Monday, October 21, 2013

Are You Being Served - Customer Mis-Experiences

I hadn’t dealt in stocks for the last few years, and I was surprised when I received a bill from my stock broker for services which I had not availed of. I was willing to give the benefit of doubt to the broker and called their customer care.
Given the fact that I was a bonafide customer, I expected the call to be received well and my questions answered satisfactorily. The call was answered promptly by an IVR which directed me through a maze of options. After careful negotiation I was told that I was customer no. 17. I thought I would be attended to sooner than later. 5 minutes passed, then 10, then 15, 16, 17 and it reached 20. Imagine, I was on hold for 20 minutes and I did not get a representative to speak to me. So much for customer service!
During the length of the hold, I was treated to a series of marketing pitches. Since I was on hold for a long time, I went through with them twice. I could not help but think how they could serve me more when they could not serve me better with the service I had supposedly availed of. I needed to resolve the problem and so could not hand up. And thus spent an inordinate time irritated and patiently.
A credit card company (one of the cards I use) decided that they had changed policy without even intimation. I was politely told that the terms of the redemption of reward points had changed and frankly I did not have much of a choice!
I am sure that customers the world over experience this every day. There are many redressal mechanisms but they are time consuming. In effect customers are bullied into submission. The power which a big organization has, has been misused. Sometimes organizations forget that it is the customer which is giving business and not the other way around.

But why allow such instances or issues to take place at all. Can organizations not be ‘truly’ customer friendly?  Can they not take steps to avoid this dissonance?
Here are a few proactive steps a company can take to reduce the disconnect :
 a) Honour commitments – don’t keep changing policies. Agreed market conditions change but that does not make it necessary for an organization to change policies ad hoc.
People are customers because they saw a basket of benefits. If you dilute them then you are diluting your relationship.
 b) Don’t punish customers for being your customers – Manipulation or taking the customers for granted is a sure shot way of creating friction and resentment.
 c) Communicate – If at all the policies have to be changed, communicate to your customers. Explain to them this is being done, Ofcourse there will be opposition but atleast you are being transparent.
d) Transparent & honest – be straight forward and factual on why  the actions are being taken. Don’t couch with legalese and marketing jargon.
e) Don’t use each interaction as a sales pitch – Customers call when they have a problem. Don’t use that time to give endless sales pitches – they don’t want to hear it!
 f) Empower employees – Empower employees to take decisions. Most often, call executives are totally without any power and cannot take any decision. They are mere robots to communicate information – nothing more!
Customers remember bad service much more than good service and that is the eternal truth. An organisation has to deliver each and every time and not rest on laurels, The repercussions of bad customer service are many.They can
a) Leave and stop using your service or product - given competition the options are many.
b) Complain to all and sundry - people love to complain and it is easier to complain than praise. Customers are people and hence don't expect them to take things lightly, most of them will shout.
c) The costs associated with losing a customer is high. It is said that it takes seven times more money to get a customer than retain a new one. The negative affects of bad PR in social media cannot be quantified. And there is very little cost to it!

Monday, July 08, 2013

If You Cannot Beat Them then Adopt Them - Extending Your Business Model

Book-music-movie retailing in India has hit hard times with almost all the major chains shutting down. The online ‘menace’ of the free availability of movies and music; increasing popularity of digital books/ e-readers and discounting by online retailers has resulted in such a situation.

Take the case of Music World (MW) – part of the RPG Group. MW was the leader in the distribution of music, movies through CDs etc. The online phenomena literally killed the concept. Music was freely available on the net and that closed the largest revenue stream possible. Movies were available for downloads through torrents and that closed another huge revenue making opportunity.

Landmark, Odyssey and other chains which built their businesses on the retailing of books, tried to expand its scope to include music, movies, entertainment devices but the onslaught of the online business put paid to its business. There is a Flipkart or a Homeshop18 which is willing to offer home delivery with a wider variety and a double whammy of better discounts. If that’s not all, e-readers along with tablets have taken the remaining breath away from these chains.

The seemingly obvious changing business landscape has caught these chains on the wrong foot. They have sought to change their businesses by restricting themselves to the brick and mortar. There is lethargy and fear compounded with apprehension which have made these organizations restrict and prune their operations.

The question is that why in the face of impending danger companies still continue to drag itself with existing models which are non –viable.

However not all organizations across the globe have been late in reacting. Walmart initially did not understand the online space and its business was slowly eroded by the likes of Amazon and others. When it responded it was in a unique way. It responded with a hybrid approach. Merchandise ordered online could be drop-shipped for same-day pickup at local stores. This and other creative solutions have totaled over $9 billion of online sales to Walmart. Interestingly facing the might of Walmart, Amazon which has no physical store fronts moved in the opposite direction and are installing lockers in neighborhood stores to allow for direct pickup.

While DVD rental chains like Seventymm have folded up albeit making some changes, Netflix, has begun producing its own content. This programming has turned out to be popular and this has attracted customers to order more from the rest of the catalogue.

The point is with appreciation of business challenges, a willingness to respond quickly, and being open to all models, chances are that companies which will survive will be those who blend its existing business with a business model which is threatening its existence.

In India perhaps the best examples of the hybrid model has been in the education sector. The traditional brick and mortar institutes like IIMs have expanded their scope of education by offering distance education through satellite and online mediums. Traditional brick-and-mortar schools suffer from fixed costs on account of infrastructure and the inherent weakness that restricts it to imparting education in a fixed space, at a fixed time. On the other hand, online education can be imparted anywhere & anytime. However credibility of the online courses is far below the traditional schools. The prestige of being associated with a premier school is aspirational. Hence there was a marriage of both worlds. IIM Kolkata offers courses in various disciplines in the management field through online partners thereby spreading itself across the country and leveraging its repository of knowledge and excellent faculty. Something which is left unsaid is that the online partner seem to have better marketing muscle and is able to get a larger number of students.

In the recent past Yebhi, an online marketplace tried to kill two birds with one stone by placing virtual store walls across outlets of Café Coffee Days. Not only did it serve as an excellent marketing story it also enabled the customer to browse and then scan the QR code to access the product through smartphones. India has a very young online customer base and Yebhi capitalized on a key catchment area by taking the whole exercise to the next level.

There are basic tenets which these hybrid models are based on:

a) Each model/company needs to leverage each other’s strengths to solve a business problem.
b) The dynamic business shifts can be addressed faster without losing the core competency. For example – one of the strengths of Walmart is its sourcing capabilities.
c) Hybrid models can be either insourced or outsourced, while education has been outsourced, shopping has been insourced. It eventually depends on the strengths & weaknesses of the organizations.

The fundamental objectives of hybrids are:

a) Allows organizations to address changing market paradigms without losing the key success factors in its existing avatar.
b) Turns disruption to the present business model into an opportunity
c) Leads to a strategic shift which can actually redefine the way the business is run.

This is certainly not a panacea of all organizations which are facing tough times due to disruption and changing times. For moving to a hybrid model there are some questions which need to be asked:

a) Are the existing services or products good enough to dovetail into a hybrid model?
b) Is the proposed hybrid offering showing a direction which hitherto was not possible?
c) Can the proposed model be handled comfortably by the organization?
d) Is the solution too far away from the existing competencies?
e) Is the new model going to slow the whole business down?

A last piece of advice- do remember it is best to compete with yourself rather than let your competition eat you up!


Monday, June 10, 2013

There is a Hole in the Ship! - Missteps in Strategic Directions

We had flight to catch at Delhi. And we were running late. We took solace in the fact that we had a real fast MUV and could rush to the airport in double quick time. But that was before we had factored a difficult clutch. While our initial thinking was correct we were slowed down by a faulty clutch which made the distance seem longer than usual.

There is an interesting anecdote about Dr. Gil Amelio (that’s how he liked to be called), the erstwhile CEO of Apple. In the late ‘90s, in a conversation with a journalist he said that Apple was a ship loaded with treasures, but it had a hole at the bottom, leaking water. And ‘my job is to get everyone to row in the same direction’. It gives a good laugh and Steve Jobs used it as a joke with many people including Larry Ellison, who needless to say could not control himself.

Many companies draw up grand plans giving it euphemisms like XXX 3.0 and so on. Strategy is a sexy word in the business world. How many CEOs would like to known as a good strategist or a good executor? My guess is that 10 out of 10 will go for the first one. Most leaders have been focused on picking a direction and then trying to get everyone to steer in that direction.

The two examples, whilst funny are representative of the way many companies and their leaders function. It also exemplifies how leaders approach strategy. The strategy may be very good, and on the face of it the boat you have taken can take you there but there is a big hole and you have to fix it first! Instead of trying to fix what is wrong, strategists are looking to steer in a designated direction.

Choosing the direction is just one aspect of the strategy. The strategy should come from a proper analysis of the organization – strengths/ capabilities, weaknesses, competition, threats etc. – a comprehensive understanding of the organization. Strategy should emanate from an understanding of the internal issues and external conditions.

More often than not, strategic direction is provided by leaders who think that the best way to solve the weaknesses of a particular organization to drive it in a new way. The hope is that the organization will have a self-healing mechanism which will resolve and cure the weaknesses. However these problems will not only prevent the organization from following the direction given but also prevent it from reaching its potential.

Consider Infosys, which till a few years back was the poster boy of the Indian IT industry. With a lot of fanfare, in the recent past, Infosys decided to change or ‘transform’ itself. Calling initiative Infosys 3.0, it was to move into three areas –
a) Transformation, which includes 'Change-the-business' initiatives like package implementation and consulting.
b) Business operations, which includes 'run-the-business' initiatives like application development & maintenance, testing and BPO.
c) Innovation, including products and platforms.

All this is fine but to put this in place, you need people to do it. Happy and satisfied employees! And that is the biggest hole in Infosys....along with other smaller ones!

1) Unsatisfied employees - The controversial iRace was introduced in Infosys a few years back and many employees were terminated. The perception of Infosys as an employer of choice has deteriorated. While employees with poor performance is like dead wood in any organization and have to removed, the way it was done had many employees seething. This initiative scorched the very fabric of Infosys and affected its culture. There is no dearth of intelligent Infoscions whose level of intelligence is same or better than competition like Cognizant, TCS etc. However competition grew far better in the same market that Infosys was also in. With a set of disgruntled or unsatisfied employees, no company can succeed.

Earlier, in India, if an eligible boy or girl worked at Infosys, it was considered a big plus for matrimonial alliances. Agreed that the earlier Infosys had a socialistic touch, however it worked in India. And it was not surprising that Infosys earlier was the bell weather for the Indian IT industry.

2) Improper communication - The leadership team could have undertaken an extensive internal communication effort, but they should have focused more on what the initiative would be. The idea was good but the execution poor. iRace fueled a sense of fear in the employees especially the junior ones and not surprisingly they worried about their future with the company. These anxieties further fueled rumors as people tried to make sense of what was happening, which further complicated matters. By taking the time to help employees better understand what was happening and why, the team could have avoided this.

3) Top down vs. bottom up - From what I read from the media the approach is top-down. A more effective way would have been to engage the organization at various levels starting from the bottom upwards. When this is done, there is a sense of understanding and employees feel they have been taken into confidence. In such a scenario the pain of separation will be minimized.

4) Improper mind-set - Organizationally Infosys is still in a services driven mind-set. While Infosys 3.0 does highlight that the requirements are different for an innovation and product driven organisation over a services oriented one, little has been done to make it work. I have personally met some brilliant Infoscions in the innovation team who would have perhaps got more attention, support and funds elsewhere.

5) Strategy driving culture - Culture comprises of norms, attitudes, beliefs etc. which will drive how the company will work. It focuses on the human side of the organization and controls the way employees interact with each other and externally.  Many leaders think that strategy will drive culture. That is very untrue. Culture and the resultant behavior will drive strategy. In such a scenario Infosys should pay careful attention to its culture. One of the strengths of Infosys was the culture it possessed. However presently, there was a huge disconnect between the leaders and their employees.

6) Fear of change - Change changes the status quo. And many individuals resist change. It can be due to many reasons – fear of failure, less involvement in the planning, not sure about the impact, lack of confidence amongst others. Managing change requires a lot of leadership involvement. And it gets tougher when the organization gets larger. A lot of hand holding is required so that the employees are made to understand and are able to cope with this change.

Fix the holes first and leaks will stop. Once the leaks stop then the boat is steady. Once the boat is steady you can set sail and reach the destination.

(Infosys is merely a frame of reference; there are other companies who have gone through this - Apple, HP, Yahoo etc.)

Sunday, June 02, 2013

Back to the Future - The Comeback of the Old Boss

Steve Jobs, Howard Schultz, Charles Schwab, A.G. Lafley, Narayana Murthy, Micheal Dell, Kenneth Lay, Jerry Yang & Paul Allaire - The Comeback Bosses
And to spice it up - Jose Mourinho, Nawaz Sharif & Indira Gandhi

Back to the Future it is, in the corporate world. In the recent days both Procter & Gamble & J.C. Penney replaced their sitting CEOs with his predecessor. It is strange that this back-to-the-future approach had to happen. Whilst the boards may speak of it as a step in the right direction and make nothing out of this brouhaha, this kind of succession isn't common. Closer home, Narayana Murthy is back at the helm at Infosys albeit in an exalted manner as Executive Chairman.

No matter what the board opines it suggests a few issues –
a) Poor evaluation of the present CEO
b) Poor succession planning
c) Desperation
d) Lack of time to look for a new CEO

 On the flip side what the board gets is
a) A known person with successes to boot
b) Understanding of his skills, strengths & weaknesses
c) Time - time to look for another CEO either to groom internally or an outside hire

It is not to say that it is entirely wrong to get the earlier boss back. Howard Schultz replaced his chosen successor Jim Donald at Starbucks and it worked. It was not the same set of circumstances though which brought Steve Jobs back to Apple but that worked too and how! However both were founders of the companies and in a sense it was easier. The same thing can be said about Narayana Murthy but A.G Lafley and Myron Ullman at P&G and JCP respectively are not.

What it does show is that generally boards prefer an insider.  A majority of the organizations prefer people already 'in'.  In the 2012 Chief Executive Study, called "Time for New CEOs," conducted by Booz & Company to study trends in successions in large public companies,  it was  found that 71% of incoming CEOs that year were insiders, and 25% had worked at the same company for their whole career.

Insiders know -
a) The culture of the organisation
b) Its people
c) The capabilities
d) Existing & potential weaknesses
e) Markets
f) Challenges
g) Competition and competitive pressures.

This would give them a leg up and can actually hit the road faster.  Insiders are said to have generated higher total shareholder returns over their tenures.

The same applies for returning bosses. They practically know most aspects and have a larger understanding of both the innards and external conditions of the organization well enough to act swiftly. What also separates them from the promoted CEO is that the challenges of being the CEO are different from being the second in command. There is someone else to take the rap or take the call when you are the second in command.  As and actual CEO, the scope is very different & it is far more taxing. This explains why Bob Mcdonald and Ron Johnson who never had CEO experience had to quit. What is more important however is the fact that comeback CEOs have a decent track record of having run their companies earlier (Ullman can be excused as he had managed to show some profits earlier at least better than Ron Johnson). It is expected that they have not missed much in their absence from the playing field. Infact their absence from the day to operations can be viewed as an advantage - they would not be responsible for the current mess!

Crudely put, calling back a boss is like calling back a contractor who was anyway supposed to do the job correctly in the first instance. Only when you are pushed to the wall will you do something like this. Hence, there are causes for concern -
a) It is obvious these comeback bosses would not come back if the company was in a mess or there was an impending mess
b) There is a possibility that the mess was created by the comeback CEOs and at least they are partly responsible because they got in the wrong CEO to replace them
c)  It is likely that that the strategies that the comeback CEOs had thought off was not workable in the long term and the existing CEO was basically following the strategy set by his predecessor (and taking the rap for it as well)
 d) All comeback bosses left for a reason, whatever it is.  Can be retirement, can be another job. There is no guarantee that they will have the same enthusiasm/ energy in the sequel

Rüdiger Fahlenbrach in his study “The Market for Comeback CEOs” studied 275 publicly traded American firms whose CEOs had stayed on the board after retirement and were still around when the company again needed a new CEO. About a quarter rehired the old one instead. This is surprisingly a high percentage!
It was also inferred that 'the decision to rehire former CEOs is related to the past performance of both the former and current CEO. Former CEOs are more likely to be rehired if they had a high stock market performance during their first tenure and if their replacement did particularly poorly. Organizations also are more likely to rehire their former CEOs the larger is the percentage of total  institutional ownership and the more intangible are the firm’s assets. The probability of a firm rehiring a former CEO is positively related to the founder and chairman status of the CEO and to his share ownership.'

Perhaps the most important category of comeback bosses consists of founder-CEOs who return to try to fix the companies they created - Steve Jobs at Apple, Howard Schultz at Starbucks, Michael Dell at Dell & Charles Schwab at the broking firm named after him. In all these cases their successors have failed and they had to step right in again. Narayana Murthy perhaps is following a slightly more circuitous route by letting the CEO stay but becoming the Super CEO (Executive Chairman)

Many of the comeback CEOs have done exceedingly well -
a) Steve Jobs changed the way Apple was looked at
b) Charles Schwab reoriented the business and transformed Charles Schwab into a full-service money manager
c) Howard Schultz brought back the romance of coffee houses and the glory days of Starbucks.

But on the flip side there are many failures too
a) Jerry Yang at Yahoo was a disaster
b) Micheal Dell has managed to keep Dell afloat but it has not been viewed by many as a success
c) Kenneth Lay's return ended in the Enron bankruptcy
d) Paul Allaire at Xerox was a flop
The burden of great expectations will be on Lafley, Ullman and Murthy. I am sure they are aware that they are expected to succeed and succeed exceedingly well. The same people (shareholders & board) who brought them will be baying for their blood if they do not meet the expectations. If they fail they be accused of hubris. However we need to admire these gentlemen, they could have sat back, and said "when I was in.......things were better". It takes a lot of courage and fortitude to take up such a demanding assignment.

Jose Mourinho and Nawaz Sharif – The future awaits you too


Tuesday, February 12, 2013

Showing That You Care - How Empathy Helps at Work

3 years back, the UK business magazine “Management Today”, along with the Institute of Leadership and Management, carried out a survey of approximately 2500 managers and non-managers each to determine how much trust employees have in the CEOs who run their organizations. 47% of those surveyed felt that leaders had done a good to very good job managing their companies through the recession.

Where things get interesting, though, is when they compared the trust levels attained by male and female CEOs. For the second year in a row, female CEOs rated higher trust levels than male CEOs. Interestingly male employees have a greater level of trust in female CEOs than those who work for male CEOs.

So what’s behind this growing divergence in trust levels employees have for female CEOs over male CEOs?

After careful analysis, the answer lay in - 'Empathy'
“Empathy means demonstrating concern and listening to reach an understanding of others ideas and feelings.”

Do not confuse empathy with sympathy; when you are sympathetic it means that you are relating to the feelings of another person given a particular situation. When you are empathetic you are able being able to understand the needs of others, you are aware of their feelings and the resultant behaviour. It does not mean you have to agree with how they see things; you are only willing and able to appreciate what the other person is going through.

The stereotypical woman is said to be 'soft' but that is the not why the women gained higher levels of trust.  One of the main reasons, female CEOs rated such high trust levels was because they were knowledgeable “of what their employees have to contend with in their day-to-day lives”. They were aware of and understood what hardships their employees faced, regardless of whether the CEO could do anything to improve the situation.
I do not want to get into a male vs. female debate, but what I would like to highlights that CEOs or leaders of any sex need to understand their employees better by understanding the environment and interpreting the information they are getting. Empathetic people are aware or appreciative of the circumstances their employees face.
  • What do leaders and their organisations need to do (men or women) – to demonstrate more empathy to their employees/ subordinates?
1. Leaders need to become more familiar with the day-to-day issues their employees face.
Typically leaders focus on results from tasks given to persons or teams. However such a unidirectional approach can prevent the leader from looking at other factors which can affect the employee's output/ productivity. For example, I have noticed that when some members of an organisation were laid off, it even affects the morale of personnel from other departments. There is a fear that they themselves maybe the next on the chopping block.  While this may sound trivial, however productivity will surely suffer. "Connect with an individual at a human level before beginning work," suggested Miyashiro, founder of Elucity Network.
2. By understanding the needs of the employees the leader and the organisation can develop bonds and hence closer relationships
"If you wish to know the mind of a man, listen to his words" – Johann W Von Goethe
Understanding the needs can help the organisation provide support to deal with the problems and challenges that the employees are facing. Problems can affect productivity and this can be an impediment to achieving the organisational goals. Once relationship bridges are built, employees will learn to trust the leader and organisation which again results in a further strengthening of trust and relationships. The positive aspects are self-explanatory.

3. Leaders need to be emotional resilient.
It takes emotional resilience to have those crucial conversations with employees—to hear about the challenges going on in their home life, to see them struggle with conflicts with fellow employees etc. Leaders need not be swayed by emotions but take a practical approach.

4. Leaders need to be patient, have good listening skills, unbiased, open to criticism and posses high emotional intelligence. 
Leaders will have to listen attentively to their employees are not treat them with frivolity.  They need to listen a lot more and then talk rather than the other way around. They should not come with preconceived notions. When you listen more, the employees talk more and are usually more open about the problems they face. Leaders gain a greater awareness of the needs of their employees.

5. Focus on others.
Take a personal interest in people. Show that you care, and be genuine about it. When leaders focus on others then it shows that the leader or the organisation is a people’s person. Empathy is a natural human trait it just needs to fine-tune in many individuals.
When personal interest is taken, there is a one to one relationship built. When a leader establishes such a bond then it shows that he or she cares for the individual and the employee is recognised as a person rather than no-name. People can see through leaders who fake it, so it is important that leaders and organisations be genuine about it.

6. When leaders understand their  teams, they face challenges better.
There is bound to be togetherness when leaders understand their teams. There is a sense of belonging and more teamwork. This helps the organisation and its leaders to not only face challenges together but also battle any mistakes as a team. Infact the team will be willing to shoulder some of the blame! There are also other positive actions which will result. For example – the employees will know that they will not be made scapegoats. Poor performances will be borne by the ‘we’ rather than the ‘I’. Through teamwork even employees who have been struggling can come up to speed.

7. Empathy takes time and hard work, leaders and organisations need to do so.
In today’s result oriented world, people tend to focus more on meeting deadlines than on the people who will help meet the results. Leaders and organisations don’t want to spend that time required to do so.  It is not easy to understand employees easily. Secondly, showing any form of empathy can be perceived as a form of weakness. Thirdly, people can also perceive it to be sign of building a group within the organisation. By spending more time learning about the needs of their employees, leaders can set the tone and approach taken by their employees to achieve their organization’s goals.

8. Create a culture of empathy
“Nobody cares how much you know, until they know how much you care”. – Theodore Roosevelt
The culture in an organisation has to be of sharing and giving. The organisation and it leaders need to create an environment of understanding and allow employees to be more vocal of their problems and issues. A singular focus on financial goals is detrimental.  The leaders need to be more open about their ideas and also create an open culture too. Leaders also need to understand the inner aspirations/purpose of the employees and channel them to achieve the organisational goals. Empathy allows you to create an environment of open communication and more effective feedback.
I can think of two great examples of organisations who practice empathy. One is from India - Tata Group and the other from the USA - Southwest Airlines. There have been umpteen stories written about them so it is a mere repetition if I were to talk about it. The fact that they have been extremely successful in the businesses they are in is perhaps the best way to showcase how successful empathy works at the workplace.

In trying to address the apparent lack of empathy in today’s workplace, it’s important that we recognize that, much like an organization’s culture, it doesn’t come down to one element, but a series of inter-related behaviours and biases which serve to reinforce how leaders and their team perceive the value of empathy in business.

Thursday, January 24, 2013

Penny Wise, Pound Foolish- Short Term Success, Long Term Failure

I love the game of tennis. The ATP (Association of Tennis Professionals) releases tour rankings of its players at regular planned intervals. There is formula which is used to calculate the rankings of the players. To keep it simple, the rankings are based on the quality of tournaments played and quite obviously on the quality of players.
The emphasis in ATP rankings are based on tenacity, longevity and consistency. Very clearly, the rankings are not based on the score sheet of each match i.e. the difference in points between players in a match. Interestingly rankings in all the sports are based on similar parameters. The key in giving rankings to such people/ teams are those who give a sustained performance (over a defined time period). Blemishes like losses are evened out as the scoring is based on a certain time period.  By that extension, players and teams, if they are to maintain or climb the rankings have to consistently perform and cannot afford to be short term winners or a flash in the pan.
Taking this principle to the world of business. Akin to the ranking, the emphasis is on the long term growth of a business/ organisation. Prolonged respect and success comes from performing consistently over a longer period of time.
However the quarter to quarter approach has taken a toll on the long term success of the business. Catering to the stock market seems to be more the norm. Quarter to quarter guidance seems to be the only benchmark which CEOs seem to acknowledge.
Since the stock markets define the parameters, the shareholders dictate the demands and expectations. Maximizing shareholder value is an idea which comes from short- sighted people and is probably one of the most stupid ideas I have encountered.  Maximizing shareholder value in the short term leads to disastrous results and this is exemplified by many companies for example - HP.
Using the tennis ranking analogy, the short term outlook of business implies that the rankings are based on the score-line of each match rather than the number of matches won. Otherwise a player can play on surfaces comfortable to him/ her and boost her rankings which the ATP rankings do not allow. Likewise businesses will have to navigate different seasons, competition and conditions over a long period of time.
What are the pitfalls of such a myopic outlook? They are multiple. Some of them are listed here.
  • Innovation
One of the first things to suffer is innovation. Once the question, “How do we make the most money?” is asked, whether it’s for the short term or the long term, decision-makers discover that innovations that add value to customers are inherently more risky than cutting costs. Everything becomes an immediate ROI based approach which also reduces the apparent value of even large, long-term benefits. Creatvity is stifled.
  • Risk Taking
With larger risk taking comes the possibility of larger losses. Risk taking can become a liability and a very cumbersome process. From an executive perspective, cost cutting is an easier tool to work with. There are very little qualitative considerations when slashing of costs are involved. It is important to note that most companies which have grown have been companies which have launched innovative products. The chances of the long term success of a ‘me to’ company are limited.
  • Cutting Corners
Toyota, has had to recall cars simply because they started focussing on costs rather than quality. With unfaling regularity,  every year they have  been  recalling cars. Cost cutting seems to be a disease and even the President Akio Toyoda has had to publicly apologise for the wrong focus. Customer focus has taken a back seat. This when personnel ask, “What’s in it for us” rather than, “What’s in it for the customer?”
  • Lack of Customer Focus
When any organization looks too much inwards and loses track of its customer then it is sounding it's own death knell. The top brass of any organization should take judicious calls and be aware that the customer is king. That is one gospel will not change. If customers are happy and satisfied then the finances will be taken care of. Profitability is a result of customer focus and not the only goal. As Peter Drucker noted, “the only valid purpose of a firm is to create a customer. “
  • Executive Compensation
Unfortunately the compensation of the C-suites is inextricably linked to the stock market. That itself creates an imbalance and this translates into the adoption of short term measures. Executives start taking measures which gets in the way of creating long-term shareholder value. Al Dunlap and even Hurd are typical examples of such CEOs.
  • Shift from Best to Biggest
Being “the best” is basically focusing on the customer. Being “the biggest” is essentially focusing on making money. There may be a slight dichotomy here but the point is that when an organisation is only focused on making money rather than being the best at what they do, there will be compromises. HP is a very clear example. From being the best at what they do, they focused on being bigger than being the best.
  • Real Market Vs Expectations Market
The “real market”, is the world in which tangible products and services are created, produced and marketed. Revenues are earned based the sale of these products/services. All expenses are paid from these revenues. There is a realism of sorts. Assuming that all the products/ services are sold, the executives can control this—at least to some extent.
The "expectations market' rides on expectations or conjectures, however scientific or mathematical they maybe . People asses the real market activities and form expectations on how the company will perform in the future. This expectation is traded by people in other words, investors in a venue called the stock market. What drives the expectation market is further expectations. 
Unfortunately if there is one person who is wrongly held responsible for the shareholder value/ expectation concept is Jack Welch; during his tenure as CEO of GE from 1981 to 2001, as a result of his capacity to grow shareholder value and meet his numbers. When Jack Welch retired, the valuation of GE had risen from $14 billion to $484 billion. Since Welch retired in 2001, however, GE’s stock price has not fared so well: GE has lost around 60 percent of the market capitalization. Contrary to popular beliefs, he has never been a proponent of focus on shareholder value. Infact he has rubbished it - “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their overarching goal. … Short-term profits should be allied with an increase in the long-term value of a company.”
Not all companies are following a short term focus.
  • Starbucks had infact even refused to share year on year store sales. And needless to say Starbucks has been going from strength to strength.
  • Steve Jobs was very clear that shareholders didn't matter much and that they certainly wouldn't interfere with Apple’s pursuit of its original customer-focused purpose: ‘to make a contribution to the world by making tools for the mind that advance humankind.’ Infact Jobs detested shareholder meetings! Needless to say, I don't need to talk about the success of Apple.
That is why we all love a Borg, Federer or closer home Tendulkar. They are famous for their consistency, class and excellence over a long period of time. Was Pat Cash as famous as anyone of them? Not a chance.
There is only one valid definition of a business purpose: to create & nurture a customer. Stick to it.

Saturday, January 19, 2013

Keeping the Customer Relationship Going - Key Learnings from My Marital Life

This note was a very personal one when we completed a milestone of completing 20 years of our married life together.

7300 days ago, we had a traditional Malayali wedding in Trichur, Kerala. My grandmother (bless her), till her death insisted till that it was only because of her that we got married – (she got her thrills from it) – after all I was a favourite grandson (did I say only too?) and Latha was her only grand-daughter in law.

Latha is the scheming sort. Pretty soon she warmed her way into the hearts of my relatives. Infact she knew more of them than I did. They would rather talk to her than me. Forget relatives, she managed to swing my father her way. He actually thought that he had a great daughter in law much better than his own son! Poor me!

We are very different persons. I am the impatient one and Latha is just the opposite. My idea of a great time is to relax and chill, her idea of a great time is some action. She loves to party and I love to be at home and only party with a few friends; she loves to dance and I like 'not to dance'. Just when I decided to drop alcohol she felt that she would try to make up for it. I like to read the lighter books and she relaxes with scientific tomes (these typical intellectual Ph.D types!)

While I would call her in various terms of endearments like kutta, she called me eeah! (more like a goat’s bleat!). According to her, I am the old man and she is the young thing and goddam it, she has even convinced our son that I am old fashioned and she is the hip, cool one. This pretty much sums up what she thinks of me!

To use the cliché, opposites attract is perhaps a no brainer in our case. 20 years is a long time and I give Latha all the credit to navigate the turbulent times and come out of it. We have hit the lowest lows and she has been that one person who put everything into this relationship and made it successful.

When I thought life was unfair and faced extremely challenging times, Latha stood by me encouraging and cajoling me. It is with a lot of support from her (and ofcourse my close relatives and friends) that I am what I am.

Sometimes I do wonder why she loves me…..and I am still wondering! Anyway thank goodness for that. Latha, I love you and I am very grateful to you for loving me.

And now let’s move onto the best part of the rest of lives! But last but not the least, I am sexier than you….you know!

There are many learnings from this relationship and this can be extended to our relationships.

  • No two customers are the same.
  • There are ups and downs in any relationship. You need address each one of them separately.
  • Don't take your customer relationships for granted.
  • You have to invest in customer relationships.
  • Dialogue with your customer regularly. Monologues do not work.
  • Be thankful for your customer. 

The Age of Distrust and The Age for Trust

Loss of Faith The last few years have seen an increasing ‘loss of faith’ against politicians and media (because all communication happens ...