Good Strategy and Effective Execution Necessarily Involves a Sound Appreciation of the Context

I find myself in the midst of an ocean of generalities: frameworks, models, recipes, formulas, 10 steps to…. Every one promising easy/quick arrival at the promised land merely by following the authors secret/revolutionary formula/recipe.

Folks even turn to me, as a subject matter expert, for advice on how to craft a customer-centric strategy, create a customer-centric culture, build meaningful engagements with customers, call forth the very best of the employees.  Sometimes, vanity get the better of me and I do offer an approach.  When reflection sets in I realise my arrogance/stupidity. Why?

Consider deeply, you may just get that the question is not how does one motivates human beings. No! The question is what motivates this flesh & blood human being right in front of me. The question is not how does one build a customer-centric culture. No! The question is how to go about shifting this particular organisation, these particular people, towards a customer-centric way of showing up and travelling. The question is not how one calls forth customer engagement. No! The question is what calls forth engagement in this particular customer.

Put differently, effective strategy, effective execution, effective change require a sound (even intuitive) grasp of the nuances of this particular person, this particular group of people, this particular culture, this particular technology.  Why?  Allowing me to illustrate through the following:

“If a house caught fire, intervention would require an understanding of the type of fire and the strategy required to extinguish it. Clearly and electrical fire cannot be doused with water, and a chemical fire will require will require a specific type of retardant.”

-Dr Eric C. Amberg, The Five Dimensions of The Human Experience

It’s even more complicated than that, the nuances are deeper. You turn up and find it’s an electrical fire. You search for water but there are no water sources nearby. Or there simply is not enough water.  Maybe it is even more complex, it is a chemical fire yet from a distance you cannot determine which chemical is involved. Or you have to persuade some person / group of people to do what they are doing AND make some chemical retardant especially for you.

You get the idea: the nuances present in the concrete, yet always absent in the abstract, have the determining influence on how things turn out. One must be sensitive to these nuances – detect them, and know how to deal with them.  This kind of understanding can only come through a certain repertoire of lived experience. In days gone by this kind of familiarity with the particular was achieve by becoming an apprentice /disciple of a master for many years.

Today we have taken the easy route. Too many folks treat the realm of human beings – a realm of contingency, of approximation, of probability – like the realm of mathematics where 2+2 always equals 4. The price to paid for taking this path is ineffectiveness.  Ask yourself what the telcos have to show for the fortunes they have invested in CRM, customer experience……

You can ask me to advise you on how to craft a strategy right for your organisation, or how to cultivate good relationships with your customers, or how to effect culture change. Please don’t expect me to provide an answer from a distance. I am not a seer nor am I a charlatan. To help you answer the question I have to get a feel for your particulars: you, the people in your organisation, it’s history, the kind of work that occurs, how folks show up and travel in your organisation, the kind of people who are your customers and how you / your products / your competitors occur to them.

I say to you, if you wish to be effective in devising strategies, influencing people, effecting change then it is necessary to give up the easy paths, the short cuts, and take the road less travelled.  To get to grips with the particulars – not just intellectually. This getting to grips must be at a deeper level – an intuitive feel for that which you are dealing with.

Why go to this effort?  Werner Erhard summed it up beautifully: “The context is decisive.”

I thank you for your listening and wish you the very best in your living. Until the next time…

 

 

 

A ‘Fresh’ Look at Customer Retention and Loyalty (Part II)

Let’s recap Part I of this conversation. The key points as I understand them are:

  • You cannot have customer loyalty without cultivating employee loyalty and investor loyalty. Why? Because they are fundamentally and inherently interconnected.  So debates about which comes first (customers, employees, investors) shows that folks lack a fundamental grasp of that which we are dealing with.
  • Customer retention-loyalty has implications that extend to every corner of the business. It is necessarily a strategic matter. As such the ownership-responsbility-accountability  belongs with CEO.  It cannot be handed off to the Marketing function (or any other function) nor given over to a Chief Customer Officer.
  • Retention is not just another metric. It is the defining metric for the whole business. Retention is used to integrate all aspects of the business into a coherent whole.

OK, now we are in a position to move forward and conclude this conversation. Allow me to set the scene by sharing this assertion with you (bolding mine):

“Stemming the customer exodus is not simply a matter of marketing; it demands a reconsideration of core strategy and operating principles.

I say that it demands a reconsideration of core strategy and operating principles in the context of a new theory of doing business.

What Theory of Business Enables Customer Retention and Loyalty?

Practice is always based on some theory of how the world works. The dominant theory that fuels just about every large business is one of profit maximisation and shareholder enrichment.  With this focus customers and employee are seen purely as means and almost never as ends in themselves.  Which is to say that they are viewed and treated as tools rather than human beings.  Human beings do not tend to be loyal to folks who treat them as tools.

If you are serious about generating sustainable improvements in customer retention and loyalty then you will need to jettison this theory and embrace a new theory of business. Why?  Lets listen – bolding mine:

The new theory sees the fundamental mission of a business not as profit, but as value creation. It sees profit as a vital consequence of value creation – a means rather than an end, a result as opposed to a purpose…

Profits alone are an unreliable measure because it is possible to raise reported short-term earnings by liquidating human capital. Pay cuts and price increases can boost earning, but they have a negative effect on employee and customer loyalty….  

…there are two kinds of profit. Call the first kind virtuous: it’s the result of creating value, sharing it, and building the assets of the business…. the other kind of profit is destructive. Destructive profit does not come from value creation and value sharing; it comes from exploiting assets, from selling off a business’s true balance sheet. This is the kind of profit that justifies terms like profiteering…..

When profit is a company’s goal and purpose, virtuous and destructive profits serve equally well. But once you see profits as a means to, and a consequence of, the sustained creation of value, then only virtuous profit will do.”

What Kind of Stand Do Those Who Excel in Customer Retention and Loyalty Take Toward People?

Which means that a customer retention and loyalty centred approach to doing business requires a particular way of seeing-treating people, and managing the business. Let’s listen – bolding mine:

“…see people as assets rather than expenses, and they expect these assets to pay returns over a period of many years. Loyalty leaders choose human assets carefully, then find ways to extend their productive lifetimes and increase their value. Indeed, loyalty leaders engineer all their business systems to make their human inventories permanent. They view asset defections as unacceptable value-destroying failures, and they work constantly to eradicate them. 

Why treat people (customers, employees, investors) in this manner? Because loyalty to count as loyalty has to be given willingly. Listen:

“You cannot control a human inventory, which of course has a mind of its own, so you must earn its loyalty. People will invest their time and money loyally if they believe that their contributions to your company will yield super returns over time. The secret is … to select these human beings carefully, then teach them to contribute and receive value from your business…”

Is Loyalty a One-Way Street?

The assumption (and practice) as I see it is that the game of loyalty is all about loyalty from customers to the company. Which is to say loyalty is a one-way street. Is this the right way to cultivate and demonstrate loyalty?  Let’s listen – bolding mine:

“The need to keep losses under control led many companies to cover the claims required by their contracts…. then refuse to renew customer policies to avoid future losses. State Farm took a radically different view. It had no intention of canceling customers it had expended so much energy and expense to acquire and maintain, most of them for many years….. Most important, disloyalty to customers would be philosophically unacceptable. Loyalty is a two-way street. Moreover, loyalty must be seen to be a two-way street. How could State Farm possibly expect its customers and agents to remain loyal if the company did not demonstrate loyalty when the chips were down.”

Why Is It The So Many Have Accomplished So Little When It Comes to Customer Retention and Loyalty?

I’ve in the customer retention and loyalty game for 15+ years. I’ve been in the arena not just a mere spectator. I have witnessed many talk fine words, I have seen many undertake all kinds of projects and programmes to increase retention/loyalty. Yet, I have seen none succeed in any meaningful-sustainable way.  Further, when I read about which companies are doing a great job in this domain it is always the same names or new entrants with new business models.

What gets in the way of existing large, publicly quoted, companies excelling at cultivating customer loyalty?  Almost every company approaches retention and loyalty tactically. So you have a bunch of business practices that drive customers to leave. Instead of changing these practices executive put in place retention teams. Let’s be clear, most organisations have merely added on retention teams and other gimmicks to their existing way of doing business. Is this enough? Let’s listen:

Building a highly loyal customer base cannot be done as an add-on. It must be integral to a company’s basis business strategy. Loyalty leaders …. are successful because they have designed their entire business system around customer loyalty…

 

Summing Up and Closing Out This Conversation

 

I have shared a particular perspective with you and I have invited you to listen to the speaking of a particular author.  How does this strike you?  Revolutionary? New? Fresh? Stale? Impractical? Nonsense?

Now is the time for me to come clean.  The perspective that I have shared with you is the perspective that I have held since my earliest days in the Customer arena. And the speaker you have been listening to is none other than Frederick F. Reichheld.  When did he speak the words that I have shared with you?  The words were put on paper and issued as a book (The Loyalty Effect) back in 1996.

Look around at what is going on and you are likely to find that customer retention and loyalty has been approached tactically. The usually result is add-on’s to the existing way of doing business. The add-on’s can take many shapes: new website, Facebook / LinkedIn presence, customer retention team, an online customer community, new CRM system…. The results?  Are they not meagre?  Which companies by taking this approach have vaulted into loyalty leaders?  I cannot think of a single one.

Why is it that those who have jumped on the Customer bandwagon have jumped on it tactically, and not strategically?  20 years ago, Frederick Reichhheld said this:

The real trouble is that many, perhaps most, executives today have adopted a paradigm which at its heart is inconsistent with loyalty-based management. Press them, and few will insist that the primary mission of their companies is to create superior value for customers and employees so investors can prosper…”

This strikes me as being the heart of the matter. Within the context of the current paradigm it is simply not possible to cultivate meaningful loyalty. So all that is left is tactics, add-on’s, poverty of increases in loyalty, more tactics….

I wish you well and thank you for your listening. Until the next time….

 

Revisiting Strategy: Does Effective Strategy Involve More Than Strategy?

Is Strategy Purely An Exercising In Thinking?

Is strategy an analytical exercise where one collects useful data, crunches this data, finds where the opportunities lie, and then selects the most promising opportunity? Is it merely a matter of ‘scanning the landscape of opportunity’ and selecting the most suitable opportunity?  Put differently, is the job of the strategist to select which table to play at?

It occurs to me that this is pretty much the view articulated by Michael Porter – the person who really put strategy on the corporate landscape.  Arguably, it is also what Tony Hsieh is getting at when he writes the following in his book Delivering Happiness (bolding mine):

 I noticed so many similarities between poker and business that I started making a list of the lessons I learned from playing poker that could also be applied to business:

Evaluating Market Opportunities

  • Table selection is the most important decision you can make.
  • It’s okay to switch tables if you discover it’s too hard to win at your table.
  • If there are too many competitors (some irrational or inexperienced), even if you’re the best it’s a lot harder to win.

Is There More To Strategy Than Table Selection?

There might be.  It may not be as simple at selecting the right table.  Let’s get back to Tony Hsieh, he writes (bolding mine):

Strategy

  • Don’t play games that you don’t understand, even if you see lots of other people making money from them.
  • Figure out the game when the stakes aren’t high.

This is great as far as it goes. As a strategist you can sit in your ‘war-room’ crunch the ‘big data’, create a map of the opportunity landscape. And then select the right table to play at based on the consideration of two factors: the opportunity potential at a specific table, and your competence in playing the game that is played at that table.

Is this all there is to the game of strategy making?  Put differently, now that the table has been selected, can the strategist/s hand over the baton to those who excel at execution-implementation: playing the game that is played at the chosen table?  For me the answer is “No”. Why?

I invite you to consider that what is so is always in flux: change/flow/becoming/birth-death-birth characterise the world in which we find ourselves. One of the central assertions of complexity science is that a small intervention at the right place at the right time can move a stable system over the change and into a radically different state. If you grasp this then you get that there is space to act, to shape the game so as to increase your likelihood of winning.

The Work of Strategy Includes The Work Involved in ‘Tilting The Table’

If the first part of strategy can be likened to ‘selecting the right table’, then I say the second and vital part of strategy involves the work that is involved in ’tilting the table’. What do I mean by ’tilting the table’?  I mean acting on the world – orchestrating the elements of a situation – so as to generate the desired outcome. Notice, here we are in the realms of implementation (execution).

So what levers are available to the strategist who seeks to ’tilt the table’?  Let’s answer that question by imagining a scenario. Let’s assume that as the strategist you have selected the digital table to play at. How might you go about ’tilting the table’ so as to increase the odds of success?  I can think of the following levers:

  1. Actions that destabilise the existing power structure in your organisation e.g. making people changes and shifting the balance of power between business units, functions, products etc;
  2. Actions you take to ‘de-stabilise’ your key competitor/s e.g. luring away their key people;
  3. Who you choose to lead the digital transformation programme;
  4. Governance structure and rules of engagement;
  5. Resources (money, people, information, tools) that you make available to the digital transformation programme;
  6. The timescale you set for the shift to digital to occur and the associated metrics for gauging movement along the digital path; and
  7. Actions you take to make the shift toward digital necessary and attractive e.g. making promotion dependent on digital skills-expertise-projects, and funding digital education-training.

You get the idea. The levers that you can identify are limited only by your imagination, your creativity.  And some will have more leverage than others.

As a strategist, is your work finished once you have done that which you can to ’tilt the table’ in favour of your team, your organisation?  It occurs to me that the answer, again, is no.

Strategy Involves An Ongoing Attunement-Adjustment to The Facts On The Ground

Given the dynamic nature of the world in which we live and in which the game of business is played out, it occurs to me that strategy making cannot be a one-off exercise.  It occurs to me that effective strategy, in a dynamic context, is alive. What do I mean by that?  What is the core characteristic of living organisms? They are attuned to their environment. Why? Because attainment is essential for timely adjustment to occur; adjustment promotes survival.

What does this mean for the strategist? Here are the words of Tony Hsieh in Delivering Happiness (bolding is mine):

Strategy

  • You need to adjust your style of play throughout the night as the dynamics of the game change. Be flexible.

Summing Up

I leave you with the following thought: the effective strategist is one who not only has experience of the arena but is in the arena where the game is being played.  And it is this involvement and mastery of the game, along with reflection and creativity, that allows him/her to be effective in strategising.  I get that this is unconventional.

Thanks for listening, I invite you to share your thoughts-experience on the matter.