in Figure 4. The purpose of this study is to focus on the value provided by Client Services to clients that have purchased maintenance contracts for their meter reading systems. Clients can choose to purchase Itron maintenance support agreements for software and hardware products. Clients then have access to their 24 hours, seven day a week phone and on-site support, as well as new software maintenance releases and hardware preventative maintenance for handheld computers.
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Itron’s Customer Support System
Organizations
The responsibility of providing support to current Itron clients falls mainly on the Technical Services department. The Technical Services department has the responsibility for phone support for Itron’s software, handheld computers, meter module endpoints and mobile readers. This group is divided into different categories with their own responsibilities. Customer Care (or Tier 1 phone support) is responsible for all front line phone support for clients. Application Technical Services (or Tier 2 phone support) handles the very complicated technical issues or those that require a significant amount of effort and troubleshooting.
Itron’s software engineering department also plays a role in Itron’s Customer Support System. There are instances when Application Technical Services requires software engineering expertise to troubleshoot a customer issue or confirm the customer issue is a software bug. Software engineering is also responsible for developing software maintenance releases for distribution to all clients on a maintenance contract. The software engineering department has outsourced some engineering effort to an Indian software programming company, Hexaware, Inc.. Hexaware, Inc. focuses a majority of their engineering effort on bug fixes for future releases, and Itron software engineering focuses their efforts on the technical design of new software features.
Customer Support Business Model
The Itron’s call support model is depicted in the Figure 5. This model makes Tier 1 responsible for managing the initial call volume and Tier 2 responsible for resolving customer investigations needed to close out the call and provide the client a response. Software engineering (within Itron and Hexaware) is strictly a support role to Tier 2. Engineering must budget for engineering hours to support customer issues and planned development monthly. Figure 6 represents the information flow and process of a customer call. As illustrated in the flow chart, Tier 2 is responsible for contacting the customer if resolution does not happen on the initial call either by Tier 1 and Tier 2.
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Technology
Client Services uses a call tracking system, Call Support Management System (CSMS) that links to the Itron’s JD Edwards Customer Information System. Tier 1 and Tier 2 personnel, along with Client Services management; access their management and operator functions through CSMS workstation clients on a local area network (LAN). Tier 1 and Tier 2 support personnel also have access to a software engineering tool called Rational ClearQuest. The personnel access to this tool is similar to CSMS with the exception there is a web browser version of the workstation client, as well as a thick client workstation application.
Rational ClearQuest is a defect and change tracking system that captures and manages all types of change requests throughout the development lifecycle. This tracking system is used during software development between software engineering teams. The system is also a means for Client Services Tier 2 personnel to request engineering time to investigate an issue. These individual requirements are termed “CQs.”
Problems
Client Services has been unable to meet their call metrics since March 2001. These metrics are outlined in the Table 1. Prior to March 2001, Client Services handled approximately 2,000 calls a month and were achieving their desired call metrics. In March 2001, Client Services assumed customer support responsibility for a new meter reading software application, MV-RS. Previously, this support was done from a different Itron office in Raleigh, NC. Itron’s goal was to reduce operating costs and standardize customer support by consolidating customer support activity in one centralized office.