Black swans

These are hard to predict, large impact events that are rare beyond the realms of normal expectation. Some people believe that all significant consequential events in history originated as Black Swans!

Who would have expected a series of what appeared to be unrelated events such as the Sub-Prime mortgage lending exposures, Northern Rock and concerns re long-term oil availability would give rise to such far reaching economic issues. It does remind us all that financial markets are based largely on a foundation of faith rather than something a bit more substantial.

Many businesses that built up on the back of a long bull market either came crashing down like Lehman's or had to do undergo some pretty radical surgery to stay in the marketplace. In some cases this involved focusing back into home markets and core strengths but the reality is that to do business going forward you have to accept that we now need to operate across a flat world!

The really great thing about the recession is that by driving businesses to cut expenses such as travel it has catalysed the emergence of a portfolio of solutions that help us to work far more collaboratively without having to leave the office. I remember early in my career with IBM having to go into a large video conferencing room for a global meeting. The camera was sound activated and slowly swung round on a turret when it detected a sound. The image quality was truly awful and out of sync. Aside from the huge amounts of fun to be had by the occasional clearing of ones throat it was a pretty useless communications tool.

The quality and ease of use of video solutions has been getting really good. It's never going to replace the benefits of a firm handshake or 1to1 lunch but it is pretty damn effective for most business meetings and significantly reduces operational costs. Many companies now have the networking infrastructure to support these technologies and willing to invest to reduce travel costs.

Perhaps the Black Swan has helped us all to now see a bit of sense here.....

The final three feet...

The term Customer historically derives from "custom," meaning "habit"; a customer was someone who frequented a particular shop, who made it a habit to purchase goods there, and with whom the shopkeeper had to maintain a relationship to keep his or her "custom," meaning expected purchases in the future.

In a recent survey of several thousand customers in the US and UK 49% of respondents claimed that poor service had led them to change service provider in at least one industry during the previous year. Another UK survey in 2006 identified that 65% of clients had taken their business elsewhere after a bad service experience. Worryingly 25% of those movers expressed intent to never return to the previous service provider!

The stats are pretty shocking when you take into account that it probably works out at 7-10x more expensive to acquire new customers than retain existing. I guess it is also worth bearing in mind that a customer is far more likely to invest in a big purchase with an existing trusted supplier than a new one.

The importance of great customer relationships is recognised industry wide but we tend to emphasise the wrong approaches and look for a silver bullet in technology instead of people. The CRM technology market place grew from $23 billion in 2000 to $76 billion by 2005 and forecasts 11% pa annual growth thru to 2014!

Ironically much of the investment has been focused on reducing the costs of servicing customers, not building new or deeper relationships. Before managing a customer relationship you need to first build that relationship and that is not where data-mining or behavioural tracking technologies offer much help.

Jan Carlzon who led the turnaround of the Scandinavian airline SAS commented that customer’s feelings about a company originate in the many small interactions including reservations, checking-in, boarding and the way they are served a drink or meal.

It’s useful to look to the retailing industry where the client interaction is at it’s most important to start to understand how the successful businesses create a great customer relationship. A particularly good example here is Starbucks. Things have been rough in this sector recently but it is worth bearing in mind that since 1992 Starbucks stock has risen a staggering 5,000%. One of its key differentiators in a heavily saturated and competitive marketplace is its ability to create a highly personalized and satisfying customer experience.

Starbucks recognizes that its customers expect any business to respond to routine requests but that when a business “colours outside the lines”, customers respond with loyalty and increased sales. One customer recalls calling into a local Starbucks an hour before opening time by mistake and resigned to a long wait in the car park. The door then opened and he was offered a coffee, as he put it, “Starbucks gets it”.

In an industry where we focus on high technology products it’s important to look a bit deeper. Unified Communication solutions are there to catalyse those human interactions, why else do we invest so much money into creating AV solutions that so closely simulate a face to face discussion and phone systems with a high quality service. The “final 3 feet” as one consultant referred to it is the most important area for us to focus on!

Nice to meet you!

I had a great meeting last year with some business colleagues from India. It was the first time we had met but, after a few coffee's and travel stories we all quickly built a lot of empathy and a lot of interest in each other that will help us work together more effectively.

It never ceases to amaze me how much we can communicate through non-verbal mechanisms. I guess in this respect my 6 year old daughter is probably streets ahead of me. By the time I have managed to get past the initial introductions with someone she will be off with their kids to find out where all the toys are!

There is some interesting science here, Dr Albert Mehrabian, a professor at University College of Los Angeles, provided us with the much cited 55:38:7 ratio. That translates to 55% of our message impact is visual, 38% vocal (e.g. tone, rhythm and inflection) and just 7% verbal (i.e. the actual words we use). That means in any meeting 93% of your message is non-verbal! It also suggests that my dog is probably a better communicator than me, he certainly makes it very clear what he wants by a simple glance at the remains of our dinner on the table that casually moves to his food bowl.

Seriously though it underlines the importance of effective communications, particularly where we're meeting someone for the first time or with audiences from different cultures. This will become increasingly more important as we all enter a phase of corporate travelling restrictions and rely on lower cost mechanisms to keep in contact. The key is to effectively use the various mechanisms available to us.

I learnt a good lesson here at a previous company I worked for. My team were scattered across Europe and in some cases I had to work with some very difficult end clients. One particular client was based over in Paris and for many weeks we had communicated by e mail and the occasional phone call. To put it mildly we had a tense relationship underpinned by mutual distrust. It didn't take long for this to spread across his team which made our job difficult.

I eventually took a flight over and arranged a meeting in an attempt to sort out our problems. I had envisaged a cathartic exchange of viewpoints followed by an agreed way to move forward. On meeting up he warmly greeted me, made a fresh coffee, and took a genuine interest in how my trip over had been and where I was staying. I then received a personal tour of his offices, was introduced to his colleagues and invited out to a meal in the evening.

It was a great evening and we didn't discuss work once. I got to know about his family, friends and interests. The next day we had a series of meetings and not one issue appeared. We shook hands and I flew back to London. Over the months post that meeting we had numerous e mail exchanges, conference calls and video conferences. All were friendly and constructive. I occasionally flew back across for a face to face and each time ended up in a fantastic restaurant with a great bunch of guys and no talk about work!

I guess I had failed to appreciate the need to understand other people's requirements. The social customs and requirements vary per country and person but we all need to understand the need to engage with people on a number of levels to build trust and an effective working relationship. Getting the balance right now means using face to face sessions selectively along with the best possible collaborative technologies to improve the effectiveness of our messages.

Get big and collaborate with your clients

Over the past few years there has been massive investment in networking technologies across the world and we're rapidly getting to the point where every part of the planet can plug into some form of broadband connection.

Alongside this computers have become cheaper and more dispersed with an explosion of associated software - e mail, search engines and workflow engines that can slice and dice packets of work across multiple geographies and then re-assemble them into a product for a particular customer base. These changes have been revolutionising the way we live our lives and do business. We are coming to terms with a very different competitive environment that is knowledge-based and geographically distributed across the globe. Our great big round world has become very flat!

Businesses take advantage of all this through their ability to leverage all the new tools for collaboration to reach further, faster, wider and deeper. A few years ago most sceptics discounted companies like Amazon ($10.7Bn in 2006) and Google ($16.6Bn in 2006) from ever becoming major players in their industry. They lacked physical premises and a few thousend employees, they would never compete with the more established corporations. What they lacked in bricks and mortar they certainly made up in vision and and ability to exploit the internet to reach each and every one of us with some exciting new products and services.

These changes are continuing to gather pace. The current recession will only serve to further accelerate events. We're moving into an era where the small can act big through both evolving technologies and by exploiting collaborations with other businesses to extend products and services beyond their core competencies and become global businesses.

Some businesses take this one more step by collaborating with their customers. A prime example here is Starbucks. Howard Schulz, the founder and chairman, reckons that it is possible to make 19 thousend variations of coffee based on the standard menu. Their branch staff are encouraged to act like it was their business and when many customers started to bring in Soya milk from their coffee they soon rolled this out as a new menu option. Starbucks understand that no matter how big they get their customers want them to listen and give them what they want.

I suspect that many people will argue that this is ok for a business like Starbucks but what else? I used to work in banking and one of the biggest assets was the local branch where the bank met its customers. The local branch manager had a comprehensive view of his customer and flexibility to advise and shape products to fit their requirements. When the financial markets started to look a bit less bullish many banks looked to reduce costs by offshoring services and closing local branches. I don't need to spell out what a huge mistake this was, you just look at how they all now market their services as being highly personalised and promise a long term relationship for their customers.

It's an interesting time to grow a successful business by exploiting technologies that increase your operational efficiencies and help you to reach out further, faster, wider and deeper into your global customer base, while your completitors are 'battening down the hatches'!

Thriving in a recession

It's interesting to see how businesses react to the recession, the usual response is to reduce costs and thin margins to encourage as much cash flow as possible.

Interestingly you would think that with money being that much tighter people would cut back on the little luxuries in life, I also thought so when I confidently tried to book the family into one of the many local restaurants where I live early in the evening this Saturday. Guess what? every half decent place was fully booked across the entire weekend! It kinda suggests to me that people will always pay for both good products and services.

I have never met Tim Steiner, the CEO and founder of Ocado (that's him in the van!), but, being a rather fussy customer I recently got in contact to ask why I was experiencing a few problems with product availability and substitutions (I missed a few beers and Bagels on a Friday!). Tim didn't need to reply, he could have delegated to one of his capable team members, but he did! He apologised for the errors and explained that he has 3,000 people making over 60,000 deliveries per week with a average fulfillment levels running at 99.8% against an industry average of 96%. That's an incredible statistic and Tim could have just left it at that, but he didn't! He also committed to taking a good look at this part of his business to see if it could be further improved. I'm convinced he will do just that and he also increased my customer loyalty level just by taking a bit of his time to write to me.

I firmly believe that the principles that Tim applies to Ocado are as relevant to all businesses. We all need to invest a considerable amount of effort in listening to our customers and deliver a level of service above and beyond what may be expected. Services teams need to be focused and measured against quality performance indicators, this ensures they focus on doing the right things - looking after customers!

There is always demand for a quality products and services. Cutting costs inevitably results in lower customer perceived quality and higher churn rates. At best this path leaves a company poorly positioned to exploit a market upturn and at worst it will run out of things to cut back on before the market turns!