Most Organisations are not Customer Focussed: so says Gallup

Very few organisations would say they aren’t customer focussed. But unfortunately customers themselves disagree. And since its customers who giveth life and taketh it away, perhaps we had better listen to them.

Gallup research, published in their Guide to Customer-Centricity, found that B2B companies are struggling to grow with 71% of their customers indifferent, disengaged, or not adequately having their needs met and, as a result, considering moving their business elsewhere.

The glass half full way of looking at it means these B2B firms are “leaving cash on the table”, according to Gallup. There are opportunities among existing customers provided firms go out and can find out what they want. Instead, companies seem happy trying to sell more of what they have to new prospects rather than build on the customers they have already despite the high costs of acquisition of new ones. Product push before customer pull.

It takes a brave and strong minded soul to admit their organisation is not customer focussed. Nobody wants to be the nay-sayer or undermine the efforts of overloaded, under-appreciated colleagues. And besides, that next role may just be dependent on our friends and colleagues, so why be the one to make a fuss?

Of course finding extra customer value is strategic and it can be easy to miss in times of uncertainty and challenging economic conditions. Doing something different means stopping doing something and doing something else instead. It feels risky.

What opportunities is your organisation missing out on? How are you going to capture them? Maybe we can help.

Reference

Guide to Customer-Centricity: Analytics and Advice for B2B Leaders, Gallup.

http://www.gallup.com/services/187877/b2b-report-2016.aspx

Get if off your chest!- #1. Thinking

There is no expedient to which a man will not go to avoid the labor of thinking”  Thomas A. Edison (1847 – 1931)

A colleague of mine has a student evaluation form framed on his office wall, from an MBA student we jointly taught a few years ago.  It marks us a very low 2/5.  The comment accompanying this scathing mark is the Professors made me think for myself, it was far too hard and not the reason I joined the MBA programme”.

Why is thinking for ourselves so difficult?

There are so many reasons that have been suggested that we really don’t know where it start. The dominant Western education system comes in for most flak, as a “system designed to rapidly equip the common person with the sort of skills they would need to competently work in factories or farms back in the 1800s”, and university is described as a “clone factory”.

Certainly culture plays a huge part, even the Western, supposedly ‘Individualist’ culture, tribe membership comes with costs attached; it pays not to criticise the leaders and not to annoy your peers. It can even be a survival strategy when living among ‘abusers’ – Uber springs to mind although I have seen others. Extroverts tend to do better than Introverts in the corporate world because they are more likely to actively court approval from peers.

The dilemma is that, research suggests that Introverts are more likely to think for themselves. Group think explained. Fit in, or stand out….

More generally, people may simply lack the motivation or have the ability/skills. The fact is that the daily toil most people have for a life simply does not require them to think.

Worryingly, according to Sofo Archon, people are simply afraid to think for themselves.  Why?

  1. Thinking brings change.
  2. Thinking brings doubt.
  3. Thinking brings responsibility.

Why is thinking for ourselves so important?

With robots and AI approaching it might be reasonable to suggest that the ability to think for oneself may be the only ability any of us needs to master in our lifetimes.  Certainly it is the source from which all future invention, advancement, prosperity, knowledge, and wisdom are likely to flow. Why is it critical?

  1. Thinking brings change – The business environment is already changing faster than most managers can deal with – inevitably they fall behind. History is littered with companies that simply failed to change.
  2. Thinking brings doubt – Certainty, stability and predictability is simply a figment of the business world’s imagination*, it has never existed. Business is risk. Tomorrow’s manager needs, not only to embrace doubt and uncertainty, but to see it as an opportunity.
  3. Thinking brings responsibility – To be a leader, one first needs followers. Followers respect leaders who accept responsibility. The past few decades have witnessed the widespread avoidance of responsibility, by politicians, religious leaders, as well as senior business leaders. As part of the structural change since the ‘crisis’ of 2008, the “I didn’t say that”, “It wasn’t my fault”, “Everybody was doing it” is being treated with growing disdain – the future belongs to those who will relish, not shirk, responsibility.

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” George Bernard Shaw (1903)

* (See Management Fads of the 21st Century. #2, Complexity)

Management Fads of the 21st Century.  #2, Complexity

The state or quality of being intricate or complicated.” Complexity describes the behaviour of a system or model whose components interact in multiple ways and follow local rules, meaning there is no reasonable higher instruction to define the various possible interactions.””Chaos is the science of surprises, of the non-linear and the unpredictable. It teaches us to expect the unexpected.”

According to the business press and commentators it would seem that since the ‘crisis’, we have somehow stumbled into an unusual and terrifying world of uncertainty, doubt and unpredictability. Prior to 2008, complexity was usually associated with the successful growth of a business – a nice problem to have. Since 2008, it has become a more widespread challenge as managers try to understand the new and shifting environment.

The first issue is the nature of the 2008 shift. It is not a recession, even a great one, but a ‘discontinuity’, a break with the previous times which are not coming back. But more about that in a different article. What it does mean is that whatever is coming in the future will not be a replay of the past.

Mihály Csíkszentmihályi

This break from the past makes everything look unpredictable because we are out of our comfort zone – what we used to do doesn’t seem to work any more; forecasts are wrong and pressure on margins is increasing.  In short, the challenge has increased and we lack the new skills necessary to deal with the new reality. Mihály Csíkszentmihályi called this being out of the Flow, or Zone. Before, we felt motivated and in control – now we feel anxious, worried and powerless.

The solution to this is not to stand still and wait for the good old days to return, they won’t. But there are things we can do:

  1. Accept that the past is not coming back and look to the future, then
  2. Listen to customers & prospects and identify how their needs and wants have changed
  3. Work with your customers to anticipate upcoming, evolving needs.
  4. Distribute this insight/knowledge by cross-functional sharing of the information inside the company.
  5. And the most difficult; Unlearn knowledge, models, techniques and beliefs that are no longer relevant

Of course, none of this will work unless we can accept that the world, and our markets, have not changed, they were always unpredictable and chaotic but we understood the rules of the previous game – until it changed. As Proust said, we don’t need new landscapes, we need new eyes.

Finally, the answer to today and tomorrow’s success is not inside the organisation. All we will find inside the organisation is history, immediately rendered obsolete by the events of 2008 and subsequently. Unusually, one of the current jargon words, co-creating, proves very apt – if we can manage it we need to accept that we no longer know best and the future lies, not in making things, but in co-creating value with your customers. Let me know how you get on.

The brain is a wonderful organ; it starts working the moment you get up in the morning and does not stop until you get into the office.” (Robert Frost)

Sacred cows make the best hamburger”*  #2, Cost Cutting

What is a cost?

“Initiatives that focus on reducing expenses to decrease facilities expenses in order to improve the financial health of an organization.”

Everybody is doing it; there is always fat to cut; we don’t have a choice; we have to remain competitive; ‘lean’ and sharp……”

We have all heard about cost cutting, but does it stand up to closer scrutiny?

I was invited to deliver a basic marketing session to a group of MSc in Finance & Accounting students.

Two questions they couldn’t answer:

  1. Where does cash flow come from?
  2. How do you define a cost?

Very disappointing if tomorrow’s CFOs don’t know that customers provide all the cash flow and profits.  Even more worrying if they think that a cost is any large expense.  Strangely, I wasn’t invited back the next year.

When I looked up the course references later, I was (almost) sympathetic:

All expenses are costs, but not all costs (such as those incurred in acquisition of an income-generating asset) are expenses.” 

“The outlay or expenditure (as of effort or sacrifice) made to achieve an object.” 

In business and accounting, cost is the monetary value that a company has spent in order to produce something.” 

“In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset.”

“Cost includes all costs necessary to get an asset in place and ready for use.”

I also looked up the definitions for Investment:

“In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit.”

“The act of putting money, effort, time, etc. into something to make a profit or get an advantage, or the money, effort, time, etc. used to do this.”

The investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.”

You can see where I’m going …

If this is the very best experts can come up with then no wonder finance departments may be unable to tell the difference between a cost and an investment. Cutting the wrong big number could destroy the business. And it seems any ‘big number’ is fair game to the cost-cutter, even if it eventually kills the company – as long as it happens in a future accounting period, of course.

Let’s apply some simple common sense and approach the problem from the Outside-In. It seems obvious to me that from the customers’ (the source of all cash flow, profits and job security) perspective, the company can take a huge axe to everything they do that doesn’t deliver customer value. They could then invest more in projects that customers do value and they want to buy in the future.

No matter how complicated the internal analysis on the spreadsheet, cutting big numbers without getting your customers to tell you whether it is a cost or an investment is no more professional than Russian Roulette.

It was a pity thoughts always ran the easiest way, like water in old ditches.” Walter de la Mare.

“Sacred cows make the best hamburger”- Mark Twain.

Management Fads of the 21st Century. #1, Big Data

“Big data is high volume, high velocity, and/or high variety information assets that require new forms of processing to enable enhanced decision making, insight discovery and process optimization.” –Gartner.

The current state of play could probably be summed up as “If the data isn’t big, it’s worthless.” But before you fall under the spell of what might just be the latest ‘management fad’, think a little deeper. Big data has been variously described as “The next frontier for innovation, competition, and productivity” (McKinsey) and “Hubris” (researchers at Harvard).

It is true, there is much more data out there than ever before, thanks to the Internet and modern computing power, but ‘data’ isn’t ‘information’, ‘knowledge’ or ‘wisdom’. To be transformed into those, data needs to be processed somehow, by machines and humans, and then translated into terms that make actions possible.  Advocates and critics of Big Data clash in this area.

The pro-Big data lobby suggests that analysis could, among other things, “Segment populations to customise actions,” “Replace/support human decision making with algorithms,” and “Innovate new business models, products & services.”

Big data’s critics meanwhile suggest that what started as ways to speedily store, retrieve and process large volumes of machine generated data, Big Data has taken on a life of its own as the end rather than a means to answering life’s questions. A symptom of the well-known ‘Hype Cycle’ effect in which a technology’s early proponents make overly grandiose claims, that are rarely met in the short term.

Critics also note there is always inherent bias in the data, especially when its from different sources and collected for its own reasons. That crashing together vast data sets from diverse sources, they say, increases the risk of ‘spurious correlations’ – associations that are statistically robust but happen only by chance. Humans would question the association between, for example, per capita cheese consumption and the number of deaths from becoming tangled in bed sheets or the age of Miss America and murders by steam, hot vapours and hot objects – clearly spurious.

It seems to us that today’s dependence on the algorithm (“In mathematics and computer science, an algorithm is a self-contained sequence of actions to be performed.”) is at fault. The rise in AI and Robotics notwithstanding (possibly the subject of a future article), secondary data (Big or Small) can tell you lots about what, who, when, where and how; but it can never tell you ‘why’.  When it comes to customer choice behaviour, which is directly correlated with your revenues and profits, understanding their motivation is crucial.

Add that to a growing ‘segment’ of people voicing privacy concerns over the use of their data without consent and we might be looking at the ‘trough of disillusionment’ before things get better.

What is a ‘Management Fad’?

According to the Harvard Business Review, “fads are typically: simple, relying heavily on buzzwords, acronyms and reductive ideas; prescriptive, listing actions to take under specific circumstances instead of supporting interpretation; falsely encouraging, promising to deliver big results; one-size-fits-all, taking little or no account of differences between companies; novel instead of radical, meaning their originality is superficial; and supported by gurus or disciples, constantly touting the prestige of adherents rather than using hard performance data.”


Management Fads have been popular for decades and in the modern era probably started with Frederick Winslow Taylor’s work on Time & Motion. Since then management has swooned over such fads as Management by Objectives – or by Walking About, “Excellence”, Total Quality Management, Kaizen, Matrix Management, Six Sigma, Balanced Business Scorecard, Investors in People, De-layering, Lean, Customer Relationship Management (CRM), Post-Modernism and Post-Materialism. The list goes on……..

What these and other fads and fashions in management have in common are short lives and flimsy evidence. The management world is highly susceptible to crazes: fads and fashions that change as frequently as clothes styles. And just like clothes styles, some come back again after a few years away, repackaged, re-branded, but essentially the same.

Contrary to what is often thought, management fads aren’t fads because they’re something new. What makes them fads is human nature and its herd instinct.  Like alchemists, managers are constantly looking for the universal panacea that will solve all their ills.  They know one doesn’t exist but hope springs eternal. Then when they see others jumping on the latest fad bandwagon, the two strongest forces in human nature kick in:

  • Greed – This might just be the genuine silver bullet.
  • Fear – That the competition may get ahead in the race.

The rest really is history.

Adrian Furnham has suggested the following ‘process’ for fads:

  1. Academic Discovery: Many faddish ideas can be traced to the stuffy and distinctly un-faddish world of academia.
  2. Description of the Study: This process can last a long time, it usually involves a lot of elaboration and distortion in the process.
  3. Popularisation in a Best Seller: A business writer/guru takes up the call, hears about the finding gives it a catchy title and before you know what, the fad is about to begin.
  4. Consultant Hype and Universalisation: It is not the academic or the author that really powers the fad but an army of management consultants trying to look as if they are on the cutting edge of management theory.
  5. Total Commitment by true believers: At this point the evangelists move from the consultants to the managers.
  6. Doubt, Scepticism, Cynicism and Defection: After pride comes the fall.
  7. New Discoveries: The end of one fad is an ideal time for trainers, writers and consultants to spot the next gap in the market.

Let’s think for a moment who gains from all this?  And who really suffers………

“Sacred cows make the best hamburger”*  #1- Benchmarking

Sacred cows make the best hamburger”*  #1, Benchmarking *Mark Twain

The process of comparing one’s business processes and performance metrics to industry bests or best practice from other companies”

Sounds good on paper – and it’s hugely popular, but does it do any good?  Mostly it does positive harm.

Viewed from the customer perspective (the source of all your firm’s cash flow and profits), benchmarking makes no sense at all.

First, the concept of ‘industry’ means nothing to your customers.  Industries are created by organisations who make similar products and services. Customers will inevitably compare your offering to the ‘next best alternative’ and only the customer knows what that might be. For easyJet it might be Skype, For Volkswagen it might mean a family holiday. What are you benchmarking?

Second, industry ‘best practices’ rarely deliver superior customer value, focusing, as they tend to, on internal costs and efficiency rather than customer benefits.

Finally, as Michael Porter remarked in 1996, “As a result of benchmarking, companies imitate one another in a type of herd behaviour in quest for productivity, quality and speed.  Driven by desire to ‘grow’, this creates unnecessary ‘hyper-competition’. Operational effectiveness is necessary, but it is not sufficient to win and it is not strategy.. Competitive strategy is about being different.

The good news is that it doesn’t have to be this way.  If you can’t stop benchmarking – it has become a ritual for many – you can start using the data correctly.

  1. Stop looking for costs that can be cut and search instead for differences (that the customer values) and invest in these instead.
  2. As others in the industry unthinkingly match costs and approach commoditisation, look for opportunities to add value that customers are seeking
  3. Broaden the benchmarking, like ‘open innovation’ into other industries that are competing for your customers.
  4. Benchmark how well you are performing in your customers’ eyes. That is Real Benchmarking.

Identity Crisis at Yahoo

When senior Yahoo executives gathered at a San Jose hotel for a management retreat in the spring of 2006, there was no outward sign of a company in crisis.

The internet pioneer, not yet a teenager, had just finished the prior year with $1.9 billion in profits on $5.3 billion in revenue. The tough days of the dot-com bust were a distant memory, and Yahoo Inc, flush with lucrative advertising deals from the world’s biggest brands, was enjoying its run as one of the top dogs in the world’s hottest industry.

But for one retreat exercise, everyone was asked to say what word came to mind when a company name was mentioned. They went through the list: eBay: auctions. Google: search. Intel: microprocessors. Microsoft: Windows.

Then they were asked to write down their answer for Yahoo.

“It was all over the map,” recalled Brad Garlinghouse, then a Yahoo senior vice president and now COO of payment settlement start-up Ripple Labs. “Some people said mail. Some people said news. Some people said search.”

The lesson here is simple – if you don’t know what business you want to be in, your customers will never work it out. Organic food had exactly the same problem so suffered badly when the Recession hit. The result of Yahoo’s indecision resulted in an agreement this week to sell the company’s core assets to Verizon Communications who will probably blend it with its existing AOL division.

Yahoo’s lack of clear focus on what business it needed to be in, and the subsequent customer confusion led to a number of missed opportunities (because they couldn’t be sure if they were opportunities or distractions) described in the Reuters article as a failed bid to buy Facebook for $1 billion in 2006. A 2002 dalliance with Google similarly came to naught. A chance to acquire YouTube came and went. Skype was snapped up and Microsoft’s nearly $45 billion takeover bid for all of Yahoo in 2008 was blocked by Yahoo’s leadership.

There is nothing new here and we can travel right back to Levitt’s ‘Marketing Myopia’ in 1960 for insight. It might be an exercise that top management don’t like doing but lack of a crystal clear business definition means that Yahoo’s customers didn’t understand Yahoo’s business. In addition, Yahoo didn’t understand which customer needs it should be satisfying, where it should be investing for growth, the boundaries for effort (what it should stop doing or do more of), who it was competing with and, most dangerous of all, who was it’s core market – that it had to look after above all others.

Do you know what business you are in?