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Be Special to Your Customers

Be Special to Your Customers

There are only two things you need to know: Don’t compete with China on cost, and don’t compete with Walmart on price. And if you’re not competing with Walmart on price and China on cost, then you have to start going up the value chain and start doing something that’s worth being paid more money for.

In the last three years, the short space of three years, 60,000 foreign-owned factories have been opened in China. That’s a new factory every 26 minutes. And in the course of those same three years, 600 foreign-owned labs have opened in China—200 a year, or one every 43 hours. Good luck competing with China on cost. In Bentonville, Arkansas, Walmart has in its files 460 terra bites of data—twice as much data on its customers as exists on the entire Internet. Good luck competing with Walmart on price.

Make Customers Fall in Love with Your Business

'The Customer Service Revolution' by John R. Dijulius III (ISBN 162634129X) A focus on cost-cutting and efficiency is how many organizations weather a down-turn, but this approach will only ultimately render them obsolete. Only constant pursuit of innovation can insure long-term success.

The CEO of the Intercontinental hotel group was fired recently. He was an accountant. And I’m sure this guy did a brilliant job of shaping up the cost structure, but it’s a new world. The chairmen who fired him said they are now in a new phase of business where the group will be a franchising and management company and brand management is central. Intercontinental will now have more to do with brand ownership.

General Erick Shinseki, retired Chief of Staff of the U.S. Army, said, “If you don’t like change, you’re going to like irrelevance even less.” During the six years that General Shinseki ran the army, he brought about more change than had occurred in the previous 75 years, and yet he was fired by Don Rumsfiled for not going fast enough!

I’m all in favor of having boring people in charge of organizations if the times are boring. But in freakish times, we need more freaks running our firms.

One of the offenses against gyrating is for a whole set of vaguely confident companies to merge with other companies saying, “Size is our defense.” Well it never has worked, and it never will work. Sears plus K-Mart is not keeping Walmart’s Lee Scott awake in Benville, Arkansas. Such a merger is called a horizontal double-dummy.

Create a Memorable Customer Experience

Most giant firms have never performed well. Forbes went back 87 years to see how the Forbes 100 had done. The answer was pathetic: 61 dead, 39 alive, and of the 39, only 18 were in the Fortune 100, and those 18 had underperformed the stock market by 20 percent. Only two of them had out-performed the market—GE and Kodak, and now we’re down to one, GE.

'The Customer Rules' by Lee Cockerell (ISBN 0770435602) What’s interesting to me is that GE is the most disorganized of that set. Not undisciplined, but disorganized. Trust me, the guy running the appliance division in Louisville, KY, could not find GE’s headquarters on a map. They send him to Louisville and say, “Make some money, dude, see ya in five years, if you screw it up, you’re outta here.” Size is over-rated.

Dick Kovacevich, CEO of Wells Fargo, said, “I don’t believe in economy to scale. You don’t get better by being bigger, you get worse.”

In 240 industries, the market share leader is the return on asset leader in only 29 percent of the cases. Nick Negroponte, head of MIT’s media lab, put it this way, “Incrementalism is innovation’s worst enemy.” In a time of non-incremental change, if you are working on making it a little bit better, you’re not working on blowing it up.

If you’re the leader, you don’t want to known as the King of the Tinkerersthat’s playing around while the world is flipping upside down. Roger Enrico, chairman of Pepsico, said, “Beware of the security of making small changes to small things, rather, make big changes to big things.” Good advice.

ISIT is blowing up every industry. We all live in a Dell-EBay-Walmart-Google world. What’s required, then, is absolute reinvention of the enterprise. Ray Lane ran Oracle for 10 years as president. He said e-business is about rebuilding the organization from the ground up. Most companies today are not built to exploit the Internet. Their processes, approval, hierarchy the number of people they employ—all of that is wrong for running an e-business.

People who have not been investing heavily in ISIT in the last five years are stupid. I watched it with Sysco, the company that distributes food to hospitals, schools, and factories. When everybody else was shutting down their ISIT investment five years ago, Sysco doubled their investment. Their chairman said, “I’m betting that I can reinvent the company, this entire industry, and get a 15-year jump on the competition.”

And they’ve done it! Sysco just bulldozed the entire industry and has grown from about $15 billion to about $35 billion dollars in five years.

Forest Gump, the father of outsourcing, said, “Don’t own nothing if you can help it. If you can, rent your shoes.” Forget outsourcing; let’s talk about best sourcing. Only an idiot would work with anyone who is not the best in the world. Several firms now even rent CEOs, so I’m not even sure we need these. There is no excuse for not working with the best.

If There’s No Perceived Difference for Your Customers, You’re Dead.

In the age of ISIT, the customer relationship is going one-to-one. Mass media is dead. Narrow-cast and one-to-one is the answer. Over the next 10 years, narrow cast will grow at 14 percent a year, mass media at 3 percent a year. To use CRM right, you have to blow up the organization and re-imagine everything you’re doing. It’s not a tool for getting a little closer to your customer; it’s a tool for revolutionizing the way you work with your customer.

'The Service Culture Handbook' by Jeff Toister (ISBN 0692842004) I love books, and I used to love going into bookstores. Now I love something else—Amazon.com. I have never met a living human being from Amazon, and probably never will. But I know this: any book I order will be on my desk tomorrow.

As Paul Cole, who ran the CRM practice of Cap, Gemini, Earnst, and Young said, “CRM is not about a pleasant transaction; it’s about a systemic opportunity to rethink the entire enterprise so that we can take advantage of every resource in the system to enhance the customer experience.”

I started blogging last year, and my life has changed. Blogging is short for “web log” and it says that the website becomes, not a place to process information, but a place to have intimate conversations. The web at its best is about conversations and portals.

I like what Home Depot is trying to do. Bob Nardelli discovered a mess when he arrived at Home Depot. Basically he said, “I want people to fall in love with the orange box, and know they’ll be taken care of. Their home electronics center, their chlorine in their pool, their home improvement projects—it’s all in that portal called, ‘Trust in the orange box.'”

We’re seeing a white-collar tsunami in professional services, as contract forms and advice are available on the web. I get mad when I hear, “But we have to protect the unsuspecting consumer.” That’s baloney. I am not an unsuspecting consumer, I’m a human being with a brain who can access health information on the web that is better than what my doctor offers. I’m not smarter than my realtor, my lawyer, or my doctor, but I’m a lot smarter than I was 10 years ago—and getting smarter every day. The conceit of gurus and doctors is, “You’ll listen to me because I wear the white coat.” What that means is, “Pay me a lot, I know some special stuff.”

What’s So Special About You for Your Customers?

I don’t deny professionalism, but I’m saying, “Don’t ever talk down to a customer.” Most young people are patrolling 50 websites. They’re not saying, “Let’s check out Lending Tree.” They’re saying, “Let’s check out Lending Tree and 100 others.”

It’s a new world order, regardless of the industry. Extremely good work is no longer enough, because the world is exploded with people doing extremely good work. Experience buys you nothing. It’s the price for entry. But it doesn’t make you special.

What is special about you? I don’t think excellence or being best is enough. Sears was best; Walmart was different. Compaq was best; Michael Dell was different. That’s the point of uniqueness.

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Learn How to Execute Effectively with Strategic Alignment

Learn How to Execute Effectively with Strategic Alignment

Aligning Strategies Throughout the Business

It is a familiar situation. Corporation A misses severely on its obligations several quarters in succession and the stock plummets. Consequently, the Board loses confidence, the CEO “resigns,” and a new CEO is chosen who declares a restructuring of the business.

In recent years, we have seen numerous such reports. Even where top-level executives display signs of “vision” and express what seems to be a sound business strategy on paper, results go amiss of expectations.

Strategy is often thought of as something that only top-tier executives can effect, and while it may be true that “top-down” strategy is most customary. We continue that individuals throughout the organization must both recognize the organization’s strategy and create an supplementary strategy for themselves—a supplemental strategy that directly impacts their respective areas of responsibility and braces the core of the business.

'Rapid Realignment' by George Labovitz and Victor Rosansky (ISBN 0071791132) We have all been there. The leadership team spends long hours deciding on a strategy to improve performance. Management teams come up with supportive annual budgets. Bout teams settle long PowerPoint presentations and exhaustive spreadsheet files. Yet not much happens in terms of deliverables! Ambitious year-end targets are missed. Improvement curves keep being shifted to the right, and the reorganization begins.

Companies with obstructive cultures and meagre strategic alignment considerably underperform their competitors. Additionally, most executives recognize what’s at stake and what matters, even if their companies don’t always seem to get it right.

Questions arise as to why these events occur: What has gone wrong and why? Are the goals too assertive? Are the apparitions or strategies deficient? Are middle managers unable to execute? If the answer is yes to all these questions, then why is it so?

All are good questions; however, the key component is strategic alignment.

What is Strategic Alignment?

'Alignment Using the Balanced Scorecard' by Robert Kaplan and David Norton (ISBN 1591396905) Strategic alignment is the connection between the goals of the business, which quantify the progress of the implementation of the strategy toward the vision, and the goals of each key contributor, including groups, divisions, business units, and departments.

Strategic alignment, then, is one and all rowing in the same direction. The tighter the linkage and the better the alignment, the likelihood of faultless execution becomes stronger.

Once implemented properly, strategic alignment delivers four major advantages:

  1. it allows an well-organized use of frequently scarce resources;
  2. it results in improved speed of execution;
  3. it encourages team efforts toward common goals; and
  4. it increases motivation by giving people a keener sense of contribution to the results of their groups and the corporation in total.

These are great results, but few corporations realize them. Since many corporations and their leadership teams try to gain strategic alignment, what barriers must be overpowered?

Strategic Alignment and a Culture That Supports Innovation

Two Key Components of Successful Strategic Alignment

Culture plays a critical role in this strategy. According to Fred Palensky of 3M Company, “for over 100 years, 3M has had a culture of interdependence, collaboration, even codependence. Our businesses are all interdependent and collaboratively connected to each other, across geographies, across businesses, and across industries. The key is culture.”

  1. Communicate broadly to help people understand the elements of the vision and of the key strategic directions. Repetition by the leadership and management teams at every opportunity—including sales meetings, company meetings, and operational business reviews—empowers each employee to understand vividly how he or she can contribute.
  2. Link the results of each employee’s job to the progress of the entire corporation strategy, and do it clearly and simply. This is best done by using simple measures of key performances (KBMs = key business metrics, or KPMs = key performance metrics) that can be connected to the employee’s annual performance review.

Strategic Alignment and a Culture That Supports Innovation

'Achieving Strategic Alignment' by Barry MacKechnie (ISBN 1439274223) At our company, we use a cascading set of goals that determine the progress of the strategic implementation. This “waterfall effect” or “goal tree” starts at the top and cascades down. The objectives are assimilated into our annual performance targets and support the key goals of our leaders. This safeguards focus and alignment as employees deliver on their objectives. Objectives are rolled back up the “goal tree” in reviews of goals.

Implementing strategic alignment requires a robust promise from the top leadership and a focus on frequent communication using simple management principles of focus, clarity, and fortification. In the end, effective execution of strategic alignment is a leader’s top priority and ensures that goals are met and success achieved.

Purpose is what the business is trying to accomplish. Strategy is how the business will accomplish it. Purpose is durable—it is the north star towards which the company should point. Strategy comprises choices about what products and services to offer, which markets to serve, and how the company should best set itself apart from entrants for competitive advantage.

Keep corporate strategy at the heart of your organization’s culture by standing up a process to keep it front-and-center.

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Posted in Business and Strategy Management and Leadership

Diversify Your Business Risk through Shared Risk and Reward Programs

Diversify Your Business Risk through Shared Risk and Reward Programs Risk assessment is a principal tool used to make current environmental decisions, but it is still crude, expensive, and controversial.

While diversification is indispensable to managing financial investment risk, business leaders need to prevaricate their bets and manage their financial vulnerabilities.

Risk taking is the part of business strategy that involves assessing how a business’s decisions will damage or benefit the company. Every business encounters risks, which may or may not be anticipated or controlled by the company.

This does not mean you attempt into markets or embrace technologies you don’t understand, but instead that you look at what you are already doing and categorize natural market synergies and product line extensions. In addition, it is best to be ahead of the curve on market trends and changes rather than lagging behind them.

Leaders Comprehend the Value of Shared Risk and Reward Programs

'Enterprise Risk Management' by James Lam (ISBN 111841361X) There is no seamless diversification strategy. It is more of an art than a science. The significant thing is to protect your margins and stabilize your cash flow while growing your top line. For example, you may have some parts of the business that are in a fast growth mode and eating cash. In this case, it would be helpful to have other areas of the business that are growing more incrementally, generating surplus cash flow and steady margins.

Risk assessment is a form of analysis of the probability and magnitude of harm from various events and activities. Related to the science of risk assessment, risk management determines how to plan for and communicate about risks. Risk perception is a science devoted to examining the qualitative aspects of risk, not simply its quantitative aspects.

To bring together the various disciplines and implement integrated risk management, ensuring the buy-in of top-level executives is vital. These executives can institute the processes that enable people and resources across the company to participate in identifying and assessing risks, and tracking the actions taken to mitigate or eliminate those risks.

'The Essentials of Risk Management' by Michel Crouhy (ISBN 0071818510) You may also have become too reliant upon one client and need to have a marketing strategy that pushes you to identify multiple new prospects that have the potential to grow with you in the same way. You may entered one market as much as you can and need to expand to other geographies. Never rest on your marketing laurels or get too self-satisfied. Companies needed to take advantage of regional management contracts.

I realize that business size does come into play here. However, regardless of how big you are, do not become a “one trick pony.” Anticipate that your business will have up and down periods and then think of imaginative ways to smooth out this curve. All good leaders understand and embrace the importance of diversification. To the maximum degree possible, put your fate in your own hands instead of being subject to whims of the marketplace.

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How Corporate Executive Education Programs Could Collaborate with Universities

How Corporate Executive Education Programs Could Collaborate with Universities

Executive education programs are comprehensive and wide-ranging. Everything from off-the-shelf programs focused on significant business challenges to made-to-order programs. Great faculty-people who can stimulate and invigorate executives-teach these programs. Executives go back to their firms with great recollections and ideas. They feel cherished by their company because the company has invested in them. Hurrah!

How can lessons from these involvements be applied to enhance business results? The answer lies in cultivating the relationship between the corporation and the university.

Curriculum design in Corporate Executive Education Programs The first step is to tailor the executive education program with the university. To do this, the firm must have specific goals that the core curriculum can address. These goals could aim at specific business problems or performance. Class makeup is important in any made-to-order course designed for impact. Attendees must be responsible for that impact.

The firm will need an executive sponsor who can enunciate the goals and contribute to the curriculum architecture. Inherent in this design is the post-program application. Useful goals are measurable. Measure their state of achievement before and after the course to understand impact. When the core curriculum is designed around these goals, attendees then can be expected to conclude the program with a plan to apply the lessons. If at all possible, the executive sponsor should hear those plans and follow their progress.

Curriculum design must integrate scalable learning. If the lessons learned during the course are to generate operational results, those who attended the course must teach them to those who did not attend. This can be a challenge given time and location constraints. Scalability often necessitates innovative solutions such as interactive e-learning sessions where employees anywhere, anytime can partake in online sessions that deliver the key message to implement. Future programs for smaller teams targeting a specific problem can be launched through virtual white-board sessions with faculty. CDs also provide a useful medium to capture and share key sessions. Workbooks can be used to scale the plans.

Corporate Executive Education Programs partnership between a corporation and a university Our universities include impressive thought leaders who spend their careers studying business challenges, pursuing solutions across industries. This talent can do far more than share their insights. If properly reinforced, they can channel their classroom work towards corporation-specific goals. This support includes pre-program preparation. Meeting with the faculty and educating them on the firm’s business and the goals is vital. Investor relations’ performances and annual reports are useful tools for this meeting. They cannot customize their teaching if they do not understand the business and the issues. Depending on the content necessitated, a non-disclosure agreement may be needed.

Faculty must also understand the attendees and their roles in the goal achievement. Once the faculty understands who does-what-where, they can effectively tailor discussions for individual and group needs. Knowledgeable faculty can also participate in study group discussions beyond the classroom and help create solutions. Also, sharing the attendees’ biographies or leadership profiles can give the faculty an understanding of their partners in this impact-focused learning journey.

The elements of a working partnership between a corporation and a university are the same ones we use for any partnership. Both parties must have an open working relationship with identified, measurable goals. Clear communication is imperative. Both parties must be focused on results and know the talent they have to achieve those results. Scalable solutions are indispensable. We approach business this way every day. Developing our key talent deserves nothing less in commitment or rigor.

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Quotations from Starbucks Founder Howard Schultz’s Book “Pour Your Heart Into It”

Howard Schultz‘s Pour Your Heart Into It touches on the best management and business practices and the techniques that Schultz used to found and lead Starbucks to the international coffee corporation it is today.

Starbucks has become an emblem of the current specialty coffee movement and a “hip” lifestyle. Starbucks coffee bars have opened in small towns and major cities alike, first in America, then around the world.

Starbucks Founder Howard Schultz

“Pour Your Heart Into It” Chapter Titles and Lead Quotations

Starbucks is a international coffee house chain with more than 17,000 stores. Founded in 1971 to roast coffee and sell it straight to drinkers at branded shops, it was only a regional company until Howard Schultz purchased it in 1987.

  • Chapter 1: Imagination, Dreams, and Humble Origins
    “It is only with the heart that one can see rightly. What is essential is invisible to the eye.”
    Antoine de Saint-Exupery in The Little Prince
  • Chapter 2: A Strong Legacy Makes You Sustainable for the Future
    “A hundred times every day I remind myself that my inner and outer life depend on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received.”
    Albert Einstein
  • Chapter 3: To Italians, Espresso is Like an Aria
    “Some men see things as they are and say ‘Why?’ I dream things that never were, and say ‘Why not?'”
    George Bernard Shaw, often quoted by Robert F. Kennedy
  • Chapter 4: Luck is the Residue of Design
    “Whenever you see a successful business, someone once made a courageous decision.”
    Peter Drucker
  • 'Pour Your Heart Into It' by Howard Schultz (ISBN 0786883561) Chapter 5: Naysayers Never Built a Great Enterprise
    “We judge ourselves by what we feel capable of doing, while others judge us by what we have already done.”
    Henry Wadsworth Longfellow, Kavanagh
  • Chapter 6: The Imprinting of the Company’s Values
    “The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”
    Martin Luther King, Jr.
  • Chapter 7: Act Your Dreams with Open Eyes
    “Those who dream by night in the
    dusty recesses of their minds
    Awake to find that all was vanity;But the dreamers of day are dangerous men,
    That they may act their dreams with open
    eyes to make it possible.”
    T. E. Lawrence (of Arabia)
  • Chapter 8: If it Captures Your Imagination, it Will Captivate Others
    “Whatever you can do, or dream you can, … begin it. Boldness has genius, power and magic in it.”
    Johann Wolfgang von Goethe
  • Chapter 9: People are nor a Line Item
    “Wealth is the means and people are the ends. All our material riches will avail us little if we do not use them to expand the opportunities of our people.”
    John F. Kennedy, State of the Union address in January 1962
  • Chapter 10: A Hundred-story Building First Needs a Strong Foundation
    “The builders of visionary companies … concentrate primarily on building an organization—building a ticking clock—rather than on hitting a market just right with a visionary product idea.”
    Jim C. Collins, Built to Last
  • Chapter 11: Don’t Be Threatened by People Smarter Than You
    “The best executive is the one who has sense enough to pick good men [and women] to do what he wants done, and self-restraint enough to keep from meddling with them while they do it.”
    Theodore Roosevelt
  • Chapter 12: The Value of Dogmatism and Flexibility
    “The only sacred cow in an organization should be its basic philosophy of doing business.”
    Thomas J. Watson, Jr. “A Business and Its Beliefs,” quoted in Built to Last

How Starbucks Became Successful

  • Chapter 13: Wall Street Measures a Company’s Price, Not Its Value
    “There are only two guidelines. One, what’s in the long-term best interests of the enterprise and its stakeholders, supplemented by the dominant concern of doing what’s right.”
    Robert D. Haas, President, Levi Strauss & Co.
  • Chapter 14: As Long as You’re Reinventing, How About Reinventing Yourself?
    “The difference between great and average or lousy in any job is, mostly, having the imagination and zeal to re-create yourself daily.”
    Tom Peters, The Pursuit of Wow!
  • Chapter 15: Don’t Let the Entrepreneur Get in the Way of the Enterprising Spirit
    “No organizational regeneration, no national industrial renaissance can take place without individual acts of courage.”
    Harvey A. Hornstein, Managerial Courage
  • Chapter 16: Seek to Renew Yourself Even When You’re Hitting Home Runs
    “To stay ahead, always have your next idea waiting in the wings.”
    Rosabeth Moss Kanter
  • Chapter 17: Crisis of Prices, Crisis of Values
    “It is by presence of mind in untried emergencies that the native metal of a man is tested.”
    James Russell Lowell, “Abraham Lincoln,” in North American Review, ]anuary 1864
  • Chapter 18: The Best Way to Build a Brand is One Person at a Time
    “What comes from the heart, goes to the heart.”
    Samuel Taylor Coleridge, Table Talk
  • Chapter 19: Twenty Million New Customers are Worth Taking a Risk For
    “Security is mostly superstition. It does not exist in nature, nor do the children of men as a whole experience it. Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure or nothing.”
    Helen Keller, The Open Door
  • Chapter 20: You Can Grow B1g and Stay Small
    “The fundamental task is to achieve smallness within large organization.”
    E. F. Schumacher, Small is Beautiful: Economics as If People Mattered
  • Chapter 21: How Socially Responsible Can a Company Be?
    “The evidence seems clear that those businesses which actively serve their many constituencies in creative, morally thoughtful ways also, over the long run, serve their shareholders best. Companies do, in fact, do well by doing good.”
    Norman Lear, Founder of the Business Enterprise Trust, Quoted in David Bollier’s Aiming Higher
  • Chapter 22: How Not to Be a Cookie-cutter Chain
    “Art is an adventure into an unknown world, which can be explored only by those willing to take risks.”
    Mark Rothko, In The New York Times, June 13, 1943
  • Chapter 23: When They Tell You to Focus, Don’t Get Myopic
    “If you can keep your head when all about you
    Are losing theirs and blaming it on you,
    If you can trust yourself when all men doubt you,
    But make allowance for their doubting too; …
    If you can fill the unforgiving minute
    With sixty seconds’ worth of distance run,
    Yours is the Earth and everything that’s in it,
    And—which is more—you’ll be a Man, my son!”
    Rudyard Kipling, “If”
  • Chapter 24: Lead with Your Heart
    “Leadership is discovering the company’s destiny and having the courage to follow it. … Companies that endure have a noble purpose.”
    Joe Jaworski of the Organizational Learning Center at Massachusetts Institute of Technology (MIT)

Starbucks Founder Howard Schultz's 'Pour Your Heart Into It'

Selections from Howard Schultz’s Analysis of Starbucks’ Spectacular Success

Schultz sponsored Starbucks as the “third place,” distinctive from home and work. Many of its shops have comfortable padded chairs and sofas. In recent years they offer free Wi-Fi for customers who want Internet access for their computers. Some Starbucks are in shopping malls, bookstores, supermarkets, college campuses, and airports. Baristas mix a range of coffee drinks.

  • “When you really believe—in yourself, in your dream—you just have to do everything you possibly can to take control and make your vision a reality. No great achievement happens by luck.”
    Howard Schultz
  • “I believe that the best way for an entrepreneur to maintain control is by performing well and pleasing shareholders even if his or her stake is below 50 percent. That risk is far preferable to the danger of heavy debt, which can limit the possibilities for future growth and innovation.”
    Howard Schultz
  • “It’s one thing to dream, but when the moment is right, you’ve got to be willing to leave what’s familiar and go out to find your own sound.”
    Howard Schultz
  • “Whatever your culture, your values, your guiding principles, you have to take steps to inculcate them in the organization early in its life so that they can guide every decision, every hire, every strategic objective you set.”
    Howard Schultz
  • “Every step of the way, I made a point to underpromise and overdeliver. In the long run, that’s the only way to ensure security in any job.”
    Howard Schultz
  • “If you want to build a great enterprise, you have to have the courage to dream great dreams. If you dream small dreams, you may succeed in building something small. For many people, that is enough. But if you want to achieve widespread impact and lasting value, be bold.”
    Howard Schultz
  • 'Onward How Starbucks Fought for Its Life' by Howard Schultz (ISBN 1609613821) “Treat people like family, and they will be loyal and give their all. Stand by people, and they will stand by you. It’s the oldest formula in business, one that is second nature to many family-run firms. Yet in the late 1980s, it seemed to be forgotten.”
    Howard Schultz
  • “While Wall Street has taught me a lot, its most enduring lesson is an understanding of just how artificial a stock price is. It’s all too easy to regard it as the true value of your company, and even the value of yourself.”
    Howard Schultz
  • “At a certain stage in a company’s development, an entrepreneur has to develop into a professional manager. That often goes against the grain.”
    Howard Schultz
  • “Whatever you do, don’t play it safe. Don’t do things the way they’ve always been done. Don’t try to fit the system. If you do what’s expected of you, you’ll never accomplish more than others expect.”
    Howard Schultz

The Recipe to Starbucks Success

The name Starbucks is borrowed from the first mate of the whaling ship in the Herman Melville novel Moby Dick. The logo for Starbucks is also nautical, a siren who in the original image had a mermaid’s tail.

The first Starbucks location opened in the United States, in Pike Place, Seattle in 1971 and the company developed globally with a brand recognition that has been compared to the longer standing, brand-distinctive McDonald’s Fast-food Empire.

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The Gift of Customer Loyalty Begins with Employee Loyalty

Customer Loyalty Flourishes

Employee and customer loyalty are one in the same. The gift of customer loyalty begins with employee loyalty. Nurtured and directed employee loyalty will create worlds of energy, inoculating against the apathy and distrust endemic in many organizations. It can also result in synergy, the energy-laden connection that emerges in a group channeling momentum toward the common good. Trust, added to the mix, instills confidence, which helps employee loyalty grow, and customer loyalty flourish.

Employee & Customer Loyalty Case Study: Sam Walton and Wal-Mart

At the time of Sam Walton’s death in 1992, Wal-Mart had annual sales of $44 billion. One out of every five retail items purchased in America came from a Wal-Mart store. His personal fortune exceeded $23 billion. Sam once said: “There is only one boss: the customer. And he can fire everybody, from the chairman on down, simply by spending his money somewhere else.” When asked how Wal-Mart was able to grow so fast, Sam replied, “The answer is always the same-people. Not only the right kind, but interested, dedicated, enthusiastic, and loyal people. That makes our company exceptional.”

Southwest Airlines Customer Service

Employee & Customer Loyalty Case Study: Herb Kelleher and Southwest Airlines

Southwest Airlines devotes a considerable budget to celebrating its employees with parties, banquets, gifts, birthday cards and outings. Accountants have told Herb Kelleher how much money he could save if he didn’t budget for these activities. His reply: “Southwest Airlines has the fewest customer complaints in the industry. How much is that worth?”

Kelleher believes that the front office is there to support the employees. He said: “Southwest has its customers, the passengers; and I have my customers, the airline’s employees. If the passengers aren’t satisfied, they won’t fly with us. If the employees aren’t satisfied, they won’t provide the product we need.” Southwest employees make flying a fun experience. They try to surprise and delight the customers.

Employee & Customer Loyalty Case Study: Nordstrom Rules

Nordstrom leaders also inspire employees with actions and directions that are surprising. For example, the Nordstrom Handbook says: “Our number one goal is to provide outstanding customer service. Set both your personal and professional goals high. We have great confidence in your ability to achieve them.” And Rule 1 simply reads: “Use your good judgment in all situations. There will be no additional rules. Please feel free to ask your department manager, store manager, or division manager any question at any time.”

The founders of Nordstrom maintain what they call a “worshipful relationship” with the customer, resulting in delighted customers, enthusiastic salespeople, and high profits. They actively practice “doing virtually anything possible to please the customer.” The founders also do virtually anything possible to please their employees.

The Gift of Customer Loyalty Begins with Employee Loyalty

Employee & Customer Loyalty Case Study: Ritz Carlton: Discovering what customers savor

A few months ago, I was involved in a seminar in Pasadena at the Ritz-Carlton Hotel. During lunch I asked my waiter for a burger and a chocolate shake. When he let me know that they didn’t offer milkshakes, I setfled for a glass of water. I was surprised when a chocolate shake arrived with my hamburger. Manuel Avila, my waiter, on his own initiative, found chocolate ice cream and cold milk in the kitchen and created a shake. Manuel felt free to exercise initiative on my behalf because of the positive creative examples set by his leaders.

When Employees are Cared for, They Care for Customers

The way employees treat customers reflects directly on the way they are personally treated. Many employees are truly loyal. The question is; how do we retain and increase our loyal employees, thereby increasing our customer loyalty base?

The way employees treat customers reflects directly on the way they are personally treated. How can you emulate these four cases to improve loyalty in your organization?

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Customers Expect Rewards in Exchange for Their Loyalty

'Customer Loyalty: How to Earn It, How to Keep It' by Jill Griffin (ISBN 0787963887) If you are over sixty, you may remember the thrill of filling S&H Greenstamps books and taking them to the redemption center.

That is how loyalty programs suck us in: we buy the things we always buy, but we get something extra. The more we buy, the bigger the reward. Today we expect loyalty programs to be part of our purchases, hence the popularity of frequent-flyer miles, supermarket discounts, merchandise rewards for credit card spending, and lower fees for maintaining higher bank balances.

But Loyalty Programs are Not Enough

You must offer a compelling value proposition and ensure that the customer’s experience is positive.

The financial value of a loyal customer is well documented. It costs a company to acquire (buy) customers with advertising, loss-leader items, and other incentives for initial purchases. If customers buy again, the company makes back its money. If they keep buying, more money is made. It becomes cheaper for the company to satisfy customers because repeat customers do not need as much support and understand the value of the brand. They even send new business. Therefore, companies need enticing ways of keeping customers.

You now have many options for incenting loyalty. You can offer discounts, provide points redeemable for free stuff, offer improved service (such as free shipping or fast turnaround), or priority treatment. As you look at your loyalty programs, determine which rewards appeal most to your customers—and then match the rewards to their desires.

Three Motivators for Loyalty

Three Motivators for Customer Loyalty Programs I see three reward programs, each supporting a different motivation for loyalty. Each motivation can be expressed positively or negatively:

  1. Reward/Greed. This is the “I get something for nothing” motivator. Flyer miles, and membership points are examples that appeal to people on a personal level. S&H Greenstamps recently reinvented itself as S&H Greenpoints (www.greenpoints.com). Their motto is “Earn them on the things you buy. Spend them on the things that make you happy.” You now register as a Green–points user and collect electronic points for shopping at affiliated stores or Web sites. You redeem your points from an online catalog of products.
  2. Philanthropy/Guilt. Some customers react more on a community level. These customers respond most positively to loyalty rewards such as donations to charity. A good example is the affinity credit card. I have accepted credit card offers from banks because a small donation in my name will be made to my alma mater. You can get affinity cards for your favorite charity. It is a painless method of philanthropy because you do not take anything out of your wallet; the vendors with whom you do business give the money.
  3. Love/Obligation (or Fear). This loyalty program is targeted at customers who want rewards to serve them as a family rather than an individual. These customers also want relief from the financial burdens of family obligations. A new company that has endorsed this motivation for loyalty is UPromise. Its loyalty program makes donations in their children’s names to tax-deferred college funds when purchases are made from participating companies.

Most companies have a mix of customers with different hot buttons. You can offer different types of reward programs to appeal to each type of customer.

Dangers of Outside Loyalty Programs

Customers Expect Rewards in Exchange for Their Loyalty Loyalty programs provide rewards separate from the brand of the company sponsoring the rewards. In addition, there are dangers inherent in promoting outside brands as a bonus.

  1. More expensive to fulfill. When you offer a product from a different company, you may pay less than its list price, but the cost is still tangible, and you do not control it.
  2. Loyalty to the reward, not the brand. The biggest danger of offering rewards that are not part of your brand is that customers become more loyal to the reward system than to you.
  3. Held hostage to your loyalty program. As a company offering rewards you are, in some way, being held prisoner by your rewards provider.

As appealing as loyalty programs may be, they are not enough to keep customers coming back. Unless the customer finds value in your products and finds it easy and pleasant to do business with you, no loyalty program will work. You must have a compelling value proposition independent of any reward system. Your customers must value you! The loyalty reward is just a bonus.

Identify the motivators and incentives that appeal most to your target audience and customers.

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Posted in Business and Strategy Management and Leadership

How to Use Benchmarking as a Strategic Leadership Investment

Benchmarking in Strategic Management

Benchmarking is more than simply making a collection of statistical comparisons. If handled properly, the technique can be used to create significant efficiency improvements in your organization.

A company measures its performance against that of other companies to assess whether it standards are higher or lower.

Collecting snapshots of what that so doing, but failing to examine the reasons for differences in performance, and not using the data to identify and developing best practice.

Benchmarking in Strategic Management

There is little point in spending time and effort collecting comparative data for its own sake, or if managers use it is only to justify current standards.

There are five main stages to effect a benchmarking.

  1. Selecting aspects of performance that can be improved, and defining them in a way that enables relevant comparative data to be obtained—in effect, producing performance indicators that will make sense to other organizations.
  2. Choosing relevant organizations from which to obtain core or headline data
  3. Studying the state to improve possible opportunities for improvement.
  4. Examining the procedures of the best performing organizations to pick ideas that can be adopted or adapted to achieve performance improvements.
  5. Implementing any new processes.

'Benchmarking for Best Practices' by Christopher E. Bogan (ISBN 0070063753) In selecting performance indicators the call for in pieces of initial data collection, it is helpful to distinguish between input and output measures and, unpredictable, the place priority on the latter. It is often easier to define inputs and outputs. Examples of input measures include staffing ratios, per capita expenditure on training or, in manufacturing companies, the wearying proportions of labor, materials, and overhead costs.

The drawback with input measures is that they greatly provide an indication of the quality of outputs. Take, for example, the widely used indicator of response time to customer enquiries. This provides only part of the picture because it gives no indication of the quality of service. Apparently, good figures may conceal significant customer dissatisfaction, while longer response times may result in clients being delighted with the results.

Benchmarking for Strategic Leadership

Benchmarking for Strategic Leadership

Ideally, this practice involves high standards in both inputs and outputs. Indexes of customer satisfaction one form of output measurement. Some personal departments conduct surveys in which their international clients—the line managers—are asked to rate the quality of the various services provided by the Department. If other organizations conducting similar surveys can be found, these ratings can for part of a benchmarking study and may indicate areas where a change of procedures could lead to improvements.

There are two different approaches—genital and selective—are choosing organizations from which to obtain comparative data. The main purpose of the fourth month in is to produce a whole range of performance measures across an entire sector. Examples of general data sources include the government’s ratings of people performance in every primary school; the audit commission’s performance indicators for local authorities et cetera.

The state must be considered with caution. Misleading conclusions can be drawn from individual performance indicators when they are viewed in isolation.

Approach that is more selective is required when an aspect of performance and that requires attention has already been identified.

In this case, it is necessary to identify organizations of brought similar nature—preferably those with a reputation for effectiveness in the relevant activity.

With the topic-based benchmarking, it is possible to collect more data about a single issue than can be obtained from a general survey. It may also be feasible to ask but spends to supplement their answers by sending details of specific policies, such as copies of absence control procedures of performance appraisal guidelines.

Performance and Competitive Benchmarking

'Benchmarking The Search for Industry Best Practices' by Robert C. Camp (ISBN 1563273527) The purpose of obtaining benchmark data needs to be kept firmly in mind: identifying potential improvements in performance. Once such opportunities have been spotted, the more intensive aspects of benchmarking can begin.

The score beyond the study of comparative statistics and the documentation of other people’s procedures. They involve a detailed, on the ground study of the methods of high performing organizations. Understandably, this requires the full co-operation of the group concerned, though it is encouraging that many companies are willing to provide extensive information and facilities.

The organizations that have benefited from the suspect of benchmarking recommend the use of steady teams including staff from different functions and levels.

The final stage of the benchmarking process is the implementation of new systems. Here, it is important to recognize that the success of other businesses may be influenced by the motivational and cultural context in which their systems operate, as much as by the technical characteristics of the systems themselves. As a result, of the issues for steady teams to investigate is the nature of the homework environment—physical and psychological—in which best practice flourishes.

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Birthplace Of Silicon Valley – The HP Garage

Birthplace Of Silicon Valley - Hewlett Packard

With only $538 as investment in 1938, a time when the long fingers of the Great Depression still stuck the nation by its financial gullet, two aspiring entrepreneurs named Bill Hewlett and David Packard used a one-car garage as a part-time workshop in Palo Alto, California, to birth a company intended to become a world leader in engineering measurement and computer technology. From such unpretentious beginnings, the two Stanford University alumnae and close friends molded an organization that for half a century would outpace its competitors through groundbreaking products, progressive employee policies, and an enduring commitment to quality and customer satisfaction.

In 1938, Dave Packard left his job at General Electric in New York and returned to Palo Alto while Hewlett looked for a place to set up shop. Hewitt found a great place in suburbs, with the 12×18 foot garage the main selling point of the property on Addison Avenue. The home had a three-room, ground floor flat for Packard and his wife Lucille, while Hewlett got the shed out back. The rent was $45 per month.

In 1989, during the 50th anniversary of the recognized Hewlett-Packard corporation, the State of California termed the one-car garage first used as a workspace by Bill Hewlett and David Packard in Palo Alto as the “birthplace of Silicon Valley.” This historic landmark also represents the beginning of innovation, chance taking, and common sense policies in a company that would bourgeon as few have before or since.

367 Addison Avenue in Palo Alto - Hewlett Packard.jpg

367 Addison Avenue in Palo Alto, California, is the house and one-car garage—dubbed the “birthplace of Silicon Valley”—where William (Bill) Hewlett and David Packard began making their first product in 1939. Mr. Packard died in 1996, Mr. Hewlett in 2001. HP bought the property in 2000, 13 years after the garage was designated California Registered Landmark No. 976.

 

This garage is the birthplace of the world’s first high-technology region, “Silicon Valley.” The idea for such a region originated with Dr. Frederick Terman, a Stanford University professor who encouraged his students to start up their own electronics companies in the area instead of joining established firms in the East. The first two students to follow his advice were William R. Hewlett and David Packard, who in 1938 began developing their first product, an audio oscillator, in this garage.

California Registered Historical Landmark No. 976

California Registered Historical Landmark No. 976 - Birthplace Of Silicon Valley

Plaque placed by the State Department of Parks and Recreation in cooperation with Hewlett-Packard Company, May 19, 1989.

The Hewlett-Packard House and Garage is also National Register Listing 07000307.

Although the garage has become Silicon Valley legend, Hewlett and Packard only stayed at the garage a mere 18 months. The company was officially founded in 1939, with HP outgrowing the garage by 1940. The company moved to a larger property nearby on Page Mill Road. The garage was bestowed the honour of the birthplace of Silicon Valley in 1989, with HP buying the property in 2000.

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Posted in Business and Strategy Travels and Journeys

Warren Buffett on Time Management: “All You Need Is … Time”

Warren Buffett on Time Management: Warren Buffett once said on time management, “The rich invest in time; the poor invest in money.”

Buffett is currently the fourth richest men in the world. He can buy practically anything he wants to, and more than nearly everyone else could ever dream of.

Nevertheless there’s one thing that even Warren Buffett cannot buy, and that is time.

Here’s a brief transcript from a Charlie Rose interview:

Warren Buffett: I mean I can buy anything I want basically, but I can’t buy time.

Charlie Rose: And so to have time is the most precious thing you can have?

Warren Buffett: Yes, I better be careful with it. There is no way I will be able to buy more time.

Warren Buffett's Interview with Charlie Rose (Time Management) Charlie Rose: And living in Omaha makes that easy?

Warren Buffett: That makes it a lot easier. I, for 50 whatever, well for 54 years I spent five minutes going each way now. Just imagine that was a half an hour each way. You know. I know the words to a lot more songs and that’s about it.

Charlie Rose: It adds up. Doesn’t it?

Warren Buffett: It really adds up. Now if you’re doing an hour a day difference coming and going that’s two and a half percent of the person’s work week. That means 40 years you’re talking about a year.

An undisciplined mind will find every reason to do what should not be done and every excuse not to do what should be done. Warren Buffett once said, “The difference between successful people and very successful people is that very successful people say ‘no’ to almost everything.”

Ira Glass Time Management Technique

This American Life‘s Ira Glass talks with Lifehacker about how he works. When asked what his best time-saving shortcut or life hack was, he responded:

I’ve got nothing. Reading other people’s answers to this question on your website today made me realize I live my life like an ape. I eat the same breakfast and lunch everyday, both at my desk. I employ no time-saving tricks at all.

Though come to think of it, I guess my biggest life hack—and this is the very first time I’ve attempted to use the phrase “life hack” in a sentence—is that my wife and I decided to live just a few blocks from where I work. We did this because of our dog. Since I spend at least an hour every night walking the dog, I didn’t want to spend another 60 or 90 minutes a day commuting. I don’t have the time. Like lots of people, I work long hours.

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Posted in Business and Strategy Philosophy and Wisdom