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.
February 16, 2009
Americans are shaken, some of us to the core. We thought we were rich, and now we’re poor. We thought the future was ours, and now we wonder, for the first time in decades. We thought our lives were capable and in control, the operational equivalent of a competent system, and now the foundation of our identity is under attack.
We are changed people in the marketplace for goods and services, and not just because we have less discretionary income and less “consumer confidence” to upgrade the washing machine. We define value differently now, and the companies that understand that difference will prevail in this environment.
We’re still getting over the shocks to our individual economics, but I believe we’re ready for the reaction to the action, ready to be coaxed out of the fetal position with news of our autonomy. We’re ready to be reminded that we are in charge of what happens now.
The shift is a clear opportunity for firms that are already in the business of control. Financial control is the natural starting place – financial services are well positioned to compete on consumer empowerment – but it doesn’t end there. Any product or service that helps us design our own destiny can have a new conversation with customers. That includes healthcare and fitness (control over body), education and training (control over mind), travel and entertainment (control over spirit). The more interesting opportunities will appear in the less obvious industries.
I spent a bit of time with Walt Whitman over the weekend. His defiance fed my own hunger to shed the anxiety – and reminded me of the genius and passion that built this country. I’m convinced that Americans are ready to be large again, to sing songs of ourselves for the next chapter of our experiment in self-determination. We will come together where we have always come together, in the marketplace, and we will disproportionately reward anyone who helps us compose that song together.
February 12, 2009
Managers today are fighting for a smaller share of smaller wallets. Many are in a defensive crouch, focused on retention and looking for ways to deliver greater value to their customers. Some companies see possibility in the inevitable churn this economy will create, but everyone is getting stuck on the same challenge: to improve customers’ experience, they have to spend more money they don’t have. Better service means higher costs.
While this sounds like a given, it is not necessarily true. It is a particularly good time for managers to go through the following exercise. First, identify your largest, most persistent buckets of cost. Then explore ways to simultaneously reduce these costs while adding services your customers will value.
Sound crazy? Consider Progressive Insurance. Progressive offers customers an optional concierge level of claims service in which it will arrange for the customers’ cars to be repaired after an accident. This removes a great deal of hassle for the customers who choose to use the service, who would typically have to find a repair shop, navigate the reimbursement policy, and hope they get good service. Progressive handles all these steps for the customer, saving them time, hassle and anxiety. And it does it all without charging extra.
How is it possible? Progressive addressed one of its largest and most unwieldy cost categories, reimbursements to independent auto repair shops. These shops delivered uneven quality for a wide range of prices, and insurers felt helpless in maintaining control over them. Progressive designed a mechanism to reduce these costs — by coordinating the activities among a much smaller group of repair shops where experience and scale could be leveraged – and improved the customer experience along the way.
Can it work for your business? I have yet to find an organization that has tried and failed with this approach, but execution matters. Changes in your value proposition must be truly valued by your customers. As obvious as that sounds, it trips up a lot of managers. The exercise also works best if you start with costs and then work your way over to delivering additional customer value. Starting with improvements to the customer experience and then trying to reverse engineer cost savings, while possible, turns out to be much less reliable.
February 2, 2009
Starbucks’ early success was the result of a lot of very smart, new thinking, including creating a market for higher-end coffee drinks and tapping into consumers’ need for a “third place” outside of work and home. For many years it thrived as it competed on its innovative business model, a relatively focused positioning. Starbucks delivered a specific experience to a specific set of customers (think Southwest not United).
For all its breakthrough thinking, its status as a public company meant that it still had to tame the growth beast. And then it came to an inflection point that most focused competitors reach, how to continue to grow after the first wave of saturation. It’s here where I think Starbucks stumbled. The company had two choices for growth — continue to expand its focused service offering at the risk of diluting the Starbucks brand or creating a new brand that would allow Starbucks Inc. to grow and learn outside of the constraints of its original offering.
The company chose the former – all too many focused competitors do – and has suffered the consequences. In doing so, it’s made a classic mistake, essentially trading off quality for growth. But this is a false tradeoff that can be overcome in creative ways that do not require abusing the brand. Yum Brands is a good example. Yum is a collection of five quick-serve restaurants. The overall Yum organization has ambitious growth expectations, but it doesn’t rely on any one brand to get there. Yum reveals that it’s possible to have a multi-focused organization. For the sake of my tall skim, extra hot, no foam latte with an extra shot, I hope Starbucks gets this message soon.
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.
January 22, 2009
This same type of “calcification,” as you call it, can also creep into attitudes towards employees. Early in my career I worked at a company where there was minimal trust between employees and managers. Someone low in the organizational hierarchy ripped out an ad from a magazine that said, “It’s the Magical Thing About Business – Start Treating People Like Your Most Important Assets and Suddenly That’s What They Become.” She made a copy on the always-broken copy machine and put it up outside her depressing orange cubicle, and it really rocked the culture. It was so clear to all of us that this particular mental model was not one of the organization’s basic assumptions. The magic at work in this place was closer to “treat adults like children and watch time reverse itself.” I left because I started to hate the petty, negative person I was when I came to work everyday.
One reason I’ve always liked working in professional services is that it’s so culturally explicit in most firms that they’re competing on the talent of the people they hire. This belief guides everything, from the distribution of decision rights (decentralized) to the innovation process (employee-driven) and, yes, even to the choice in copier (always working). Why waste such a precious asset’s time on jammed paper?
This type of culture gives everyone a reason to show up and step up. I think the biggest lost opportunity in most organizations is the unrealized potential of the people clocking in everyday, at least the fraction that’s profoundly bored. The majority of us are desperate to be engaged, and since most organizations aren’t inviting that level of engagement, all that unused capacity is now on Facebook at 10:30 in the morning – unless it’s troubleshooting with the IT department.