Video from 1991 when Steve Jobs was at NeXT. Even with the customer focus however, NeXT failed. But this does show the difficulty in how to truly apply customer focus. You have to be creative. You have examine data. You have to really understand how your customers use your products or services (go to the gemba). You have to speculate about the future. The video is also great evidence of providing insight to all employees of the current thinking of executives.
Posts about Customer focus
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When Companies Can Treat You Like an ATM, Many Will Do So
Paying $400 for a big piece of physical gear plus a couple hours of labor didn’t bother me. Paying $400 for a primitive circuit board and a few minutes to plug it in does.
Bottom line: $400 because a $2.02 Song Chuan 832 Series 30 A SPDT 12 VDC Through Hole General Purpose Heavy Duty Power Relay burned out.
This is a combination of companies 1) not being customer focused, 2) short term thinking, 3) very ologopolistic markets (very little competition). So when you are looking at this from the view of providing the best system, for in this case refrigeration, it is not a very difficult solution. You would want to minimize loss (have parts last) and in case they don’t minimize replacement cost. You would design the entire system so the parts that do burn out are easily replaceable and cheap and ideally notify you which part is broken (without the need for expensive contractor visits).
However, if your goal is to maximize company profit it is easy to see how you would develop a system that rips off the customer (very expensive part replacement, huge text messaging fees…) and attempts to capitalize on very little competition in the marketplace and customers that cannot reasonable analyze the system to see how they will be penalized by choosing your very expensive to maintain equipment. It is what they seem to teach in business school – take as much advantage of your customers as you can get away with. I prefer the Jeff Bezos school of thinking
It is a vastly different mentality to try to charge customers less as Amazon does (rather than say the practices of: Verizon, Bank of America, AT&T or Comcast). Your organization has to focused not on your quarterly profit (and if you are think kind of company, probably your personal bonus targets) but in serving your customers well, and in continually improve the value you provide to customers. And the company takes a share of the value just as all other stakeholders do (customer, employees [not just those in the c-suite)], suppliers, society…). Not only do I want to be a customer of this kind of company, I want to be a stockholder.
Related: Drug Prices in the USA – Worse Hotel Service the More You Pay – Customer Service is Important – $8,000 per gallon printer ink – new deadly diseases (often companies rely on bad “intellectual property” policies to restrict customer options)
Sometimes Micro-managing Works
Sometimes micro-managing works. That doesn’t mean it is a good strategy to replicate. If you benchmark Apple you might decide that you should have a tyrannical obsessive involved CEO who is directly involved in every detail of products and services. After all Apple is now the second most valuable company in the world with a market capitalization of $324 billion (Exxon Mobil is the top at $433 billion) and a huge part of that is Steve Jobs.
Nice quote from How to beat Apple
An interesting point, and really it doesn’t matter if it is completely true it illustrates a point that Steve Jobs is the rare leader that helps by being completely involved in nearly every detail. And at the same time he provides strategic leadership rivaled by very few others. But if you try to benchmark this (simplistically – as most benchmarking is done) you will fail. This works with Steve Jobs and maybe a handful of other people alive today. But with most leaders and organizations it would fail completely.
On another point Jason Kottke makes, I would normally suggest the opposite approach:
I think you may well be better off doing the opposite and countering Apple’s secrecy with openness. It would depend on your organization, but, I think you might be better off trying to exploit Apple’s weakness instead of trying to do what they do well. Now things are never this simple but on a cursory level I think that is where I would look.
Google now has a market cap of $171 billion, Apple is almost double that – just 3 years ago Apple first exceeded Google’s value.
Related: Leadership is the act of making others effective in achieving an aim – The CEO is Only One Person – Jeff Bezos Spends a Week Working in Amazon’s Kentucky Distribution Center – Respect for People – Dee Hock on Hiring
Innovation in Thinking and the Web
I agree. And I think this is a good example of an organization needing to adapt to the changing environment. I thought about what I would do if I ran a news site and how I would try to take advantage of the possibilities to increase engagement using internet technology.
I do think if I was trying to increase engagement I would try to figure out how to highlight thoughtful commenters. I would probably try to look into something like the commenting system on Reddit (with Karma) and also the ability to follow commenters (like you can follow article contributers on Seeking Alpha). I would look at giving value back to good comments (maybe something like commentluv). I would definitely have a pages where you could view more comments by a commenter. I would try to set up categories and then list top commenters on local politics, local sports, health care… I would display in the order of popular comments (like Reddit) not just list in order made. There are lots of ideas I don’t see used (but I haven’t really thought about it until 5 minutes ago – maybe these are already widespread, or maybe I haven’t really though out why they wouldn’t work well).
I just remember a post here previously about a newspaper in Kansas that was taking some sensible actions, and seemed to get the value chain they were serving. I would also take a look at them if I were really going to do this for a news organization.
This blog has a failure miserable, engagement with readers. Hopefully I can work on improving that in the next year. My last post, Customer Focus and Internet Travel Search (is the effort of one of the 4 founders of Reddit).
Customer Focus and Internet Travel Search
The internet should make finding airline flight information easy. Instead it is a huge pain. Hipmunk has taken on the challenge of doing this well, and I think they have done a great job. This video provides an excellent view of both web usability and customer focus. This is a great example of focusing on providing customer value and using technology to make things easy – which is done far to little at most companies.
Related: Innovation Example (Farecast – which seems to have been bought by Microsoft and broken) – Making Life Difficult for Customers – Confusing Customer Focus – Joel Spolsky Webcast on Creating Social Web Resources – CEO Flight Attendant
If you have customers that see you as adequate you will keep customers based on inertia.
But you have several big problems awaiting you. Those trying to win your customers business only have to overcome inertia – which can be very low hurdle (saving a small bit of money, some minor additional feature). If your customers are delighted they won’t leave (by and large) without significant reasons to.
Also your attempts to increase price are very likely to lead to increased customer losses (than if customers are delighted). Delighted customers are willing to pay a premium which helps profits enormously (Apple has done this quite well).
Delighted customers will refer others to you – great free marketing.
Satisfied customers leave you very little leeway for error. If you cause satisfied customers some problem (which granted, hopefully you won’t but if you do) they are not likely to be forgiving. If they are delighted they may well stay even if you have a delay, provide less than stellar customer service for some request…
Trust Your Staff to Make Decisions
The failure to give your organization the flexibility to serve customers is a big mistake. Many companies make this mistake. Often the basic problem is managers don’t trust that their systems to hire and develop people that will make good decisions. The solution to this problem is not to give your staff no authority. The solution is to manage your systems so that you can trust your people. This is not as easy to do as it is to say, I will grant that.
Southwest Airlines and Zappos are companies that do respect employees. And those employees then provide great service. But it isn’t a simple thing. To truly manage a system with respect for people isn’t as easy as just putting up some slogans. But if you want to provide good customer service this is one requirement. There are plenty of others: continual improvement, evidence based management, customer focus, systems thinking…
These thoughts were prompted by a nice post, jetBlue Just Blew It
Of course their site has a lot of bookings and almost no one makes an error like this. But any UI designer who looks at their site could see that it’s absolutly possible since the length of the trip is never revealed except for the flight dates. (I”m arguing that they could put in a little fading header that tells you how long your trip is for.) If’ I’d see anywhere that my trip was scheduled for 35 days I’d have immediately know there was an issue. (I could make a simple change to the jetBlue UI that would solve this problem for everyone within a day.)
Today when I looked at my emailed itinerary I immediately spotted the problem and went online to change my ticket. They have a $100 change fee which I paid thinking I’d give them a call and that surely they’d waive that. After all, it wasn’t a change I was asking for, it was the ticket I wanted in the first place. It was less than 24 hours and the flight wasn’t for a month.
In speaking to the customer service rep who ‘called’ a manager. I was informed that I had only a 4 hour window to make any changes and that after that, there was nothing anyone could do. You see, no one at jetBlue customer service has the ‘authority’ to refuse this fee. It was company policy that they couldn’t actually do anything.
Problems With Student Evaluations as Measures of Teacher Performance
Dr. Deming was, among other things a professor. He found the evaluation of professors by students an unimportant (and often counterproductive measure) – used in some places for awards and performance appraisal. He said for such a measure to be useful it should survey students 20 years later to see which professors made a difference to the students. Here is an interesting paper that explored some of these ideas. Does Professor Quality Matter? Evidence from Random Assignment of Students to Professors by Scott E. Carrell, University of California, Davis and National Bureau of Economic Research; and James E. West, U.S. Air Force Academy:
Student evaluations are positively correlated with contemporaneous professor value‐added and negatively correlated with follow‐on student achievement. That is, students appear to reward higher grades in the introductory course but punish professors who increase deep learning (introductory course professor value‐added in follow‐on courses). Since many U.S. colleges and universities use student evaluations as a measurement of teaching quality for academic promotion and tenure decisions, this latter finding draws into question the value and accuracy of this practice.
These findings have broad implications for how students should be assessed and teacher quality measured.
Southwest Not Delta or United
One of the posts highlighted in the last post was one example of how Southwest behaves. It wasn’t a one time thing. It was a common result of the system Southwest has in place where they treat customers like human beings that should be respected (as Southwest does with employees).
Then you have the typical horrible treatment the other airlines practice. Like this example where Delta damages this guys bike and refuses to accept responsibility. That is until they suffered a huge amount of additional ill will over such horrible treatment of James Lawrence, who is participating in 20 half iron mans to raise money to help provide systems to provide water for those in Africa in need of it.
Which is similar to when United broke the guitar of this guy, except United I guess figured more bad publicity really doesn’t matter given that it seems to basically be their business plan. On the bright side if you do a good job of complaining you can actually do well. But thousands of people (probably tens or hundreds of thousands) suffer the results of systems destine to provide horrible service.
Systems of people function in repeatably ways. Based on the horrible service airlines provide you can be almost certain their managers do not treat employees with respect. When organizations treat front line staff as costs that need to be minimized and as unthinking, untrustworthy problems they will almost certainly pass on the bad treatment to customers.
Aligning Marketing Vision and Management
Why do so many companies market one thing and provide something else? I know it might be easier to sell something different than what you offer your customer today. But if you decide to market one vision, why don’t you change your organization to actually offer that?
I suspect this is substantially due to the outsourced nature of large marketing efforts. It makes sense to me that when you outsource your marketing message creation it isn’t tied to your management system and the two silos can pursue their own visions.
I would imagine marketers would claim they “partner” yada yada yada (and sometimes it actual seems to happen, but not often). As a consumer it sure looks to me like companies outsource marketing to ad agencies that come up with marketing plans that are not in harmony with the real company at all. I can understand putting a positive spin on things, but so much marketing is just completely at odds with how the company operates.
Treating a marketing message as something separate from management is a serious problem. When your marking message says one thing and your customers get something else that is a problem. I think the message is often based on what the executives wish the company was (and the outsourced marketers think it should be), but it isn’t the customer experience the management system provides.
If you believe the vision of your marketing then make sure your organization has embraced those principles. I think, often, companies would be wise to follow the vision their marketers came up with. But instead they tell customers to expect one thing and manage the organization to provide something else. I just don’t see how that is sensible.
Worse Hotel Service the More You Pay
The more you pay for your hotel room the more likely they will charge to provide decent WiFi in your room. Whether a company tries to rip you off with exorbitant prices, or lousy service, is just a function of their lack of respect for customers. Obviously it is cheap to provide decent WiFi (as staying at numerous cheap hotels shows – nearly all offer WiFi completely free).
Most expensive hotels show they do not respect their customers. Some actually do rise to the level of a typical budget, and cheaper, hotels and motels so it isn’t all expensive hotels that fail to meet this low standard. The management of those hotels come from the same school of management thought that produces our bankers.
Jeff Bezos captures one difference between poor managers (prevalent in many spreadsheet focused managers) and lean manufacturing managers with the quote: “There are two kinds of companies, those that work to try to charge more and those that work to charge less.”
Thoughts on: Hotel WiFi Should Be a Right, Not a Luxury
Lean Inventories Do Not Excuse Failing to Deliver
Low inventory levels do not mean failing to have products available for customers. Now, if you manufacturing in huge batches and can’t respond to customer feedback then it might mean failure to predict customer demand does mean failure to deliver. But lean thinking has shown how to avoid this problem. People need to adopt lean manufacturing practices and gain the benefits of low inventory levels without the costs of failing to deliver what customers want.
Retailers themselves are battle-scarred by last year’s fourth-quarter fiasco. Following the financial meltdown of September 2008 and amid the most severe economic crisis since The Great Depression, consumers retrenched.
That’s when stores hit the markdown panic button, slashing prices upwards of 75 percent. The result was the worst holiday selling season since 1970, according to The International Council of Shopping Centers.
But although leaner inventory levels should drive profit margin gains this holiday, “retailers might not have enough inventory to fully satisfy demand,” said Citigroup retail analyst Deborah Weinswig, in a research note. It is a risk they are willing to take.
“They would rather lose a sale than take the markdowns they had last year,” said Goldman Sachs analyst Adrianne Shapira.
The retailers need to design their systems with lean thinking in mind (not lean – as in cut expenses without thought). And they need to work with suppliers using lean manufacturing principles.
Related: Be Thankful for Lean Thinking – Guess What? Manufacturing in the USA is a Good Idea – Tesco: Lean Provision – Zara Thrives by Ignoring Conventional Wisdom – Operational Excellence – lean manufacturing articles
Credit Card Company Tries Providing Value
Most credit card issues seem to use business models based on tricking customers into paying high fees. PartnersFirst is focusing on providing value to customers. A Different Kind of Credit-Card Company
Credit-card companies have made billions on affinity cards over the years – but regulators and lawmakers worry that consumers get raw deals. Critics say colleges put their financial interests ahead of those of their students, encouraging them to rack up high-cost debt. “Affinity cards started simply as a product that alumni associations could offer members, but alumni boards realized they could bargain for more cash up front,”
The companies involved in banking and credit cards in the USA have been hostile to customers for quite some time. I have been waiting for someone to decide to provide value to customers and take a fair profit. Hopefully PartnersFirst will continue this model, though I am suspicious, if they succeed they will be bought by another financial firm that is too-big-to-fail in order to once again restrict competition via their standard practice of buying any competitors instead of providing value to customers.
YouTube Uses Multivariate Experiment To Improve Sign-ups 15%
Google does a great job of using statistical and engineering principles to improve. It is amazing how slow we are to adopt new ideas but because we are it provides big advantages to companies like Google that use concepts like design of experiments, experimenting quickly and often… while others don’t. Look Inside a 1,024 Recipe Multivariate Experiment
While we could have hypothesized which elements result in greater conversions (for example, the color red is more eye-catching), multivariate testing reveals and proves the combinatorial impact of different configurations. Running tests like this also help guide our design process: instead of relying on our own ideas and intuition, you have a big part in steering us in the right direction. In fact, we plan on incorporating many of these elements in future evolutions of our homepage.
via: @hexawise – My brother has created a software application to provide much better test coverage with far fewer tests using the same factorial designed experiments ideas my father worked with decades ago (and yet still far to few people use).
Akio Toyoda’s Message Shows Real Leadership
“Contributing to society” at Toyota means two things. First, it means, “to manufacture automobiles that meet the needs of society and enrich people’s lives.” And second, “to take root in the communities we serve by creating jobs, earning profits and paying taxes, thereby enriching the local economies where we operate.”
Toyota has overcome many challenges during its seven decades of business. What has made this possible is the way we make our cars under our “customer first” and “genchi genbutsu” principles
Rather than asking, “How many cars will we sell?” or, “How much money will we make by selling these cars?” we need to ask ourselves, “What kind of cars will make people happy?” as well as, “What pricing will attract them in each region?” Then we must make those cars.
Through these processes, I would like to make Toyota’s product development and product lineup more region-focused. We will change our policy from achieving “a full lineup everywhere” to “a lineup necessary to meet the needs of each region”. We will also launch new vehicles that anticipate consumer needs and are exciting to drive.
At the press conference in January, I talked about my desire to become “a president who is closest to the frontlines, or gemba.” I believe that the essence of management lies in the gemba, and Toyota employees play a vital role there.
Once again Toyota shows they are the type of management I want to invest in. In my last post I discussed another: Jeff Bezos at Amazon. Google management is another management system I am glad to invest in. Toyota, Amazon and Google are 3 of my 12 stocks for 10 year portfolio.
Toyota continues to show they are an exceptional company that doesn’t waver due to short term pressures. They know the management system they have in place is excellent. They always try to improve. And they react to evidence that shows they have room to improve. They then access the situation and move forward.
Related: New Toyota CEO’s Views (2005) – Interview with Toyota President (2006) – Deming Companies – “2007 has been a difficult year for Toyota” – No Excessive Senior Executive Pay at Toyota – Webcast on the Toyota Development Process
Zappos and Amazon Sitting in a Tree…
Amazon is acquiring the unique company – Zappos: we have written about Zappos previously: Paying New Employees to Quit. Jeff Bezos uses the webcast above to talk to the employees of Zappos. Excellent job. The letter from Tony Hsieh, the Zappo’s CEO, to employees is fantastic. This is a CEO that respects employees. These are leaders I would follow and invest in (and in fact I am glad I do own Amazon stock).
Several months ago, they reached out to us and said they wanted to join forces with us so that we could accelerate the growth of our business, our brand, and our culture. When they said they wanted us to continue to build the Zappos brand (as opposed to folding us into Amazon), we decided it was worth exploring what a partnership would look like.
We learned that they truly wanted us to continue to build the Zappos brand and continue to build the Zappos culture in our own unique way. I think “unique” was their way of saying “fun and a little weird.”
Over the past several months, as we got to know each other better, both sides became more and more excited about the possibilities for leveraging each other’s strengths. We realized that we are both very customer-focused companies — we just focus on different ways of making our customers happy.
Amazon focuses on low prices, vast selection and convenience to make their customers happy, while Zappos does it through developing relationships, creating personal emotional connections, and delivering high touch (“WOW”) customer service.
Pixar Movie Management Magic
“Second, we have some pretty great people that they’ve managed to collect here. This is our 10th film, and every film has just gotten better and better, whether that be in animation or special effects or lighting. And it just all comes together to make for some really fantastic stuff.”
“One of the things that I really love about [Pixar] is that no matter what you do, if you’re a production assistant or a producer or a marketing executive or running the kitchen, everyone here thinks like filmmakers,”
Like, I didn’t work on ‘WALL-E,’ but I feel like it’s mine, you know? And I want that to look great and be great. And then I want that bar to be higher and for us to be challenged.”
Pixar has done a great job of creating the right climate for the business they are in. They make movies and have been very consistently successful. Many of those strategies are useful concepts for everyone. Create a climate that promotes pride in work. Create a climate where everyone sees how they contribute to the end product. Hire people you trust and let them do their jobs. Seek continual improvement. Respect people. Customer Focus. Innovation (for example: Pixar Is Inventing New Math).
By the way, Steve Jobs, Apple co-founder, paid $5 million for Pixar and sold his share for $3,700 million of Disney stock (he is the largest shareholder of Disney – approximately 7%). Pixar Movies include: Toy Story, Monsters Inc. and The Incredibles.
In-N-Out Burger’s Six Secrets for Success
Treat Employees Well — The Snyders always held their employees in high esteem, paying them higher wages than competitors and calling them associates to make them feel more connected to the franchise.
“They believed in sharing their success with their employees,” says Perman, noting that In-N-Out associates make $10 an hour working part-time and starting store managers make $100,000, plus bonuses tied to store performance. The company benefits package is also generous. Such treatment engenders loyalty from workers.
“They have the lowest turnover rate in the fast food industry, which is notorious for turnover,” says Perman. “They say that the average manager’s tenure is 14 years, but they have managers who have been there 30 or 40 years.”
Keep Things Simple and Consistent…
The fundamental idea of respecting people is something most executives seem to have no interest in. Treating employees as the critical partners in organizational success is just something that doesn’t leap out at you based on the actions of most managers, unfortunately. And that poor management damages the performance of the organization.
Read more about In-N-Out Burger management practices in Stacy Perman’s new book In-N-Out Burger: A Behind-the-Counter Look at the Fast-Food Chain That Breaks All the Rules.
Related: Respect for Workers at In-N-Out Burger (Nov 2006) – Building a Great Workforce – Another Year of CEO’s Taking Hugely Excessive Pay – Respect for People, Understanding Psychology – People are Our Most Important Asset
Revealed Preference: the preference consumers display by their action, in contrast to what they may say they prefer. While surveys may be useful people often say they will do one thing and actually when given the choice to do so, don’t.
Normally what matters is not what people say they want but what they actually will choose. For that reason revealed preference is a better measure than stated preference. Stated preference is often used as a proxy for actual preference (which may be fine) but it is important to understand that it is just a proxy for actual preference.
See more explanations from the Curious Cat Management Dictionary.
Joel Spolsky Webcast on Creating Social Web Resources
Joel Spolsky webcast on creating Stack Overflow (with the goal of providing answers to professional programmers) using ideas from anthropology. Once again he provides great information. This is particularly interesting for software development but also just a good presentation for understanding the importance of customer focus and systems thinking.
What they focused on and did:
- Voting – Reddit… (see our management Reddit)
- Tags – lets you see what you want and to block tags you don’t want to see.
- Editing – letting users edit the questions and responses. For a technical question and answer system this is very useful (based on my experience).
- Badges – people like to earn “credit” (psychology)
- Karma – “people are willing to do for free what people are not willing to do for small amounts of money” (psychology)
- Pre-search – provide quick view of previously answered questions
- Google is UI – Assumption: “the front page is Google search” – build based on the idea people will search via Google
- Performance – 16 million pages a month with 2 web servers. They are using the Microsoft stack, not open source.
- Critical mass – they focused on getting a large user base on day one of the beta site