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Time to retire shareholder value maximization strategies. How about focusing on customers instead?

Thursday, February 11th, 2010

In the current Harvard Business Review, Rotman school dean Roger Martin (author of “The Opposable Mind” and “The Design of Business,” both books endorsed by this blog) argues that it’s time for a new overarching goal for the firm (”The Age of Customer Capitalism“). Martin argues that since the 1980s companies have been focused on the wrong objective: shareholder value. He states that shareholders are frequently short-term holders and overwhelmingly indirect (i.e., you buy a share of a mutual fund that invests a fraction of that share in a particular firm). Therefore, the side effects of shareholder maximization strategies are short-term thinking and lack of concern for anything not directly financially-related.

Reading Martin’s piece brought to mind the chill that went through me years ago when I read Michael Jensen’s (the godfather of shareholder maximization) 1980s HBR article “The Eclipse of the Public Corporation.” In this piece Jensen argued vociferously that older, low-debt versions of company capitalization were antiquated, and the companies of the future would be highly leveraged in order to tightly tie owners to the performance of their companies.

We see where that got us. Perhaps there were others who also instigated the era of private equity, but I first and foremost blame Jensen. He got what he wished for and as a result saddled the rest of us with an unmitigated disaster – an economy teeming with overleveraged investments – which looked great as long as the economy kept growing, but which changed into albatrosses around our collective neck when the (inevitable?) downturn came.

Now, says Martin, it’s time to redefine the relationship between a company and its stakeholders. Shareholders are one, and not the primary, audience for company strategy. Customers come first.

Well, hallelujah!

[Martin has an interesting companion piece to this on the HBR website, "What We All Lost When Business Lost Respect." ]

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Another thing on customer service vs. network at wireless companies

Friday, August 7th, 2009

This was a million years ago in tech terms, but during the mid 1990’s my friend Amy told me that she had given up AT&T long distance for Working Assets, a reseller. Why? I asked her. Cheaper? Its social mission?

Amy told me this: “Working Assets was nice to me on the phone.”

Related post:
Wireless companies are no longer in the network business

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The “Values Proposition”

Tuesday, March 31st, 2009

The term “value proposition” has been in vogue in business-to-business sales for twenty years or more. In short, it means that a product for sale must, in essence, create more money (in increased revenue or reduced costs) that it costs to purchase. “If you buy my widget for $x, you’ll get $5x back over the next 10 years,” or something like that.

The value proposition is a very logical concept. That is its beauty and its limitation.

While many companies are aware of their value proposition to customers, few if any know their “values proposition”: the collection of things about the company and its products & services that customers value (along with the things they don’t value or which customers see as negative).

The values proposition is the underpinning of the customer reference. When companies are asked “why would you/wouldn’t you recommend a company or product?” they respond with answers informed by deep, emotional reasons like “they save me time,” “they make me smarter,” “they are available whenever I need help.” If you have happy customers, you have a values proposition too. Do you know what it is?

We’ve helped companies define and understand their “values proposition.” Contact us at inquiry@caddellinsightgroup.com if you’d like some help finding out yours.

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The salesperson’s point of leverage

Monday, March 9th, 2009

It seems like the deck is stacked against salespeople these days. With budgets as tight as they can get, the few clients who need to make purchases have a number of suppliers to choose from. All the power rests with them, right?

Not exactly.

The same budget-tightening that has cancelled/deferred valuable projects has also limited companies’ peripheral vision. They send many fewer people to industry conferences. Managers and executives turn their focus inward, to manage the fallout of job cuts, pay cuts and benefits cuts.

Executives, as a result, are losing visibility into customer needs, market trends, and competitive strategies. At a recent client meeting, after their team had done a great job diagnosing the impediments to purchasing from patterns in their sales calls, the VP of Marketing asked me what I thought. I demurred: “You guys are the experts in your business. You’ve done a great job figuring it out.”

He said, “No. You are the expert. You are the proxy for the customer. We have the inside-out perspective, and that’s important. But you have a sense of the outside-in perspective–what the customer is feeling–without being burdened by our processes and culture. So, what do you think?”

And in here is the great opportunity for salespeople. They can provide executives the outside-in view of their companies. Salespeople can immerse themselves in the industry, focusing on what the end-customers (their prospects’ customers) need and expect. They can provide that insight to the prospect and also ensure that proposed solutions address those needs and expectations.

Challenging, yes. But doable. And perhaps even the realization that there are valuable, proactive things you can do right now can help you get to work and make that next phone call. Which just might lead to the next deal.

(Photo from jjorgen2 via stock.xchng)

Related post:
Why Are Companies So Inwardly Focused?

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In praise (kind of) of bankruptcy

Monday, March 2nd, 2009

The stigma of bankruptcy has colored the debate about whether and how to bail out the US automakers. (A friend recently pointed out an irony–”if we have to choose which company to bail out, it probably should be the one that doesn’t want to be bailed out, Ford.”)

In today’s Wall Street Journal, a Harvard Law School professor, Mark Roe, takes up the question, in the op-ed “Would A GM Bankruptcy Crash Its Suppliers?” And he points out that there are several pieces of the bankruptcy code that are favorable to suppliers and might allow them to be better off than they are in the current situation:

Courts know that bankrupt companies need to keep getting supplies, inventory and parts for manufacturing to be viable. Hence, the bankruptcy code and the bankruptcy courts put payments for new supplies at the top of the queue, even ahead of most old lenders. Send in fresh supplies, and the courts have the bankrupt company pay for them, even while prebankruptcy creditors cool their heels.

When that is not enough, courts can do more. Critical vendors can have their prebankruptcy invoices paid if that’s what’s necessary to keep the supply conduits fluid. A bankruptcy judge has to approve these kinds of payments — they’re not automatic — but the approvals are regular and quick, sometimes made on the first day of bankruptcy.

My experience backs this up. I managed the customer base for a company who counted among its biggest customers Worldcom and two divisions of Adelphia, all of whom declared Chapter 11 in the early 2000’s. (We got “critical vendor” status at Adelphia.) While the process was painful, and required a lot of careful management on our part, we were paid during the bankruptcy, and even got back (eventually) most of the receivables that were outstanding at the time the companies declared. Moreover, they were still customers years later, by the time I left that company.

I would underline Roe’s point that a supplier to a Chapter 11 company at least has knowledge that they are at the front of the line to be paid for services provided under Chapter 11, that the company is bound to pay timely, and finally that there is recourse through the bankruptcy court for disputes.

It’s time to look at the Chapter 11 option clearly, instead of stigmatizing it as “broke,” “insolvent” or “destitute.” Because the current situation, of continually pouring money into the companies in exchange for half-measures at restructuring, isn’t doing the suppliers, the company, or the country any good.

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Customers are talking

Friday, February 27th, 2009

You may have noticed that the title of this blog has changed. After nearly three years, “Shop Talk: Innovation, Marketing and Alliances” has been retired. (Actually, it lives on in the incarnation of this blog that appears at Pennlive.com.)

I’ve begun to focus my professional activities around helping companies listen to, make sense of, and act on customer stories–that is, narratives offered by or involving customers, rather than survey data, eye movements, brain scans, or other measurement approaches. I’m calling this focus “Customers Are Talking”–hence, the new name of the blog.

At the beginning of the year, I set a goal to write one “Customers Are Talking” post per week. That has grown to 2-3 posts, and so now it’s time to make the switch.

While the content may not range as widely as “Shop Talk”’s did, I still retain the right to digress as necessary. Such is the privilege of self-publishing. And the Shop Talk name will live on in our occasional podcast. (New edition to premiere next week.)

Please leave your reactions, dissent, kudos, etc., in the comments.

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Customers are talking: is a customer-service dialogue a story?

Tuesday, February 10th, 2009

Some of my work recently has been applying narrative-sensemaking techniques to customer service dialogues (typically recorded phone calls), which is a fancy way of saying helping companies find patterns in what customers are saying about their products and services, and to use these patterns to drive changes that will help them sell more products and/or make their existing customers more satisfied.

This is a little different from the more traditional approach of eliciting stories via interviews, anecdote circles or web forms. In those circumstances, carefully-crafted questions help generate stories (”this happened, then this, and then this”). Customer-service calls are not elicited–they are spontaneous expressions–and don’t follow the story format. They are simply two people talking.

So a question is, I guess, can you get useful stories out of mere dialogue?

In thinking about this question, I’ve been reflecting on the novels of William Gaddis, an American writer who published only a handful of books from the 1950’s to the 1990’s. I’ve read two of them, “JR” and “A Frolic of His Own,” and both have barely any exposition at all. 90+% of the text is dialogue, barely puncutated, overlapping, and often confusing.

“JR” is a very forward-looking book about a junior-high-school student who speculates his way into a multi-million dollar paper fortune. Given that it takes place in the mid-70’s, JR does his trading via the payphone in the school hallway. Today, he’d be on TD Ameritrade.

“A Frolic of His Own,” written in the 1990’s, takes issue with the (again very present-day) issues of litigiousness and intellectual property. In addition to dialogue, hilariously-deadpan legal briefs help move the story along.

Reading Gaddis’ books is a lot like listening to those customer service calls. A bit disorienting or hard to understand, often touching, sometimes funny. Always humanizing. And always stories.

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Customers are talking: turning points in telephone sales calls

Monday, February 2nd, 2009

I’m working on a project to listen to telephone sales calls and help the client find patterns explaining why some calls end up in a sale and others don’t. Each call is a story, complete with emotion, conflict, and turning points. Listening to dozens of these, pictures begin to emerge of how people buy, and how, even when they like the product and may want to buy, don’t. And it has nothing to do with logic.

One turning point I’ve experienced is the moment when a call turns from being headed to a close, to not. On the calls, it’s very subtle: a pause, a change of subject, perhaps an additional question from the prospect. But afterward, a call that seemed to be heading toward a sale instead is, at best, a promise to call back.

The best way to explain it is to relate a personal story.

I’ve been a customer of Verizon Wireless for more than five years. I got a telemarketing call from them today, offering inducements to renew my service contract early. I’ve been evaluating this for a while now (this is a subtext of my posts on the Blackberry Storm), and after discussing it at some length with my wife, we’re headed toward renewal.

This call, then, could have been Verizon’s way of closing the deal. I was pretty ready, although I was thinking of doing this in March. If the deal was good enough, perhaps I would pull the trigger today. The call went something like this:

“Mr. Caddell,” the rep said, “we are offering some extras today if you want to renew your contract early. You might be able to get a discount on a new phone.”

“When does my contract expire?”

“The end of July.”

“I thought it was the end of March.”

(turning point 1) “That’s the time when you are eligible for an early equipment upgrade. Your contract expires in July.”

“OK, what are you offering?”

(turning point 2) “100 extra minutes per month.” (This wasn’t attractive to me at all. We don’t use the minutes we have now.)

“How much off the phone?”

(turning point 3) “Well, you’ll be eligible for that at the end of March.”

“Earlier you said I could get a discount off a phone.” (I didn’t tell her that Verizon had already sent me two mailings offering me phone discounts for renewing now.)

“I said you might be.”

There was no way was I going to renew then. At each turning point, in fact, I became farther from renewing than I had been before the call. Instead of feeling happy, encouraged, eager to get a new phone, I felt frustrated, annoyed, and that I had wasted time even picking up the phone.

It wasn’t the rep’s fault. She was given a difficult product to sell (competing, in fact, with the company’s own mailings). When I began to ask pointed questions, the pitch fell apart. There was probably no rep on earth who could have closed me with that offer.

Which is a significant learning from this project for me. Selecting and training reps is only a part of the formula for success in telesales. The product must be useful, and the offer must be made attractive. And that work happens far outside the call center.

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“Underground” as an example of narrative study

Monday, January 26th, 2009


Over the last couple of years, I’ve gotten more involved with collecting and sorting through multiple narratives to help businesses understand and deal with difficult problems. (Difficult, meaning the normal tools such as numerical analysis, process mapping, etc., are insufficient to understanding the issue.) This has become a cornerstone of my professional life, and it’s been a rewarding and at times thrilling undertaking.

Shawn Callahan at Anecdote introduced me to this area, and then I learned about the work of Dave Snowden at Cognitive Edge. I met Cynthia Kurtz, who was an early collaborator with Dave Snowden, and have learned a lot from her as well. To the extent that the work I do is valuable to my clients, these folks deserve much credit.

Yet one of the best teachers I have had here (and I’m still a rank beginner) is the book “Underground” by Haruki Murakami. He’s one of my favorite novelists, and this is one of his few nonfiction books. I read it years ago, long before I’d learned the terms “story listening,” “mass narrative capture,” or “sensemaking.” But when I began learning from Shawn, Dave, Cynthia and others, it immediately came to mind.

In “Underground” Murakami seeks to understand and to help readers understand one of the most terrifying episodes in recent history–the sarin gas attack on the Tokyo subway system perpetrated by members of the Aum Shinrikyo movement in 1995.

Except for a brief author’s preface, the book consists of the stories of survivors of the attack. Murakami interviewed everyone he could find from the list of victims, and presented their stories, unadorned, one after the other. He then interviewed a number of members of Aum Shinrikyo, and presented their stories, as well (a decision that is aligned with goals of narrative learning to take in multiple perspectives of a situation).

The result is a chilling, relentless book, that nonetheless does what no news report, CNN story or even historical chronicle could do–shows the impact of the attack and its aftermath on the real people who were caught up in it; and illuminates the puzzling (to outsiders) behavior of the Aum Shinrikyo members. It’s a fully-realized, three-dimensional picture of a disaster, and goes a long way to explaining the unexplainable. In this way it’s like an extended version of John Hersey’s great “Hiroshima,” though shorn of the authorial voice.

When you read this book, the stories layer and layer; you see the event from a deeper and deeper perspective, till you almost feel like you’re there, inside the attack, experiencing it with the victims. And then you read the Aum Shinrikyo stories, and somehow you see that their world has its own internal logic. You finish the book, and you’re exhausted, but you know deeply about this terrible event, how it happened and what it did to people. Your brain is working hard throughout–you’re sensemaking.

If you’re interested in narrative sensemaking, or you just want to learn the full story of a human disaster, you must read “Underground.”

(Here’s a much earlier reference to “Underground” and the subject of story-listening.)

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New York Times on mistakes in the workplace

Sunday, January 18th, 2009

Today’s Times business section covered one of my favorite subjects today, as part of its “Career Couch” series: mistakes in the workplace. Even better, they interviewed an important researcher on this subject: Amy Edmondson of Harvard Business School (discussed many times on this blog, including here and here).

Here’s my favorite quote from the article:


In any job that requires continuing thought and judgment, we need to be “aware of the huge potential of things to go wrong,” Professor Edmondson said, because “we all can handle only so much cognitively at a time.”

The article is excellent in recommending courses of action to report and recover from a mistake. I wish they had spent more time discussing how to learn from one’s mistakes. Sometimes errors are one-off oversights, other times they reflect weaknesses we need to work on (at still other times they are serendipitous events, but that’s another story). How does one tell the difference?

Here’s a personal example. I noticed that I lost track of several conference calls over a period of months. This was unthinkable to me, since I’d always prided myself on discipline and organization :). But the pattern was worrisome. In my business, if you miss a client conference call, or worse, two or three, you may have an ex-client on your hands. What I realized was, I was getting busier, and therefore my mind was not able to manage all the data I was asking it to. This realization drew me to David Allen’s book “Getting Things Done” and adopting many of its suggestions.

To learn most from your mistakes, I’d suggest this approach. When an “unplanned event” happens, and after you do all the sensible things recommended in the Times article, jot yourself a note. What happened? What did you expect, and how did the outcome differ from your expectations? Put it in a file.

At the end of the year, or at another time when you have space and a clear mind to reflect, pull out the file. Review the notes. See if patterns emerge. Are there variations of errors happening over and over? Why? Can you make any changes to try to reduce their occurrence in the future?

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