Snuff the Bureaucrats, Embrace the Customer, Listen to the Worker
The way our biggest firms have traditionally treated customers and employees is frightful. But is the old guard, even as it starts singing new tunes, ever paying the piper!
Consider: Sometime next year or the year after, Johnny-come-lately Walmart of Bentonville, Ark., will likely race past Sears to become the U.S. champ in retail sales. In the last two years seemingly invincible IBM has lost more than one-third of its personal computer market share to Apple, Compaq, and company; ten years ago Apple was an $8 million company, and Compaq wasn't even a gleam in the founders' eyes.
General Motors' main domestic competitors were on the ropes in 1980, and the firm has enjoyed protection from foreign competition since 1981. Nonetheless, massive GM managed to shed a quarter of its market share from 1980 through 1987.
In just the last 60 months, the "mini-lab" mom and pops have wrested over a third of the $5 billion photofinishing market from, primarily, venerable Kodak. And the like-named "mini-mill" stalwarts in steel have ripped almost as much of our steel market from the feeble hands of the majors.
Turner Broadcasting barely racked up $28 million in revenue a decade ago, but it was subsequently the bête noir that forced total reorganization upon ABC, CBS, and NBC.
This unprecedented attack by unknowns on seemingly impenetrable fortresses adds up to what Silicon Valley marketing guru Regis McKenna calls "the rise of 'other.'" One of the few defenses against the "other" juggernaut is exorcising the massive bureaucracy that forms a gulf between corporate leaders and suppliers, customers and employees. Just how much that gulf costs is revealed by the valuation that the market routinely places on the split up of big, sluggish firms. For instance, Time Inc. is now "in play." Its stock, going for $95 a share at the end of September, would bring $200 a share if the company were broken up. Translation: lop off top management and corporate staffs, set the bits and pieces free—and you increase shareholder wealth by a tidy $6 billion. Some commentary on incumbent management!
The fact that every product and service, old or new, is being reinvented also plays into the hands of "other." Northwestern University marketing professor Phil Kotler contends that "there's no such thing as a mature market." By the early 1990s, for example, the average automobile will feature more computer power than what was aboard the Apollo moon-landing vehicle in 1969. Even bathtubs are not immune to change. Former commodity producer American Standard emerged from the doldrums by introducing a $30,000 model that includes microprocessor-controlled, pre-settable bath temperatures and a television. In particular, "service added"—software, instant customization and quick response—is transforming every product and providing untold business opportunities.
The emerging idea of service as every manufacturer's chief source of advantage comes through loud and clear in a study by The Forum Corp. of Boston: The principal reason customers shift from one supplier to another is lousy service (named first by 70 percent of the sample)—not price or even quality (15 percent each). I'm certainly not advocating shoddy quality, but there's empirical and anecdotal evidence galore demonstrating that service added holds the key to manufacturing competitiveness. The trouble is, this message is a tough sell to traditional execs, who insist on the primacy of tangible product attributes.
Dramatic proof of our nonchalant attitude toward service jumps out from Department of Transportation regulations that define arriving airplanes as on time if they are late by 15 minutes or less. As far as I'm concerned, a flight scheduled to land at 2:42 p.m. that lands at 2:43 p.m. is late—if we're serious about competing, that ought to be our attitude, consumer and producer alike.
So what's the opposite of such institutionalized nonchalance? A recent Harvard Business Review article focused on the awesome power of a bold service guarantee. Take "Bugs" Burger Bug Killer: (1) You don't owe one penny until all pests on your premises have been eradicated; (2) if you are ever dissatisfied with the service, you will receive a refund for up to 12 months of the company's services—plus fees for another exterminator, of your choice, for the next year; (3) if a guest spots a pest on a customer's premises, BBBK will pay for the guest's meal or room, send a letter of apology, and pay for a future meal or stay; and 4) if your facility is closed due to the presence of rodents or roaches, the company will pay any fines as well as all lost profits, plus $5,000. Wow!
Microprocessors in our tubs and gutsy guarantees are among the sophisticated answers to the global competitive puzzle. But more basic approaches also exist. Morris Lasky has turned around more than a hundred organizations (hotels, stores, factories) in the last 20 years. Success magazine unveiled his secret: "I'd say that 95 percent of a good bailout campaign comes from the comments of the people who are already there ... [who] know what the problems are, but have never been asked ..." He troops the line, listens closely, and then gives workers the green light to implement solutions they've suggested. That's about it. However, I worry that such an answer to our "big" problems is far too simple for America's sophisticated managers. It's the kind of idea that only appeals to "other"—that is, homespun types, such as Walmart founder and septi-billionaire, Sam Walton. Or maybe you?
(c)1988 TPG Communications.
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