Regulatory lessons ring home

As much as Springtime, we find the early weeks of Autumn a great time to think again about our objectives. To reflect on the year past and to think ahead. Maybe it's living in a university town like Cambridge (or the fact that we still have kids at school) that encourages this focus on academic years.

What are your goals for the coming year? Or taking inspiration from the Olympians in China, what would be your equivalent of lifting gold in August 2012? There's little point in looking back with regret from today. But imagine yourself now in four years time. What would you be looking back on then, wishing that you had started working towards from September 2008?

We've set ourselves some challenges at idenk. Not quite competing with Usain Bolt in the 100m or Rebecca Adlington in the swimming (although I fancy having a go at the table tennis) but exciting for us. And motivating enough to put in the necessary enthusiasm and effort.

The rest of this month's bulletin picks up the issue of regulating markets - a hot topic in these pleasantly warm September weeks. We also explore customer satisfaction: the challenges in understanding what people really think about the products and services you offer.

We're Off to Market

You may have seen the controversy over the plans for establishing a new Milton Friedman Institute at the University of Chicago (see: Not everyone (including some of the Chicago academics) like Friedman's "market-knows-best" ideology and his relentless promotion of competition as the means to drive growth and satisfy our needs and wants.

Still, most of us look to markets of one sort or another to foster competitiveness with the expectation of keen prices, innovative new products and attentive customer service.

With these and other benefits in mind, the government is introducing a more commercial approach to healthcare in England. Strategic Health Authorities and Primary Care Trusts across the country are charged with developing more competitive markets in their areas through contracting for services and encouraging the role of private and third sector organisations, many of them as new providers.

This is a big change - not just of market structures and processes but also in terms of skills, relationships and culture. In planning and managing for these changes, there is a wealth of experience and insight that can be drawn from other sectors where liberalising markets has been used to introduce more competition. Telecoms is one of these areas.

Even for those of us old enough to remember, it's easy to forget that 25 years ago pretty much all you could get as a residential customer of British Telelcom, still then part of the old Post Office, was a simple fixed line and a standard issue phone - more often than not one of the type 700s in ivory with a round dial. If you were ordering a new line (less than 50% of homes had a phone then), you often had to wait weeks, sometimes months, for it to be installed.

That whole era must seem bizarre to those born in the last 15 years. There are now over a 1,000 companies providing some form of telecoms service in the UK. In the space of 15 years, we have reached the point where there are more than two phones for every person in the UK, we spend as much time talking on mobiles as on fixed lines and over a third of households can download from the Internet at speeds of more than 2Mbits per second.

But to get to this position has needed significant market management by the regulator - latterly Ofcom and prior to that Oftel. What are the lessons for new regulators to be learned from these 25 years of experience in telecoms? Here are 10 for a start:

  1. Always have the end customer in mind as the guiding light in deciding what is best for the market - "is this good for customers"?
  2. More new players bring in more ideas, more investment, more skills. You can never have too many businesses willing to take the risk in making a success of it
  3. But you have to allow new players to fail. There are usually others willing to step in and pick up the pieces - often to the increased benefit of the customers affected
  4. Those 'incumbents' who are currently the main providers are likely to maintain their market share (BT is still by far the biggest player in telecoms) so you have to be firm on what they must deliver to customers and how they must treat other providers
  5. Don't expect the culture of existing players to be instantly transformed by the prospect of competition. Old ways die hard.
  6. Inevitably some resources will get channelled into players competing with each other by legal challenge or by being smart with the regulations. Playing the regulator effectively is seen as a source of competitive advantage
  7. For some services, it might be an idea to restrict competition for a while to give a few players a chance to establish something big that requires a lot of upfront investment (there were only two companies allowed to develop mobile services to start off with). Alternatively, you can consider giving new providers some form of 'wholesale' access to those assets (buildings, technology, people, etc) of current players that give them a monopoly or dominant position
  8. It takes time to change the market - take a long view. It may take 5 or 10 years - or even more - to see some of the structural changes you want
  9. Be willing to change your mind on the direction of regulation to reflect what actually happens as opposed to what was intended to happen (the original idea was to have lots of telecoms companies with their own fixed line network infrastructure but there are now only two - BT and Virgin Media - that connect to more than half of houses in the UK. So regulation now focuses on giving competitors 'equal access' to BT's network)
  10. You'll know you're on the right track when you are able to remove regulation from a part of the market and let the players compete freely in the knowledge that they are delivering what customers want.

Lexicon of leadership: S for Stories of Satisfaction (7 is the new zero’ you know?)

It is lunchtime and we are talking with a client - a City insurance colleague. His mother in law had to phone round saying her husband had died.

From the call centre of the much maligned privatised utility company: "I am so sorry to hear of your loss, how are you holding up? We have a special team here to help you if you need further help"

From the GP receptionist in the much loved NHS: "Sorry, who was he?"

A powerful story. Do you reckon she would rate her NHS services at least 'satisfactory' if asked in a survey?

In keeping with the first lesson from the regulation of the telecoms market, we think that instilling a passion for meeting customers’ wishes is the main lesson from commercial sector organisations for the public sector — not the contract and legal cultures many froth about: not the faux commercialisation of written specifications and recourse to the courts, but a deep seated commitment to delighting those who use services.

So increasingly, in both the public and private sectors there is a mantra of putting customers first. Fine. But, how do we understand the wishes and interests of various people? And what influences this? If we recognise staff engagement and commitment as important in satisfying customers, how do we get an insight into this too?

Pretty soon senior leaders are interested in the slippery concept of ‘satisfaction’. What do staff surveys tell us about staff happiness? What do customer satisfaction scores really show? What should leaders do?

However, these satisfaction scores can be pretty meaningless. Taking the NHS as an example again, many organisations have aggregate patient satisfaction scores in the upper 70% range. Seems impressive you might think. Many organisations take comfort from these scores. However, we argue that results at anything less than the mid 90s should worry leaders. Our ‘five-fold discount’ hypothesis contends that for five reasons the average scores that many organisations are proud of (or even complacent about) probably need to be discounted downward.

So what is the case for a ‘five-fold discount’ of satisfaction scores to a lower net level:

  1. First, there is a natural patient predisposition to satisfaction. Emotionally, we need the experience to be good. We start with a positive pre-disposition to the experience of health care (unlike the expectation of car sales and estate agency). In some other sectors (eg home improvement, retail) there is a tendency to blame the supplier if it goes wrong — anxiety overwhelms and individuals project all their fears and regrets onto the supplier. We argue that in health care this is a less likely consumer response when completing an evaluation form, due to factors 2 and 3 below.
  2. Second, users fear retribution when they next need the service, so are more likely to score high so as not to ‘alienate staff’ that they might depend on again.
  3. Third, there is an inbuilt reluctance to blame frontline NHS staff and services: “it can’t be the staff’s fault” is a starting mindset. Poor NHS staff attitudes are often tolerated. There is a common patient perspective that discounts poor performance, almost as if staff are doing it for love and voluntarily. If the actual remuneration and cost of services was clear we wonder if this discount would lessen.
  4. Fourth, the methods used (ie tick box forms) tend to mask discontent that would emerge with a more open approach (eg listening to patient stories). Take the case of older people. They are often noted to have positive scores, but listening to their anecdotes highlights the many hidden negative narratives. It might be argued that when a service is free at the point of use then consumers are more forgiving. Again, we believe that the right methods will still elicit the deeper views at the heart of any service experience, be it in the public or private sector
  5. Fifth, the information available to most service users to make an informed judgement of satisfaction is limited and likely to over-estimate satisfaction due to limited awareness of what could be done or what great practice looks like. This asymmetry may explain the fact that when we have asked many groups of NHS managers and clinicians what their average rating of satisfaction — or compassion — is we get an average (both mean and mode) of 50%.

There is a need for much greater honesty about the level of poor performance. It is essential to break the addiction to excusing current scores. This is even more striking when we realise in the commercial sector that experts in customer service regard any score less than 7 out of 10 as a negative rating.

Being honest about this issue is necessary to build the case for fundamental change in health services. The NHS has a couple of years to make the same step change improvements in patient experience and safety that are now the norm with many activity and financial targets. Otherwise we believe more radical solutions to improving health care quality will be sought.

And C is Still for Climate Too!

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