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
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.
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.
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.