IBM’s Turnaround: Taking Service Seriously

January 28, 2010

I recently discussed Google’s response to the service demands on its new Android phone.  Google has prided itself on excellence, but has come up short with the Android offering, where hands-on service is a critical part of getting it right.  As I wrote in that post, the phone needs a different kind of customer interaction than Google is used to delivering.  If Google continues to rely on its standard service model, it will continue to struggle.

There was an interesting parallel in the NYT’s recent description of IBM’s turnaround, which has been fueled by its pivot to high-end services.  Why has IBM succeeded where others have stumbled?  In part, it’s because IBM didn’t underestimate the challenge.  IBM managers realized how much change was required to play and win the services game.  That may sound simple, but the emotional barriers to service excellence can be enormous.  Said differently, acknowledging that you can’t deliver great service without some serious soul-searching can be as important as whatever happens next.

What did IBM do differently?  The short answer is everything.  The longer answer is that it took service seriously.  And then changed its products, pricing, processes, human resources, and customer interaction.  For example, instead of designing a product that it then sold into organizations, it learned how to uncover a client’s problem and develop solutions to that problem.  Fortunately for IBM, many of its clients had similar problems, which has permitted standardization across solutions.

IBM gets 80% of its revenues from services. Just a few years ago it was 50%, and not too long before that, services were essentially a hobby for the company.  IBM has demonstrated that it’s possible for a product company to play the service game, but pulling it off requires new attitudes about customer needs — and a deep humility about the road ahead.   When that kind of humility meets those kinds of attitudes, the outcome is happy customers. And when you throw standardization into the mix, now you have a service business.

Google’s Service Problem

January 15, 2010

The NYT recently described Google’s customer service supporting its new Android phone.  The article described how customers can’t call Google for help and that it may take up to 48 hours for the company to respond to email messages.  The article referenced one customer who has been trying for a week to talk to a live person. Still no luck getting through.

This article made the front page of the NYT business section because it’s a story about Google, not because it’s a particularly rare or surprising service phenomenon.  When a service model designed for one type of customer needs (e.g., using web-based adwords) is then used to serve an entirely different set of needs (e.g., after-sales service for a new type of phone), there is predictable turmoil.

The interesting part will be to watch how Google responds to the realization that it’s trying to meet wildly divergent service needs — what I call distinct operating segments — with a single operating model.  In my experience, the company has some choices to make if it wants to deliver excellent or even adequate service.  Option A is to serve one operating segment well and essentially ignore the other.  That’s not as bad as it sounds.  Southwest Airlines optimizes its service model for low-maintenance travelers. When high-maintenance travelers come along, it doesn’t turn them away, but it also doesn’t work very hard to accommodate them.  Southwest serves one segment with excellence and asks everyone else to adjust.  This is the definition of focused service.

Option B is to create a distinct service model for each operating segment.  If Southwest is an example of focused service, I call this approach multi-focused service.  To execute well on a multi-focused structure, Google must convince itself that multiple service models are better off under the same corporate roof.  I’ll talk about that more in later posts, but the key is shared services.  While shared services are often appealing at first glance, the model can be very difficult to pull off.  (Here’s a link to an HBR article where I touched on the concept of shared services briefly at the end.)

There are many examples of excellent organizations operating with either focused or multi-focused service models. But there are far more examples of organizations doing neither.  Instead, these organizations work hard not to disappoint either operating segment too much, which ensures a limit to the anger and outrage, but also ensures mediocrity.  It’s the path of least resistance because customers complain more about bad service than they do about the absence of excellence.  A hard truth about service is that you often have to disappoint some people in order to delight others.

The responses by two of Google’s employees seem to foreshadow the direction it’s taking:

Katie Watson, a Google spokeswoman, said no one was available to speak about the service problems. But in an e-mail statement, she said, “Solving customer support issues is extremely important to us.”

Andy Rubin, Google vice president for engineering in charge of Android technology, gave a similar response, indicating that its challenge was to reduce its email response time from days to a couple of hours.  These statements suggest that Google’s still committed to using its existing service model to serve an entirely new operating segment.  I’m hopeful that abandoning this fantasy is an outcome of these initial service difficulties.