This document discusses the favorable position of ClickSoftware (CSKW) as a provider of customer service solutions within the context of major secular trends; the confluence of technology in workforce and service management, consumer empowerment, and strengthened regulatory oversight. Such secular trends are mutually reinforcing elements in compelling businesses to respond and adapt to disruptive change. Underlying change is the power of information as a source of value --for consumers, businesses, and governments.
The catalysts for this discussion are recent articles reporting two unrelated events; one in California and the other in New York.
- Shocked Residents Recall California Gas Pipe Blowout
- Cable Contract Has Fines for Late Service Calls
The articles examine consequences in the field service activities of a utility company (life, health, and economic loss) and of a cable service provider (increased customer service requirements, and penalties for late service calls). Implicit in both cases is the need of businesses and governments to respond to the growing complexity in consumer-business-government relations with sophisticated management tools that translate information technology into real time, value-based decisions.
ClickSofware is front and center in the response to growing complexity in the relations among consumers, business, and government; and to the increasing demand for technology-driven business improvement. Such improvement is a high-priority for firms and other entities who want to be competitive and seek to become value-based organizations.
Rapidly expanding product demand and continued operating effectiveness should energize market expectations and propel the price of the ClickSoftware stock to substantially higher levels. (Previous articles have discussed the firm’s operating performance, enterprise valuation, and the value of the stock).
“The Best Way We Can”
Prior to the internet consumers viewed the world of information with blinders. Just like in the horse races, blinders encouraged consumers to keep focused not in the racing field, but on information that was selectively prepared and carefully dispensed. A narrow field of information and choices made for a very uncertain and weak consumer voice in the marketplace.
Traditionally, service provided by utility-type companies was constrained by available technology, particularly in areas such as wireless communication, internet access and real-time business analytics. Until recently, service activities were very primitive –once-a-day work scheduling, line-based contact with field technicians, no global positioning capability, no decision-making support for intra-day work rescheduling, no updated contact with waiting customers; no this, no that, not the other.
Despite circumstances such as the life-threatening blowout of natural gas lines in California, or neglect, or perhaps unfair or rude treatment by giant-sized utility companies, consumers depend on their lifeline services. Understandably, providers try hard to serve customers well and to retain their business. Unfortunately, inadequate information management and disproportionate reliance on physical resources makes of economic customer service provision a tall order.
Under these circumstances, customer service performance is uneven at best; loaded with expenses generated by human intensive activities. Characteristically, providers seek low expenses, low customer complaints, low complaints by servicing technicians to HR (due to forced overtime and incomplete vacations), low fieldwork mistakes, and low regulatory fails.
Without an optimization algorithm, the levers of value are hidden and non-actionable, and performance goals represent in reality no more than well-meaning wishes. The dynamic nature of field customer servicing is an ever-changing puzzle of possible permutations among an expanding set of variables –job requirements, available resources (mobility, machinery, and tools), scheduling priorities, applicable regulations (and job permits needed), and relevant costs. In the traditional operating mode performance measurement is a losing guessing game. Without decision support tools and effective linkages between processes, roles and accountabilities, metrics, and reward and compensation programs; creation of shareholder value is a daunting undertaking.
The view that customer service activities represent sunk costs, or overhead, is being turned on its head. Likewise, the practice of “doing the best we can” to get through another customer service day, has already seen its best days, if is not altogether obsolete. “Doing the best we can” is akin to playing tennis with one hand tied behind your back.
Governments and entities entrusted with the consumer protection are also changing (this document does not discuss other major issues, such as homeland security, civil liberties, social welfare, etc.). Just as in the case of businesses, technology also enables and drives change in government. Just as in business, the power of information is a source of value for governments, regulators, and consumers, alike.
Matters such as fairness in pricing, conditions of service, contract disclosure, and asset proficiency related to public safety (maintenance, repair, and upgrade of infrastructure) must be achieved. Effective regulatory consumer protection calls for sophisticated tools to manage quality of service holistically, including prioritized anticipatory measures for the safety and well being of customers and the public at large.
In a value-based organization empowered skilled knowledge-workers (with clear roles and accountabilities) operate within a context of shared principles, process, metrics, and compensation and rewards. Inherent in this framework is the access to support tools that organize information and value metrics for real time decision-making. Such value-based model integrates the value proposition of the business (provides services that benefits clients, and that clients value), attractive economic returns to shareholders (performance metrics), and management effectiveness (in the organization and allocation of resources, including technology) to deliver both, the value proposition and economic returns. Key drivers in a value-based organization are revenue growth, net-operating-profit-after-tax margin, capital efficiency, and market expectations.
To be clear, field customer service is an integral part of overall business operations. Field service touches the client and shapes the client’s own opinion of the provider’s value proposition. At the most fundamental level, this opinion translates in client loyalty or client loss; either revenue gain, or revenue loss.
To deliver benefit in the eyes of clients, service providers need the tools to manage their businesses one client, one client-transaction, one day at the time. To manage each field service client singularly and to concurrently add to shareholder value providers need to integrate technologies (in fields such as data management, business analytics, wireless communication, and global positioning) into a total value-based business.
The impact of field customer service in the financial picture of the service provider is major. The management of business operations (working capital), including field customer service, involves the profit and loss statement, the balance sheet, and the cash flow statement. Net cash from operations feeds free cash flow (net of capital expenditures), which is a principal determinant of enterprise value and of the value of the stock.
Field service management technology, when properly integrated into a working capital management system (entailing processes, roles and accountabilities, information management, metrics selection, and a compensation and rewards system) is a key element in enabling effective management in a value-based organization.
An excerpt from the Q2/10 quarterly earnings report the company describes its business as follows:
ClickSoftware is the leading provider of automated workforce management and optimization solutions for every size of service business. Our portfolio of solutions, available on demand and on premise, creates business value through higher levels of productivity, customer satisfaction and operational efficiency. Our patented concept of `continuous planning and scheduling' incorporates customer demand forecasting, long and short term capacity planning, shift planning, real-time scheduling, mobility and location-based services, as well as on-going communication with the consumer on the expected arrival time of the service resource.
As the pioneers of the `W6' concept more than 20 years ago, we have perfected solutions for solving a wide variety of problems on Who does What, for Whom, with What, Where and When. The combination of proven technology with educational services helps businesses find the right balance between reducing costs, increasing customer satisfaction, employee preferences and industry regulations/legislation. ClickSoftware's solutions manage over 200,000 resources in service businesses across a variety of industries and geographies. Our flexible deployment approach, breadth and depth of solutions and strong partnerships with leading CRM/ERP vendors and system integrators makes us the number one choice to deliver superb business performance to any organization. The Company is headquartered in the United States and Israel, with offices across Europe, and Asia Pacific.
ClickSoftware is ready, willing, and able, to take the lead on business improvement --to empower businesses (and other entities) to deliver on their value propositions, achieve attractive economic returns, and enable effective management; and to contribute in the migration to a value-based organization.
ClickSotware’s own performance supports the view that the company itself shares in the attributes belonging to value-based organizations. Some of these are outlined below.
- Produces intelligent products, enabled by technology and specialized skills; flexibly assembled with building-block modules in accordance with customer specifications for the purpose of resolving problems, optimizing solutions, and creating value.
- Organizes a low-risk value chain based on core competencies; accesses the marketplace to source skills and resources for deployment within the firm and beyond –to include an eco-system of value-added partners and providers of non-core competence services.
- Uses capital efficiently; leverages skills, technology, and soft assets, to deliver custom-made, high-margin, solutions.
- Takes charge of the levers of value to translate resources into products that represent solutions that clients want, while producing attractive economic returns and expanding shareholder value.
Easy information access and the power of technology are reconfiguring businesses in tandem with the continuing expansion of consumer and social choices, and political pressures on government and regulatory rule. Change is real and is happening at an accelerated pace.
Integration of field service technology within the broader scope of client relationship management and enterprise value management is of strategic value in the migration toward a value-based organization.
The trends underpinning the issues discussed in the articles mentioned above, and the increased demand for technology-enabled business improvement, are secular in nature, as is the need to enhance competitiveness.
ClickSofware is leading in the response to the growing complexity in consumer-business-government relations and to the increasing demand for technology-driven business improvement. Such improvement is a high-priority for firms who want to be competitive, and for government entities who seek to effectively discharge their responsibilities and meet their ultimate purpose.
Continuing expansion of aggregate demand for ClickSoftware solutions supports continuing fast revenue growth. Such growth along with a track record of healthy net-operating-profit-after-tax margin, high capital efficiency, and expanding free cash flow, should energize market expectations and drive substantial increases in the price of the stock.
Disclosure: Author is long CKSW