Friction Versus Profitability

Have you ever had the chance to calculate (or at least realize) how much friction there is between your customers and your business? How many touchpoints are there between your team and your customers so a deal can be closed? Is it the prospection, the negotiation, the closing, the actual service rendering or maybe the collection phase that gives you or your customer more headaches? The general hypothesis is that the more friction you have with your customer, the less profitable your business is.

Friction may have many faces: time, money, effort, unwellness, discomfort. Customers in general, whether they are people or companies, are less and less open to all these kinds of friction: of course, time and money are by far the most valued resources that anyone is adamant about losing. This is an important point to understand and include in a business strategy, because decreasing friction may result in a very high competitive advantage. 

For instance, banking has evolved and successfully reduced friction in a lot of procedures and touchpoints within their customers’ journey that were usually terrible experiences at their physical branches. Instead, you can now easily transact (send a transfer, request  credit, pay a service) through an app or website and do it safely. Watching a movie was kind of difficult before streaming, since you had to go to the video store, choose a movie, check if it was available and return it after you watched it within the term you rented that movie for or be penalized. Today, you can get your weekly groceries from the store without having to move from your house or office, rather than waiting in endless lines and carrying your bags to the supermarket parking lot. Today, banking transactions are around 15 times what they were 10 years ago; that means more than 1,500% growth. Similarly, how much video and audio content is consumed now compared to 2012? This has been possible due to friction reduction from the offering companies to their respective markets and consumers. Any industry that has successfully reduced friction has evolved and expanded exponentially. 

In general terms, industries working under supply and demand always create friction between buyers and sellers. In the case of the offshore oil and gas sector, between the owner/operator and the charterer. It’s a simple and classic relationship: when supply is low, prices go up and the charterer has  to pay higher prices; when supply is high, the charterer has more options and, therefore, prices drop. In either case, one of the parties won’t be happy. And that is only the beginning of the transaction. IThere is also the massive paperwork (sometimes literally paper going back and forth) from one party to the other and back. The whole transaction process is full of touchpoints and friction from day 1 to the day the owner is paid for their services. 

All along the sales cycle for chartering a vessel, friction takes place at almost every step. It’s difficult to identify business opportunities; it’s difficult to reach the decision-makers generating those opportunities; it’s difficult to compare options on equal terms and conditions to get the best and most convenient offer; it’s difficult to start the service after analog inspections and authorizations; it’s extremely difficult to have certainty on when the owner will get paid. At each of these touchpoints, that friction is costing time and money for either or both the owner and charterer. This means that every time friction is  reduced at any step of the cycle, the whole cycle gains efficiency and is actually saving time and money for both parties. 

Nowadays, there are plenty of tools and platforms to reduce friction at specific steps of different processes in different industries and organizations: CRMs, ERPs, talent and recruiting managers, e-signature platforms for signing documents electronically, document managers for sending, sharing and tracking documents; funding and credit platforms for financing payments for suppliers and working capital, among others. The sky is the limit and the number of startups emerging out of the blue has been massive. However, not one of the (major or minor) players in the offshore oil and gas logistics segment has a strategy or idea on how to use these tools in order to reduce friction, increase efficiency and, therefore, profitability. There are also many technological advances referring to maintenance and a ship’s digital twins, fuel-saving methods and ways to make the most out of the vessels, but all of them are related to the operation itself, not the goal of reducing friction with their customers. Identifying, solving and integrating digital tools harmoniously in order to achieve friction reduction along the process to charter a vessel in the offshore oil and gas logistics segment is now possible. More info at info@nautech.com.mx.