Champion-challenger outsourcing involves multiple contact center providers competing for future work. Although that can lead to companies collaborating with the best known partners, it has also opened the door for intreprid and innovative challengers with much smaller operations.
“Companies aiming to secure new contracts offer to take over a portion of contact center work, and show they can do better,” wrote Callzilla CEO Neal Topf in a recent op-ed on the competitive strategy. “There is something to be said for crawling and walking before you have to sprint.”
Customer experience experts agree with the sentiment.
“The champion-challenger model often enables a mid-tier or lesser known service provider to get a foot in the door by providing a unique capability,” said Melissa O’Brien, Research Vice President, Customer Engagement, Retail and Travel Strategies at HFS Research. “It often provides the ability for a third party to prove its capabilities versus an internal team and shakes up the status quo. [In the] best-case scenario, it can even drive some innovation in services.”
However, the framework must be set up to properly incentivize performance for both parties. “If key performance indicators aren’t the right measurements, what are you accomplishing by competing based on them?” O’Brien asked. “Companies need to think through what outcomes they’re seeking before putting this model in place.”
One case study produced by O’Brien’s HFS colleague Elena Christopher suggests companies are making strategic use of champion-challenger to test artificial intelligence adoption. Christopher explained that Citizens Bank implemented a champion-challenger model to test new technology, putting a newer AI-powered solution into production as a “challenger” to its existing waterfall-based segmentation models (“champion”).
FinXEdge Collect (formerly CollectEdge) is a machine learning-powered product that helps lenders and debt collectors reduce delinquency rates, improve operational efficiencies and enhance customer experience. The product has been running since March 2019. To date, Infosys (owner of the product) points to these results:
- Exceeding its roll rate lift objective by more than 100 percent.
- Delivering savings with a reduction in staffing because of refined delay queuing and contact strategies.
- Delivering a credible business-led use case that supports expansion to broader data sets and collections functions.
- Cultivating trust and a strong belief in the potential of ML-based models, which are delivering benefits for collections and being evaluated for broader use within Citizens Bank.
In a report published on its website, global services provider Eventus said its own champion-challenger approach has produced valuable results. According to the company, the framework was especially effective when clients own and control their contact center technologies and no longer need to obtain them from a traditional, full-service BPO provider.
“Instead, they can contract with smaller, specialist labor outsourcers – available onshore, Nearshore and offshore – to support different clients’ specific requirements,” Eventus writes. “By putting labor vendors in a position where the best provider gets the bulk of the volume on an ongoing basis, champion-challenger outsourcing can generate dramatic improvements in customer satisfaction, as well as significant reductions in operating costs.”
O’Brien of HFS notes that the Covid-19 pandemic means companies are typically consolidating volumes with the most reliable partners. However, she envisions a bright future for innovative challengers.
“Coming out of the pandemic… companies will be seeking new ways of doing business to protect against disruption,” O’Brien said.
In the future, she sees space for crowdsourcing or gig models, pure play work and geographical shifts. “All of this opens the door for challengers, especially those with fresh ideas, in the longer term,” she said.
“Champion-challenger is always important when the volume justifies having more than one operations center,” Neal Topf of Cadzilla told Nearshore Americas.
According to Topf, the model has become even more useful amid Covid-19, as companies seek to reduce risks exposed by the crisis. However, he said that executives still viewed business continuity (BCP) and disaster recovery (DR) planning as more pressing concerns.
“When a site or portion of a site or operation goes down, like what we saw with Covid, how does the operation respond?” Topf asked. “What plans are in place to make a transition seamless and un-interrupted?”
Topf said the pandemic had exposed important vulnerabilities in current business models.
“Many operations were interrupted when sites had to shut down. Many weren’t prepared to immediately transition to a work-from-home environment. Some were able to, many took time to implement. Companies in the US don’t want to hear about interruptions.”
The CEO said there were many examples in Jamaica and Colombia where large BPOs were unable to operate all together. He also said there were incidents in which BPOs found themselves in trouble with local law enforcement for ignoring mandates and playing fast and loose with the rules.
“Yes, champion-challenger is always important to allow for multiple sites, multiple geographies and multiple providers,” Topf said. “But the main driver of that outcome today is the BCP more than anything else.”