I just read two news articles this morning of the type that make me gnash my teeth and shake my head. Both involved Fortune companies planned to cut staff by the thousands based on bad financial results. Say what? To these companies, I ask, “Why were you carrying so much excess staff you could do without?”
Most service companies carry double-digit percentage excess staff. Likewise for product companies in their back and front office settings. How do I know? Process redesign, streamlining in particular, plays a primary role in helping clients meet and exceed customer requirements. And we constantly find excess staffing over-distributing decision-making authority, leading to employee disempowerment and creating excess bureaucracy, both of which drive customers nuts. Today’s customers want to deal with well-trained, empowered employees and as few of them as possible – and on the web an increasing percentage wants to research and order commodity goods without any personal contact.
So how does head count typically change after streamlining? By a negative 15% to 20%, in our experience. But rather than streamlining, most organizations throw people at problems, and the more they add the less efficient and effective work becomes. So instead of streamlining to create a win-win for both company and customers, they create lose-lose by overstaffing.
Historically, virtually all corporate entities have been designed from production/service delivery out (inside-out). And a few unlucky companies have been designed from accounting out (upside-down). In either case, when companies try to redesign strategy and process from the customer in (outside-in), they run smack up against their organizational structures.
Inside-out and upside-down companies are aligned and managed around functions. Customer-centric (outside-in) companies are aligned and managed around customers. Unfortunately for customer-centricity, companies can’t get from A to B by throwing a switch. The journey is rough and risky, which is a core reason why most customer-centric companies either started that way or transitioned before they were fully formed.
Based on my experience, the alignment change issue stops more companies in their path to customer-centricity than even lack of executive leadership. Do you agree?
If you’d like to do a deeper dive on this topic here’s a new white paper (parts of which will be folded into the book).
The optimist in me says, “Probably not.” The realist in me suspects we are, for several reasons.
-Customers were initially grateful that many companies appeared to be searching for comity. However, buyers now appear to be moving through this phase, which I call “play nice.” Now they’re seeing through the many insincere seller efforts to look and sound more customer-centric and becoming more cynical and mistrustful of sellers than ever. Hence, an increasing percentage is no longer “playing nice.”
-Influenced not only by transacting business over the web but by not seeing the “what’s in it for them” from forming relationships with sellers, many buyers are trying to minimize contact with sellers, preferring efficiency over spending time interacting with sellers.
-The more latitude sellers give buyers to “have it their way,” the more idiosyncratic customer behavior becomes – to the point where finding common approaches to satisfying varied customer preferences is becoming very difficult. “Process-on-demand” (term coined by my colleague Bob Starinsky) is beginning to replace customer best practices.
I’m right now in the process of writing a full article on this topic, which is how I get to the bottom of perplexing questions. The article is far from done. In fact, I want to read portions of Doc Searl’s excellent new book, “The Intention Economy,” before I wrap it. However, I can already share what I’m seeing through customer lenses.
Customer-centricity is a halfway point between win-lose favoring sellers and win-lose favoring buyers, with the latter being a place business absolutely doesn’t want to go. So in a sense, business (at least enlightened portions) created customer-centricity to stop customers from “crossing over to the dark side.” But a sizeable percentage of customers in developed economies have already pierced the customer-centric line of defense – and have crossed over. And a lot more are coming.
The consequence? Companies have to be prepared to become “customer-reactive” and deal with customers who don’t give a rat’s a** about whether or not sellers survive. Very different business model than customer-centricity.
Last week I wrote about the difficulties Best Buy CEO Brian Dunn was having meeting customer expectations, which had been raised by previous CEO and visionary Brad Anderson, who retired. Today, Dunn is done. Victim of being a nuts and bolts operating manager for a company that needed another visionary. Best Buy badly needed someone at the helm committed to meeting and exceeding customer expectations – including shifting BB’s operating model to meet shifting customer preferences. An interim CEO from the Board will take command while the company searches for a new CEO.
What do you think chances are Best Buy knows what to look for this time?
Have you ever watched an entire business category slide below the horizon? I first did while too young to understand what I was watching – as passenger and mixed passenger/freight railroads didn’t make the bend. But even when I hit graduate school years later the “Penn Central” case study was still very current. Classic example of not changing business model in the face of rapid environmental change.
Since then we’ve all seen more sectors fade from sight. Everything from neighborhood full service groceries; to specialty consumer a/v stores; to big, powerful cars that could pass everything but a gas station; and more recently, we’ve witnessed the demise of mid-sized airlines, mid-priced jewelers plus shoe store and bookstore chains. And we’re now inexorably heading towards the end of client-server computing (outside of extreme speed enterprise stuff) and even PCs themselves.
But what’s next? Are we ready for online niche categories to fade away, just as brick and mortar business categories did? I believe online travel services are toast, as are a plethora of social media services. And Are we ready to turn traditional healthcare on its ear? I suspect we’re reaching the end of medical clinics staffed by FPs and GPs. Likewise physical tax preparation services and perhaps all tax preparation services. A simplified tax code would send most of the accounting industry packing.
Rephrasing the question, how far will customer-centric attitude and desire to help customers take an organization?
In my mind, not very far. Yes, process is my practice focal point, but I don’t believe I’m being biased. After every customer relationship audit, I come up with change recommendations that can be categorized as: “behavioral;” “process-based;” “process plus technology” based. The latter two categories almost always dominate the list.
Southwest Airlines broke the model while organizing and has stayed customer-focused ever since. Tellingly, however, when Southwest initiated service in several congested major airports (instead of secondary airports), its vaunted on-time arrival numbers took a whack. Is that because operating out of major airports “unbroken” the mold?
Several Asian airlines have achieved significant levels of customer-centricity seemingly within the traditional model. But perhaps East vs. West cultural differences gave them a route Western airlines can’t take.
What I’m driving at here is I can’t see any possibility American Airlines, Air France/KLM, British Airways, Delta, United et. al. can migrate very far towards customer-centricity. Before merging with united, Continental tried, but at the first sign of economic adversity folded back to the norm.
Used to be enterprise technology was designed for finance and/or manufacturing first – and all other functions, especially those directly affecting customer experience, as an afterthought. Still today finance and manufacturing technology needs are typically taken more seriously than other functions requirements. But that’s changing.
Increasingly, the business community is viewing technology’s first obligation as enabling and improving process. When process design starts out at the customer end, rather than deep in the bowels of the company, technology must start there too. Otherwise, process and technology inevitably wind up misaligned. Plus, as it turns out, supporting finance in particular with technology is much less demanding than supporting customer-affecting work. So why would any systems architect let the less demanding functions dominate systems design and decisions? For example, we’re working now with a client that hired us to redesign process and then help select a new ERP system to support process. But they now realize that managing service operations is their major challenge, while they have tons of accounting and finance options. So we’ll design around the application layer.
This customer-driven turn of events turns systems architecture and IT overall on their respective ears. But we would do well to step back and look at other functions to anticipate customer primacy turning them outside-in as well. Your observations?
Will sales be able to switch from proactive to reactive?
A good friend, colleague and long-time client – Joe Lethert, founder of Performark – recently wrote an eye opening piece about the role of sales in the organization, especially in B2B. Joe described how customer use of the Internet is supplanting sales’ prospecting role, which is gradually transforming sales’ role from proactive “hunters” into reactive “information providers.” Customers go find the vendors they want to consider and then ask sales for information. They want (and expect) to bypass the persuasion piece.
The past couple week I’ve been reminded of how far behind the eight-ball sales has fallen. I’ve been prequalifying project management and inventory management technology for two clients, which has put me in contact with countless software vendors. Of course, we all know gambits like “see our web demo” (but first reveal all your info so we can pepper you with sales calls). But one aspect of the process really struck me as anachronistic. “We’re going to assign you a relationship manager.”
That’s bovine waste matter. All it means is “we have a commission plan to protect,” and if no one “owns” you from a commission standpoint, you’ll get scant or not attention. I can’t tell you how many hours I’ve wasted playing phone tag with traveling reps I “have” to go through to get information. “Relationship manager?” Not hardly. A true relationship manager would want to get me the information I need as quickly as possible, no matter who gives it to me. But software companies playing this game lose in the end. I downgrade or eliminate them as soon as the game begins.