I’m currently reading The Essential Drucker, a collection of Drucker’s best works on management over six decades. Drucker is quite clear on what he believes the purpose of every business to be, what defines it, is at its core and where to start – from the Outside looking In! (bolding mine)
“The answer to the question, What is our business? Is the first responsibility of top management. With respect to the definition of business purpose and business mission, there is only one such focus, one starting point. It is the customer. The customer defines the business. To satisfy the customer is the mission and purpose of every business. The question, What is our business? Can, therefore, be answered only by looking at the business from the outside, from the point of view of the customer and market.”
Following the Socceroos (National Football team of Australia) Asian Cup win, Brian Schwartz (Deputy Chair of Football Federation Australia) was recently invited to give a talk on Leadership at a The Customer Experience Company breakfast event.
Brian is the Chairman of IAG, deputy chair of Football Federation Australia and The Asian Cup Organising Committee, and also Westfield and Scentre Group. Previously, Brian was CEO of Investec Bank and prior to that CEO of Ernst & Young Australia.
Brian opened his talk with “a bit of theory” from his own experience of what makes good leadership today:
1. A preparedness for change. Brian’s view is that you have to be dissatisfied with the status quo in order to drive change, that you have to be the change yourself, and that you need to find ways to bring others with you on the journey. As Brian quoted – “The world is moving so fast these days that the man who says it can’t be done is generally interrupted by someone doing it” though interestingly that quote came from Elbert Hubbard, over 100 years ago!
2. A long-term mentor. Brian has been fortunate to have enjoyed good mentoring over his career – someone who can respond honestly to your situation, who you trust to ask “what would you do?”. Mentoring needs to be long-term, not just a one-year commitment.
3. Courage to do the difficult things. There are often situations where it can be hard or risky to take a course of action, to stick your head up. But in his career, even when it seems like a failure there have been significant benefits, and this courage keeps you fresh. “As long as you’re green, you’re growing. As soon as you’re ripe, you start to rot.” (Ray Kroc).
4. Good teamwork. Good leaders succeed because of good teams, and the weakest link in a team is usually a problem for the leader and the rest of the team. Brian doesn’t like “I” specialists, and the lesson he’s learned most in his career is to not leave the wrong people in a role – do the hard stuff quickly (he confessed that he is still learning this).
5. Values, consistently communicated. Leadership has changed since Brian started his career – from an autocratic do-as-I-say approach to a collaborative style. This means that values and culture are critical to bringing people with you. “Be the change that you wish to see in the world.” (Mahatma Gandhi)
6. Succession planning. This is critical – and there is no better example than the technical team in the FFA, who impressed Brian with their plans for the team; for each player they had a list of current alternatives, plus a plan for the upcoming generation that can take over, plus insights into the younger generation and how individuals should be developed.
The complete write up on Brian’s talk given at the breakfast event can be found here.
I finally finished reading Walter Isaacson’s, The Innovators, this weekend and it was a thoroughly enjoyable read. In the last Chapter, Ada Forever, Isaacson describes the lessons history has taught us when it comes to innovation.
First and foremost is that creativity is a collaborative process. Innovation comes from teams more often than from the light bulb moments of lone geniuses. This was true of every era of creative ferment. The Scientific Revolution, the Enlightenment, and the Industrial Revolution all had their institutions for collaborative work and their networks for sharing ideas.
Ideas are, more often than not, an evolution as opposed to a revolution.
…it was based on expanding ideas handed down from previous generations. The collaboration was not merely among contemporaries, but also between generations. The best innovators were the ones who understood the trajectory of technological change and took the baton from innovators who preceded them.
A balanced team is best…
The most productive teams were those that brought together people with a wide array of specialties. Bell Labs was a classic example. In its long corridors in suburban New Jersey, there were theoretical physicists, experimentalists, material scientists, engineers, a few businessmen, and even some telephone-pole climbers with grease under their fingernails.
Even though the Internet provided a tool for virtual and distant collaborations another lesson of digital-age innovation is that, now as in the past, physical proximity is beneficial….Predictions that digital tools would allow workers to telecommute were never fully realized. One of Marissa Mayer’s first acts as CEO of Yahoo! was to discourage the practice of working from home, rightly pointing out that “people are more collaborative and innovative when they’re together.”
The best leadership team combines vision and fosters collaboration…
Throughout history the best leadership has come from teams that combined people with complementary styles…pairing visionaries, who can generate ideas, with operating managers, who can execute them. Visions without execution are hallucinations. Robert Noyce and Gordon More were both visionaries, which is why it was important that their first hire at Intel was Andy Grove, who knew how to impose crisp management procedures, force people to focus, and get things done. Visionaries who lack such teams around them often go down in history as merely footnotes.
The most successful endeavors in the digital age were those run by leaders who fostered collaboration while also providing a clear vision. Too often these are seen as conflicting traits: a leader is either very inclusive or a passionate visionary. But the best leaders could be both.
The most successful had one thing in common…
…they were product people. They cared about and deeply understood, the engineering and design. They were not primarily marketers or salesmen or financial types; when such folks took over companies, it was often to the detriment of sustained innovation. “When the sales guys run the company, the product guys don’t matter so much, and a lot of them just turn off,” Jobs said. Larry Page felt the same: “The best leaders are those with the deepest understanding of the engineering and product design.”
…innovation will come from people who are able to link beauty to engineering, humanity to technology, and poetry to processors. In other words…creators who can flourish where the arts intersect with the sciences and have a rebellious sense of wonder that opens them up to the beauty of both.
Andrea Ovans recently wrote an article for the Harvard Business Review regarding innovation titled “Is Innovation More About People Or Process?” and resolves that:
In the end, the answer to the people or process question is probably “both”: people matter; process matters. Talented people can be hobbled by poor processes; hesitant people can be uplifted by smart processes. In the best of all possible worlds, extraordinary people pursue innovative ideas through processes that are perfectly suited to their talents. In the real world, less-than-perfect people are wise to use all the help they can get.
In my own previous post “What is Innovation?” I highlighted a story that in turn highlighted another observation that innovation was born from many ideas from many people rubbing off one another until the best idea was formed. That in itself is a process. Bringing people with different perspectives together so they can contribute different ideas or views on an initial idea until it is pollinated into the flower it can be. The more creative the people are the more diverse the contributions to that melting pot will be.
An often annoying, sometimes painful, ‘Moment of Truth’ for airline customers (with checked baggage) along their customer journey, is collecting their bags on arrival. WestJet accented this Moment of Truth brilliantly to deliver a ‘Moment of Magic’ with their famous 2013 Christmas Miracle marketing stunt.
At this stage Delta’s “Bags on Time” initiative appears to be a trial running only for a limited time with plenty of exclusions and only applicable to frequent flyers. No doubt if they believe its a promise they can keep ongoing, expect to see it return in the future with more permanency and less restrictions.
BA on the other hand, has already conducted a trial of its ‘Carousel Collection’ service at London City airport and is now rolling the service out to “all passengers arriving at London City Airport on domestic flights”. This service means customers don’t even have to collect their bags on arrival, can go straight to the office and have their bags shipped to an address of their choice.
Traditional market segmentation methods, including those I was taught when studying an MBA, focus on segmenting (a.k.a pigeonholing) customers based on criteria such as:
- demographics (age, sex, marital status, income),
- geographic (country, post code),
- behavioral (attitude towards, usage of ) and
- psychographics (activities, interests, opinions).
But as pointed out by Clayton M. Christensen, Scott Cook and Taddy Hall in the Harvard Business Review, “the methods that most of us learned to segment markets, build brands, and understand customers—are broken.”
Companies who don’t really know who their customers are, use traditional market segmentation to pigeonhole the general population into boxes, then measure which ‘boxes’ or pigeonholes are buying what they are selling and which are not. They then look at the pigeonholes not buying and, again using the same criteria as input, devise ways to advertise to that pigeonhole. This isn’t very scientific and is one of the reasons behind the jibes often directed at marketing departments.
On the other hand, BMW – an Outside In / Customer Centric company – knows and understands that you should categorise customers based on their needs. In the BMW advertisement below, BMW is signalling to a particular category of customer, that this car has been built to cater for their needs. Watching the video, you might as I did, question whether you can go to BMW’s web site and ‘build your own car’. But you can’t (not more than usual anyway) and there is no need. BMW has already built this particular category of customers’ needs into this 3 Series model.
You may have also noticed the different types of people in the advertisement. They were from different countries, spoke different languages, both male and female, both young and old and varied employment situations. Yet they all had the same/similar needs in regards to the experience they needed to have.
Clayton Christensen describes this a similar way. What job are the customers hiring the product to do?
“The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” Peter Drucker
“Get closer than ever to your customers. So close that you tell them what they need well before they realise it themselves.” Steve Jobs
I am currently reading The Innovators by Walter Isaacson (also Author of Steve Jobs Biography). In his book Isaacson states:
“Most of us have been involved in group brainstorming sessions that produced creative ideas. Even a few days later, there may be different recollections of who suggested what first, and we realise that the formation of ideas was shaped more by the iterative interplay within the group than by an individual tossing in a wholly original concept. The sparks come from ideas rubbing against each other rather than bolts out of the blue.”
This reminds me of a story I was once told about innovation at an American power company, Pacific Power and Light, slightly abbreviated here…
“Ice storms in the Winter would result in ice accumulating on the power lines to the point the lines would break under the weight. To prevent this happening, immediately after each storm, Linesman would be sent out to climb up the poles and shake the lines to remove the ice. This was unpleasant and dangerous work and they needed a better solution.
PP&L had, in the past, conducted a number of “brainstorming” sessions with no positive results. They then turned to a professional resource to organize still another session. He suggested that a diverse group be assembled to look at this problem. Rather than assembling just linemen and their supervisors, the resource insisted that people with a large variety of job functions be convened to look for a more creative way to get the ice off the power lines. In the “brainstorming” session that followed, were linemen, supervisors, accountants, secretaries, and people from the mail room.
Several hours into the meeting the professional resource was beginning to become concerned that this effort would be as unproductive as previous ones. Then, during one of the coffee breaks, he overheard two of the linemen talking.
“I hope we can finally figure out a better way to skin this cat.” said one. “I really hate this job. Why, just last week, I was coming down from a pole, and, when I hit the ground, I was looking eye to eye at one of the biggest, meanest black bears I’ve ever seen. That bear, apparently, was not happy that I had invaded his territory, and chased me for well over a mile before he was satisfied that I would not return.”
Trying to stimulate the group, the resource retold this tale to the rest of the session.
“Why don’t we train the bears to climb the poles. They are so big and so heavy that their weight would probably be enough to shake the wires and knock the ice off.” quipped one of the linemen.
After the laughter died down, the group thought of hundreds of reasons why that was a silly idea.
Then another of the linemen suggested that although training the bears seemed foolish, perhaps by placing honey pots on top of the poles, the bears would naturally climb the poles to get the honey and, in the process, shake the poles sufficiently to knock the ice off the lines.
After another period of laughter followed by more objections, one of the more senior, more sarcastic linemen said, “You know all those fancy helicopters those fat cats in the front office fly around in all the time? Why don’t we grab one of those and fly from pole to pole placing the honey pots on top just after an ice storm.”
Still another period of laughter followed. Then one of the secretaries spoke for the first time. “I was a nurse’s aide in Vietnam. I saw many injured soldiers arrive at the field hospital by helicopter. The down wash from the helicopter blades was amazing. Dust would fly everywhere. If we flew the helicopter over the power lines at low altitude, would the down wash be sufficient to knock the ice off?”
This time there was no laughter – just silence. She had come up with an answer. By valuing diversity and by encouraging divergent thinking, the resource had enabled the group to come up with a possible solution to a problem all wanted solved.”
James Dodkins, Chief Customer Officer at the BP Group, recently posed the question “What do YOU define customer centricity to be? What qualifies as a customer centric organisation?“
My ‘off-the-cuff’ response was “One where a customer’s needs are consistently met. And if, on the rare occasion they are not, recovery is swift and sincere.”
A couple of days later Maz Iqbal questioned whether being Customer Centric was necessarily a good thing in a very personal and thought provoking post. In my eyes Maz makes a similar argument to that of whether Hitler was a Leader or not. A question that has been argued for and against by Leadership theorists for decades generally on the basis of principle that a true Leader can only lead for good and not evil or it does not matter either way – a Leader is a Leader.
Yes organisations can be focused or centered on customers for the wrong reasons – for example they may have no intention of creating value for customers and are simply chasing “bad profits”. But proponents of Outside In or Customer Centricity would argue this is fundamentally against the principles of Outside In / Customer Centricity.
At the end of the day, its all about the definition of terms, just agree yours with those you interact with and move forward.
A little over a year ago in late 2013, Forrester Research proclaimed “We have begun a 20-year business cycle in which the most successful enterprises will reinvent themselves to systematically understand and serve increasingly powerful customers.”
If this is so, what was Jan Carlzon, former President of Scandinavian Airlines, articulating in his 1987 book Moments of Truth, when he said “We are at an historic crossroad where the age of the customer orientation has arrived”?
And what did the famed business management guru Peter Drucker mean when, in his 1954 book The Practice of Management, he stated “There is only one valid definition of a business purpose: to create a customer.”?
Of course, the most successful companies throughout human history, are the ones whom have understood that customers are their most important asset. After all, they pay the salary of everyone from the board, to the CEO, to the back office and the front line. Without customers to repeatably buy what you are selling, you have no company.