What Is Transformation?
For the purposes of this conversation, when I speak ‘transformation’ I am pointing at a radical shift in one’s way of being – as in one’s way of showing up and travelling in this world. If you are Christian, and know your Bible then think of the transformation (often called conversion) of Saul to Paul. What was intrinsic to this transformation? Was it not a letting go, a complete letting go, and embracing the unknown?
What Has Transformation To Do With Customer-Centric Business?
What has this conversation to do with all things Customer and especially customer-centric business? Everything. As I have said many times before a shift to showing up and doing business in an authentically customer-centric way requires a transformation: personal (Tops, Middles, Bottoms) and business (policies, practices, processes, tools).
a. What is the access to transformation?
What is the access to transformation at the individual (personal), and business (organisational) level? Allow me to share the following with you:
In some Asian countries there is a very effective trap for catching monkeys. A slot is made in the bottom of a coconut, just big enough for the monkey to slide its hand in., but not big enough for the hand to be withdrawn when it is clenched. Then you put something sweet in the coconut, attach it to a tree, and wait for the monkey to come along. When the monkey slides its hand in and grabs the food, it gets caught. What keeps the monkey trapped? It is only the force of desire and attachment. All the monkey has to do is to let go of the sweet, open its hand, slip out, and go free - but only a rare monkey will do that.
- Joseph Goldstein, A Heart Full Of Peace, Best Buddhist Writing 2008
OK, this Buddhism stuff shows up for you as ‘other worldly’ – unrealistic. So allow me to make it real for you.
b. The Transformation of Zappos Occurred in March 2003
Listen to Tony Hsieh talk about the early days of Zappos when the leadership team was struggling to find funding to keep Zappos going – the cash had run out (bolding is my work):
A month later, we still weren’t profitable. We still couldn’t raise funding.
But we had a decision to make.
How serious were we about this idea of making the Zappos brand be about the very best customer service? We had discussed the idea internally with our employees, and everyone was excited about the potential new direction.
But was it all talk? Or were we committed?
We hadn’t actually changed the way we did anything at Zappos yet. We did a lot of talking, but we weren’t putting our money where our mouths were And our employees knew it…..
For 2003, we were projecting sales to double, with about 25 percent of our overall sales coming from our drop ship business. The drop ship business was easy money. We didn’t have to carry inventory so we didn’t have any inventory risk or cash-flow problems with that part of the business. But we had plenty of customer service challenges.
The inventory feeds ….. from our vendors for our drop ship business were 95 percent accurate at best …. On top of that, the brands did not ship as quickly or accurately as our own WHISKY warehouse, which meant we had plenty of unhappy and disappointed customers. But it was easy money.
We all knew deep down inside that we would have to give up the drop ship business sooner or later if we were serious about building the Zappos brand to be about the very best customer service. We also knew that the bigger we grew, the more reliant we would be on the cash from drop shipping. There would never be a good time to walk away……
So we made what was both the easiest and hardest decision we ever had to make up until that point. In March 2003, with the flip of a switch, we turned off that part of the business and removed all of the drop ship products from our web site.
We took a deep breath and hoped for the best…..
We had to deal with our first test of our new direction right away. With a drop in revenue, cash was even tighter than before.
Now we had to figure out how to make next week’s payroll.
- Tony Hsieh, Delivering Happiness
Not easy is it? Which kind of explains why many organisations which talk about customer focus, customer obsession, customer-centricity are playing at the periphery: making process changes, buying-implementing technology etc. Which CEO or leadership team looks forward to taking a deep breath and hoping for the best?
If you are serious about cultivating genuine-meaningful loyalty between yourself and your customers then you have to open up your clenched fist. And let go of all the policies-practices-products-people that generate bad profits – profits made at the expense of your customers.
As Tony Hsieh says there is NEVER a good time to do this. So the best time to do that which goes with showing up and travelling the authentic customer-centric path is NOW! Why now? Get this, everything that ever happens, happens NOW. I know that this is not how it shows up for you, or me. And look into this, deeply, and you will see the truth of it. All action occurs in the present, NOW.
Here is where it gets interesting. There cannot be an organisational transformation unless it is preceded by individual/personal transformation; this individual/personal transformation has to start with the Tops – it is called leadership.
What is the subtitle of Tony Hsieh’s Delivering Happiness book? “A path to profits, passion, and purpose”. It occurs to me that the many with whom I speak show an avid interest in profits – increasing profits. Few show any interest in any purpose other than ego: self enrichment in its many disguised. Passion? Passion for great customer service, passion for great Customer Experience, passion for the genuine well-being of customers as fellow human beings? If you come across it then please share it with me.
CXDay organised by the CXPA took place yesterday. At the invitation of Marco Rodrigues, I found myself at the CXDay event taking place in London. Here is what I took away from that event:
The terms customer-centric, Customer Experience, and innovation are empty. They are so empty that each person can fill them up whatever meaning they wish. And they do. Then the debates occur as to what customer-centric means, what customer experience is and is not, what counts as innovation or not. Some academics see an opportunity here: to define Customer Experience as a set of capabilities backed by empirical data and thus put in a place an established framework for assessing Customer Experience maturity and benchmarking.
Life is difficult/frustrating on those who find themselves either preaching and making a living from Customer Experience. And it is perhaps even more difficult for those who find themselves part of the Customer Experience team within a large corporate. One such person told me that she found it frustrating to make sense of what Customer Experience involves. Dive into it and you realise it is a many headed monster. There are many questions and no ready made silver bullets. To deal with the Customer Experience challenge you have to get pretty much everyone else in the organisation to work with you to tame the monster. And these folks are not interested. To them Customer Experience is irrelevant to what they have to do on a day to day basis. And for them the folks in the Customer Experience show up as an irrelevant annoyance.
Customer Experience has been and continues to be a blessing for one set of folks: the VoC vendors. These folks cannot believe their luck: listening to the voice of the customer has become a mandatory exercise for just about every organisation and their is an endless appetite for what the VoC vendors are selling. Yet all is not as great as it sounds. The more intelligent VoC folks (at VoC vendors) are concerned. Why? Because they are wondering when someone is going to wake up, notice and call it as it is. How is it? Corporations may be listening to VoC, they certainly aren’t doing much about it. And so from a practical perspective they are not listening to their customers. So the most rational course of action is to put a stop to their relationship with VoC vendor and scrap their Customer Experience team.
A handful of people get it and are living it. What do they get? They get what the whole Customer Experience thing is all about. Renata Wallace, the owner and managing director of Wallacespace gets it. As soon as I walked into Wallacespace (the venue for the CXDay event) I found myself saying “This is a meeting space with soul!”. Then I listened to Renata share her story and I got that Renata embodies the soul that is so manifest in the look+feel of Wallacespace. What struck me most forcefully about Renata is how she is so different to just about every senior person in meet in big corporate land. What makes her distinct for me? She oozes the kind of humanity that is rare in corporate environments.
It’s great to meet up with people in person. I enjoyed meeting up with Marcio Rodrigues – who reminded me of the event and encouraged me to attend. I enjoyed meeting up with Ian J. Golding a customer experience evangelist and consultant. I enjoyed meeting Nadine Dyer, a Customer Experience Manager, who shared with me how that which I speak her lands for her. I enjoyed meeting Renata Wallace……. For me nothing takes the place of face to face encounters with human beings. And in that respect I thank the folks from Wallacespace who supplied us with drinks, canopies, and friendly service.
I wish you a great day and thank you for making the time to listen and in some cases share that which I speak here. Live well, be a source of positive difference in the world. Be a Renata Wallace! A human being in touch with his/her humanity and revelling in it. This is an invitation you can accept or reject – as human beings you and I are ‘condemned to be free’ to always be the chooser who chooses, even choosing not to choose and just going with the way that it has been set up for us.
Why is it that I prefer not to business with a customer-centric business? Allow me to share my answer by referring to the UK grocery market. Which supermarket chain was applauded, by many, for its customer-centred way of doing business? Tesco. What was held responsible for fuelling this customer-centred way of doing business? The Tesco Club Card. Through this loyalty card, Tesco captured and made effective use of customer shopping data to grow revenues and optimise profits. In the process Tesco came from nowhere to became the world’s second largest retailer.
Where is Tesco today? Here is what The Economist said back in July 2014:
… on July 21st Tesco abruptly announced that Mr Clarke would be leaving his job, apparently prompted by a warning that profits in the first half of 2014 would come in “below expectations”. In June Tesco revealed a drop in same-store sales that Mr Clarke admitted was the retailer’s worst performance in 40 years….
Recession taught middle-class shoppers that discounters like Aldi and Lidl were cheap but not nasty; they spent some of the money they saved at higher-end grocers, such as Waitrose and Marks & Spencer……
Tesco is faring badly. Its sales dropped by nearly 2% in the year to June while those of its closest rivals, Asda (which is owned by Walmart) and Sainsbury’s, rose by 3% or better. Despite his exertions, Mr Clarke failed to persuade consumers that Tesco offers better value than the discounters or quality to match the upmarket merchants.
Is this as bad as it gets? No. Here is what the Guardian newspaper stated in on the 22nd of September this year:
Tesco has suspended the head of its UK business and called in independent accountants and lawyers to investigate after discovering that its guidance to the City overstated expected first-half profits by about £250m….
Tesco shares fell almost 8% on Monday morning to an 11-year low of 212p, making them the biggest faller in the FTSE 100 index and wiping £1.5bn off the retailer’s market value. More than £6bn has been wiped off share value since 21 July, when the previous chief executive, Phil Clark, was ousted.
Why is it that Tesco is in such deep trouble? I say that Tesco has arrived at where it is at due to its customer-centric way of doing business. What do I mean by this? I mean that the Tops got fixated into harnessing the data yielded by the Club Card to get customers to part with more of their money in Tesco stores.
Was this done by offering customers superior products as in higher quality products? No. The products were middle of the road yet ways were found of selling these at higher prices through clever marketing and merchandising.
Was this done by providing superior customer service in the stores? No. Tesco cut back on the number of people working in the stores so it was not unusual for the customer to find that there was nobody around to help when help was needed or find long queues at the checkout tills.
Was this done through a superior shopping experience? No. Management chose not to invest in the stores or the shopping experience in the stores. As a result the stores become less and less attractive over time.
I prefer not to do business with a customer-centric business because the management of such a business is more likely to be focussed on extracting value from their customer base through a variety of clever manoeuvres than earning its keep through superior products (Apple, Waitrose), superior service (John Lewis, Zappos), low prices (Lidl, Aldi), or a combination of service and low price (Amazon).
If you are a customer and your supplier is touting customer-obsession then you might want to think about whether that is a good thing. Is the obsession with providing you with a superior product, superior value, and/or experience? Or is it an obsession with with finding clever ways of getting you to buy more, pay more for what you buy, and get less in return? You might want to keep in mind that which many remind me of: business is not altruistic.
Let’s assume that for the purposes of this conversation that when I use the term customer-centricity I am pointing towards a specific behaviours which show an organisation as being attuned and responsive to the needs of their customers – their core customer base.
How should you go about effecting change in the behaviour of your people, your teams, your functions, your business units, your entire organisation so that your organisation shows up as customer-centric? The authors of Six Simple Rules point out that managers go about effecting change by typically taking a hard approach (strategy, structure, process). And when this fails or to make it more appealing they introduce elements of the soft approach (training, team building, affiliation events). How well do these approaches – hard, soft, hard+soft – work?
In the last post I illustrated what tends to happen when managers take the hard approach: set direction, communicate direction, set metrics to hit, change the bonus system. What about taking the soft approach? How does that tend to work out? Lets return to David K. Hurst’s experience at Hugh Russel:
The top management team emerged from Hugh Russel as a “band of brothers” ….. we found we could “read ” situations better … “contextual intelligence” seemed to be an important feature of our newfound skills. So, after our near death experience, we set out to create an educational experience that would nurture the spirit of commitment, excitement, and engagement we had seen at the senior level of the organisation….
What did this senior leadership do? They organised a series of 3 day retreats [“core samples”] where 50 people drawn from all levels of the company (truck drivers, salespeople, branch managers, vice presidents) were invited to a “lovely old cottage”. What happened on the retreat? The participants hung out together doing team exercises, case studies, got feedback on their behavioural styles, and discussed the issues that the Hugh Russel was facing. How did it go? The senior leadership were delighted with the results:
Discussion at the meetings was open and honest, the behaviours observed were cooperative, and the feedback from the participants was excellent..…… our local branch managers, who nominated most of the attendees, told us that they saw changes in the behaviour of those who had come to the session, even staunch union members. We were very pleased.
The soft approach works! If you take folks from all levels of your organisation to a three day retreat, at a nice place, educate them, teach them, develop them, give them feedback, and allow them to hang out with another then you are well on your way to being customer-centric. Or are you?
Then, over time, the feedback from the managers became less positive….. after awhile back at work, the participants began to revert to their old dysfunctional habits. Many of them who had been cooperative and open during the core samples became surly and aggressive again after a few weeks back at work.
Slowly it dawned on us that we had completely misunderstood cause and effect….. We thought we were teaching them new behaviours, which they could practice back in the workplace. But they knew these behaviours already since they were the ones the workers used in friendly environments, like their homes or bowling alleys or golf clubs. The open environment of the development sessions evoked those social behaviours.
Please make note of the line that I have put in bold. The behaviour that was being taught was behaviour that the folks already had in their very being: cooperation is intrinsic to us. In infant never makes it past infanthood unless it arrives and is nurtured in a cooperative context. So if cooperation is not showing up in the work context then it is because non-cooperation is the functional behaviour in the work context. And cooperative behaviour is dysfunctional in that work context. What can we learn from David K. Hurst?
We had misunderstood the power of context over our people’s desire and even their ability to practice these behaviours back at work. The closed work setting was completely different from that of the country estate …..
Martin Heidegger was on to this phenomenon back in the 1920’s almost a hundred years ago. Most managers are yet to get it: when you ‘deworld the world of its worldhood’ you are in the land of theory. And what is theory? Theory is derived from the Greek word: theoros. What does theoros signify? Spectator. And if you follow that which I speak here on this Blog, you may have gotten the profound difference between “being in the stands and being in the arena”.
Let’s continue listening to David K. Hurst:
…. we weren’t teaching them soft skills that they didn’t already know; we weren’t conveying any hard skills that might have been helpful to them; we weren’t using live company cases or confronting real issues…… our management development program had some of the ingredients of a behavioural trap – short term rewards and a long terms waste of resources.
How does David K. Hurst conclude this story? With a profound lesson for anyone seeking to effect behavioural change that lasts:
This is a perennial problem with development programs, especially those that depend upon a radical change in context to produce their effects. Climbing a challenging mountain peak or whitewater rafting can certainly build temporary espirit de corps in a team. However, the challenge is not to take the skills learned in those challenging contexts back to the workplace but to create challenging workplace contexts that evoke those desirable behaviours. The development sessions should deal with the constraints that prevent an organisation from creating challenging work environments where learning and teamwork are a natural response….
– David K. Hurst, The New Ecology of Leadership
1 – That the challenge of showing up as a customer-centric organisation is one that involves a radical change in context to produce the kind of behavioural change that is needed from just about every person in your organisation;
2 – The central task of any leadership team is to get to grip with the existing work context – to understand what it is about the context that generates the behaviour that is generated today; and
3 – Using this insight to nudge-influence-shape the work context (made of up many micro work contexts) such that the only functional way for your people to show up is as being attuned to and responsive to customers.