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 Cure for Service Complacency

September 1, 2009

The NYT described how the post office is responding to reduced demand as customers increasingly turn to alternatives for exchanging letters.  The action is late, arguably decades late, and not at all uncommon.  When organizations face limited competition (in the case of the post office, it was literally no competition), they often suffer from what I like to call service complacency.  Service complacency is the malaise that infects a culture when good service feels like a choice rather than a business necessity.

While this conclusion may seem reasonable on its surface — you have nowhere else to go, dear customer, so delighting you needn’t be my goal today — it denies an important truth.  Even if your competition is not visible today, your increasingly dissatisfied customers are a beacon for them.  And the new entrants that you can’t yet see often don’t show up in the form of direct competitors, but rather as enablers of the workarounds your customers have already resorted to using.  This is a much more serious threat since the rules of engagement aren’t immediately obvious.

In the case of the post office, customer dissatisfaction had been brewing for decades, but regulation literally gave customers no alternative.  This mix of high retention but low satisfaction was the perfect breeding ground for service complacency.  The post office’s most demanding customers started to get creative, which is often a red flag.   They started using fax machines, then e-mail, then e-mail with attachments.  When FedEx finally entered to deliver original documents quickly and reliably, the dynamics of the entire industry had already changed.  At this point, FedEx was not the post office’s biggest problem.

On the one hand, you could say this is just the march of technological innovation, and the post office could do nothing about it.  I think there’s more to the story than that.  Customers are typically slow to embrace innovation when existing solutions meet their needs.  But when an existing solution disappoints and disrespects them, which was the service experience that many post offices were delivering, then adoption of alternatives can happen at lightening speed.

How should the incumbent respond?  The are two enormous hurdles standing in its way.  First, it has to learn how to treat customers as if they have a choice.  And, second, it has to create an operational culture where controlling costs is a matter of survival.  Neither of these steps will be easy for the post office.  Competition has not forced the post office to care deeply about cost or service, and it’s hard to develop these muscles simply because Congress decides it’s time to start using them.

Today, the post office relies heavily on sending junk mail and packages that we order online.  This will not be enough to sustain it.  Unless the organization recognizes the intensity and range of its competitive threats, a fear that should show up in every single line item and every single customer interaction, then I’m not optimistic it will overcome its service complacency.