“The problem with CRM, for example, is people assume that a company knows what to do to create value for customers. But I say no, this decision cannot be unilateral; it has to be collaborative. Consumers will not be seen as targets any longer, which is what CRM is about?how to target a single consumer with a database. Key now is how to engage them as equal problem-solvers so that we get value that is unique. And once you’ve come to this conclusion, the amazing thing is the opportunity for value creation to expand exponentially because now we have more people telling us what they want. We don’t have to second-guess and we don’t have to do shock demand forecasting by SKU. If you deliver experiences, you’re going to be producing on demand. That’s the idea.”
When I first read this passage from an interview with C.K. Prahalad & Venkat Ramaswamy promoting their new book, “The Future of Competition: Co-Creating Unique Value with Customers”, I found myself muttering in agreement. A few days later I find myself more sceptical.
I guess the give away comes later in the interview when Prahalad says,We?re not talking about customizing products. We are talking about customizing experiences or creating unique experiences for individuals, even if they all have the same silly product. The difference is if that product is energized by information technologies, the experience can be personalized.”? (My italics)
My sense is that “creating unique experiences for individuals” could be as diversionary as the current obsession with brands. In a time of perceived intensive competition and pressure on prices many companies seem to be search for a magic bullet to solve their dilemmas. At the moment it’s brands. Next it could be “creating unique experiences for individuals”. Focussing on either can lead to missing the point, which is not having “silly” products or services in the first place.
There are two kinds of silly products or services. The first is when the people in a company regard what they offer silly and their customers as stupid. That’s straightforwardly morally corrupt and corrupting. Just don’t do it.
The second is far more common and is allied to failure demand, which I wrote about in an earlier posting. Here the product or service is close to meeting what its customers require, but is flawed in detail. Many products and services fall into this category – we buy them because they approximate to what we want and put up with them because we cannot find or afford anything better.
These kinds of products and services contain a vast stock of hidden value. A focus on making products and services better not only creates more value for the customer, but is also likely to help eliminate unnecessary costs making the company more valuable.
For example, John Seddon found failure demand to account for between 20% and 50% of the demand in financial services call centres – failure demand being a failure to do something right for the customer. So one could reasonably infer that a financial service company that almost always did something right for their customers could eliminate a significant part of their costs in running their call centres. More than that since most of the source of these failures lie deep in a company’s systems and processes, which is a form of waste, seeking to eliminate that waste would itself generate still more value.
The level of waste of both material and time in producing products is also staggeringly high. It is only because competitors are equally wasteful that many companies keeping going. Here again, the opportunities for unlocking hidden value can be immense, as many Japanese companies found as they smashed the competition in many industries some decades ago.
The problem is the level of attention required to make and deliver better products and services is a Sisyphean task – you just have to keep rolling that damn boulder up the hill over and over again. Much easier to focus on developing your brand, doing a bit of financial engineering or reorganising your organisational structure yet again and then moving on before the consequences of your actions become apparent.
Of course, too much attention to your internal process can be equally dangerous. The successful company has to be Janus faced, looking both inward and outwards at where the opportunities lie. Just as they need a passionate interest in their own products or services, they also need a genuine interest in the people that buy them, a sense of curiosity about why they do and a respect for them as the people who validate what they do. However, there is nothing new in this. A company like 3M seems to have this built into their DNA.
Viewing customers as equal problem-solvers rather than targets, as C.K. Prahalad & Venkat Ramaswamy suggest, is a sensible business strategy and can create fertile ground for innovation. The new communications technologies have created new possibilities for doing this. But I still wonder how scalable it is. Traditionally many organisations dealt with the problem of scalability by breaking themselves down into geographic branches or divisions and giving local managers considerable autonomy. My sense is that with many organisations in the recent past the technology has been used to lessen the autonomy of local managers rather than as means of genuinely getting closer to customers.
The exceptions are most often found in small businesses. I have followed with great interest the way my friends Karen Mahony and Ben Copsey have used the internet to build strong collaborative relationships with the people who use and buy their products. In both cases they seem to mange the Janus faced relationship between a fierce committment to excellence in what they produce with rich feedback loops with the people that use them.
It is difficult to get hard information about very small businesses, one tends to stumble across examples, but my sense is that the greatest benefits of the new communication technologies are to be found here. This is the space where the relationships can be relationships between people as well as between buyers and sellers. For larger organisations and companies it is more difficult and in this abstract world focusing on the daily grind of getting the details right may be the most effective way of realising their hidden value.