Why your organisation is not customer-centric even if it is customer-centric

This is a long post and a philosophic one so you might be better off doing something else unless you have an avid interest in customer-centricity and getting to grips with it. Furthermore, you might not like what I share here. It may disturb you and you find yourself annoyed even angry at the nonsense I am speaking. You are warned, now let’s begin.

Cutting through the confusion/tiresome debate around customer-centricity

There is much speaking/writing/debating on customer-centricity. Listening/reading/taking part in this ‘conversation’ it occurs to me that there is so much confusion about customer-centricity and the term has either become discredited or will be if we carry on as we are carrying on. So I write this post to bring clarity and workability to customer-centricity.

It occurs to me that the confusion around customer-centricity arises as a result of two distinct ways of talking about/making sense of customer-centricity being collapsed into each other. It is because of these two distinctions that it is possible for an organisation to be customer-centric and ‘not customer-centric’ at the one and the same time. There are subtle nuances around these distinctions which provide more distinctions. For the sake of brevity I am only going to explore/share the two big distinctions and ‘uncollapse’ them.

Customer-centricity as means (vehicle to get you to your end destination)

As I understand it, the marketing literature that brought ‘customer-centricity’ into the mainstream is concerned with customer-centricity as a means – as a vehicle for attaining marketing objectives. The business literature followed so that when ‘business strategists’ talk about customer-centricity they are talking means of accomplishing business objectives. When these marketers, these strategists, talk about customer-centricity then they talk about the course of action that the business takes (strategy). And they talk about organisational design – the way that the business should be organised (structure, roles, KPIs, management information etc) around customer segments rather than products.

In a product-centric company management is concerned with finding ways of selling more products to whoever can be made to buy the products. And the measure of success at playing this game is market share. Furthermore, in a product centric company the company will be organised around products. Business unit A will focus on one category of products from manufacturing/sourcing through to selling/servicing. Business Unit B will focus on a different category of product. When it comes to information you will find that it easy to get hold of information on/around products. For example, you will be able, easily, to find out how much of a particular product was sold; you will not be able, without considerable effort, to find out which products a customer bought across the entire product range supplied by the company as a whole. Then there is understanding / insight: you are likely to find that there is a lot of understanding of products but understanding/insight regarding customers (the context of their lives, what matters to them, how they buy etc) will be shallow.

According to the theorists and consultants the management of a customer-centric company should be concerned with ‘share of wallet’ not market share. The organisation should be organised around customer segments. And the strategy should be concerned with generating deep insight into customers and using this insight to come up with products, services, solutions even experiences that get customers to buy more from the organisation whilst costing less to serve. This may mean sourcing/creating new products to meet newly identified unmet needs. Or it could mean coming up with better value propositions: re-jigging how and what you communicate so that these customers buy more from you. The theory goes that if you do this then your organisation will keep more of your customers and they will ‘recruit’ new customers for you through word of mouth marketing.

So this school of customer-centricity, customer-centricity as means to, is concerned with changing organisations from being product centric to customer-centric. Or from an ‘inside out’ orientation to an ‘outside in’ orientation. So the talk deals with formulating customer-centric strategies, changing/transforming the organisation, putting in CRM systems…….

Notice that when taking about customer-centricity as means there are no moral questions, no moral considerations. In this clearing one grapples with formulating the right strategy, the right organisational design, picking the right CRM systems and bring about the desired change.

Customer-centricity as ends (‘for the sake of which’)

This is where it gets interesting. It is possible and some people do talk about customer-centricity in terms of ends/purpose. You see it is possible and necessary to ask the question: why, for what purpose, are we going to all this effort to move from being product-centric to customer-centric, from ‘inside-out’ to ‘outside-in’? Heidegger came up with the distinction ‘ for the sake of which’, which I want to use. All this effort to be customer-centric (as means) what is it for the sake of?

Read the literature that is used to by theorists, consultants and technology vendors and you find your answer: for the sake of the profit motive, for the sake of making higher profits. So the fundamental centre of the game of business has not changed at all. The be all and end all of the game of business continues to be the profit motive: making the numbers to enrich shareholders. Just the means has changed. That is fine. And consistent with customer-centricity as means.

Now throw into the mix a very different bunch of people. People who have a different understanding and speaking of customer-centricity. These people say that for a company to count as customer-centric, it has to be run ‘for the sake of contributing to / enriching the lives of customers’. These people are not naive, they get that for a company to survive it has to be profitable and it has be concerned with making profit. And they argue that the key difference is that the profit motive is secondary: a requirement to play/stay in the game rather than the raison d’etre of being in and playing the game.

Look, you and I have to be concerned with food/eating yet that is not the reason we choose to live, that is not what our lives are about. Or consider Steve Jobs. Jobs claimed that he never did it for the money. He claimed that he was driven, obsessed with, creating products that he loved to use, his family friends loved to use, products that he could be proud. Yet, Jobs was enough of a pragmatist to know that Apple needed to be profitable. When he came back and took the helm at a bloated and almost bankrupt Apple, Job was ruthless in making tough decisions including cutting product lines, distribution channels and firing employees that did not meet the standards/requirements set by Jobs.

Where did it customer-centric as ‘for the sake of contributing to / enriching lives of customers’ originate? As far as I can tell there are two sources – the Scandinavian school of relationship marketing and the Services school coming out of the USA. I am thinking of the likes of Gronroos, Berry, Parasuraman, Heskett, Sasser, Zeithaml and Bitner. Read through this literature and you will come across moral values and considerations, including customers as ends in themselves and not just simply means, even if they are well disguised. Why disguised? I say because these guys were seeking to get traction and influence the powerful ‘hard’ types in business.

Why it is that your organisation is not customer-centric even if it is customer centric and how it explains the lack of authentic customer loyalty

By now you should get why it is that one person can say that an organisation is customer-centric and another person can say that this very same organisation is not customer-centric. And they can both be right, be speaking ‘truthfully’: one is talking about/pointing at customer-centricity as means and the other is speaking about /pointing at customer-centric as ends where the ends is for the sake of contributing to / enriching the lives of customers.

According to surveys, executives consider their companies to be customer-centric and yet few customers consider companies to be customer-centric. The executives are standing in the clearing customer-centricity as means and customers are standing in the clearing customer-centricity ‘for the sake of contributing to / enriching customer lives’. So is it any surprise that standing in two different spots they see very different views and come up with different answers?

I say that vast sums have been spent in the name of customer-centricity and they have not delivered the promised land. Why? because companies have continued to play the same game (the profit motive) and simply changed the means: customer-centricity as means. They are not at fault. They have been encouraged in following this path by legions of marketing theorists, business strategists, consultants and technology vendors. Yet, this path can never lead to the promised land. Why?

Because when the customer talks about a company being customer-centric he is talking about and pointing at a company that shows up for her as being in business ‘for the sake of contributing to / enriching the lives of customers’. And so few companies are playing this game.

Let me tell you a story

An angel disobeyed God (so goes a story by Tolstoy) and is punished – thrust naked into world, a churchyard of a small Russian village. A poor cobbler passing by, ignorant of the angels divine origin, saves him from freezing to death; gives him clothing, food and shelter; and keeps him on as an apprentice. Several years pass.

Then one day this fallen angel smiles in such a way that his face radiates an extraordinarily dazzling light. The cobbler begins to wonder about his guests origins and asks him why such a radiant light shines about him. The angel then reveals himself for what he is, explaining that the only way he will be able to go back to Heaven is to learn what people live by.

He says that his understanding had begun when – having turned into a man – he was rescued from freezing in the churchyard. Now, continues the angel, he has finally realised that human beings cannot live each for himself, that they are necessary to one another, and that love is what they live by.

And finally

As customers we may not want relationships with companies, with businesses. Yet we can tell when we are loved. When it occurs to us that a company, an organisation, loves us then we cannot help but form a bond, an attachment with that company. When I think of such bonds of attachment I think of USAA. It occurs to me that this company does exist for the sake of contributing to and enriching the lives of its customers – military personnel and their loved ones. Clearly customers ‘feel the love’ and reward USAA with their loyalty. Which may explain why USAA is the leader/the exemplar of customer loyalty in the categories it operates.

Do you love your customers? Do you love your customers like USAA does? Or do you love the profit motive and fake love for your customers?

Extreme Trust: can honesty be a means of competitive advantage? (part 1)

I enjoy reading what Don Peppers and Martha Rogers write.  In fact their point of view spoke to me in such a way that it called me to join up and become a part of  The Peppers & Rogers Group, for a while, back in 2000.  Don and Martha have published a new book Extreme Trust.  In this series of posts on trust I am going to share with you, comment upon and explore topics that are addressed by Don and Martha in their book.

Does trust matter?

Why don’t you take the salesman at his word and buy what he is selling you?  Because you have learnt that what is in the interests of the salesman, to make a sale and take our money, is not necessarily in your interest.  Why don’t you accept the advertising put out by companies?  Because you have learnt that advertising, as a whole, is not truthful – you know that it has been designed carefully, purposefully, to push your buttons so that you buy.  Put differently you simply don’t trust the advertising.

Trust matters.  Why?  Because our lives are tied up with each other.  Heidegger pointed out that the fundamental being of human being is being-in-the-world – we are not spectators in the stands, we are right there in the midst the world.  Who is there right with us and an essential component of the world?  Our fellow human beings!  Our experience of living and how our lives turn out depends on how we conceive of one another (selfish, co-operative, selfless) and how we treat each other (help one another, look out for one another, indifferent towards one another, exploit one another).  Whether we trust one another or not matters, what we trust another with or not matters, who we trust and who we do not trust matters.

How will you compete against the likes of USAA?

Don and Martha start Extreme Trust by sharing a great story and asking a powerful question that gets to the heart of the matter. Let’s start with the story. It is about USAA a financial service company that consistently comes out as the most trusted financial services organisation in the USA.  The culture at USAA if based on a single yet profoundly powerful statement: treat the customer the way that you’d want to be treated if you were the customer.

After the first Gulf War (1991) USAA  sent out refund checks to several thousand “members” (customers).  Why?  USAA figured out that men and women (armed forces) serving overseas weren’t driving their cars in the USA, suspended the premiums for those months, and sent out unsolicited refund cheques when these men and women got back to the USA.  USAA did not have to do this and no-one asked them to do it.  How did this turn out?  Nearly 2,500 of these refund cheques were sent back to USAA by grateful customers who told USAA to keep the money and simply be there “when we need you.”

Now, here is the question that Don and Martha pose: “How will you compete against a financial services institution that customers love so much they sometimes refuse to accept refunds and are loyal into the third generation and counting?”

What makes USAA (and other companies like USSA) so different from competitors?

I have repeatedly asserted that most of what passes for customer-centricity is simply a sham.  Specifically, the philosophical base, the moral grounding, the fellow feeling, that is necessary for customer-centricity to show up as customer-centric, in the eyes of the customer as a moral being is absent.  This is what Don and Martha say on the matter:

“Most businesses and other organisations operating today think that they’re already customer-centric and they are basically trustworthy, even though their customers would disagree……. Being “trustworthy” is certainly better than being untrustworthy, but soon even “trustworthiness” won’t be sufficient. Instead companies will have to be trustable.

..trustability is a higher standard still.  Rather than working to maintain honest prices and reasonable service, in the near future companies will have to go out of their way to protect each customer’s interest proactively, taking extra steps when necessary to ensure that a customer doesn’t make a mistake, or overlook some benefit or service, or fail to do nor not do something that would have been better for the customer”

In short, USAA and companies like USAA (Amazon, Zappos, Apple, Google…) are trustable and as such they practice are built on the three pillars of trustability.

The three pillars of trustability

According to Don and Martha (in Extreme Trust) the three pillars (they use the term ‘principles’) of trustability are:

Do the right thing.  Essentially this is about the distinction between ‘good profits’ v ‘bad profits’.  Doing the right thing involves giving up practices (like exploiting customers) that generate ‘bad profits’.  And it involves coming up with a business model that generates ‘good profits’ by creating genuine value for customers by aligning with the needs and interests of customers and getting a fair return in exchange. Doing the right thing lies in the realm of leadership and strategy.

Do things right.  This is all about operations and operational excellence.  It is about the domain of management and concerns itself with functions, processes and details so that you make it easy for your customers to do business with you across the entire customer journey and generate the right kind of customer experience at each touchpoint that matters.

Proactively.  In Don and Martha’s words “Knowing that a customer’s interests is not being well served and doing nothing about it is untrustable.  Not knowing is incompetent…. A company might be scrupulous in its ethics, completely honest in its brand messaging, and highly involved in tracking its customer satisfaction, but will it be proactively watching out for its customers interests?  If it wants to succeed in the age of transparency, yes.

What gets in the way of being a “trustable” enterprise?

Why aren’t more companies, even most companies, like USAA, Apple, Amazon, Zappos and the like?   This is a domain I have tackled several times and I say it is addiction to ‘bad profits’.  What do Don and Martha say?

“The fact is that far too many businesses still generate substantial profits by fooling customers, or by taking advantage of customer mistakes or lack of knowledge, or simply by not telling customers what they need to know to make an informed decision.”

Why become a “trustable” enterprise?

Don and Martha are clear that companies don’t have a choice – the tide has turned, customers have the power, and by wielding this power customers will force companies to become “trustable” or die.  This is how they put it:

“.. lots of traditional, widely accepted, and perfectly legal business practices just can’t be trusted by customers and will soon become extinct, driven to dust by rising levels of transparency, increasing consumer demand for fair treatment, and competitive pressure…… Things that companies, governments, and other organisations never meant for people to know they will know.”

“Transparency will increase because of technological progress, and progress is inevitable.  It cannot be avoided or slowed down.….. As important as our social nature is.. social media and other interactive technologies have injected it with steroids.”

What is my take on this?

My thinking and philosophical orientation is in line with that being shared by Don and Martha in their new book Extreme Trust.  As such it is no surprise to me that I am enjoying reading it.  Nonetheless, there are areas in which I find that I am not in agreement with Don and Martha.  They make the distinction between “trustworthy” and “trustable” and in my world that occurs as contrived.

In my world you are either pregnant or you are not pregnant you cannot be half pregnant.  In my world, either I can trust you because I know that your care for me and are looking after my interest or I know that I cannot trust you.  In my world most companies do not merit my trust – I, the customer, simply show up as a wallet to be emptied.  And then there are companies that I do trust because they have done the right thing.  How does the right thing show up as the right thing in my world?  When the company takes a course of action that leaves me better off and it costs the company money. When I hear about what the company is doing to contribute to a ‘good world’.  When I hear about the postive experiences of other customers.

I am 100% in agreement with the power of transparency.  The potential for the kind of disruptive change that Don and Martha are speaking about lies in us wielding technologies that unconceal that which has been concealed from us.  Great example in the UK are the MPs scandal.  Once UK politicians used to lecture the world on honesty, moral uprightness and look down on less developed countries on the account of their corruption.  For many years the UK politicans got away with being corrupt and then the bubble burst.  UK politicians are not in a place to lecture anyone.  Another example is Rupert Murdoch and the News of the World phone hacking scandal.  For many years Rupert, some would claim, was the Kingmaker and pretty much got what he wanted.   He even got the Conservatives to hand him BSkyB on a plate.  Then came the disclosure that a dead girls phone was hacked and the moral revulsion of the ordinary folks forced a public enquiry on a reluctant prime minister, the closure of a newspaper and the abandonment of the BSkyB takeover.

In the next post in this series I will share more of what I learn as I progress reading through Extreme Trust.  I will conclude the series of posts with a review of the book as a whole so that you can decide if you want to read it for yourself.

Is eliminating the bargaining power of customers more important than working on the Customer Experience?

Listening to the Steve Jobs biography by Walter Isaacson I am left with the impression that nothing was more important to Steve Jobs then using technology to produce great products that delivered a great user experience.  Good enough was good enough, even great, for many in the computer industry.  Only insanely great was good enough for Steve Jobs.  Anything less was simply not good enough, it was not ‘art’ and not ‘worthy of artists”; great artists don’t want to put their names on good enough art.

Given that Apple, Amazon, Zappos, USAA, SouthWest Airlines, Zanes Cycles, Richer Sounds, Salesforce.com, O2, American Express.. have shown what can be done by focussing on the customer, why aren’t companies focussing on the Customer Experience?  According to Mindshare the biggest issue with companies and executives is turning VoC into changes in the business such that a powerful impact is made on the Customer Experience.  Why is it an issue?  Because of ‘Other Priorities’.  What can these other priorities be?

Clearly THE priority is the share price and the way to hit that is to focus in revenue generation and profitability.  How do you increase that?  The standard framework is that put forth by Michael Porter in the Five Forces model.  According to this model, the companies that do well are the ones that:

  • Reduce/eliminate the bargaining power of customers”;
  • Reduce/eliminate the bargaining power of suppliers;
  • Reduce/eliminate the threat of new entrants;
  • Reduce/eliminate threat of substitute ‘products’; and
  • Reduce/eliminate competition by ‘taking out’ competitors

Do you notice what is implied in this framework?  Do you notice that the assumption is that the company and the customer are in competition?  The aim is to reduce the bargaining power of the customers.   It occurs to me that the Tops are not sitting there fretting over customer and the Customer Experience.  It occurs to me that they are sitting there figuring out how to outmanoeuvre customers, suppliers, competitors and regulators.

The financial crisis, the BP Gulf of Mexico oil spill and the phone hacking scandal (in the UK) have shown that regulators are easy to ‘buy’/outmanoeuvre.  That leaves customers, suppliers and competitors.  Isn’t the best way outmaneuvering customers to set up barriers to entry (patents, ‘buying off’ regulators, buying/holding key assets…), buy up/share the market with the competition and creating a difference where no difference exists through advertising and PR?

As I was mulling this over  the folks at The Simple Dollar emailed me this graphic about how AT&T and Verizon are doing extremely well due to the duopoly that they have created and maintain.  I can’t help but think that to arrive at this place is business nirvana for just about every CEO and his band of merry men (the Board of Directors)!

Digging into ‘customer-centricity’: what is the defining feature of a ‘customer-centric’ company?

My last post (a practical enquiry into service, customer experience and customer-centricity) generated some interesting conversations.  A particularly interesting conversation took place between Bob Thompson and me – you need to scroll towards the bottom and read the comments.  In this post I want to address the key question that Bob raised:

Customer-centricity is at least as vague a term as CRM and CEM. Is it a strategy? A state of mind? A loyal relationship?   Personally, I’ve defined “being customer-centric” as delivering value that customers care about. The end results should be more loyal customers.  But it’s not quite that simple. How do we explain the success of Ryanair, which offers a low-cost service, gets lots of travelers and makes money, but can hardly be said to have raving fans?

If you have looked into that conversation between Bob and myself you will see that I addressed the Ryanair issue.  So what I up for addressing is the question: what clues can you look for that helps you to distinguish a ‘customer-centric’ from a ‘not customer-centric’ company?

Is listening / responsiveness the distinguishing feature?

In this post Bob Thompson asserts that Starbuck is customer-centric because it listened to him.  Bob had an issues with his local Starbucks: “we started noticing that about 30 minutes before the store officially closed, employees brought the tables and chairs from outside and piled them up inside the store. Frankly, it made the store look like “we’re closing” and customers weren’t welcome.” So Bob wrote an email to Starbucks pointing out the issue, he got a response within 24 hours letting him know that the matter would be discussed with the store manager.  And then Starbucks acted on Bob’s email request: “Not only did Starbucks listen, they did something. Fast!  That evening, and all the evenings since then (I checked) the tables and chairs were left outside until closing. And what do you know, there were customers actually using them!

So my question is that if a company makes it easy for you to contact it, responds quickly to your contact and then sorts out your issue / gives you what you are asking for (like Starbucks did with Bob) does that make that company customer-centric?  From where I stand and view customer-centricity the answer is NO.  Why?

Think back to my last post and in particular the issue that arose between the customer and Joe the bartender. Joe acting in the best interests of the customer (including the customer’s wife and three children) refused to serve more alcohol to the customer.  The customer had an issue with this, he reached out to the company, the company gave Joe (the bartender) a telling off, fixed the issue and compensated the customer for his trouble by giving him two free drinks.  What was the end result?  The customer got heavily drunk, drove home, had a crash and died – taking three other people with him.

Purpose-Vision-Mission statements – do these help us distinguish a ‘customer-centric’ company from a ‘not customer-centric’ company?

When you read the following vision/mission statements I’d like you to be present to what emotions they evoke in you as well as what thoughts bubble up for you.   Let’s start:

Ryanair:  “Ryanair’s objective is to firmly establish itself as Europe’s leading low-fares scheduled passenger airline through continued improvements and expanded offerings of its low-fares service. Ryanair aims to offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost-containment and operating efficiencies.”

Yahoo!:  “Yahoo!’s mission is to be the most essential global Internet service for consumers and businesses.”

Microsoft:  “Microsoft’s mission is to enable people and businesses throughout the world to realize their full potential.”

Dell:  “Dell’s mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve.”

OK, now lets move on to a second set of companies.  As you read these mission statements please be present to how these land for you – what feelings and thoughts do these evoke for you?

Chick-fil-A:  “Chick -fil-A’s corporate purpose statement reveals the heart of our company: “To glorify God by being a faithful steward of all that is entrusted to us and to have a positive influence on all who come in contact with Chick-fil-A.” Chick-fil-A’s mission statement reveals our commitment to service: “To be American’s best quick-service restaurant.”

Southwest Airlines:  “The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.”

Amazon: “Our vision is to be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.”

USAA: “To facilitate the financial security of its members, associates and their families through provision of a full range of highly competitive financial products and services; in so doing, USAA seeks to be the provider of choice for the military community.”

Starbucks:  “Our mission: to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time.”

Virgin Atlantic: “At Virgin Atlantic, our mission statement is simple…To grow a profitable airline…Where people love to fly…And where people love to work.”

Did you notice the key differences?

Customer-centric companies are in a totally different league when it comes to the game that they are playing.  Did you notice that their mission statements:

1.  start with / draw attention to customers, what jobs they will do for their customers, what value they will create, how they will treat their customers?

2.  speak words that speak to human beings in terms of their ‘concerns’ as human beings: ‘glorify’,’ faithful’, ‘positive influence’, ‘service’, ‘warmth’, ‘friendliness’, ‘pride’, ‘spirit’, ‘dedication’, ‘member’s, ‘worthwhile satisfying employment’,’discover’, ‘financial security’, ‘competitive products’, ‘families’, ‘nurture’, ‘human spirit’, ‘love’, ‘people’..?

3.  are concrete, meaningful and even inspiring to customers (and employees) whereas the mission statements of the ‘not customer-centric’ companies are vague, amorphous, general and generally meaningless and uninspiring?

Customer-Centricity: being of service, enriching lives and contributing to a better world

From where I stand I am clear that the key characteristic that characterise and distinguish a ‘customer-centric’ company from a ‘not customer-centric company’ is that the ‘customer-centric’ company is playing a totally difference game.

The ‘not customer-centric’ companies (including those that espouse customer-centric rhetoric) see customers as tools, as instruments, as means for enriching the Tops and the the people who represent the shareholders. And within that context there is no consideration of the longer term, stewardship of the world that we live in, the dignity of our fellow human beings.  Anything goes as long as ‘rent’ is extracted from customers to line the pockets of the Tops and shareholders.

Under the rhetoric of ‘customer focus, customer experience, customer-centricity, customer obsession’ is the urgency to sell, sell, sell the products that the companies has to sell.  The customer rhetoric is there only because it has become hard to sell because customers are more demanding, more discriminating and their is a high level of competition. The whole edifice is built on fear, greed and the “I-It” orientation towards customers, employees, suppliers, partners, communities in which these companies operate.  In short, this is business as usual – the standard economic/industrial/organisation model that is in place today and accepted as best practice, the smart way to do business.

The ‘customer-centric’ companies are primarily coming from a context of being of service, of contributing to our fellow humans, of making a genuine and worthwhile difference to the lives of the people who touch and are touched by the company- customer-centric companies live a “I-Thou” orientation.   The Tops who founded and/or are running these companies get the importance of making profits.  Yet, that is not the purpose nor the mission of these companies.  To ‘customer-centric’ companies profits are like the air that we breathe necessary to survive and profits are the reward that customers/employees bestow on the company for the service that the company has rendered.  Profits are marker of the level of contribution they make.  And profits are the grain that can be stored today for when the ‘seven years of famine’ strike.

A warning or two

First warning: ‘customer-centricity’ does not necessarily guarantee financial success.  Customer-centric businesses can and do go out of business – all that is needed is a disruptive innovation.

Second warning:  you actually have to live up to the ‘customer-centric’ mission statement to be viewed as being ‘customer-centric’ by your employees and customers.  Starbucks espoused the mission but took all manner of actions that did not fit in with the mission to grow revenues and profits to meet shareholder expectations.  It got into a mess and the man who had formulated, fought for and lived the mission statement (Howard Schultz) had to come back, take over and turn around Starbucks – get the people in the business connected with and living the mission wholeheartedly.  Today, Tesco is where Starbucks was at.  It espouses a fine mission – “Our core purpose is, ‘To create value for customers to earn their lifetime loyalty’. We deliver this through our values, ‘No-one tries harder for customers’, and ‘Treat people how we like to be treated” – and it failed to live up to it for several years and is now paying the price.

Do you know the difference between a good strategy and a bad strategy? (Part I)

“All too much of what is put forward as strategy is not.  The basic problem is confusion between strategy and strategic goals.” Richard Rumelt

So much talk about strategy and so little understanding of what it is, what it involves, and the difference between a good strategy and a bad strategy.  You can call me a little touchy (or a lot touchy) when it comes to strategy and strategy making.  I encountered strategy only after being heavily involved in the operational stuff – getting my hands dirty making the ‘trains run on time’.  Being new to strategy I made the time and put in the effort (lots of it) to study  strategy and strategy making.  I do wish more people would do the same then we would not have tons of rubbish being written on strategy by people.  Yes, this paragraph is a rant.  Now lets move forward and doing something constructive: learn the difference between good strategy and bad strategy.  If you don’t care then I suggest you stop reading right now.

What Paul Hagen of Forrester says on strategy

As you might have noticed (if you follow me on Twitter) I make time to keep up with the domains that impact the Customer.  During the course of this process I came across a post on the 1to1 Blog by Paul Hagen (“principal analyst, Forrester Research, serving Customer Experience professionals”). Step 2 – Define key of a strategy – got my interest, here it is:

2) Define key elements of a strategy. There are many different kinds of experiences that companies can deliver…all of which are valid. Witness USAA and Costco, both of which score high marks on Forrester’s Customer Experience Index. A strategy should provide a vision for the kind of experience to deliver, derived from a core value proposition inherent in a company strategy and key attributes of the brand promise that are most meaningful to customers. This “intended experience” should provide guidance about the kinds of activities the company can start (and stop) doing to achieve the end-state. The strategy also needs to articulate the company’s aim for how good the experience should be…does the firm seek to be the best in its own industry or across all industries, or is it merely trying to maintain parity with other firms? This will guide the kind of resources that the firm may need to dedicate to reaching this objective.

Design the Customer Experience to be in alignment with the Value Proposition

I am in total agreement with the first sentence of Paul’s statement.  What he is saying is that there is no such thing as a homogenous customer experience.  The customer experience that you design and deliver has to be in alignment with the value proposition that you have communicated to your customers. This is why, in the model below which I developed and use, the Value Proposition feeds into the Customer Experience; the third pillar is Customer Insight – it feeds the creation/refinement of the Value Proposition and the Customer Experience. 

The sequence goes like this.  Generate insight into customers (Customer Insight).  Use this insight to craft a Value Proposition that a customer/market segment finds attractive enough to sign-up for.  And deliver a Customer Experience that is in alignment with the promise (implicit, explicit) made through the Value Proposition.  Do that and you have happy, even delighted, customers – which is why both USAA and CostCo can score high marks even though the Value Propositions and associated Customer Experience is radically different.

So far Paul and I are in agreement.

Does anyone understand what a real strategy is?

Then he goes on and ruins it for me:

He writes “A strategy should provide a vision for the kind of experience to deliver, derived from a core value proposition inherent in a company strategy and key attributes of the brand promise that are most meaningful to customers……”  Hello, anyone at home?  A vision is a vision – it is picture of the ‘future’ that you want to bring about.  So, I might have a vision of living in Rio and spending my days surrounded by Brazilian beauties, soaking up the sunshine, waited hand and foot, swimming in clear blue waters…. A vision is not a strategy and a strategy does not include a vision.

He continues with “The strategy also needs to articulate the company’s aim for how good the experience should be…does the firm seek to be the best in its own industry or across all industries, or is it merely trying to maintain parity with other firms? This will guide the kind of resources that the firm may need to dedicate to reaching this objective.”  Now that sounds awfully like objective setting to me.  Maybe I am a little simple and being simple, in my world objectives are objectives and they in turn drive the formulation of the strategy.  Continuing with my analogy, if my objective is to be waited hand and foot on the beautiful beaches of Rio, all my needs catered for, then I have to formulate a strategy that allows me to get hold of the money/power that I need to realise my objective.  Notice that the objective comes first.

Continuing with my Brazilian (Rio) analogy, let me ask the question: “Why do I need a strategy?” Perhaps the challenge is that I live in the UK, I am penniless and I do not have a passport.  Now if that is so then I need a strategy that addresses these challenges – the challenges that prevent me from being in Rio surrounded by Brazilian beauties and being waited on hand and foot.  Let’s continue and explore this further.

What are we talking about when we talk about strategy?

The issue at hand is that ‘strategy’ has becoming a meaningless phrase bandied about by all of us (including myself) to mean anything that we want it to mean.  In my simplest way of thinking, one needs a strategy in order to outwit intelligent opponents and/or address an important challenge which if not faced ‘promises’ an exit from the game of business.  Does that sound like Kodak to you?  Which is why monopolists who control valuable resources, that people cannot easily do without, do not need to formulate a strategy: they just have to make sure that they continue to be the monopoly supplier.

The components that feed into and drive the strategy making process include: Challenge (the pain that requires a strategy to be developed); Vision (the future state that you wish to create / bring about); Objectives (the specific, measurable, outcomes that you want); Resources (what resources are ready at hand); and Constraints (these can take many forms political, legal, technological, values that cannot be sacrificed….).  If you want a deeper understanding of strategy and strategy making then read this post.

What are the hallmarks of a bad strategy?

Richard Rumelt has written one of the best books (Good Strategy Bad Strategy) I have read on strategy (and I have ready many of them).  He says that there are 4 hallmarks that we can look out for when detect a bad strategy.  Can you guess what they are? Here are the 4 the hallmarks:

Fluff/  Fluff is gibberish that masquerades as strategic concepts and arguments .  It uses “Sunday” words  (words that are abstruse / inflated)  and esoteric (I call them ambiguous, unnecessarily complex) concepts that create the illusion of high-level thinking.

Failure to face the challenge. Bad strategy fails to recognise and clearly set-out the challenge.  Richard points out that if you fail to clearly set-out the challenge (in concrete terms) one cannot evaluate a strategy or improve it.

Mistaking goals for strategy.  Richard says that many strategies are just statements of desire (the vision) rather than plans for overcoming obstacles and addressing the challenge.

Bad strategic objectives.  Strategic objectives are bad when they fail to address critical issues or when they are impracticable.

I will go into these in more detail in forthcoming posts.  In the meantime I wish to leave you with the following statement by Richard Rumelt which, in my view, goes to the heart of the matter:  “All too much of what is put forward as strategy is not.  The basic problem is confusion between strategy and strategic goals.” Do you think Paul Hagen has fallen into the same trap?

How to cultivate strong customer relationships: focus on the “sliding door” moments and ATTUNE

Don and Martha say practice the Golden Rule

In their latest post – “Empathy, Self-Interest and Economics” – Don Peppers and Martha Rogers spell out the importance of the Golden rule.  They point out that at a behavioural level only psychopaths conform to the view of human nature taken by neo-classical economics.  To business leaders they say:

“Companies that want to earn their customers’ trust have to be willing to act in their customers’ interest—sometimes even when the customers’ interest conflicts with their own (at least in the short term). This is why i-Tunes will remind you that you already own a song you are about to purchase, for instance. And it’s why USAA won’t sell you more insurance than you really need, even if you mistakenly ask to do so.”

“The point is that having empathy for others is a critical part of human nature, and if you want your business to succeed, then you have to show empathy for customers, also. That means treating a customer the way you’d want to be treated yourself, if you were that customer.”

Is the UK utility industry listening to Don and Martha?

It doesn’t look like the Tops in utilities industry in the UK are listening to Don and Martha.  Npower has been slapped with a £2m fine by the regulator Ofgem.  Why? According to Marketing Week:

“Ofgem says Npower failed to record all details of the complaints it received and did not put in adequate processes to deal with complaints. It was also accused of not giving dissatisfied customers enough information about the Energy Ombudman’s redress service.”

Now you might be tempted to think that this is a one-off, an aberration.   Well British Gas (the major player) was fined £2.5m back in July.  Why?  Well in the words of Marketing Week:

“Ofgem’s investigation found that British Gas had failed to re-open complaints when the customer reported and unsatisfactory resolution; failed to provide customers with key details about the service provided by the Energy Ombudsman and failed to put in place adequate processes and practices for dealing with complaints from small businesses.”

And Marketing Week goes on to write EDF Energy is also currently under investigation from Ofgem over the way it handles its complaints.”

So where are we at?  Two of the six big players that dominate the gas and electricity market have been fined for mishandling customer complaints and a third player (EDF) is under investigation for the same offence.  What does Npower have to say:

“A small number of processes were not correctly adhered to. Ofgem is now satisfied that all problems have been rectified and we are fully compliant with our obligations to our customers. We have zero tolerance for this type of issue and we’ll continue to work hard to make sure our customers are put first.”

I don’t know about you but to me that sounds like a load of bull: if Npower really did have a zero tolerance for this type of issue then it would have made sure that an effective complaints management process, team, system was in place.   When you lookmore deeply at the industry you see that the structure has been designed to extract profits at the expense of customers: complex pricing, too many confusing tariffs, bills that are difficult to understand……

Making the customer relationship work: what we can learn from John Gottman

I you do operate in a competitive industry then you might be able to learn from the research of John Gottman – he is been studying what makes marriages work (or not) for over 40 years.  In a recent article he sets out the key things that he has learnt:

“What I found was that the number one most important issue that came up to these couples was trust and betrayal. I started to see their conflicts like a fan opening up, and every region of the fan was a different area of trust. Can I trust you to be there and listen to me when I’m upset? Can I trust you to choose me over your mother, over your friends? Can I trust you to work for our family? To not take drugs? Can I trust you to not cheat on me and be sexually faithful? Can I trust you to respect me? To help with things in the house? To really be involved with our children?”

“.zero-sum game.” You’ve probably all heard of the concept. It’s the idea that in an interaction, there’s a winner and a loser. And by looking at ratings like this, I came to define a “betrayal metric”: It’s the extent to which an interaction is a zero-sum game, where your partner’s gain is your loss.”

“But how do you build trust? What I’ve found through research is that trust is built in very small moments, which I call “sliding door” moments, after the movie Sliding Doors. In any interaction, there is a possibility of connecting with your partner or turning away from your partner.

In his article John provides a good illustration of such a sliding door moment when he saw the sadness on his wife’s face.  Here is what he says about that:

“I had a choice. I could sneak out of the bathroom and think, “I don’t want to deal with her sadness tonight, I want to read my novel.” But instead, because I’m a sensitive researcher of relationships, I decided to go into the bathroom. I took the brush from her hair and asked, “What’s the matter, baby?” And she told me why she was sad.  Now, at that moment, I was building trust; I was there for her. I was connecting with her rather than choosing to think only about what I wanted. These are the moments, we’ve discovered, that build trust.”

ATTUNE: how you cultivate trust and build strong relationships

John Gottman’s graduate student has taken their work on trust and broken it down into the idea of being in attuenment and has come up with an acronym (ATTUNE).  If I replace “partner” with “customer” we have:

  • Awareness of your customers’s emotion;
  • Turning toward the emotion;
  • Tolerance of two different viewpoints – yours and your customer’s;
  • trying to Understanding your customer – to look at the situation through his/her eyes;
  • Non-defensive responses to your customer;
  • and responding with Empathy.

My take on this

How you handle a complaint from a customer is a “sliding door” moment.  It is also a great opportunity to practice ATTUNE as complaints are high emotion events that you can use to build or rupture emotional connection.  Given that is so I continue to be surprised at how few companies do well in the complaints process.  If Npower and British Gas had taken such an approach (call it a customer friendly approach) to the complaints made by their customers then they could have: gotten insights into customer needs; learned where their business practices were failing customers; built a better relationship with customers; and avoided a fine.

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?