If It Weren’t for Those Pesky Customers, Mr. Dell

June 29, 2010

In the NYT’s article this week about Dell’s recent decline, what struck me most was how far Dell had strayed from its original obsession with customers.  My sense had always been that Dell’s  low-cost fanaticism was in many ways similar to Wal-Mart’s — their mission was to deliver the absolutely lowest prices, so they were willing to work like crazy, and perhaps even torment their suppliers to get there.

But the details in this article, including a cover-up of faulty motherboards and evasive maneuvering with customers, is completely at odds with that genesis.  If true — and the article makes a pretty compelling case — then Dell would be following in a long tradition of organizations that stumble when they start to view customers as obstacles to their own corporate performance.

Dell became Dell for its operational excellence in the service of customers.  The company ushered in a whole new way of serving by delivering variety, speed, and prices that had never before been seen in its industry.  It was truly revolutionary.  And truly focused on end users.  But something different, and not that uncommon, seems to have happened in recent years:  Dell began to find itself more interesting than its customers.

It’s as if companies like Dell wake up one day, excited and surprised by what they’ve become, and start suffering from the self-distraction of a teenager.  They’ve gone from boy to man, and it’s heady stuff.  And the media fawning and magazine covers make it that much more difficult to resist themselves.  Along the way they seem to forget that what made them great was their customers.  In Dell’s case, it was the relentless and creative focus on finding better ways to serve them.

But like a nagging parent, Dell’s customers were eventually treated like a drag on the company’s bright, shiny future.  My advice to Dell management — and to any other company on a similar ride — is to have some respect, remember where you came from and make customers the center of your universe again.  The correction shouldn’t be that hard for Dell.  Looking up to customers is in their corporate genes.


The Beginning of the End at AT&T

May 24, 2010

In an incredible announcement, AT&T declared that it will be raising its termination fee for iPhones and a few other devices from $175 to $325.  The company offers some explanatory chatter about handset subsidies, but the real message it’s sending is that it’s simply done trying to win over customers.  Rather than keeping us the old fashioned way, by creating and sustaining real value, AT&T is now just charging us a ransom to leave.  Imagine an AT&T that was truly confident in its ability to serve? How would it behave in the marketplace?  It would invite customers to stay only as long as we’re satisfied — and not a cell-phone minute longer.

I find this decision scandalous, particularly since I’m already a frustrated AT&T customer (I can barely make it through a phone call without it being dropped).  When a company moves towards trapping customers, the clock starts ticking on its ability to serve them.  Penalties for ending the relationship create sharp antagonism with customers — antagonism that’s disproportionately felt by front-line workers — and signals to the entire organization to forget about excellence.

This toxic combination ensures mediocrity and accelerates a company’s decline.  I get it.  Winning the cell phone game is hard, and the people behind the idea likely had the best interests of the company in mind.  But when you broadcast that you can’t convince customers to voluntarily stick around, everyone hears you loud and clear, including your employees.  Who would keep trying in a culture like this?

Sigh.  This is a sad day for AT&T.


Imagining the Future of Leadership

May 14, 2010

HBS Publishing is now hosting a blog called Imagining the Future of Leadership, which includes a six-week series on how leadership might look in the future.  This week’s focus:  leaders for the future, where I posted on Suze Orman: Defying the Standards/Empathy Tradeoff.


Organizational Insecurity

May 2, 2010

I was intrigued by a recent NYT interview with Omar Hamoui, founder and chief executive of the mobile advertising network AdMob.  Hamoui argued that organizational insecurity led to deep resistance to discussing problems:

When people are insecure, they just tend to hide and bury [problems]. The bad news eventually comes out, but it comes out all at once, and in sort of catastrophic form. I’m just much more in favor of conveying all the bad news in real time.

He continues:

If everybody at the company can feel that they’re not putting their jobs in peril by relaying those kinds of things, then you really do get a pretty accurate picture.

This manifests in a distinct culture at AdMob:

…we spend a great amount of time talking about everything that’s wrong. Not because we’re trying to be negative. You can only talk for so long about what’s going well and have it be useful. You can be a lot more productive if you spend time on the things that aren’t going well.

But this is atypical in most organizations, and so when others join the conversation, they need to be trained:

When we would have visitors come to our board meetings, I would have to spend time prepping them ahead of time, basically telling them: “Don’t worry. The company’s not falling apart. Everything’s going fine. This is just how we are.”

I often discuss the need to surface problems (here’s an earlier post on the subject), and whenever I do people get nervous about creating a culture of “whiners.”  They worry that if people are encouraged to bring up problems, particularly if they’re not on the hook for the solutions, then discussions will be reduced to toxic complaining about the other guy.  Hamoui has found just the opposite:

… nobody at AdMob is shy to point out a problem or an issue with a product or service, even if it’s a product or service that they didn’t build or they don’t own or doesn’t fall within their domain. People aren’t shy about bringing up these issues and being fairly demanding that we solve them. I think that that’s led to us being very proactive.

Every company has problems. Surfacing those problems and addressing them quickly is the sign of a healthy, secure organization.  It’s also the sign of an effective leader.  As Hamoui demonstrates, spinning reality and covering up the truth may be the more costly and dangerous path.


Retention is Not the Same Thing as Satisfaction

March 21, 2010

Last year I posted about the research Dennis Campbell and I did in financial services where we found the surprising result that self-service can increase costs (the article was just published in Management Science.)  Dennis and I have been working with Ryan Buell, a fantastic doctoral student at HBS, on additional research about self-service.  This new research shows, unsurprisingly, that online customers have higher retention than customers who are exclusively offline.  The goal was to determine whether the increased retention is due to greater satisfaction (customers love being in control and using all those convenient online tools) or greater inertia (it’s too painful to re-enter all those billpay addresses).

The winner? Greater inertia — the aggravation of switching  is just too high for online customers.  Even more troubling, it turns out that online customers are less satisfied than offline customers.  So even though online customers stick around longer, they’re not at all happy about it.  Why is this a problem?  Because these customers are a ticking time bomb for banks.  Once a competitor figures out how to reduce the pain of jumping ship, they’ll be first to exit.

It’s tempting in any competitive environment to conclude that “loyal” customers must be satisfied ones.  But we’ve found that even when customers keep giving you their money, they still might be miserable.  All those familiar faces may not be placing a particularly high value on your products and services — rather, they may simply be placing a higher value on the time and energy it would take to leave you.  My advice is to start scanning the horizon for competitors who can give your customers a better experience without exacting a high price for the privilege.  Or better yet, play it safe and become that competitor yourself.


Fewer, Better People

March 15, 2010

The first time I heard the concept of “fewer, better people” was in an executive education session taught by my colleague and mentor Earl Sasser several years ago.  I have been captivated by the idea ever since, the idea of building an organization that cultivates and rewards excellence in its employees — and makes it sustainable by minimizing the size of the team.  I have rarely seen the fewer/better HR strategy in practice, however.  In a recent NYT interview, Kip Tindall, CEO of the Container Store described his version of it:

…one great person could easily be as productive as three good people. One great is equal to three good. If you really believe that, a lot of things happen. We try to pay 50 to 100 percent above industry average. That’s good for the employee, and that’s good for the customer, but it’s good for the company, too, because you get three times the productivity at only two times the labor cost.

A significant obstacle to enacting this strategy is that you need a great deal of confidence in your ability to tell the difference between good and great employees. And then you need the discipline to say no to the good ones, which can be particularly difficult in a growth context.  But the merely good can destroy a culture of great.  Finally, you need to design an environment where great people can work effectively.

None of these steps is easy.  Take the average fast food restaurant as an example. Now try to redesign the restaurant to require a third of the people, each making twice the current wage.  The current selection and training processes would have to be scratched.  Jobs and incentives would have to be thoughtfully reconsidered.  Where to begin?  Start with this workforce in mind, and pull out a clean sheet of paper. How could their work be done differently?

The answers aren’t obvious, but what’s the potential payoff?  Employees, customers and owners who all love interacting with your business.


The Best Business Book I’ve Ever Read

March 9, 2010

I’ve recently finished a book written by my colleague Youngme Moon.  I’m about as biased an observer as there can be when it comes to Youngme, but I don’t want that to get in the way of my recommendation.  Youngme’s book Different is easily the best business book I’ve ever read.  It made me smarter, more observant and more insightful.  If you’re thinking about how to differentiate a business in an increasingly competitive landscape, here is your handbook — no, here is your inspiration. For a taste, take a look at this introduction to Different on YouTube.


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