The Two Faces of Facebook

March 31, 2009

Facebook is throwing Mom and Dad under the bus. As a recent  NYT article chronicled, many of Facebook’s older users are in open rebellion against the service’s new Twitter-esque functionality that allows customers to broadcast every impulsive thought, feeling and lunch order in a real-time stream of sometimes trivial updates. This works for the kiddos, a generation that’s been putting camcorders in their bedrooms since the early nineties. The rest of us have some dignity:

“The changes just feel very juvenile,” Ms. Rabban says. “It’s just not addressing the needs of my generation and my peers. In my circle, everyone is pretty devastated about it.

Should Facebook care? Not necessarily. The company now has a classic service challenge — diverse customer segments that have outgrown a single service model. Facebook’s younger users value things the older ones find distasteful.  The company had to choose between satisfying one group and annoying the other, or trying some kind of compromise that would frustrate both.  It’s encouraging that Facebook resisted the temptation to do the latter. Most companies end up chasing the dream of making everyone happy, at the cost of a slow slide from excellence to mediocrity in the experience of their most valuable customers.

Ironically, a bit of customer “devastation” may be an encouraging sign. It may mean a company is making a clear strategic bet — in this case, on younger, more tech-savvy users.  Facebook may be able to find a way to graciously serve both segments eventually, but it will have to invest in at least the appearance of different service models.  Short of that, annoying the adults may be a terrific strategy.

A Recession-Proof Business Model (Stop Provoking Your Customers)

March 26, 2009

In a recent WSJ article, an airline analyst was quoted as saying that when everyone else is charging for formerly-free services such as pillows, it didn’t make sense that Southwest wasn’t.  I couldn’t help but think that these analysts might be part of the reason the industry is in such dire straits.

Southwest’s CEO responded that “adding fees is no way to grow an airline — customers hate that stuff.” He’s right. Despite the brave, new economy in which we find ourselves, a few things are still true. One is that it’s hard to sell things to customers who hate you. To state the obvious, this is particularly true when when they have real alternatives to whatever you’re selling. Less obvious, it seems, to companies that think their customers have no choice but to suck up the pain, is that if your customers hate you enough, those very alternatives will show up eventually.

When an industry racks up serious customer pain points — think lock-in periods for cell phones — it’s an invitation for competitors to enter and win by championing the customer.  Usually, this changes the game for everyone.  Southwest is rare in that most of its incumbent competitors (and the analysts who egg them on) have yet to internalize the full source of the company’s advantage. 

Southwest gets a lot of things right. One of those things is its aggressive commitment to meet its customers’ core needs, including low fares, direct flights, and flight schedules that optimize on frequency and flexibility. Another is its ability to meet those needs with enthusiasm and dignity. The fact that it’s pulled it off for the last 30 years while its competitors descended into toxic relationships with employees, unions, shareholders and customers helps explain why Southwest consistently delivers superior financial performance.

These are tough times. My best advice is to ignore the equivalent of the airline analyst in your own life and resist the temptation to try to survive at your customers expense. Let Southwest’s resilience in one of the world’s toughest industries be your inspiration. If your goal is to be around to serve your customers when the economy recovers, a good place to start is to stop provoking them.

Chief Culture Officer

March 20, 2009

In an interview for a recent Business Week article, Zappos CEO Tony Hsieh described the source of the company’s exceptional performance and increasingly legendary customer service:

Ask Hsieh to describe his secret sauce, and he’ll tell you that much of Zappos’ success comes down to the company’s culture and the unusual amount of openness he encourages among employees, vendors, and other businesses…

If we get the culture right, most of the other stuff, like the brand and the customer service, will just happen. With most companies, as they grow the culture goes downhill. We want the culture to grow stronger and stronger as we grow.

Hsieh understands that another name for CEO is Chief Culture Officer. When culture is built and protected deliberately by the CEO — as it is by Hsieh, who embodies the values he wants Zappos to compete on, including transparency and excellence — culture sets the stage for a company to thrive.  As Steve Kaufman, a dear friend and colleague who used to run Arrow Electronics, likes to say, “culture eats strategy for lunch.”

Culture drives the millions of invisible choices that aren’t covered in the strategic plan or employee handbook and would be silly if they were, norms and attitudes like unfailing respect for customers and  pride that’s linked to group performance. Culture manifests visibly too, of course, often by leaders who do whatever it takes to defend it. In Zappo’s case, this means that all new hires who complete the introductory training are offered $2,000 to walk away.  People who are the strongest fit with Zappo’s culture don’t take the money.

But culture is the strong, sensitive type. For all its power, it reacts strongly to neglect. When culture is not a high priority for CEOs — which is often the case — culture can lose its swagger, show up unevenly across business units, and quickly stop being a source of competitive advantage. In today’s economic climate where customer retention and customer value are increasingly vital, excellent service will be a differentiator.  Tony Hsieh is a powerful reminder of the role that culture and its stewards will play in that journey.

Extreme Customer Service

February 24, 2009

BusinessWeek’s cover story this week is called Extreme Customer Service. The title has an aspirational ring to it, and the article celebrates examples of “extreme service,” including a UPS delivery person who is instructed by his president to defy the firm’s six-hour delivery window policy, show up at a customer’s door at precisely the scheduled time (extreme!), and deliver chocolates and dog treats along with the storage unit the customer was anticipating. As the story is written, it’s meant to be a beautiful ending, complete with the delivery person offering to assemble the unit.

Extreme Service Man looks like a hero, but he’s actually a symptom of a serious service problem. Defining his behavior as excellent service is contributing to escalating costs and plummeting satisfaction in almost every service industry.  When employees must go “above and beyond” to satisfy customers — a natural impulse in environments where dissatisfaction is rising —  it means that something is broken in the service model.  And responding with costly, ad-hoc spikes in service quality makes it harder to surface and solve the underlying problem.  Serving some clients with excellence, it turns out, increases the likelihood of serving the rest of them with mediocrity.

The goal for service businesses must be reliable excellence. Organizations that deliver truly great service build service models that consistently meet the needs of all clients. They invest in the systematic delivery of outstanding value — and treat Extreme Service Man as a well-meaning menace to the pursuit of excellence.

Customers for Hire

January 24, 2009

Embracing the humanity of your customers has another distinct advantage — customers can also help you run your business. Companies that recognize that their customers are thinking/feeling/doing human beings often learn to work effectively with them to operate and improve organizations.  This has cost advantages, of course, but it also opens up new opportunities for increased quality and differentiation.

Intuit is a great example of a company that leverages their customers as contributors.  Intuit actively engages customers in everything from coming up with new product ideas to answering service questions from other customers.  Employees still do the bulk of the work at Intuit, but customers improve their work at almost every step in the value chain. Threadless, the fast- growing T-shirt company, takes this customer operating role a step further by using customers to create the vast majority of new product designs.  At Threadless, employees improve the work done by customers.

Customer insight and creativity is among the most underutilized assets in organizations today. Particularly in our current economic climate, it’s worth it for most companies to explore ways that their customers can play a more active role in creating the products and services they consume.

The Customer is Always Human

January 21, 2009

Political systems are not the only complex systems that can harden themselves against the people they’re designed to serve. Companies, too, can become disconnected from the humanity of their customers, often without even realizing it. This makes service difficult to provide, much less service excellence. In my experience, a key responsibility of managers is to actively fight this type of “calcification” by shaping the mental models that guide employee behavior.

I find David Neeleman, former CEO of JetBlue, to be a helpful role model. Mr. Neeleman would fly JetBlue at least once a month, working as a flight attendant, meeting customers, modeling the unscripted norms he wanted everyone else to embody. He found that once a month was about the right frequency to ensure that employee attitudes towards customers were resilient enough to withstand the calcification pull. I have seen many service slogans at companies, often variations on the “customer is always right.” My advice is to modify this to the “customer is always human” and find ways to make this mental model a central tenet of an organization’s culture. It’s an investment that will improve service at least as much as the best of training programs.