Customer World

Poverty of attention

I often wonder as we have access to more or more information, why is it that it is getting more and more difficult to take decisions ? Jeffery Phillips had a very interesting perspective on the same.Jeffery writes:

"I spotted a statement on a whiteboard that's stuck with me for a few days.  On the white board, in big, messy handwriting, was the statement:

A wealth of information leads to a poverty of attention.

The point of the statement is that what we are missing - what many of us lack in today's working environment - is not enough information, but enough attention to the important things.  We've migrated from decision makers who had to "go with their guts" and could focus their attention on important things, to those who simply cannot (and will not) get enough information and who are distracted by the search and analysis of information, rather than focusing the right amount of attention and effort on any particular problem."

We just need as much minimum information as possible( or just the right information)  and enough  time for attention amongst ourselves to make the decisions.

 

Learning customer-centricity from ING Direct

ING Direct is one of the few successful financial services companies in the US with an unique business model. In this environment of financial meltdown in the US, ING Direct has practiced & built a bank with a difference. There is a lot to learn from them. Lots of things that I have read and heard in the past but here is a first account of an interview with Arkadi Kuhlmann, CEO, ING Direct:

In a candid interview with Bill Taylor, Co-founder and Founding Editor of Fast Company, Arkadi shared his business ideas and here’s a rough summary of the conversation( Thanks to Swift Community for this content):

Bill Taylor: how did you build this bank?

Arkadi Kuhlmann: There are 9,600 banks in the USA so who needs another one? That was the challenge we had and we thought that if you do everything like everyone else, how can you expect the results to be different? This meant that it was time to look at the business model to see if we could do things in a different way. A way that may be counter intuitive.

So we focused upon building liabilities rather than assets. 

We know that banks create assets and fund them as cheaply as possible and enjoy the margin. So we said let’s do this the other way, and grow liabilities first. So we focused on gaining deposits, and finding assets as the second step. Many say that is nuts, as you are funding liabilities and so how are you going to find the assets but, if you are going to be different and try something to see if it works, you have to change the definitions.

Bill Taylor: how did you find the innovation to be different?

Arkadi Kuhlmann: The best way to find innovation is to look at other industries.

For example, if you’re looking for innovation, why look at other banks? You just get the same old thinking. So we looked at hotels, airlines and more, and the model I liked the most was fruit and grocery stores. These stores are running a 1% margin business, with limited shelf space and trying to attract customers, and are challenged by that because they all look the same. We thought: “what if we were in that environment as bankers?"

You can then put down some key drivers, and ours were that we needed to deal with high volumes at low margin in a commodity business on a large scale.

Bill Taylor: and so you then need to advertise that message too?

Arkadi Kuhlmann: Every bank has ads with kids running through wheat fields and saying “we love our customers”, but everyone realises that that is BS. Stop advertising “we’re there for you”, and focus on delivering on the things that customers really care about. That’s why we focus upon the causes we promote, and the advertising and promotions are all about what mainstream America cares about and what customers care about, not what bankers care about.

BT: and what do customers care about?

AK: if you could build a bank just functionally or technically, people would have done that, but you need to understand how customers are technically interwoven with money. Our rates are not the highest, and we are not the best at services, so why do people stay and why do they come? It’s about the beliefs and values of our bank and how we convey that to them.

Mainstream America is looking for people to validate their beliefs and for authenticity. That is why I make a phone call every week with a customer: to understand them better. And those calls are a bit about the transaction, but mostly about money and their views about money. You must understand how customers see money, as this is powerful.

BT: so do you categorise customers based upon limits and values, as you don’t appear to?

AK: I have no minimums on our accounts, we only have maximums, and I don’t like and don’t want rich Americans. I don’t want all their bitching and moaning. They come in and say, “I’m willing to give you a million dollars, what are you going to do for me?” and I say, “Nothing”.

There’s no hierarchy here. It’s a democracy and we’re all level. I sit in the call centre. We have no titles on business cards. You have to get rid of all that hierarchy stuff to do this business model. That’s why we all sit together.

That’s why I tell the rich guys to go down the street and leave. I don’t’ want them.

BT: Do your staff get worried if you’re on the phones?

AK: We have 8 million customers, and about 5,000 customer account closures a month. But those closures are because this bank is not right for them. I actually want to get rid of those account and we do select some where we know we are just not right for them. To close someone’s account this way, you have to do it with compassion. So we call them and tell them they’re in the wrong place. Not all customers are right for ING Direct and you just happen to be one of them.

For example, 7% of Americans change their accounts every year. 3.5% of them do this because they are looking for a better deal. The other 3.5% are manic depressives. They’re unhappy people and they switch to us to say, “Make me happy”. We can’t do that.

BT: How do you get everything to work together in alignment?

AK: Do you know how easy it is to run a bank when you only have one interest rate? Ask any employee and they know the rate and 40% of customers come by word of mouth. How is that possible? Because folks say they know that they will get the same rate you got. You won’t get a better deal or a worse deal. You get the same deal. That’s why neighbours recommend us because they know they’ll all get the same deal.

And all this cross sell stuff is over hyped. It’s cheaper to get a new customer than to sell the existing customer a second product. In fact, much of the stuff banks talk about is wrong.

Folks say you cannot run a bank without fees, but customers don’t believe it. So you shouldn’t charge fees if people don’t like them. Just roll them into something else and say you’ve done away with them. That’s why one of our slogans is, “Bank fees are like sand in your bathing suit”.   Customers like that.  They understand it.

BT: I understand you’ve written $26 billion of mortgages, with only 15 foreclosures. How did you avoid the problems?

AK: Most of us know that in 2002, we needed to get assets and get mortgages. But the mortgages business in the USA I knew was just not right.

We think we’re the largest community bank in the country and, with that mentality, we also think we have to keep our mortgages on the banks’ books. Selling our mortgages on Wall Street was just nuts. I mean I don’t know anyone out there with a 30-year CD account, so why sell 30-year mortgages? That’s why we offered a five-year fixed rate mortgage. We service them for six basis points, and we do a billion dollars a month of them even now.

In fact, Bill, we now have $35 billion mortgages on the books. The average 30-year mortgage lasts for seven years and you cannot guarantee thirty years in life. We don’t know if we’ll still be healthy and married in five years, let alone thirty.

If we had kept mortgages on the bank balance sheets, we would not have the problems we have today. We need to keep mortgages on the bank balance sheet. That was our view. If we cannot cover the mortgage with deposits, we don’t take them.

I want Americans to be in their homes and to be able to keep them. A home is a place you hug your wife and raise your kids. It’s not a financial asset.

Ring fence it and stop the Wall Street guys mucking around with the American homestead.

When you talk to Main Street, we say if you want a mortgage, you have to be able to afford it. That’s why I want a down payment. If customers come in saying they want 100% loan to value, I say who’s doing the maths here?

We can change behaviours and this country but it won’t be by Wall Street, it’ll be by Main Street.

BT: On the one hand you’re a start up but you have a big parent company – how does that work?

AK: Most of the time it doesn’t work, for the reasons of the parent being a big old company. Think of Star Wars and the Empire Strikes Back. We are Luke Skywalker in the orange jumpsuit. That’s us.

The culture and the way people engage are radically different to the rest of the group, but there’s something unique about ING. They’re very long-term focused and open to new ideas. They are in an environment that tolerates differences of opinion and friction. And there’s an overall broader thinking.

BT: What about hiring staff. Do you have any criteria?

AK: We don’t hire bankers, because bankers come in with their DNA and they have their legacy which won’t fit. Instead we hire dancers, musicians and artists.  People who can deliver a great and different experience. 

Top Ten Reasons Organizations Don't Teach Trust

Charles Green has  a brilliant post on this topic( thro' Tom Hines of Monitor Group):

"My question to you, Charlie, is simple, but something that I've been struggling with for some time now. If every CEO or other senior leader (or at least the great majority) seems to agree that success in selling is in some part attributable to trust based selling concepts, then why do they spend virtually all of their training $$ on sales process, closing techniques, etc. It seems like a dirty little secret that this is nothing but a waste of money."

"I have worked with literally hundreds of sales people over my career and no process, qualification questions or closing technique ever works without establishing trust as the foundation of any client relationship. So the question then is why don't organizations prioritize and invest in helping their organization understand the dynamics of trust and use that as the foundation of any other program they try to implement? It seems to me that they spend a great deal of money on "quick fix" programs that do nothing to change behaviors and belief systems about the importance of trust and how it is the only way to improve performance."

Well, Tom, no surprise, you’re preaching to the choir. But I know you mean the question seriously too, and I too take it as a serious question.

Why is it that things are that way?

Here’s my Top Ten list for why organizations, especially sales organizations, don’t invest more in trust. 

10. Fear--of looking wussy, as in Real Men Don't Play Trust Games.

9. Thinking that business is about competition. It’s not. It’s about commerce.

8. Fear—of someone taking advantage of us; hence do unto others before they do unto you.

7. Bad long-term logic. We are dominated by financial logic, internal rates of return and present-value discount rates. That belief outlaws any investment beyond about 25 years. The parent of a child operates on a longer timeframe, not to mention entire nations in Asia.

6. Inability to defer gratification.

5. A Hobbesian hangover. The continued belief, fostered by ideologue economists and politicians, that the world is an evil place—life is nasty, brutish and short--and therefore the best defense is a good offense. Even if the premise were true (I have no position on it), the conclusion certainly is not.

4. The cult of rationality. Belief that only “scientific” management works; forget passion, belief, relationships—and trust.

3. Over-emphasis on measurement. The belief that “if you can’t measure it, you can’t manage it.” Just think about that. False on the face of it.

2. The cult of short-termism. Here-now, bird-in-hand, payback time, fees-not-interest, outsource, monetize—it all adds up to transactions, not relationships. Not good for trust.

1. Fear—that someone will find out who you really are if you don’t manage your image. So tighten up, spin everything, and get out of Dodge before they can spot you for who you really are.

What's your answer to Tom's question?

How are you taking care of your data in your organization?

There's an interesting report by Experian on how organizations are ignoring basis steps in taking care of their data. The report entitled, ‘Contact Data: Neglected asset seeks responsible owner’, surveyed 2,078 organisations worldwide, and revealed that the overall approach to data quality and integrity around the world is at best half-hearted and, at worst, cavalier.

Take a look at the topline of the report:

• Nearly a quarter of organisations (23 per cent) use data for strategic planning and decision making every day, responsibility for the upkeep of this data is passed from pillar to post.

• 59 per cent of respondents said that responsibility sits with middle management, from a CRM Manager through to an IT or Sales Manager.

• Only 50 per cent of organisations went on to say that data quality is championed by someone at board level.

• Organisations admitted that only half (52 per cent) of their employees have bought into the importance of data quality, revealing a lethargic approach to an issue that affects business success on a day-to-day level.

• Only 46 per cent of the same sample said they have a documented data quality strategy in place.

• 34 per cent said they do not validate any of the information they collect on their customers and prospects, whether that be name and address, contact number, e-mail address or bank account information.

My take: Looks like in many organizations, while customer data is touted as the most important asset, the efforts taken to  upkeep the quality leaves much to be desired. It needs commitment at the C-level, else it is not seen as priority by many operating managers. This must become a part of the KRA or KPI of every operating business head and CXOs must ensure compliance if they want their organizations to succeed in the future by leveraging this information.

Future Corporations - A world without HQs. Only HUBs

C.K. Prahalad and Hrishi Bhattacharyya write about a new world order that is transforming corporations:

Growth prospects for multinational corporations (MNCs) are expanding enormously. In Asia, Latin America, Africa, and Eastern Europe, there are more than 4 billion new potential customers whose rising incomes and aspirations have created an unprecedented market for all manner of goods and services. They want to own homes, to eat nutritious food, and to have varied entertainment options. They want toothpaste, cell phones, and motorcycles. To cater to these needs, business-to-business enterprises will be called upon to provide chemicals, cement, machine tools, electricity, and much more.

Many corporate leaders recognize this opportunity, but few are developing the capabilities or the management focus that they will need to realize its full potential. They persist in thinking of these new markets as “emerging markets,” separate from their existing customers in the industrialized world. Many companies have not reorganized their operations to serve a fully global economy.

Currently, most companies attempt to “go global” in one of two ways: centralization or decentralization.The gateway–hub structure represents a third alternative: a hybrid that reduces the tension between global integration and local responsiveness. Corporate leaders who are based in business unit–style organizations in selected gateway countries have a natural base from which to extend their footprint into nearby markets.Together, the 20 gateway countries — 10 from the industrialized world and 10 from emerging markets — account for about 80 percent of the world’s economic activity, and 70 percent of its 6.6 billion inhabitants. An MNC could most effectively expand its operations around the world by making it a priority to set up hubs in these gateway nations.

A gateway–hub structure can be flexible. A Chinese hub could manufacture goods for Greater China, other Asian markets, the Middle East, Europe, and the U.S. Conversely, a vibrant consumer market need not depend on a single hub: A hub in the U.S. could draw in goods from Brazil, China, and Mexico. All the hubs would probably be involved in manufacturing, but only some might incorporate research and development.

I personally think, we need to use markets/countries (effectively basis their strengths) that can add competitive advantage to various functions to an organization and get them to work in a networked manner. The challenge is to move these processes seamlessly across countries and that is what will make or break this structure.

Emerging Technology trends that will shape business and economic growth - McKinsey's perspective

Carleen Hawn has drawn-up a nice summary of McKinsey's article.

Technology alone is rarely the key to unlocking economic value: companies create real wealth when they combine technology with new ways of doing business. … we have identified eight technology-enabled trends that will help shape businesses and the economy in coming years. These trends fall within three broad areas of business activity: managing relationships, managing capital and assets, and leveraging information in new ways.

A. Managing relationships

1. Distributing cocreation

The Internet and related technologies … allow companies to delegate substantial control to outsiders—cocreation—in essence by outsourcing innovation to business partners that work together in networks. By distributing innovation through the value chain, companies may reduce their costs and usher new products to market faster by eliminating the bottlenecks that come with total control.

The Caution:
Companies pursuing this trend will have less control over innovation and the intellectual property that goes with it, however. They will also have to compete for the attention and time of the best and most capable contributors.

2. Using consumers as innovators

Consumers also cocreate with companies; the online encyclopedia Wikipedia, for instance… Companies that involve customers in design, testing, marketing (such as viral marketing), and the after-sales process get better insights into customer needs and behavior and may be able to cut the cost of acquiring customers, engender greater loyalty, and speed up development cycles.

The Caution:
But a company open to allowing customers to help it innovate must ensure that it isn’t unduly influenced by information gleaned from a vocal minority. It must also be wary of focusing on the immediate rather than longer-range needs of customers and be careful to avoid raising and then failing to meet their expectations.

3. Tapping into a world of talent

… Much as technology permits [companies] to decentralize innovation through networks or customers, it also allows them to parcel out more work to specialists, free agents, and talent networks…new talent-deployment models could emerge [and] changes in the nature of labor relationships could lead to new pricing models that would shift payment schemes from time and materials to compensation for results.

The Caution:
This trend should gather steam in sectors such as software, health care delivery, professional services, and real estate, where companies can easily segment work into discrete tasks for independent contractors and then reaggregate it … Competitive advantage will shift to companies that can master the art of breaking down and recomposing tasks.

4. Extracting more value from interactions

Companies have been automating or offshoring an increasing proportion of their production and manufacturing (transformational) activities and their clerical or simple rule-based (transactional) activities. As a result, a growing proportion of the labor force in developed economies engages primarily in work that involves negotiations and conversations, knowledge, judgment, and ad hoc collaboration—tacit interactions, as we call them. By 2015 we expect employment in jobs primarily involving such interactions to account for about 44 percent of total US employment, up from 40 percent today.

The Caution:
Tere is still substantial room for automating transactional activities, and the payoff can typically be realized much more quickly and measured much more clearly than the payoff from investments to make tacit work more effective. Creating the business case for investing in interactions will be challenging—but critical—for managers.

B. Managing capital and assets

5. Expanding automation

Companies, governments, and other organizations have put in place systems to automate tasks and processes [like] forecasting and supply chain technologies…. Now these systems are becoming interconnected through common standards for exchanging data and … this information can be combined in new ways to automate an increasing array of broader activities, from inventory management to customer service.

The Caution:
Automation is a good investment if it not only lowers costs but also helps users to get what they want more quickly and easily, though it may not be a good idea if it gives them unpleasant experiences. The trick is to strike the right balance between raising margins and making customers happy.

6. Unbundling production from delivery

Technology helps companies to utilize fixed assets more efficiently… Information and communications technologies handle the tracking and metering critical to the new models and make it possible to have effective allocation and capacity-planning systems. Amazon.com [has] expanded its business model to let other retailers use its logistics and distribution services [and] independent software developers … buy processing power on its IT infrastructure so that they don’t have to buy their own. Mobile virtual-network operators, another example of this trend, provide wireless services without investing in a network infrastructure.

The Caution:
Companies that make their assets available for internal and external use will need to manage conflicts if demand exceeds supply. A competitive advantage through scale may be hard to maintain when many players, large and small, have equal access to resources at low marginal costs.

C. Leveraging information

7. Putting more science into management

Technology is helping managers exploit ever-greater amounts of data to make smarter decisions and develop the insights that create competitive advantages and new business models. From “ideagoras” (eBay-like marketplaces for ideas) to predictive markets to performance-management approaches… Leading players are exploiting this information explosion with a diverse set of management techniques. Google fosters innovation through an internal market: employees submit ideas, and other employees decide if an idea is worth pursuing or if they would be willing to work on it full-time.

The Caution:
Leaders should get out ahead of this trend to ensure that information makes organizations more rather than less effective. Information is often power; broadening access and increasing transparency will inevitably influence organizational politics and power structures. Environments that celebrate making choices on a factual basis must beware of analysis paralysis.

8. Making businesses from information

Accumulated pools of data captured in a number of systems within large organizations or pulled together from many points of origin on the Web are the raw material for new information-based business opportunities… market imperfections include[ing] information asymmetries and the frequent inability of decision makers to get all the relevant data … allow middlemen and players with more and better information to extract higher [prices] by aggregating and creating businesses around it.

The Caution:
But that sword can cut both ways; today’s aggregators, for instance, may themselves be aggregated tomorrow. Companies relying on information-based market imperfections need to assess the impact of the new transparency levels that are continually opening up in today’s information economy.

Secrets to building a customer-centric organization - #4

When it comes to building a team in an organization that thinks and breathes customers & selling best-in-class offerings, the process of recruiting the right 'fit' people rather than just the right people is important. What does this mean? It means that you might have identified the most qualified and the most experienced person for the job but they might not fit the culture, values, motivation, passion and environment that you may have in your company. The right fit is as much important as the right people. NY Times has an interesting article on 3 ingredients of success which provides more insights when you want to evaluate people and understand why they do what they do:

• After interviewing 200 people worldwide “who have made a difference in their fields,” three authors conclude that “success in the long run has less to do with finding the best idea or business model than it does with discovering what matters to us as individuals.”

• “When success just means wealth, fame and power it doesn’t last and it isn’t satisfying.”

• ...builders find lasting success when three essential elements come into alignment in their lives and work.

1. The first element is meaning. “What you do must matter deeply to you,”
2. The second is a “highly developed sense of accountability, audacity, passion and responsible optimism.”
3. Successful people “find effective ways to take action.”

Check the people who you want to recruit against this backdrop because you want to have in your team winners and not losers. Believe me, the difference will show and your customers will see it.

Secrets to building a customer-centric organization - # 3

Every customer-centric organization has to create a culture of organizational authenticity.

There is an interesting discussion around this topic in Fast Company. I have taken a few of the discussion points and posted them here.

What is organizational authenticity? Organizational authenticity means what is felt and thought concerning the mission and purpose aligns with what is said and done on a regular basis. - Paul S Markle

Transformational leadership transcends the one or few individuals and instills a sense of purpose and vision in the entire organization. The power play role of leadership is more focused with their position in their 'world' than organizational authenticity / integrity . - Donna  Karlin

How does a company ensure they attract authentic leaders for sustainability and growth and to promote a culture that is based on integrity?

"I believe there has to be a two way accountability pact or structure where both staff and leadership can ask and answer the question (in the affirmative) "Am I where I need to be to reach my level of excellence?" and "I am inspiring all those around me to reach for their level of excellence?" And can all include "...and live in alignment with my personal values and ethics?" If the people care about each other enough to ask, then they'll care enough to be authentic." - Donn Karlin

Here, you can take a organizational authenticity quiz. Go on and take the test!

Secrets to building a customer-centric organization - # 2

When it's Disney, you know there is more passion behind the company than just some products, characters or merchandize! No wonder, it shows in the customer experience.

Read some Disney quotes and understand the passion behind the man and his ideas:

“Disneyland is a work of love. We didn’t go into Disneyland just with the idea of making money.”

“When we opened Disneyland, a lot of people got the impression that it was a get-rich thing, but they didn’t realize that behind Disneyland was this great organization that I built here at the Studio, and they all got into it and we were doing it because we loved to do it.”

“Disneyland is like a piece of clay, if there is something I don’t like, I’m not stuck with it. I can reshape and revamp.”

“The idea of Disneyland is a simple one. It will be a place for people to find happiness and knowledge. It will be a place for parents and children to share pleasant times in one another’s company; a place for teachers and pupils to discover greater ways of understanding and education. Here the older generation can recapture the nostalgia of days gone by, and the younger generation can savor the challenge of the future.

“To make the dreams of Disneyland come true took the combined skills and talents of hundreds of artisans, carpenters, engineers, scientists and craftsmen. The dream that they built now become your heritage. It is you who will make Disneyland truly a magic kingdom and a happy place for millions of guests who will visit us now and in the future.”

Read more

Leadership scarcity

It's easy for organizations to be wanting to be customer-centric but the challenge is the need for a leader who can set the agenda, pursue the agenda relentlessly, be steadfast about the results, be ruthless about execution across various departments in the organization etc.. But, according to Jeffrey Phillips that's the area where there is a huge gap. Company boards need to find such leaders and there seems to be scarcity for such souls:

....there are few true leaders in most businesses, since it is impossible to pursue more than a handful of "visions" or strategies in any business without complete chaos.  Most senior executives in businesses are "managers" - that is, they understand the vision and attempt to implement it to the best of their understanding.  They don't create the vision, and in most cases don't fully back it or understand it, but are doing their best to implement the vision.  In any context, in any organization, there can be a maximum of one leader in this regard, however, in most firms there aren't any real leaders.  Most CEOs are pragmatists, guided by Wall Street and expected earning and returns.  Some leaders, like Jack Welch for instance, became recognized because he had a vision and pleased the street.  Some leaders, like Steve Jobs, have been recognized for their vision but have had up and down experiences - most likely because they could not communicate their vision effectively to a solid management team below them.  In many other firms, however, it is difficult to identify who is responsible for creating a vision and encouraging people to follow his or her vision.

....The best place today to find true leaders in businesses is in smaller, private firms.