The one difference that makes all the difference

The C-level doesn’t get it

In a recent post Jeannie Walters she highlighted the 4 challenges facing customer experience practitioners.  Which challenge is first in the list?  “The C-Level Doesn’t Get It”.  She goes on to write:

  • “In fact, an overarching (and repeating) lament was “How do I get them to GET IT?””
  • “No matter how you say it, it seems to be an ongoing, uphill battle right now.”

The difference between philosophy, strategy and tactics makes all the difference

Now that may not make sense until you get that there is world of difference between philosophy and strategy and tactics.  Philosophy is the ground zero of existence – it is your raison d’etre of being.  Strategy is simply a course of action that you have selected in order to achieve what matters to you – your higher order objectives.  Tactics are simply the how of strategy; tactics do not have to connect up to constitute a strategy and often they do not in many organisations when functions develop their own silo ‘strategies’ that optimise the parts and end up suboptimising the whole.

Now here is the issue: almost all companies have approached customer-centricity/customer experience/customer focus as a strategy (at best) and/or simply tactics to grow revenues and profits. Very few companies have embraced creating superior value for customers as their business philosophy – the reason for existence.  And that makes all the difference. The acid test for differentiating between philosophy and strategy is to look for the “in order to”.  Think of the early Christians who accepted being eaten by lions rather than renounce their faith: these Christians could have renounced their religion in order to live – the pragmatic business person would say that the sound strategy was to renounce the religion.  Starbucks ended up doing that for a while and then Shultz resumed the mantle of CEO to help Starbucks to rediscover its founding philosophy: the customer experience.

What we can learn from Steve Jobs and Apple on this distinction

The points that I want to make are excellently spelled out in a post by James Allworth.  Here are the aspects of his post that really speak to me and to the central point that I am making in this post (anything in bold is my work):

Everything — the business, the people — are subservient to the mission: building great products. And rather than listening to, or asking their customers what they wanted; Apple would solve problems customers didn’t know they had with products they didn’t even realize they wanted

When describing his period of exile from Apple — when John Sculley took over — Steve Jobs described one fundamental root cause of Apple’s problems. That was to let profitability outweigh passion: “My passion has been to build an enduring company where people were motivated to make great products. The products, not the profits, were the motivation. Sculley flipped these priorities to where the goal was to make money. It’s a subtle difference, but it ends up meaning everything.”

When he returned, Jobs completely upended the company. There were thousands of layoffs. Scores of products were killed stone dead. He knew the company had to make money to stay alive, but he transitioned the focus of Apple away from profits. Profit was viewed as necessary, but not sufficient, to justify everything Apple did.

An executive who worked at both Apple and Microsoft described the differences this way: “Microsoft tries to find pockets of unrealized revenue and then figures out what to make. Apple is just the opposite: It thinks of great products, then sells them. Prototypes and demos always come before spreadsheets.”

Similarly, Apple talks a lot about its great people. But make no mistake — they are there only in service of the mission.  A former Apple product manager described Apple’s attitude like this: “You have the privilege of working for the company that’s making the coolest products in the world. Shut up and do your job, and you might get to stay.”

Apple hasn’t optimized its organization to maximize profit. Instead, it has made the creation of value for customers its priority. When you do this, the fear of cannibalization or disruption of one’s self just melts away. In fact, when your mission is based around creating customer value, around creating great products, cannibalization and disruption aren’t “bad things” to be avoided. They’re things you actually strive for — because they let you improve the outcome for your customer.

A final word

The hardest thing for ‘experts’ and ‘Tops’ to do is to unlearn – to let go of the accepted wisdom and habits that have been forged over many years.  Yet that is exactly what is required today for companies in competitive markets to prosper.  And it is certainly required if companies want to excel at the Customer game – create superior value for customers through superior value propositions that make customers lives simpler, easier, richer.  Are professional managers up to that task?  Here is what James Allworth writes in his post:

“Anyone familiar with Professor Christensen’s work will quickly recognize the same causal mechanism at the heart of the Innovator’s Dilemma: the pursuit of profit. The best professional managers — doing all the right things and following all the best advice — lead their companies all the way to the top of their markets in that pursuit… only to fall straight off the edge of a cliff after getting there.”

What do you think?

Howard Schultz/Starbucks: 18 insights and lessons from a customer experience master

It is worth learning from the masters

You may have noticed that I am an avid student of all things customer.  Over the last few months I have been reading Onward by Howard Schultz and I have found it to be an insightful and inspiring read – I recommend you buy it and read it!

Perhaps, I love the book because it validates my point of view (bias) on customer-centricity and customer experience – as a philosophy rather than a strategy or simply tactics (I’ll get into that distinction in a follow up post).  For today I simply want to share with you some stuff in the book that resonated with me in the hope that you may find it useful too (any stuff in bold is my doing).

18 insights / lessons from Howard Schultz

“A well built brand is the culmination of intangibles that do not directly flow to the revenue or profitability of a company, but contribute to its texture. Forsaking them can take a subtle, collective toll.” (p23)

“I always say that Starbucks is at its best when we are creating enduring relationships and personal connections. It is the essence of our brand, but not simple to achieve. Many layers go into eliciting such an emotional response.  Starbucks is intensely personal.” (p23)

“Unlike other brands, Starbucks was not built through marketing and traditional advertising.  We succeed by creating and experience that comes to life, in large part, because of how we treat our people, how we treat our farmers, our customers, and how we give back to the communities.  Inside the company, there had always been an unspoken level of trust….” (p27)

“I suggested something to the group as the ideas began to percolate. “The only filters to our thinking should be: Will it make our people proud? Will it make the customer experience better? And will it enhance Starbucks in the minds and hearts of our customers?”” (p75)

In my head I knew that no silver bullet would transform Starbucks overnight, but in my heart I was on the lookout for a big idea – what would be the next Frappucino, the most successful new product in Starbucks’ history?” (p75)

“But there was an even more important reason that I chose to eliminate comps from our quarterly reporting. They were a dangerous enemy in the battle to transform the company…….The fruits of this comp effect could be seen in seemingly small details. Once I walked into a store and was appalled by the proliferation of stuffed animals for sale.  “What is this?”  I asked the store manager in frustration…..The manager didn’t blink. “They’re great for incremental sales and have a big gross margin.” This was the type of mentality that had become pervasive. And dangerous.” (p89)

“In any well run retail business, there is, by definition, a maniacal focus on details……..In 2008 I felt very strongly that many of us had lost our attention to the details of our business…..Like a doctor who measures a patient’s height and weight every year without checking blood pressure without checking blood pressure or heart rate, Starbucks was not diagnosing itself at a level of detail that would help ensure its long-term health….We thought in terms of millions of customers and thousands of stores instead of one customer, one partner and one coffee at a time. We forgot that “ones” add up.” (p97

Their instruction at this “seeing” exercise was to consider each retail experience not as a merchant or an operator, but from the point of view of the customer. What did they witness, smell and hear? What non-verbal cues enhanced the experience? ……That journey helped put our leaders back in customers’ shoes, providing an enlightening and for some emotional exercise that underscored how important it was to put the customer at the centre of every meeting and business decision.” (p107)

“Starbucks coffee is exceptional, yes, but emotional connection is our true value proposition.  This is a subtle concept, often too subtle for many businesspeople to replicate or cynics to appreciate. Where is emotion’s return on investment? they want to know. To me, the answer is clear: When partners like Sandie feel proud of our company – because of their trust in the company, because of our values, because of how they are treated, because of how they treat others, because of our ethical practices – they willingly elevate the experience of each other and customers, one cup at a time.” (p115)

I have always believed that innovation is about rethinking the nature of relationships, not just rethinking products and as Michael explained how Ideastorm was helping Dell listen to customers and improv its products and services…..Thee was definately something here for Starbucks.  A chance to reconnect with customers we had lost touch with.” (p120)

“..one of the most important pieces of advice I’d heard upon my return…….”Protect and preserve your core customers.”…..”The cost of losing your core customers and trying to get them back in a down economy will be much greater than the cost of investing in them and trying to keep them.“” (p129)

“Some corporations are built, or rebuilt, on data driven business plans and hired guns with formulaic strategies. They may succeed, but they lack soul.  Starbucks is, by its founding nature, different……..transformation was not only about tightening nuts and boltsIf we did not also feel, if we did not have conviction in our values and believe that we really were in the business of human connection – on our farms, in our offices, in our stores, in our communities – then we were doomed.  We had to preserve our humanity.” (p131)

“But what many or our people had in spirit they lacked in business acumen and tools…….We also observed too much waste…….Something subtler was being wasted: our people’s time and energy……The fault did not lie with our people in the stores.  They were doing the jobs they had been asked to do with the resources and training they’d been given.  For all the brand’s marketing success, Starbucks needed a more disciplined operations system…..” (p145)

Growth had been a carcinogen. When it became our primary operating principle, it diverted attention from revenue and cost saving opportunities, and we did not effectively manage expenses……..Then as consumers cut their spending, we faced a lethal combination – rising costs and sinking sales – which meant Starbucks economic model was no longer viable.” (p149)

“As I stared at the list of 600, a lesson resonated: Success is not sustainable if it’s defined by how big you become.  Large numbers that once captivated me – 40,000 stores – are not what matter. The only number that matters is “one”. One cup. One customer. One partner. One experience at a time. We had to get back to what mattered most.” (p152)

“Kristen summed up Lean’s benefit well: “We were spending too much of our time fixing moments , but not actually solving problems. But fixing moments, like mopping a dirty floor, only provides short-term satisfaction.  But take the time to understand the problem – like how to keep a floor from getting so dirty in the first place – solves, and maybe eliminates a problem for the long term.”” (p278)

“At it’s core, I believe leadership is about instilling confidence in others..” (p302)

“There are companies that operate huge global networks of retail stores, like us.  Others distribute their products on grocery shelves all over the world, like us.  And a few do an extraordinary job of building emotional connections with their customers, as we have learned to do.” (p311)

My recommendation

Buy the book – it is a great read and has lots of real world lessons and insights.  For most business people it is likely to be a challenge because Starbucks is Starbucks because it is not built on nor operates on conventional business wisdom and practices.

Why do only a handful of companies excel at cultivating customer loyalty?

The story state of Customer Experience

Dave Brocks latest post (selling disguised as relationship management) and Beyond Philosophy’s Global Customer Experience Management Survey (2011) which made the point that a lot of stuff that is not Customer Experience is being badged as Customer experience got me thinking about this sorry state: lots of talk, lots of people with the right titles, lots of spend on technology and yet the same old organisational behaviour.   Which begs the question: why it is that only a few companies truly excel at Customer Experience and customer-centricity?  Now I can list all the usual candidates: spaghetti like systems, silos, channel proliferation, organisational design, conflicting agendas & metrics and so forth.  That is exactly what I am not going to do because I believe that these are red herrings that are used to paper over what is so.  So let’s take a skeptical look at business and see if this sheds any light.

The smuggler, the border guard and the wheelbarrow

Every day a man turns up at the border with a wheelbarrow and some stuff in it.  Every day the border guard examines the stuff in the wheelbarrow convinced that the man is smuggling something.  Some days the stuff is clothes, other days footwear, sometime watches, sometime blankets yet none of the stuff in the wheelbarrow is contraband and so the border guard reluctantly allows the man across the border.  This goes on and on until the border guard retires.  Shortly after that the border guard and the man meet accidentally and the border guard asks him to say what he was smuggling.  The man replies “Wheelbarrows!”

Let’s stop for a moment and look at the whole customer stuff: customer satisfaction, customer focus, customer loyalty, customer relationship management, customer experience and customer-centricity. And ask the question: what is right in front of us that we are missing?  What is our ‘wheelbarrow’?

The name of the game is neither Customer Experience nor customer-centricity

Is it easy to do well in a truly competitive industry?  No, it is hard work.  What is the ideal scenario for every company in a competitive space?  To become the monopoly supplier.  Why is this appealing?  Because, you can dictate terms to the customers and they have to play ball.  When you are in that position you do not have to bother with all this nonsense about customer focus: customers are difficult, being customer focussed is hard work and besides it stops you from making monopolistic rents.  If you cannot have a pure monopoly then you can get something like it – and oligopoly.  This is where a small bunch of companies control the market: they sell similar products, at similar prices, in similar ways and have the same business models.  In effect, they ‘agree’ to carve up the market and the profits.  Often these industries have high barriers to entry and so there is no real competition: think banks, utilities, telecoms…….The last thing that any CEO, Board of Directors or shareholders want is a truly competitive market.  Why? Because you have to fight for customers and their wallet.  Which brings us to an important point.

What has changed is that the traditional means of attaining this outcome no longer work as well as they used to.   Originally there was control over valuable natural resources and distribution channels. Later, control of intellectual property and shaping the mind of the consumer through advertising, branding and PR. Since the rise of the internet the traditional means (resources, distribution, IP, advertising..) have not been working that well.  Just think of the disruptive power of the internet: you no longer need stores and all the capital that goes with that; your market is the whole world and you do not even have to setup a website – you can pitch your tent at ebay and sell to the whole world; and customers are awash with useful information that makes them better informed, smarter decision makers and more discriminating buyers.  This is why we have heard and read so much talk about targeted marketing, relationship marketing, permission marketing, personalisation, customer focus, customer service, customer experience, customer-centricity.

Does that mean that there has been a wholesale transformation of the heart (love of the customer) or of the head (change in worldview)?  I am think that there has been no such change.  The game is still the same: to orchestrate the levers of power to become monopolistic suppliers and thus extract monopolistic rents.   And if that is not possible then many businesses do the utmost to get the better of customers (too many option, complicated pricing, misleading advertising, dumbing down customer service etc) to maximise short term profits.  If it is the ‘age of the customer’ (IBM says it is) then we are talking about many businesses being dragged kicking and screaming into the ‘age of the customer’.  Many if not almost all would prefer the good old times when customers had no voice, no power and simply put up with what they were given.  Take a good look at the laggards (you know who they are) and you will notice that they still hold monopoly type positions, accrue monopolistic rents and continue to pay lip service to customer service and ‘the customer is king’.

If you see this then you can see the ‘wheelbarrow’ that is right in front of us and which we may have been missing: the vast majority of businesses want and strive to become monopolistic suppliers so that they can monopolistic rents without the hard work of being customer-centred.   If you accept this then you can understand that whilst the titles of changed from “Sales” to “Relationship Manager” the hidden objective is the same: sell more, increase “share of wallet”.   You can also understand why business process management, lean, cost-cutting via self-service technology, customer service, marketing etc  have all been rebadged as Customer Experience – changing labels is the easy part and Drayton Bird has an excellent/witty post on this.   Put differently, all the talk of customer focus, customer service, CRM, Social CRM, customer experience and customer-centricity is simply the bric-a-brac in the ‘wheelbarrow’ that prevents us from seeing the ‘wheelbarrow’ for what it is.   Any real form of customer-centricity (as opposed to the talk) is being brought on by new entrants to the battleground.  And by the power wielded by customers who now have the technologies and platforms to be better informed, make smarter decisions and make their voices heard

To excel at customer-centricity, Customer Experience and customer loyalty you have travel along the road less travelled

Which bring me back to my original question: why do only a handful of companies excel at cultivating customer loyalty?  Because by design or by accident the people who started these companies  operate from a customer centred paradigm and have built customer-centred business models, cultures and organisations.  And the leaders of these companies were willing to play the long term game.  How long did it take for Amazon to become profitable?  What about Zappos?   Is USAA simply a vehicle for churning out profits for shareholders or an organisation with a mission to service members of the armed forces?  Starbucks is a great example of a company that made it fortune by understanding customers human needs and delivering them (“the third place”)  and then got itself into trouble by forgetting this mission (and associated values, operating practices) and chasing growth and profitability targets set by the analysts.  Starbucks had to go back to the basics to connect with their customers and win them bac

Perhaps this handful of companies (Amazon, Starbucks, USAA, Zane Cycles, Zappos..) will provide the inspiration for authentic customer-centricity:  O2 (UK mobile telecoms operator who does not think of itself as that) is a company that has embraced customer-centricity with a fervour that is necessary to be an experience services brand and organisation.  In the process it has become the leader in the UK telecoms industry: brand, revenues, subscribers, profits. The recent Ofcom results show that “The least complained about mobile provider….was O2, with 0.02 complaints for every 1000 customers compared to 0.14 in the case of 3UK.”  This is remarkable when you consider that O2 was spun off from a former state monopoly BT in 2001.  And birth O2 was viewed as a second rate player in the telecoms market and some doubted its future prospects.  Maybe more executives will follow the lead of O2 and genuinely orient their companies around customer, customer experience and customer-centricity.

A final word

To excel at Customer Experience and customer-centricity you have to have an affinity for people as human beings.  I will go further and say that you have to connect with and care about your customers as human beings first and wallets second.  Going even further I’d say you have to love your customers and show them that you love them.  In my view this is and has always been the great (hidden) strength of Steve Jobs and Apple:  a deep affinity for the misfits, the rebels, the people out to create a more beautiful world.  If you can see merit in what I am saying then I recommend that you read the following insightful post by Pete Abilla: How to be human

What do you think?