Beyond Close to the Customer

Tom Peters

I’ve devoted 25 percent of my columns over the years to a hundred ways to get close to the customer—passionate leadership, exhaustive measurement, meaningful incentives. Here’s my scary conclusion: Apply them all and there’s a good chance that five years from now you’ll be no closer to the customer than today.

So what’s the answer? In short, it’s the “gotta” factor: Those who want to transform their enterprises must create autonomous, modest-size, close-to-the-market units that serve their small markets—or else.

Ben Lytle, chief executive of the $2 billion (revenue) Associated Group of Indianapolis was proud of his effort to decentralize the financial services company, until he got in the elevator one day: “I was really excited about having gone from a functional organization into five major business units. A claims processor was in the elevator too and I asked her, ‘How do you like working in the new structure?’ And she said, ‘Oh, real well.’ And I asked, ‘Where do you work?’ I expected her to say something like, ‘I work in the commercial division, we support small businesses.’ But she said, ‘Fourteen.’ All that had changed for her was the floor of the building where she worked. Nothing else!

“That experience really made me look at how to change culture. You have to change what people see, where they live, how they’re paid, everything.” Change everything he did, creating a series of small, tightly focused companies (collectively called Acordia). Each has a CEO, about 100 employees, its own facilities, total profit and loss responsibility, a local board of directors (mostly outsiders), even the right to make acquisitions.

Acordia Business Benefits of Evansville, for example, has a potential market of just 11 counties. “We either make it or break it on 11 counties in Indiana,” CEO Russ Sherlock says. “So we have to be the best darn insurance company for these counties that anyone could ever want.” The early going suggests that Sherlock and his colleagues are doing just that—tailoring products to small and middle-sized business customers’ needs in ways they would never have dreamed of doing before. Why does Sherlock bend over backward? He’s gotta!

Pat McGovern, CEO of International Data Group (IDG) which publishes 150 magazines including Computerworld, understands: About 4,000 IDG employees are broken into 80 autonomous business units with about 50 people in each. Every IDG company turns in an annual business plan, with goals that are normally aimed at “growing revenues at twice the rate of market growth,” according to President Walter Boyd. And once you sign up for those goals, you’d best make them. “If an independent business unit manager misses three quarters in a row,” Boyd says, “then he gets the dreaded visit from me—at which point we suggest it might be time to look for something else to do. We feel that our presidents are very much in touch with their market. Once they make their commitment, we expect them to keep it.”

But the Associated Group and IDG pale beside CEO Percy Barnevik’s act at Zurich-based ABB Asea Brown Boveri. He’s split the $30 billion, heavy-industrial monster into roughly 5,000 profit and loss centers, averaging 50 people each. Again, story is “gotta”: They either make it in their small marketplace, or they’re out of work. (There’s more to the story, of course. ABB has a minuscule corporate headquarters—it’s incapable of interfering with its far-flung, autonomous offspring!

Propelling front-line units into the arms of the customer is the strategy of Electronic Data Systems (EDS), too. The 65,000-person company is divided into very accountable, 10-person project teams. As a new employee at EDS, you’re tossed on to one of those teams, at a customer location, on day one. You quickly learn that it’s up to you to figure out how to make things happen for the customer—or else. Those who get it soar. Those who don’t leave.

But none of these strategies can rightly be called “customer-centered.” I suggest, as an alternative, symbiotic organization. My dictionary defines symbiosis in terms of interdependence, mutually beneficial relationships, different species embedded in/living off/feeding off/reinforcing one another. So it’s not “close to” (the customer), not “obsessed with,” not “externally oriented,” not “market-driven.” Instead, the Associated Group, IDG, ABB, et al. practice a more Zen-like “one with,” “indistinguishable from.” The poet Robert Graves wrote:

After when they disentwine
You from me and yours from mine,
Neither can be certain who
Was that I whose mine was you.
To the act again they go
More completely not to know.

Now that’s more like it! Incidentally, once you’ve restructured to cause almost unconscious symbiosis with customers, well, then go back and do your measurement, incentives, etc. But all that is the cart, not the horse. The horse is human-scale business units, unimpeded by corporate staffers, who serve their narrow market because they gotta.

(C) 1992 TPG Communications.

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