Customer Service and Problems as Differentiator

Once I ran a Service Division which included a customer service function. Initially, we received so many customer calls at peak volume that we’d have long hold times. Clearly, -not good service. The reasons customers called had to do with poor performance in other departments within the Service Division. Those problems I tackled first. At the same time we provided extensive training to the customer service representative to give them expertise in solving customer problems, and we empowered them to make decisions. As we resolved the service issues, the call volume dropped and our quality of customer service skyrocketed.

The business was a commodity service and customers could fairly easily switch between providers. Pricing was generally regarded as the only competitive advantage and we were very competitively priced. However, our customer service surveys were indicating a growing sense of loyalty due to our speed of answer and the friendliness and expertise in handling any problems customers had. We had a differentiator! But if our other services were flawless, the customer would not call us। The problem we faced was how do you delight customers if the only way to do it is to have them call us to resolve a problem?

We figured this out and our great customer service gradually drove loyalty, and an increase in market share.

Economic Theory

Recently a Nobel Prize winning economist suggested that global trade is driving a long-term convergence of per-capita GDP by enabling the distribution of knowledge, (know-how) throughout the world. But that is an incomplete view. It isn’t knowledge and know-how that will drive the leveling; it is the ability to innovate - the ability to create new knowledge - that will drive the leveling of economic well-being. Without the ability to innovate at par with the best of them, you will always be playing catch-up. This ability to innovate is the key valuable asset in any enduring for-profit enterprise.

Risk Leader

Fundamentally, a leader goes first, and leads by example. The other people are called followers. Everyone is going the same way. On a slightly deeper, but important level it is useful to understand that real leadership involves inspiring people by example that a risk can be surmounted. People do not need to be led if the direction they are going in involves no personal risk, that’s just supervision. The leader shows how to step over the fear and take the risk.

The issues around taking risks are something an innovator gets very familiar with very quickly. Our brains tend to become inelastic around repeated success patterns. This phenomenon manifests itself in a strong negative, almost protective, reaction to something that threatens to alter the pattern. Innovation is, of course, all about altering some existing pattern. The risk the innovator faces is the personal consequences of putting forward something that gets everyone’s hackles up. The first response to a good idea often involves a personal attack “With all due respect[1] your idea is crazy”, or “this is just a poorly conceived, stupid idea.” Because strong synthesizers often have low EQ’s they are not adept at navigating the interpersonal landscape, including confrontation. Devil’s Advocates can kill good ideas if the person with the ideas lacks confidence in the organization. Leadership makes pushing forward such ideas more palatable. Leaders must set an example showing a willingness to take risks. It is impossible to lead people to take risks if you do not significantly participate in the risks yourself.

An officer wanting to lead his soldiers up the hill into a hail of gunfire needs to inspire his troops to move forward. If the officer is standing there if full body armor with bullets bouncing off and his troops only have their cotton uniforms, he may have a little trouble delivering that needed inspiration. It doesn’t take a great synthesizer to see that today’s CEO’s seem to be immune from personal risk. Simply the amount of the compensation a CEO takes home means that the fundamental risks most people face in losing a job do apply to the executive ‘leader’. Second, many companies have announced lay-off due to declining performance, without preceding such layoff with some significant diminution of Senior Executive compensation. The people, most in control of the company’s poor performance, suffer the least or not at all. And finally, recently we’ve seen CEO’s who’ve led their companies into disaster; get led to the door and walk away richer than if they’d led the company to success.

When Harold Geneen, the CEO of ITT, was issued stock options by the board of directors, he immediately went out and borrowed a huge amount of money to exercise those options. Options are popular because they remove the downside risk for the recipient. By exercising them immediately, he put all that risk back in, and doubly so, since he had to borrow the money to buy the shares. He understood. If the leader wants to lead a great company, then he needs to set an example as a risk taker.
If boards want their CEO’s to take leadership roles, they will need to construct pay packages that put back the risk. Huge pay should come with huge risk. Severance package for CEOs should be based solely upon the subsequent performance of the company as reflected in dividends.
[1] “With all due respect” really means “I am tolerating your idiocy”

Last night I attended the University of Chicago GSB Consulting Roundtable for a very informative presentation on Web 2.0. One of the applications we talked about was using the social network structure to do ideation. The process starts with a straw man idea. This initial idea is sent to two people who add to, or modify the idea -- change it to create a somewhat new idea. Each of these people sends their idea to two additional people who modify it, send it to two other people, and so on. Each participant gets to rate and rank the ideas, and ultimately there’s an idea(s) selection process.

It will be interesting to watch how this ideation process pans-out. It is a popular belief in innovation circles that to get a really good idea, you need lots of ideas. This is the old Edisonian approach to innovation. There is nothing wrong with generating lots of ideas. If you’ve got to solve a problem, and you don’t have a better method, then lots of ideas is a pretty good approach. You’re likely to generate a reasonably workable idea.

I think there is at least one great benefit to this way of ideation. In any business there is a chance that a strong synthesizer is close to the problem. It’s highly probable that this synthesizer has already thought through the problem and has a good solution. In many businesses, there is no good way for this kind of person to surface an idea. This type of ideation process may allow the idea to be surfaced as a ‘modification’ of the straw man. It still may go nowhere because often the change that’s needed cuts pretty deep into what’s in place.

People are naturally cautious about big changes. Part of that is because big change usually carries a degree of risk. But it is also true that our brains form increasingly rigid ‘success’ patterns around processes that have repeatedly worked well in the past. These hard wired patterns blind us when we examine a new idea. It is why in hindsight a hard fought for solution looks obvious when the dust settles. Oddly enough, the best ideas are almost always initially rejected with statements like: “the idea is completely unworkable”; “he doesn’t know what he’s talking about”; or “we already tried something like that and it was a total failure”. People’s brains reject change to a process or product that has long been successful. The real obstacle to this Grapevine ideation process is the notion of rating-and-ranking ideas. It is a popularity contest. The best idea will likely be pretty unpopular initially. What is needed is problem-solution evaluation criteria.

Lots if important innovations did not come from some group-think (after all, each act of synthesis happens in just one brain). The literature is full of examples of important innovations that were rejected repeatedly as dumb ideas. It is just how our minds work. Thomas Watson of IBM initially rejected the computer, 3M repeatedly rejected masking tape, Xerox rejected the personal laser printer (which HP then made into a very profitable business), and HP also rejected the display monitor, etc. It was the persistence of the originator that eventually turned the idea into a delivered solution.
One area where it would be interesting to test the usefulness of the Grapevine approach, would be in the initial problem-definition stage. That is, use the tool to define the problem precisely, with the rate and rank process identifying the fundamental properties of the problem, then the solution can be evaluated in terms of how well it purports to address each of these properties.

Knowledge in Business

Browsing on websites about ‘Knowledge’ I came across a site that had this statement prominently displayed:

Ultimately, knowledge in business only has value if it results in action.

At first this looks a bit like a ‘mom and apple pie’ kind of statement. But when I though about it, I realized that the statement is just wrong. This suggests that if a company is going to invest in knowledge, then the company ought to reasonably expect the knowledge will result in action. By implication, the company would not invest in knowledge, if that knowledge did not have an obvious potential to result in action. Hence the engineering department would pay for engineering classes, but not learning to signing for the deaf (assuming no obvious link to action.) Someone who does not understand the role knowledge plays in innovation must have made this statement.

Synthesis, the combining of existing knowledge to form new knowledge, is the primary source of innovation for most companies today. Very often the solution to a problem comes in the form of a metaphor from some distant knowledge. E.g. the ping-pong ‘burp’ gun leading to the ‘sinking’ pipeline solution (described in another blog, [Example: Synthesis and the Obvious Solution] below). We are not able to predict what knowledge will provide a pattern, which drives our brains toward a particular solution. Hence, broad knowledge, with lots of ‘waste’ is better than narrow knowledge which does not give our brains the distant metaphors we use to solve problems.
The second reason that obtaining knowledge in an alien field is valuable, is what happens to our brains as we age. The metaphor of a rubber band works well here. If you do not take care of a rubber band it loses it elasticity and, after a time, it will snap. However, if you take care of a rubber band, you can maintain its elasticity. The human brain is the same way. Our ability to see things differently, to find new patterns from our knowledge depends upon the elasticity of our brains. Neurologist, like those at UC Berkeley have shown that if we keep challenging our brain to learn new things, things that are very different from what we already know, then we can maintain our brain’s elasticity. Otherwise, it loses its elasticity and our ability to see things differently ossifies. That is, if you speak Spanish, don’t choose Portuguese to challenge your brain, it is too similar to Spanish. Instead, learn to sign for the deaf, or read Braille, or learn to sculpt or study Chinese literature. Choose something very different from anything you’ve been exposed to before.

Is Experimentation Innovative?

Experimentation requires diligence, rigor, meticulous adherence to technical methods and perseverance. In a corporate environment, good experimenters are people who are diligent and rigorous, and can follow prescribed methods without variance and will keep at it. These people do not get easily sidetracked.

Synthesizers, on the other hand, are constantly looking for new problems and newer ways to solve them. They are easily sidetracked, and would be more likely to perform each experiment a bit differently in an effort to produce a quicker, cheaper, more efficient result. They are also more likely to drop the experiment if it does not produce results quickly.

Experimentation is expensive, time-consuming, and does not guarantee a solution to the problem at hand. Companies that must experiment, like chemical and drug companies, are constantly looking for ways to shave costs and delay from Experimentation. That’s where super-synthesizers add real value. They see problems from different perspectives.

Such companies should seek out such synthesizer talent and incorporate it into the Experimentation process। They will find unseen problems and solve them with great expertise. Occasionally, a failed experiment yields a serendipitous discovery. A synthesizer will see a failed experiment from a completely different perspective giving the company a double opportunity to enjoy new IP from a serendipitous discovery.

Yes, Experimentation is innovative!

Two tenets of good MIS

Two tenets of good MIS design are: 1) the information should be unbiased, and 2) the benefits to the firm of having the information should outweigh its costs. MIS that is designed to demonstrate the value to the firm of a department’s activity almost always violates both these tenets. When they produce MIS designed to demonstrate the impact on profit of their activities, it’s easy for support managers to rationalize that the MIS is cost effective and free of bias. But support activities such as those performed by building maintenance, the transportation pool, the janitorial services, etc.,. are done because they are deemed necessary to the operation of the business. They are already considered valuable and trying to put a profit measure around them will not alter that.

A janitor once tried to show the impact his work had on the bottom line of the firm. He undertook a study of the impact on employees when he failed to fill the men’s room toilet paper dispensers. Measuring the time delays caused by this lack of paper he determined that on average this would cost the firm 59 second per employee per day. He further then estimated the impact of filling soap dispensers, vacuuming the carpets, sweeping and mopping, emptying trash cans, etc.,. Ultimately his analysis showed that his work contributed close to $1.5 million per year to the firm’s bottom line.

Even if we assume the janitor’s information is unbiased and accurate। What is the value of this information? Is the firm going to go out and hire 20 more janitors and realize a $30 million benefit to the bottom line? Is the firm going to give the janitor a ten-fold increase in salary? Is management going to look at the janitor’s activities with a new sense of awe?

When a department mixes useful management information with MIS of this nature, it undermines the perceived value of the information. It is important for any support function to be careful to only produce information which will have a meaningful impact on decisions which affect the bottom line.