Because Customers Asked for It

July 28, 2009

The NYT recently did an article on the company Lululemon, which has been targeting the niche yoga market.  I had a strong reaction to the interview with the CEO, at the point where the reporter tries to understand why the company had branched out in surprising ways from yoga-related items:

O.K., but why does the chain sell, for instance, rain jackets? Customer demand, Petersen says: “They asked for it.”

At first glance, this statement should not be controversial.  The logic is straightforward:  give customers what they ask for, and your business will thrive since you get to guarantee demand before production.  This rationale is particularly attractive in markets where the cost of misjudging demand — exacted through markdowns, stock-outs, and inventory obsolescence — can make the competitive difference.

But this same strategy has also led countless companies into trouble.  Why?  Because customers typically don’t understand the operational implications of their requests.  They don’t have complete information.  Customers often know what they want, but they don’t know whether you can organize your operations to deliver it effectively.  They don’t know what else you’re doing or planning to do, or how the cost and quality of those things will react to their desires.

It is a company’s obligation to consider both customer demand and operational complexity as it decides what to offer.  If adding a product or service is straightforward given your existing operational footprint, then fulfilling requests may make sense.  But if it means expanding that footprint in significant ways, then the decision is much more complicated.

I often see operational complexity run amok in companies, particularly in difficult economic moments.  There can be an overwhelming temptation to create demand, any demand.  I have seen well-intentioned managers in virtually every industry produce what customers ask for and end up with an operating environment that is difficult to control in terms of reliably delivering excellence or profits.  The moral?  Listen to your customers, but know that they can’t save you from yourself.  Only you know the true costs of their demands.

Beers and Handshakes at the White House

July 26, 2009

How did a “post-racial” black president with extraordinary empathy, an exemplary police officer who specializes in racial profiling, and one of the country’s great scholars on race relations crash into each other on the topic of race?

Maureen Dowd chalked it up to a “town vs. gown” clash of egos, which feels too simplistic. As does Obama’s attribution of stupidity.  One clear sign of a systemic problem, we’ve learned in our business, is the folks at the top blaming errant, front-line employees.

A typical organization works to get average inputs to create excellence.  In this case, excellent inputs created a massive service failure, which means that the system is probably broken.  Learning occurs when we understand why reasonable people make the choices they do, so let’s give the principals here – the professor, the cop and the President — the benefit of the doubt, and see where it lands us.

Here’s my quick accounting.  The cop thought he was interrupting a burglary.  As a white person, he had the luxury of not experiencing the events that followed through the prism of race.  He could just do his job.  The professor did not have that option.  He responded to the possibility of arrest in his own home for an ambiguous crime in a context of deep distrust between “black and blue” in America.

That distrust turned standard procedures and routine questions into the perception of race-based aggression.  The professor responded disrespectfully to his experience of being disrespected.  The cop responded to his experience of being disrespected with handcuffs.  Enter the President, who used his bully pulpit to name the context of distrust that escalated the incident – racial profiling – a phenomenon that is both improving and that no one really disputes.

So the problem here – and this is not breaking news – is that race still influences the experience of American citizenship.  And this moment represents an extraordinary opportunity to talk about it, to surface and address the lingering symptoms of our country’s “original sin,” a social, economic and political system that was not race-blind, to put it mildly.

It turns out that the same people that failed to produce a good law enforcement outcome are perfectly positioned to lead that conversation.  The brilliant scholar, visionary President and honorable officer could engage a public that’s leaning forward to build trust that would improve our public life.  The biggest risk at this point is that the opportunity will be lost in a series of photo-ops, press conferences and politicized meetings designed primarily to benefit the individuals involved.

There’s a collective opportunity here, which the President described as a “teachable moment.”  But we’re unlikely to get there with beers and handshakes at the White House.  We’re unlikely to learn anything from this moment unless someone makes a clear decision to lead us.

The Naked Leader

July 21, 2009

Red Smith famously said, “writing is easy…you just sit down at a typewriter and open a vein.”  No one believed him like Frank McCourt.  We lost McCourt over the weekend, but not before he gave everything he had to his readers and students.

McCourt didn’t stop the bleeding when he got up from the typewriter, one reason he was so good in the classroom.  He was exposed, completely.  His example suggests an intersection of great writing, teaching and leadership.  The more layers he removed, the more effective he became at making other people better.

One of the more powerful anecdotes in McCourt’s ‘Tis is about his transformation from an authoritarian, sadistic ruler of his students at Stuyvesant High School, among the most elite in the country, to someone with the devotion and empathy to excite young minds. We find him hiding behind a ridiculous front of dominance and power – and then, in an instant, he removes it.  And his life starts over.

Every day I teach with my guts in a knot, lurking behind my desk at the front of the room playing the teacher game with the chalk, the test, the eraser, the red pen, the teacher guides, the power of the quiz, the test, the exam, I’ll call your father, I’ll call your mother, I’ll report you to the governor, I’ll damage your average so badly, kid, you’ll be lucky to get into a community college in Mississippi, weapons of menace and control.

One day a rebellion starts to brew.  One student has had enough.  The class starts circling around McCourt’s dirty, little secret, which is that the tyrant at the front of the room never went to high school.

So, Mr. McCourt, I thought you had to get a license to teach in the city.

You do.

Don’t you have to get a college degree.

You do.

Don’t you have to graduate from high school to get into college?

You mean graduate from high school, from high school, from from from.

I suppose you do.

Tyro lawyer grills teacher, carries the day, and word spreads to my other classes. Wow, Mr. McCourt, you never went to high school and you’re teaching at Stuyvesant? Cool, man.

And into the trash basket I drop my teaching guides, my quizzes, tests, examinations, my teacher-knows-all mask.

I’m naked and starting over and I hardly know where to begin.

As the book unfolds, it becomes clear that this decision leads to McCourt’s extraordinary impact.  This was his pivot from safety to influence.  Most leaders confront a similar choice at some point in their lives, usually the choice between impersonating a leader and actually leading.  By documenting what can happen when the mask drops, McCourt made it harder for the rest of us to hide.

Microfinance in the U.S: Kiva Enters at its Own Risk

July 15, 2009

This post also appears on the official blog for the book In the River They Swim, a collection of essays about fighting poverty in the developing world.  The book “tells the story of change in the microcosms of emerging businesses, industries and governments.”

A healthy fraction of Kiva’s vibrant community of micro-lenders is up in arms about the organization’s decision to begin facilitating loans to low-income borrowers in the U.S. The language these lenders are tossing around is angry and personal. They feel betrayed on behalf of entrepreneurs in developing countries, whose dreams may now be threatened by a diversion of capital to Miami, New York and San Francisco.

Kiva should be encouraged by the outrage. It speaks to the success of its model, which connects the rich and the poor with a mix of intimacy, dignity and scale that few other models have been able to achieve.

Kiva’s lenders are invested, literally and emotionally. Poverty is not a theoretical, if regrettable condition when you’re helping Busena buy a motorbike to expand her charcoal business in rural Sudan. Busena is not a lost cause or looking for a hand-out or not your problem once Kiva invites her into your living room with a humble request to borrow a few hundred dollars – a few hundred dollars she’ll give back to you, by the way, to lend to someone who’ll need it more once she grows her customer base.

At this point in your relationship, you’d do a lot for Busena. You’re in deep. The trust you’re building is high and rising, and you’ll let nothing get in her way, certainly not a homeowner in the Bay Area who wants 10k to upgrade the toys in her daycare center. How many motorbikes could that buy in Sudan? How many other Sudanese lives could be touched by broadly distributing US $10,000 of working capital? How are we even talking about these people in the same paragraph?

These are fair questions. Even if we accept the reality of poverty in America, the scale is different, often radically different. Income per capita in the United States today is more than 100 times larger than in Liberia, Burundi or the Democratic Republic of Congo. There is little room in those differentials for much of a debate. The planet has become a high-stakes economic lottery for its inhabitants, and the winning ticket is U.S citizenship.

But here’s the thing — Kiva’s success is tightly linked to the freedom it gives both lenders and borrowers. The model’s most important byproducts (that intimacy, dignity and scale) are all driven by the fact that both borrowers and lenders get to make their own choices. All stakeholders get to be powerful and sovereign and create value for each other based on very personal definitions of increased wellbeing.

Busena’s betting on a motorbike, and I’m betting on Busena. I think her success will have a disproportionate impact on women and girls in rural Sudan, a population that is among the poorest and most disenfranchised in the world, and I believe deeply in the transformative power of role models for marginalized groups. Those are my investment criteria, but it doesn’t compel me to design a system that others have to follow, even if I think my strategy for social change is better. And believe me, I do.

Too much would be lost by imposing those limits, including an erosion of the core value of self-determination that makes Kiva work. The decision to enter the U.S. market is an extension of that value. Kiva introduces the privileged to the not-so-privileged, and then gets out of their way. That’s the point. The organization is blowing up a model where I have to trust someone else in a large opaque bureaucracy to invest my philanthropic dollars wisely – and where Busena has to subject herself to someone presuming he knows better than she does how to improve her own life.

This debate touches on other, less personal issues, like whether the emphasis of microfinance is on helping people to manage poverty or escape it. I think it’s the former, which doesn’t mean it’s less important. A hard truth is that only a tiny minority of new businesses – what are sometimes called dynamic enterprises – scale to the point where they have a meaningful impact on economic growth and its ability to create widespread prosperity.

I would argue that enterprise-based solutions to poverty should focus disproportionately on finding and supporting these dynamic businesses, but there is a whole range of enterprise-based responses to poverty that are vital complements to these initiatives. They help the poor and the very poor to meet basic needs and raise their incomes in sustainable ways, without undermining their dignity and humanity along the way.

Kiva is among the most influential players in this arena because of its commitment to empowering individuals on both sides of the microloan. Capping that power by limiting lenders’ ability to decide who is worthy will not advance Kiva’s mission. In fact, it’s precisely the type of top-down, paternalistic approach to philanthropy that Busena and I are both trying to avoid.

United Breaks Guitars

July 13, 2009

United Airlines baggage handlers broke Dave Carroll’s guitar.  Google United Airlines these days and two links dominate:  United’s official site and a video of a song Carroll wrote called, “United Breaks Guitars.”  The video has been watched over a million times.

Carroll reports that he actually witnessed the instrument’s demise, when fellow passengers on his United flight looked out their windows and yelled, “they’re throwing guitars out there.”  He then began a fruitless campaign of trying to get the airline to reimburse him, a nine-month ordeal captured in the video by a parade of apathetic employees.  United’s explanation?  As reported by the Chicago Tribune, Carroll had made a procedural misstep by not filing a claim within 24 hours.  There was nothing they could do. Sorry.  And so Carroll wrote a song.

There is no question that the video is a PR problem of the worst kind.  As a friend of mine said, “I’ve seen more press about this song than actual United ads.”  Bad service and United Airlines are now powerfully linked in the minds of consumers. But United’s bigger problem is lurking in the hundreds of comments posted everywhere this story is being told, from individual blogs to pillars of the mainstream media.  These comments make a compelling case that indifference towards customers is business as usual at United.

United spokespeople now say that they’re going to use the video to help the company improve its service, and my prediction is that these efforts will fail.  The company’s language is tentative.  If Carroll’s experience illustrates a systematic pattern of failing customers — and the anecdotal evidence suggests that it does — then United’s leadership will need to do something much bigger than launch a superficial service initiative.  They will need to find the courage to return to the blueprints of the business model and take responsibility for the fact that they created a system that reliably produces mediocrity.

Having no direct experience with United’s service design, here’s my guess as to what drove the behaviors that infuriated Carroll:

1. A United call center agent in India turned down Carroll’s request for making good on the damaged guitar.  The agent was selected and trained to comply with an increasingly complex set of procedures, and he was likely measured by his ability to follow these procedures precisely and efficiently.  Did he do a good job?  The policy clearly states that claims must be filed within 24 hours, and he likely had no authority to override them.  His performance is probably also measured by the number of calls he can handle in a day and perhaps even the number of calls he can handle without passing them off.  Now put this individual —  probably the lowest paid employee at United — in a situation where customers are justified in yelling at him all day long, and it’s not difficult to predict the outcome.  In fact, the agent did his job well as the system’s architects designed it.  He followed the rules and handled the call quickly, without bothering his manager.

2. What about the baggage handler seen throwing the guitar?  It is not difficult to imagine his crew being told earlier that day that plane turnaround time is the most important driver of the airline’s success, that times had been creeping up, and that low employee effort was at least partially to blame.  What’s a reasonable response to these messages?  Getting the luggage off the cart and onto the plane as quickly as possible.  This would almost certainly require throwing bags, particularly if the time guidelines made it all but impossible to meet the turnaround goals by respecting each piece of luggage.

3. And the front-line service team on the planes and in the airports, the ones who likely fielded Carroll’s original complaint?  These teams are also responsible for all-important turnaround times, which in their case requires managing an incredible range of customer variance, from disabled passengers to families with screaming children and excessive baggage.  They probably regretted the damage to the guitar, but their jobs were on the line in a climate of declining resources to manage the problems within their direct control.  They were probably eager to return to the urgent challenge of getting passengers to their destination with fewer planes and fewer colleagues, to say nothing of fewer tools  (lunch, anyone?) to reduce the growing discomfort of  air travel today.

My point here is that if you’re committed to changing a service experience, try to understand why reasonable, well-intentioned employees are behaving in existing ways.  Only then can you expose the underlying causes of the service failure.  Most change initiatives come up short because they start with Carroll’s basic premise — that employees aren’t trying hard enough or don’t care enough.  In these situations, managers often conclude that inspiration, brow-beating and tweaks to the incentive structure will shame or motivate employees to perform better.  But employees are rarely the problem.  The problem is usually the service model in which employees are operating, which has set them up to fail systematically.

United’s leaders must take responsibility for their central role in frustrating their customers.  This means redesigning the system so that employees can succeed on a regular basis.  If the company follows Carroll’s lead and blames employees for the problem, I suspect that little will change, except the rising level of customer dissatisfaction.  For those with less musical talent than Carroll, this will mean voting with their feet not their voices.  In the absence of accountability at the top, United’s customers will desert them.

Owning It

July 9, 2009

In a recent interview with the New York Times, Wendy Kopp, co-founder of Teach for America, gave an insightful answer to the question: What are you looking for in teachers you recruit? (Emphasis added below):

We’ve done a lot of research on the characteristics of our teachers who are the most successful. The most predictive trait is still past demonstrated achievement, and all selection research basically points to that. But then there is a set of personal characteristics. And the No. 1 most predictive trait is perseverance, or what we would call internal locus of control. People who in the context of a challenge — you can’t see it unless you’re in the context of a challenge — have the instinct to figure out what they can control, and to own it, rather than to blame everyone else in the system.

In this case, there are so many people who could be blamed — kids, kids’ families, the system. And yet you’ll go into schools and you’ll see people teaching in the same hallway, and some have that mentality of, “It’s not possible to succeed here,” and others who are just prevailing against it all. And it’s so much about that mind-set and the instinct to remain optimistic in the face of a challenge.

Kopp’s insight applies to sourcing good leaders, as well.  A pattern of success is not predictive enough, since it reveals nothing about the difficulty of a person’s path.  Paraphrasing Governor Ann Richards, being born on third base and hitting a triple are very different things, although it may be hard to tell the difference from the outside.  If you really want to know how someone will perform with a leadership mandate, look for a pattern of perseverance. Ask them to describe moments when life struck them out, and listen closely to their explanation.  Their willingness to be accountable for a bad outcome, to resist blaming other people or circumstances — what Kopp calls “owning it” — may be the most important indicator of future impact.

Drew Dixon Williams on Michael Jackson’s Legacy

July 7, 2009

Our dear friend Drew Dixon Williams has spent her life in the domains of politics and music, plotting the ascent of voices with the power to move us on all sorts of levels. She weighed in on Michael Jackson’s impact this week, on a website she recently launched called Second Ladies. Second Ladies is designed “to harness and sustain the enthusiasm about our phenomenal First Lady in order to build and support a community of similarly empowered women.” The site is an exciting platform, an explicit mechanism for fostering leadership, particularly among women.

A parade of commentators has tried to articulate Jackson’s influence over the last week, but Williams brings new insight to the discussion of how he changed music and culture forever. And while she says that she is “not altogether comfortable opining on a regular basis,” we hope this post is a sign of things to come. A taste below and the full link here:

As has been said many times in the barrage of media coverage following his death, MJ broke down barriers. He was the first black artist whose videos got played on MTV. His records defied the long-standing precedent of segregated airwaves to get airplay on rock and pop radio stations in the eighties. Those milestones were significant to be sure, but in my opinion, the biggest barriers that he broke down were psychological. His gift was so great that he transcended race, not just in terms of format, but in terms of feeling. All across the globe men, women and children let Michael Jackson get under their skin, even as his own skin morphed towards an ideal image of beauty that he himself was in the process of obliterating.