Driving that kind of innovation at their companies almost always comes down to four key issues for CEOs, says Charles Kalmbach, managing partner-human performance, organization and change strategy at Accenture (formerly Andersen Consulting). The first is .the issue of overall organization performance.

"In the past, CEOs focused much of their energy on processes and their company's cost position," Kalmbach says. "Going forward in the current economy, the major issue is the performance of the organization looked at from a holistic perspective. Chief executives have to ask themselves if their organization is aligned with its strategic intent."

The second key issue is clarity around capabilities. Business leaders must understand the human performance capabilities they need to have in order to achieve their objectives-not just in an abstract or generic sense, but in a very specific way. "If they can't do that, then the amount of effort they will have to expend in order to drive change and innovation in their companies is simply too challenging," Kalmbach states. Third is putting people at the center of the change process. Since overall organization performance is the sum of individual performance within the organization, unless the process of change is started with this premise at its center, it will not succeed. That means understanding the full life cycle of how the organization attracts, retains and even exits people, Kalmbach contends.

In the current economy, the major issue is holistic performance of the organization.

The final issue is that of leadership. "Change is not something that just happens," he says. "The CEO and his or her key people throughout the organization' have to make the case for change and innovation, and they have to create an environment that fosters it." The CEO needs to create true leaders in the organization, not just managers.

Central to the changing aspect of human performance in organizations is the growing role played by alliances. As Accenture associate partner and director of alliance-related thought leadership and offerings Nick Palmer notes, companies have pursued alliances for a variety of reasons in the past. Reaching new customers, accessing new technologies, pooling capital, building scale and sharing and reducing risk have been traditional motivations. Today, however, a new and equally compelling reason has emerged: to drive change and innovation within the organization.

ALLIANCES ARE KEY

Accenture's research indicates that through alliances many companies are seeking to learn new ways of doing business by gaining insights into everything from market segment needs to new technologies and innovative production processes to completely new business models. Alliances offer them the opportunity to acquire new skills and knowledge, and by focusing on nontraditional alliance goals, they can engineer an internal structure that contributes to the likelihood of success of future alliance efforts.

Making the most of the opportunities alliances have to offer requires employees to develop a different set of skills than those needed for working with vendors or other company employees innovation in human performance. "This is truly a new capability organizations need to have today, and it's not limited to just a few people," Kalmbach says. "A company needs a group of top executives to be champions for the development of this skill set, and if they don't develop and nurture it, they will lose their ability to move quickly and effectively in today's marketplace."

One alliance goal that is coming to the forefront, according to Palmer, is learning. While learning has always been an element of alliances, traditionally it has not been a primary concern. With knowledge-based skills and attributes playing a more important role at many companies in the New Economy, that situation is changing. More organizations are making learning an explicit alliance goal and giving it a status at par with economic objectives.

Alliances offer businesses the opportunity to acquire new skills and knowledge.

Says Palmer, "This kind of learning is fundamentally different from the exchange of proprietary information typical of the joint ventures of earlier decades. The nature of alliances has fundamentally changed. Today, there is far less incentive for one party to take advantage of the knowledge capital of the other through temporary alliances." That is because many of today's alliances entail an explicit intention to create shared value in the near term and more-effective relationships in the future.

In the most recent Accenture annual Alliance Issues and Trends survey, learning was cited as a critical goal in 41 % of the alliances maintained by respondents, and that trend is expected to surpass 50% next year (2002).

Perhaps nowhere is innovation in human performance more critical than at the point of contact between a company and its customers-ground zero for all types of commerce. As the interaction between customers and companies becomes more complex, and customers become more demanding, sophisticated and difficult to retain, companies need to develop new strategies to survive at ground zero. The thinking that has developed around this challenge is dubbed customer relationship management (CRM).

Accenture's research makes clear a stark reality in today's business world: If a customer feels he or she has not been served well, that customer will move on.

ELEMENTS OF SUCCESS

To succeed in this environment, businesses and their employees must:

* Understand their customers their wants and needs currently and in the future. That is the foundation of long-term relationships. To achieve that goal, companies must be able to gather and analyze information from across the organization to get a total picture of the customer. Increasingly, they will need to use that information to understand customers on an individual level and to offer targeted, customized products or services.

* Know and serve their best customers. At many companies serving consumers, a small percentage of customers account for a large percentage of the company's total sales volume, according to Accenture research. Identifying those customers and focusing resources on them is critical to success in today's economy. At the same time, companies must find ways to turn unprofitable customers into profitable ones.

* Manage varied and disparate points of contact. With interactions between companies and customers becoming more complex and varied, traditional vehicles such as the sales force and billing must be complemented by call centers, alliance partners and technology solutions such as the Internet and interactive voice response systems. To understand and serve their customers, companies have to coordinate and integrate those points of contact.

The balance of power has shifted, and the ball is now in the customer's court.

* Maintain and improve operational excellence. Customer expectations are high, and in a technology-enabled environment that gives them access to more information than ever before, those expectations will only get higher. Companies must develop the capabilities to manage growing amounts of customer information, and their systems must be flexible enough to allow them to respond to new offerings from competitors.

Customer relationship management empowers companies and their human resources to build the long-term customer relationships necessary to succeed in today's competitive marketplace. An effective CRM strategy is more than just a technology "point" solution or isolated customer-service initiative. It encompasses all the activities involved in identifying, attracting and retaining the best customers. Properly executed, CRM results in sustainable, profitable growth and increased shareholder value.

FedEx Corp. is one example of an industry leader that has bought into the CRM movement. It recently launched a multimilliondollar CRM program aimed at cutting costs and optimizing its existing customer data in efforts to cross-sell and up-sell services to existing and new accounts.

Using software provided by Clarity Inc., FedEx has created a system that gives each member of its 3,300-person sales force a comprehensive view of every customer-one of the key points in Accenture's outline of the four critical elements of CRM. The software identifies each customer's needs and suggests services that might meet those needs, according to FedEx vice president of worldwide services David Kevren.

'Not responding to a competitor's move is simply not an option in this industry.'

FedEx began phasing in its system this year (2001) and plans to use it to refine customer data-and employee responses to it-in ways not formerly possible. As a participant in one of the most competitive sectors of commerce (rapid package delivery, a sector whose prominence is likely to grow along with the spread of e-commerce), FedEx anticipates its competitors are likely to respond to its initiative.

"There's no doubt about it;" says Chris Newton, an analyst at AMR Research Inc. in Boston. "Not responding to a competitor's move is simply not an option in this industry." As the "commoditization" phenomenon that has sapped the power of brands in the product area spreads to the services sector, companies such as FedEx, United Parcel Service of America and Airborne Express (DBA; Airborne Freight Corp.) have no choice but to match any innovative steps taken by their competitors.

US WEST is another company that has seen the writing on the wall and heeded the message. In response, it has launched an innovative change program that extends to virtually every aspect of human performance within the organization. Working with Accenture, it has invested in enhanced network capabilities that support its mission of dramatically improving customer service, focusing on end-to-end process and reinvesting in its human resource by helping employees develop new competitive skills to meet market demand.

CONCERTED EFFORT

The process involved a concerted effort focusing on human performance, network and call center skills and execution capability. The result was a cultural transformation-innovation in human performance-that returned tangible, measurable value for the company and the customer.

For example, US WEST, with Accenture's help, created a Center for Customer Experience (CCE) focused on improving the customer experience. CCE proactively identifies and manages potentially negative situations. Since its rollout-accomplished in less than six months-CCE has reduced formal customer complaints by more than 70%. The program is also improving end-to-end processes and accountability across disparate units within the company and improving service response performance on the front line.

Another tactic some companies are deploying to foster innovation in human performance is encouraging creativity. There is a growing body of research that indicates relationships within an organization, are critical to its performance-and that the CEO's role in setting the tone for those relationships is paramount.

"We mandate our leaders with the explicit permission to do what it takes to achieve healthy profitability and growth and to change and recharge those issues should they flag," says Paul Nakai, managing partner and senior vice president of Senn-Delaney Leadership Inc. and co-author of The Mindful Corporation-Liberating the Human Spirit at Work.

Attempts at quick fixes create more stress and higher levels of cynicism.

But that's not enough. Leaders need to view their enterprises from a perspective that recognizes the need for growth and regeneration in the human resource and allows for it to happen. "This perspective not only takes into account the health of an organization's results and profitability," Nakai contends, "it also doesn't lose sight of the fact that, at heart, it is a living, breathing entity-full of potential and capacity, and open to innovation."

As Nakai and co-author Ron Schultz point out in their book, "Leaders who see organizations from a more mechanical perspective are often those who believe they can and must drive the business hard because, after all, it is a mechanical operation that needs to be driven."