ServiceNow, Inc. (NOW) Earnings Call Transcript & Summary

Yes. I've got a slightly different additional point to bring to bear, which is one of the interesting perspectives we brought to this customer service problem is, of course, work to resolve and win over that customer through that exemplary service that it can turn from a detractor to an advocate. But then the other point of view is if you think of every one of those as potentially feedback into something that didn't quite go right in the process. Maybe there was a promotion that wasn't well communicated. And as Kim alluded to, the world is complex, but you shouldn't make a complex for our agent. So you've got an owner operator who's third party who may not be fulfilling. So what we've learned is if you understand that root cause, that underlying issue and you actually take care of it, you may obviate the need for 5, 50, 500 more customers to encounter the same issue. So delighting that particular customer who's in front of you but taking that signal to say what is it that may have gone wrong. And what we've seen is if you actually apply that mindset, it does free up resources because you don't get those 500 additional phone calls, you do have better time and resources to truly make the business better and serve the customers to reach out to you. And then a net effect of all of it is the entire process gets better. You're continuously improving, and you are continuously delivering.

Wow, so taking these elements that you can automate and then gaining some insights from that to, in your words, to obviate the need for making contact because the organization has figured out how to improve that process on behalf of all customers, not just that one. It's pretty remarkable. Great. Well, let's talk about -- I think a lot of what we're talking about here is pertaining to the ability to leverage AI and automation in the processes. And that was, in fact, the fourth key finding that we found, is that AI and now generative AI are delivering real value in customer service. And really interesting to see the perspective from this customer experience leader in Japan saying, rely more on AI and think of it as a way to please your customer. So lean into it, leverage it, use it to better serve your customers and elevate that experience. So in fact, when we looked at what were the key drivers, the key capabilities that could drive a reduction in customer effort, right, to make it easier for them, both artificial intelligence, generative AI rose to the top, followed by chatbots, integration with systems of record, self-service and then finally, process automation. So I'd love to drill into this a little bit further. Kim, customers want a human touch. But how do you make AI have a human touch? Like what does that look like in practice for you?

For us, we incorporate AI into the process. So we're not yet going into chatbots. We're looking into it. So that's our next endeavor in 2024. And I think the key for that when I'm looking at it is I want to make that as human in experience as possible. And that's very realistic in today's environment. You can make that a human experience even though you're dealing with the bot. I think people have that. You think about the person talking to the IVR and they're saying representative, representative, right? I don't -- that's not the case anymore, right? You can get very human, very realistic and in some cases, an even better experience using a bot, if you do it in the right way. And one of the things that we tend to do, again, kind of to make things more efficient is to make our humans more robotic. So we're giving them scripts. And we're saying, read it this way, which takes out that personal touch, right? And so I think that it's humanizing your AI or your bot, making sure that the customer gets the same level of service and interaction that they would if they're dealing with a human. But for our humans or live agents, let them have their personality, let them shine through and give them sort of guidelines and then where you can, automate that process for them. So things like one touch refunds, right? That shouldn't be a complex process. They shouldn't have to log into 3 different systems to identify if you're a rewards member and things like that. It should all be right there in front of them, which allows them to see the holistic view, the same way that you would program your bot to do. And so I think there's a place for both. And I think that all of those experiences can be human, and that really gives the customer again the control. Some people don't like talking to bots, right? And then some people would prefer that. And I think some of it's generational. And I think that more and more people are comfortable interacting with gen AI and chatbots and things. So you just want to make sure that regardless of what channel you choose or if it's a bot or a live agent, that experience is always reflecting your brand and that everyone, bots included, have the tools to deliver the same level of service.

That's great. So is debt human touch and how do you bring that humanity through, whether it's automation or, to your point, leveraging automation to help your agents be more empathetic and more human. One of our other customers, I'd like to share his quote that how do we turn agents into artists, right, to enable them to use their creativity in solving problems supported by technology and automation. Elizabeth, in your book, the first element is choose your mindset. How does mindset play a role for CX leaders as they think about integrating artificial intelligence and generative AI into their business?

Mindset is the precursor for change. When you think about our minds that actually drives our thoughts, which drives our behaviors, which then ends up in our results that we want. And we see it anywhere in our lives. And so when we think about our mindset towards technology, AI, gen AI, it's worth thinking about as leaders. What is my mindset towards this? Because it isn't wise, I would say, it's not wise to think everything should be handled through AI technology or nothing should. But in the balance in the middle is to think about, okay, how can we use all of these tools that you guys just mentioned, so many options? How can we look at all of these tools as tools in our toolkit to be able to solve these problems for customers? So when we have awareness of what of our mindset is toward technology and also our mindset toward innovation and change. And so some of what was in this research that I thought was so interesting caused me to ask, like why is it that customers want to talk to an agent? Is it because they want to interact with a person? Or is it because they don't believe that technology is going to be able to solve their problem? Like Kim just said, it made me laugh when she said representative, representative, representative, because I have been there so often where I'm like I don't even believe this is going to work for me, just give me a person. So when we think about our mindset towards technology and towards change and towards innovation, I think it helps us to ask better questions, to think better thoughts and ultimately to be able to create the solutions for employees and customers that are going to be the remarkable and stellar.

That's great. Start with that mindset and ask the questions and learn from there. Terence, how do you think about putting AI to work?

I think that thought by Elizabeth on mindset is fairly profound. And the way we've seen bringing a human touch is actually starting out by supplementing the humans who are the ones at the front line. One of the most interesting applications I saw and to one of the things that Kim said earlier is you can't hide your channel. So one of the channels, unfortunately, that some people try to hide is e-mail. There's phone, which is very dominant. There's chatbots. But there's good old e-mail. We do that all day. And when your customers find that e-mail, millions of e-mails pour in. And I found it was pretty sad. The phrase actually used was soul crushing because it was someone's job to come in, in the morning and hand assign and hand categorize each e-mail into the particular folder. And this really took away from the joy of this person who came thinking that they were going to support customers. And that's, for me, a perfect application of AI. The machine can read that e-mail, can automatically understand what the issue is, can automatically send it to the right team and even tag it with sentiment, this person is really upset, this person is feeling hurt, and support that agent so that at point, they bring their wholesales to resolving the issue. And they saw dramatic increases in productivity to what we said earlier about resources. And even when it comes to chatbots, one of the thing that we saw that was really neat is supplementing the human. So you start a chat with a human. But at that point in the conversation where the agent advises that we're going to resolve this issue for you. Maybe you need to put a new payment method or something like that. Can I hand you over to this autopilot? This chatbot can automatically capture, say, your new payment information or your new delivery address. And it supplements and it still gets to the core of I need my issue resolved, but the technology for me, the pointy end of automation is AI allows the machine to do some pretty nifty things, but it doesn't do everything. But it does some pretty nifty things so the humans don't get unshackled from the drudgery of manually reading millions of e-mails every day.

Yes. No, that's really insightful, Terence. And it's not just at the front end. We think of automation and the chatbots, but it's really throughout the entire journey that AI and automation can provide that lift to the humans in the process to help them not only reduce the effort for the customer but have a more enjoyable work existence through that and not have that soul-crushing experience that you talked about of manually intervening when a machine could do it much more better, much more effectively. Well, great. Well, that takes us to our fifth and final revelation that we found. And that's really around the future of customer experience. And really, what is -- what lies in the future? And how do the various capabilities that organizations are looking at, how they may enable that future? From one leader's point of view, the future of assistant lies in automation and automating of service by using AI. But we saw that in other key capabilities' rise to the surface when looking at both customer experience leaders and the agent's point of view. So at the top of both lists was workforce automation and workforce optimization. Integration of systems of record were high on the list for leaders and process automation as well. And when we go down the list, we see AI, generative AI, all of these play a significant role in importance for the customer capabilities of the future, being able to deliver on that excellent customer experience. Agents seem to differ on some of the items, which is interesting to see. Their perspective is different. Let's drill into that. Kim, how do you think about these priorities? And what might be driving both -- some of the common and diverging solutions considered by both CX leaders and agents?

I think what Terence said earlier about using -- so the contact center is a way to gather so much data and insight. And what you don't want to do is just keep repeating the same mistake over and over. And things like voice analytics, sentiment analysis, right, it can really elevate those problems quicker. So instead of it taking 2 months to realize, oh, there's this problem in our app or all these negative customer reviews, you can hear that through the contact center and then be the true voice of the customer for the business and say, hey, they don't like this, right? And this is something that we need to fix. And so I think using it in that way is really important because we want to solve the problem. We want to make that individual customer happy, but we also want to use what we've learned to influence the business to make the experience better for all of our customers. And that's the one thing that I love about some of the tools that we have where we can pull out like agent opportunities, right? What are the things that they're doing well or not doing well? We can coach them to be better. We can pull out keywords, topics, things like that. So that way, we can -- as leaders, right, we're focused on one interaction at a time. But we also want to look at the bigger picture and how can we reduce volume, fix problems, get ahead of it, see things coming down the pipe that maybe we wouldn't be aware of otherwise. So for me, I think that's huge in terms of leading the contact center. It isn't just about the phone calls or the e-mails. It's really about what are the trends, right? And what can we do to get ahead of those and help everyone in the organization to be better?

That's great. Using the insights to determine where to invest next and how to take down those big rocks and address them to make the experience better and then to the next and then the next. That reminds me of a phrase that I learned that Toyota uses. It's better, better, never best. So how do you continue to learn, continue to improve and work towards achieving that, recognizing that it's a journey, and then there may not be a full destination? Elizabeth, the last element that you write about in your book is pursue innovation. AI, generative AI, workforce optimization, by definition, are innovations. How can we iterate and innovate our approach to innovation?

Yes. I think at the heart of innovation is to change. And I think as people, we like the effects of change, but we don't like the process of change because it means the end of something. It means learning something new. And I think having that sensitivity as leaders that when we're going to institute a new innovation, it's going to create a lot of change for our people, but it's critically important because we've all probably heard the quote from Wayne Gretzky about going where the puck is heading. He was so great as a professional hockey player because he was thinking about where the puck was going. And that's exactly what Kim was just saying about we got to follow the trends. We got to look for the things that are coming next. And I think that it's incredibly important at the height of our success as organizations that we are pushing even harder into innovation for what's coming next. It can be really easy and very natural that when we are at the height of success that we actually want to relax but that's the last thing we need to do. We actually need to double down and think about what's next, what's the thing that's coming after that. And so a great story that I think is inspiring for sure for me in my days of leading research and development for food service and hospitality at Chick-fil-A was about DARPA. And I was not familiar with this government organization before. But the history is that when the Soviet Union launched Sputnik into space during that whole race into space exploration. It is in the late '50s. It caught the United States off guard. And Eisenhower was President at the time. And basically, he said, no more, we are not going to be caught off guard like that. And DARPA is a governmental group. It was ARPA at first and then became DARPA. But it's a governmental group that focuses on what is next that we need to know about for our country, for our military, for all the things within the United States. And I think that's really, really fascinating and something that we as organizations and leaders can take and apply that we don't ever want to be caught off guard. We might decide that we're not going to pursue a certain trend or we're going to do something differently, but we always want to be in knowledge and aware of where the trends are going and how we might want to respond to that. And when we take that position of always being prepared and never caught off guard, we're going to make sure that we're able to future-proof ourselves and our brand for our customers and stakeholders and for the organization as a whole.

Wow, that's great. So how do we learn to innovate in a way that helps us be better prepared for the future and kind of keep our eye on where -- your quote of Wayne Gretzky, skate where the puck is headed, keep our eyes on that. Terence, love to get your thoughts here. How can organizations be prepared? How do they weigh in on this dichotomy of delivering great experience but also helping ensure employees are happy and productive in the organization? I'd love to get your thoughts on this.

Well, as an optimist and a technologist, I like to think the great power of software -- of our software is you do not need to make those trade-offs that, yes, you can elevate your customers' experiences, and you can also make your employees feel empowered and able to positively act on what they're working on. And as a technologist, I like to actually go from the opposite direction. I would say the -- what you should look for is some of these principles. I see tremendous innovation in business. The concept of taking a convenient -- corner convenience store and digitally enabling it, being able to order your food before you get to that store and getting rewards and being recognized for it was fairly revolutionary. Now the question is, is your technology flexible enough to support that? Is your technology malleable enough to pivot with wherever the organization needs to or even macro events like we saw with the pandemic? And so the technology should be in support of the business goal. The technology should be in support of your team members like we just talked about with AI in support of your agents. And ultimately, the technology should be in support of delivering that great customer experience. And the rest will follow.

Wow, that's great. So it's all about how do you -- how does technology provide that support to the organization's goals, objectives, which is ultimately delivering a great customer experience, right? Whether you're in banking, government, nonprofit, there's always a customer there. And how do you deliver on that to help support your mission, to help support your business? So wonderful. Well, thank you. Let me go ahead and just -- with that, I'll summarize kind of what some of the key takeaways were for today. And so first of all, I want to thank each and every one of you Kim, Elizabeth, Terence. What a delight it's been to have this conversation and discussion with you. Just really remarkable and really thank you for your time. Before taking questions, let's just summarize some of the key takeaways and how organizations can deliver stellar customer experiences. And really, there's 3 imperatives that organizations should consider from this discussion and from the survey results. We see that first, it's about enabling that self-service across channels to enable that customer to better get the service that they need and help automate that resolution when possible. And this can help speed issue resolution and reduce case volume. Next, it's about streamlining operations across the front, middle and back office, which can help automate the tasks and improve visibility to everyone involved, whether it's that agent, the customer or somebody in another department. And finally, it's about empowering agents. And a lot of our discussion was around how do we empower these agents that are burdened with all the cases and how do we lift them up with real-time information and intelligence to enable them to help solve issues quickly and importantly, with the empathy that they have as human beings. AI and automation, as we discussed, plays a critical role in delivering on each of these imperatives and help you elevate experiences while reducing costs. A win-win if there ever was one. Well, with that, I want to thank everybody and then welcome questions from the audience. And let's see what we have here.

First one is, really, it's about resilience. And it's how do you cultivate employee resilience in the face of ever-changing technological landscape. Elizabeth, do you want to take that one?

Sure. I think that's combining what you were just talking about, about empathy for our customers, having that same kind of empathy for the team. When there is a lot of change going on, it does require incredible amount of resilience for employees and for the team. And so I think that goes back to a combination of the mindset that we have for change and how we're creating a mindset in our cultures for change and then also what we're creating and how we are serving our teams in creating that change. And one of the things that I think can be extremely helpful and is really practical is whenever there's a change that's coming, how are we engaging the team's voice in the actual change? How do they have a seat at the table for what the new solution is going to be? And then how can they also be an advocate for this new solution? So wherever that is within the organization, I think it's just really important that we're always designing the employee experience just like we would design the customer experience. And that will in turn help them being more aware of the changes that are coming. And then ultimately, I think it can help them be more resilient, too, because they know that this was designed not just to them, that it was designed by them and for them.

Great. So engaging employees in that experience, developing what that new next solution should be and almost treating them as you would a customer in terms of that fact finding and engagement. The next one, let me kind of read this. So as a global brand -- Kim, I think this is for you. How do you strategize resource allocation for both operating the business and investing in growth, particularly in the context of AI?

Great question. Just this summer, we actually rolled out a new app experience that is not only customer-friendly -- more customer-friendly but also more associate-friendly. So what we realized through listening to calls and listening to the customers' experience at the store, we found that the associates were having trouble with our app. So there was multiple scans they needed to do. So customers wouldn't get rewards. They wouldn't be able to redeem things. And so what we decided to do is really kind of circle around and say, how can we make this app experience not only better for our customers but also better for our associates? And so we made some changes, rolled out the new app over this summer. Of course, there's that learning curve, right, where our associates and our customers had to learn a new app as well as our agents, which that was challenging. And that was something we put much thought into because we wanted to make sure they were very prepared. We don't want customers to call, ask about the app and the agents aren't informed, right? That would be a terrible experience. And so we've been really tracking it. And what we found is that the store associate complaints are going down, and a lot of that has to do with the app. And so that is a success. And so that's an investment that really help not only customers but internally for our own folks to make their jobs easier, make our customers' experience even better. And as we continue to hear feedback through our channels, we give that feedback directly to the digital team pretty much in real time. And they're able to put it on their road map and fix problems that we're experiencing very, very quickly. And so I love that because sometimes you can get feedback from customers and there's such a delay, right? But if you prioritize that and you say, hey, we're hearing customers saying the bar code isn't big enough, right, they were able to put an enhancement very quickly and solve that issue. So constantly learning and adjusting, but I think most of all is making those investments not only thinking about the customer but also everyone in the organization and how can we make it better.

So think about the end-to-end process and the end-to-end solution.

Yes.

That's great. Okay. Terence, I think this one might be for you. It's asking, automation and AI can be applied in multiple places across delivering a great customer experience. Where should companies think about starting in terms of applying these technological capabilities to get the greatest value for the customer?

Certainly. I think I'll cheat off what Kim was just mentioning, which is zoom out and think through that entire customer experience and that entire customer journey but then follow that journey inside the organization through the different teams and through the different processes. And that we found is where you can easily surface the point of greatest need and where you can get the greatest benefit. I alluded to the -- e-mails is one of them, but there's -- also referring to the previous question you said and Elizabeth's point, always being aware that technology is ever moving. So one of the cool new things we implemented was a document intelligence. You combine AI with reading documents. And now it could read -- have a customer took a picture of or a screenshot of a receipt when they were disputing something. And now that opens up a new avenue of something that you can apply to. So doing a survey of what that end-to-end process, we support customers through that. We call that a CX workshop or a CX experience. And then being very deliberate to say, okay, where can we do an experiment, where can we make some -- a change. And like Kim just mentioned, sometimes it's the smallest things have the biggest lift. Making that bar code just a little bigger helped everyone across the process through fairly light lifts. And last of all, the technology should be that flexible, being able to turn it on, tweak it, being able to embed it in the appropriate places, connecting with all those existing systems. The technology you're putting to work should not be the inhibitor. It should be the enabler to quickly execute.

That's great. So think holistically, look for the quick wins, experiment and scale.

Exactly right.

That's awesome. I think that's all the time we have for questions for today. But we'll definitely take those that we weren't able to respond to and take those off-line. I really want to thank you all for joining us. And again, the background for this discussion was the CX Trends report that's been recently issued by ServiceNow. And we'd love to give each of you the opportunity to get your hands on this report. A lot of effort went into collecting the data across, again, B2B and B2C customers, CX leaders and agents. We skimmed the surface today on some of the highlights, but there are some nuggets in there for each of you that you'll find. Please scan the QR code to download the report, and love to get your feedback on it. So with that, I want to thank you all today for joining the CX Trends customer service insights in the generative AI era web seminar. Thank you again to our panelists and wishing you all a great day.