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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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Posted in Business and Strategy

How to Build Lean and Agile Management

How to Build Lean and Agile Management

Hierarchical is out; horizontal is in.

There’s no room today for the multiple layers, slow decision making, and dependence on leaders. Successful organizations are characterized by consultation, collaboration, and cross-functional problem-solving, decision-making, and planning.

Why are horizontal organizations so much more nimble? Extended product development cycles are replaced by rapid movement from design to market; decision-making bottlenecks are eliminated; leaders empower and delegate; and the focus is on the success of the business, not individual functions.

Horizontal Leadership Success

Leaders intent on this transition must take four actions:

  1. Horizontal Leadership Success Look into the mirror. The top team sets the tone. Before expecting others to “go horizontal,” senior managers must ask, “What are the decision-making patterns on our team?” “To what extent do we see ourselves as accountable and responsible for one another’s success and for the outcomes of our team?” “Do we depersonalize conflict and confront one another honestly and openly?” If the president is still calling the shots; if team members are constantly lobbying for resources; or if internal conflict has brought decision making to a halt-it’s time to practice what we preach.
  2. Align all your teams-beginning at the top. Raising team performance and refraining team behavior begins with alignment. Ask seven questions to determine whether or not a team is aligned: Does the team have clear goals? Are those goals aligned with the strategy? Do all team members know who is responsible for what and how they will be held accountable? Are protocols or rules of engagement agreed upon so everyone knows how decisions will be made? Are rules in place for how conflict will be managed? Are relationships between and among team members healthy and transparent? Do people assert their point of view honestly and openly and treat disagreement not as a personal attack but as a business case?
  3. Shift from commanding to influencing. In the new paradigm, the one who wins isn’t the person with the most clout, but the one who possesses the right strategic instinct, content capability, rapport, and persuasion. When Susan Fullman was director of distribution for United Airlines, she was a cross-functional player in a hierarchical context. Her success hinged on her ability to influence rather than command: “I had to sell my vision to each director. And I couldn’t do that without learning to clearly articulate my ideas, depersonalize the way I made my case, develop my powers of persuasion-and learn to listen to each person and address their concerns.”
  4. Become a player-centered leader. The horizontal organization calls for a shift in the role of the leader to a new “player-centered” model. The question becomes: How prepared are the players to handle increased authority and responsibility? As teams proliferate and decision making becomes decentralized, people must step up. Managers must know each person’s capabilities and skills and adjust his or her “style” accordingly.

'Lead with Lean' by Michael Balle (ISBN 154480844) For example, when managing an inexperienced team leader, a senior manager needs to provide a high level of direction, structure, and support; but as team leaders become more competent, the senior manager can adopt a more hands-off style. The goal should be to inspire and empower, not prescribe or direct. Provide coaching and collaboration as each player requires.

Many leaders talk about decentralization, delayering, and empowerment. But decisions continue to be made by the CEO; functional heads are still vying for resources; and further down are vacationers and victims.

Horizontal organizations are more states of mind than states of matter. It’s not as much about titles and boxes as it is about every employee showing up, every day, as an energized, strategically focused team member.

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Posted in Management and Leadership Mental Models and Psychology

Union Advertisement Slams Southwest Airlines and asks, “Has Southwest Lost its Way?”

On 25-Nov-2014, the Transport Workers Union (TWU) of America issued a half-page advertisement in USA Today bashing Southwest Airlines management about their baggage handling operations.

Southwest Loses More Bags Than Any Other Major U.S. Airline

Southwest Loses More Bags Than Any Other Major U.S. Airline.

Southwest Airlines, historically known for rarely losing luggage, now loses more bags than any other major American airline, according to the U.S. Department of Transportation’s Air Travel Consumer Report, released this month. What happened?

Quite simply, under the leadership of Gary Kelly, Southwest Airlines places profit ahead of people and a quality product. The airline now flies larger planes packed with more bags than ever before but doesn’t hire additional baggage handlers and, in the last four years, hasn’t provided a raise to half of its ground workers. More suitcases, larger planes, tighter schedules and an overworked ground crew not only mean lost bags: it means delays for al Southwest customers—even those who don’t check luggage.

This year will be Southwest’s most profitable. During the second Quarter alone, the airline earned nearly a half-billion dollars in profits. Gas prices have fallen, more seats have been filled, revenues have been growing. Wouldn’t it make sense at this time to invest in ground workers and on-time performance?

Southwest’s stock ticker symbol is LUV. But is Southwest still the “luv” airline or is it just a heartless machine? Losing bags is bad—but eventually they find their way home. Losing a successful company culture can be forever.

The TWU posts advertisements which are intended to be perceived as harmful to the airline in order to attempt to extort a better package.

Although the “facts” being displayed in this union-paid ad are certainly up for debate, there’s no doubt that the workload of the rampers has increased because Southwest is the only airline that doesn’t charge checked baggage fees.

This is the latest manifestation of the dramatic evolution that has Southwest over the years, both from external and internal forces. In a nutshell, economic reality is now catching up with Southwest Airlines. The fuel hedges are spent, the network carriers have restructured and merged, and at the same time Southwest has gone from being pretty much the lowest-cost operator in the market to middle-of-the-pack and has high labor costs than ultra-low-cost carriers such as Spirit Airlines.

Southwest Airlines Free Checked Luggage Baggage Policy

Southwest has to control costs somewhere to remain competitive. They’ve probably tried, to at least some extent, to do it through productivity gains, by making rampers do more with less (same workload with fewer rampers, or increased workload with same number of rampers). But that, too, of course, has its repercussions, such as the one detailed in this TWU advertisement.

While paying employees well and treating them with respect will ensure better performance, Southwest Airlines is having to learn to cope in a more challenging economic environment, especially as to cost. Reduce cost, increase productivity – something has to give.

Southwest Airlines recognized this as union propaganda and integral part of contract-negotiation season. To the union bosses, nothing’s ever enough … their workers are always underpaid and under-appreciated. Southwest Airlines spokeswoman Brandy King responded,

Although it’s a common practice, informational picketing does not change the Company’s approach to negotiations. We continue to share the Union’s sense of urgency to secure a fair agreement. Reaching the right deal for both Employees and the Company remains a top priority; and it must be one that is fair to all Employees, enables the Company to grow, and protects our position as a low-cost leader in the industry.

We have a renewed focus and effort on improving baggage delivery and over the past few months, we’ve seen a steady decline in our mishandled baggage rate. In October, we proudly delivered approximately 99.5 percent of our bags correctly and we continue to see improvements.

Regarding the number of bag carried, the packing habits of Southwest passengers haven’t changed. Customers continue to pack the same number of bags since the “Bags Fly Free” campaign was initiated in 2008. What the campaign has done is attract more Customers to Southwest, improving the bottom line. At the same time, the number of bags carried on other airlines has decreased, which improves their overall DOT ranking.

As the number of Southwest Customers increase, we continue to hire in response to that growth. Over the last three years, the annual number of bags handled per Ramp Agent has steadily declined, not increased.

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Posted in Airlines and Airliners Management and Leadership

Staying Up to Speed on Leadership Reading

Michelle Kumbier, senior vice president, motorcycle operations, Harley-Davidson Michelle Kumbier, senior vice president for motorcycle operations at Harley-Davidson believes in lifelong learning and aspires to inspire her employees to believe in that. She says, “you don’t become a leader and then forget about it; you need to continue to grow and develop.”

Kumbier has the following books on her credenza on leadership:

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Posted in Management and Leadership