Chapter 8

Culture—The Soft Stuff Is the Hard Stuff

It’s helpful to recap briefly before plunging into the steps and rewards of Level III. Without a solid grounding and progress at Levels I and II, achieving Level III won’t likely be possible.

You’ll remember the focus of Level II was to go beyond the transactions between customer and supplier, and look to better understand the reasons behind their behaviors in those transactions as well as the reasons for the related voice of the customer (VOC) measurement results. Whereas Level I activities were usually effective at detecting the customer’s unmet needs, and recovering from or correcting the causes of not satisfying those needs, it was insufficient for understanding the customer’s points of parity and points of differentiation that impacted their satisfaction throughout their total experience with the supplier. Level II efforts created reasons and opportunities to team with or engage the customer in an ongoing fashion so the supplier would have a more real-time view (instead of a rear-view mirror or snapshot) of what it takes to consistently satisfy the customer’s myriad touch point owners. Only by consistently understanding and delivering on those various satisfaction drivers would the supplier earn the customer’s trust and confidence needed to reveal their unstated needs. In effect, the customer is saying: Worry about getting the basics right first. Then, maybe we’ll talk about ways we can do more business together!

The ultimate goal of Level II, however, was to turn those multiple points of engagement into ongoing dialogues—dialogues that create opportunities to team and build mutually beneficial relationships. We saw that a supplier company with a Level II focus can enjoy several distinct benefits or advantages that impact its economic performance.

The Level II connections provide a far more complete picture of the customer’s definition of value and many needs that the supplier would never have discovered in typical VOC activities. With that, a supplier is uniquely positioned to identify new solutions (offerings) for the customer, and improve existing offerings—all adding to the value the customer receives. That added value can then result in less price sensitivity, greater share of wallet (SOW), lower selling costs from repeat purchases, and additional revenue streams for the supplier. The improved processes associated with Level II can reduce cycle time and raise productivity for both sides, and lower the cost of ownership for the customer. And while all of that is taking place, the supplier is creating and strengthening its barriers to entry for the competition that further reduces selling costs, marketing expenses, and pricing pressure. Level II starts to create a fabric of loyalty that can be quite difficult for a competitor to break through. In sum—Level II has significant economic impact, and represents significant growth opportunity for the supplier.

Despite these clear and compelling benefits, there are some limitations to Level II that result in a supplier leaving significant economic and branding opportunities untapped. In addition, without embedding the customer focus such that it becomes part of and helps define the supplier’s culture, the gains made at Level II, and even Level I, can backslide or unravel altogether. See Figure 8.1, which charts the Customer Focus Maturity Model® (CFMM) up to this point.

Figure 8.1 Customer Focus Maturity Model®

Level III moves past the unmet customer needs reported at Level I from rear-view looking voice-of-the-customer measures. It moves past the deeper understanding of customer value and the unstated needs brought into view by Level II teaming activities. Level III creates a relationship where both sides jointly focus on the unknown possibilities and trends that might impact their respective and mutual businesses further down the road (future view). It seeks to build on the VOC and teaming practices of the first two levels, and embed those practices into the culture on both sides of the customer–supplier relationship. Level III creates a customer-centric culture that is leveraged across the entire supplier organization—aligning the self-centered silos, protected turfs, and competing agendas that can stall or dismantle customer focus progress. Level III establishes customer value as the common fiber linking all of the supplier’s philosophies, objectives, processes, and practices. Level III also provides the model, evidence, venues, and tools to encourage a corresponding or reciprocal focus throughout the customer organization, and eventually throughout other parts of the supplier’s value chain. Sound ambitious? You bet it is! Ambitious and achievable.

Four distinct, but interrelated, key elements are involved in achieving Level III, as shown in Figure 8.2.

Figure 8.2 Key Elements of Level III

Key Element 1: Develop a Value Creation Mindset

This first element goes back to something we explained in our process orientation discussion in Chapter 7. The sole reason a company—your company, any company—exists is to create economic value for its various stakeholders. And no stakeholder will realize any value unless and until the customer does. To generate value for any stakeholder, your company must first generate value for its customer.

When we ask people to describe their business to us, we almost always get an answer that revolves around that company’s products or services or industry. Rarely will the answer include the notion that the company exists to create customer value or to serve some customer. The cold truth is—at the end of the day—if you don’t create something unique and valuable for your customer, nothing else will matter. It’s not your products and services that pay your bills; it’s the customer’s purchase of those products and services that pays your bills.

Simply put, your entire organization exists for the sole purpose of identifying, creating, and delivering customer value. Your company is part of a value chain. More specifically, it’s a link in that value chain that forms a connection between your suppliers and your customers.

So the first key to reaching Level III is to begin changing how your employees and managers perceive the purpose of the company. This entails being very clear about why your company exists and the broader value chain within which it exists.

Once this view of the company’s external role has been established, a similar context and language must be created for the company’s internal roles. When we ask managers and employees in a given company to describe how the company is made up or structured, the answer we usually get is in terms of an organization chart. That is, most people describe the company’s make-up in terms of business units, departments, functions, roles, or responsibilities.

In reality, any company is made up of a series of processes that are linked together to create customer value (i.e., to fill the customers’ needs). When a business unit, department, or function identifies its role or purpose, it should be defined in the broader terms of how the function contributes to the value creation process. Whether it’s accounting, engineering, production, procurement, customer service, human resources, sales, marketing, or any myriad other functions—each has a role to play in the process of creating and delivering customer value.

For example, at Walt Disney World there are 2,000 job descriptions, but there is only one purpose of every single one of those jobs: to create satisfied customers.1 Another example is the phrase Southwest Airlines puts at the bottom of every paycheck: “This paycheck is made possible because of your customers.”2 The more an organization defines, emphasizes, and talks about that broader, overarching customer process and the roles within it, the more employees and managers begin looking at the larger picture.

One of the problems we typically encounter in this value chain discussion is the tendency many companies have to use terms like “external customers” and “internal customers.” There is only one customer—the person or company who buys the products or services your company sells. Everyone in your company must see himself or herself, not as part of a particular department or business unit, but first and foremost as part of an end-to-end process that exists for the common purpose of generating customer value.

When people in the organization have to think about internal versus external customers, it can cause confusion, cynicism, division, and misalignment of purpose. Winning companies define, organize, and manage themselves around the customer’s experience. And to do that effectively, there can only be one definition of “customer.”

People need one true north that whenever there’s a decision to be made—there’s no question about which customer the decision must benefit. Every employee, from the lowest skilled or paid to the highest, needs to think, act, and talk like there is only one kind of customer. That’s the kind of focused, single-purposed, aligned mindset companies need if they wish to reap the gains of Level III.

As straightforward as this might seem, it has proved challenging for many organizations. Your people have been conditioned to think of and identify with their job, function, or department. Seeing themselves as part of the broader company, or a customer-value-creation process, is not natural for them. It will be uncomfortable for some, counterintuitive for others, and downright contentious for others. This new way of thinking, behaving, and operating is a significant mind-shift, so repetition will be critical for the unlearning, and learning—needed to succeed.

Key Element 2: Ask, Act, and Align Everything You Do

Level III requires another key element that involves three actions (you may want to remember them as the triple “A’s”): ask, act, and align. Figures 8.3, 8.4, and 8.5 highlight each one, respectively.

Figure 8.3 Always Ask the Important Questions

Figure 8.4 Always Act on Answers

Figure 8.5 Align Your Value-Creation Efforts

Asking Questions Is an Obligation

In a customer-centric culture, or any high-performance culture, every employee has permission and an obligation to ask the tough questions. This is important to a company’s customer focus for at least three reasons:

Here’s a way to test understanding of the customer’s point of view in your own company the next time you have a group of employees together. It’s most effective in Level II when you’re trying to generate a broader base of employee awareness and support. Assuming you have gathered the employees in a meeting room, you’ll want to choose two opposing walls of the room for this exercise. Let’s call them the north wall and the south wall. Put a piece of paper on the far left end of the north wall and write the word “worst” on it. Put another piece of paper on the far right end of the same north wall and write the word “best” on it. Do the exact same thing on the opposing south wall with two fresh pieces of paper—one with the word “worst” and one with the word “best” written on it.

Now pull half of the employees aside and privately ask them to think about how well they think the company is doing at providing its customers with a quality experience. Ask them to stand against the north wall—picking a position anywhere between the two pieces of paper that represents their individual answers or views. Ask them to remain standing in their chosen positions until instructed to return to their seats. Note where they all stand, how dispersed or clustered they are, and how many are at the best end versus the worst end versus the middle.

With the first group still standing along the north wall, privately ask the other half of employees to put themselves in the customers’ shoes and think honestly about how the customers view the quality of the experience they’re having with your company. Have them stand against the opposite south wall—once again picking a position anywhere between the two pieces of paper that represents their individual answers. Note where they stand and how it compares to the first group. You can then ask each group to describe what they were asked to represent along their respective walls, and have them explain why they took the positions they did. Most of the times we do this exercise, it shows rather quickly how internal and external views can differ about the quality of your customer’s experience.

The point is, you can’t assume you know what the customer is feeling, thinking, or wanting on a real-time basis. In different ways, and at different touch points, you continually have to ask.

Building a culture where people are encouraged, comfortable enough, and obligated to ask tough questions is critical to a successful customer focus. You need a company-wide expectation that everyone, regardless of level and function, asks tough questions that help the company learn and improve the customer’s experience—questions of their leaders, of each other, of their suppliers, and of the customer.

Your most unhappy customers are your greatest source of learning.

—Bill Gates, Microsoft

Acting on What You Learn

The next key is to act on the information you get when you ask questions. (See Figure 8.4.)

We have seen far too many VOC initiatives, and even internal survey processes, that ask for input and then don’t really do anything with the input they get. In most cases, asking and not acting is worse than not having asked at all. The main purpose of asking tough questions is to learn and improve from the answers. A customer-focused culture is also a learning culture.

A great example of this occurred in the 2008 Summer Olympic Games in Beijing. Following the final round and closing ceremonies of the men’s court volleyball competition, the gold-medal-winning USA team’s coach Hugh McCutcheon said that no one gave this team a prayer last year of doing well in these games—much less winning the gold. They hadn’t won gold in 20 years. The team, however, proved everyone wrong by beating Brazil in the final round. When a reporter asked McCutcheon what he felt the key was to this team’s success, he said, “It was their ability to learn. They took each game one at a time, learned from it, and applied those learnings to the next one. They truly learned how to win.”

Learning doesn’t happen just by asking. It happens by first asking, then acting. You then apply it to new situations, ask some more, learn some more, and apply it further. To succeed, a customer-focused culture must have a penchant for both learning and action. You can’t get bogged down in gathering and/or analyzing input or data. You need to develop as comprehensive a view as possible, as quickly as you possibly can, and start acting on it. You can always fine-tune and adjust as you go based on new data or further analyses.

Winning organizations are those who move faster, communicate clearly, and involve everyone in a focused effort to serve a more demanding customer.

—Jack Welch, GE

We see too many companies over-engineer the learning process such that they are forever reviewing something and never get to the doing something. And by the time the company acts, the nature of the problem has changed, the problem has gone away altogether (which isn’t always a good outcome) or somebody else has already solved it. “Ask and act” is a two-punch combination that keeps your customer in front of you and focused on you, and keeps your opponents on the outside looking in.

Take for example, one specialty manufacturing company that had just finished conducting their second annual customer satisfaction survey. The survey was made up of 15 individually scored questions and two open-ended questions. The prior year’s survey was generally good, with a 42 percent response rate and an overall average satisfaction score of 4.25 out of a possible perfect score of 5.0.

The company spent the better part of a month going over the detailed survey results to identify anything they considered urgent or really problematic, but nothing stood out. Not quite sure how or whether to do anything with the findings, they put the survey on the back burner for the time being.

Two months later, one of their customers called to inquire about something unrelated, and just in passing before hanging up, asked how the survey process had gone. This inquiry, though isolated, got the company thinking once more about what to do with the survey results. But given that a couple months had now passed, the thought was that there really wasn’t anything in the results screaming for action, and given that they only knew of one customer who showed any interest in the status of the survey, the survey follow-up was placed on the back burner once again.

The next year’s survey results for the same set of respondents were noticeably different. This time they had a 57 percent response rate and an overall average satisfaction score of 3.85 out of a possible perfect 5.0. There was a decline from their prior year’s scores in 13 of the 15 questions, and several of the individual question scores were below 2.0. Moreover, the prior year’s survey resulted in some 40 written responses to the open-ended questions, but this year’s results reflected over 200 written responses—the majority of which were neutral or negative. Overall, this was a decidedly different picture for the company.

Obviously, the company needed to quickly understand what was driving this year’s significantly lower results. Fortunately for this particular manufacturing company, it didn’t take long to figure it out. The written comments made it clear that in addition to some reported problems driving the second year’s lower ratings, the customers didn’t appreciate not hearing anything back from last year’s survey efforts. Several went further to urge the company to not bother them again as this was clearly a waste of time on both sides. The survey questions with scores showing the most significant year-over-year declines were the questions dealing with communications, follow-through, and commitment to quality service. Clearly, their inaction in the prior year had left an impression on their customers—and it wasn’t a good one.

Another fortunate factor for this company was that this year they were ready with a post-survey action plan. They quickly compiled and evaluated the results, and within three weeks had a follow-up communication going out to all customers whether they responded to the survey or not. Obviously, that communication wasn’t conclusive and didn’t announce any wholesale changes or solutions, but it did highlight the key findings from the survey, set forth a timeline for further examining and responding to those key findings, and had an appropriate amount of humility and apology for the prior year’s inaction.

The key lessons one can learn from this company’s experience include the following:

• If you don’t plan to act—don’t ask.
• You don’t need to be 100 percent ready before acting.
• Don’t underestimate the value of small action steps.
• At a minimum, tell customers a few key areas you’re further evaluating or analyzing.
• Tell customers how soon they can expect an update or action.
• Acting includes acknowledging things you can’t address in the short term.
• Acting includes telling customers things you might not ever be able to address.
• Create follow-up expectations that you can meet.
• Say what you’ll do by when—then make sure you do.

For years, we have seen companies learn the hard way about not acting soon enough, not acting substantively enough or not acting at all. Companies that have relied on these six standards of VOC action have fared much better.

Another important characteristic of the learning culture that’s so important to a supplier’s customer focus is to foster what we call a “no-blame zone.” We find that when people are given clear expectations and goals, and the parameters of their ability to make decisions and take risks, they tend to make far more good decisions than bad ones. And the bad ones they do make tend to be moderate to minimal in their impact.

For example, we worked with one particular organization that had been struggling to establish a meaningful, actionable vision and value statement. After a series of discussions with them, we proposed what they referred to as the company’s core value statement. Surprisingly, it wasn’t what you would normally think when you hear that often over-spoken and under-used term—core values. For this company, which we’ll call AB Co, that term would take on a slightly different meaning. In effect, their core value statement provided that no one could ever go wrong, be questioned, be criticized or “blamed,” if they acted or made a decision based on the company’s three values:

The proposed core value statement went on to explain that anyone who feels they can’t support and help advance these three values probably wouldn’t like working here and probably won’t succeed working here. Of course the real key is how they implement and enforce their three values. But everyone was struck by the clarity of it and how it distilled the organization’s essence into something that provided simple and clear guidance.

Some companies, however, are not at all forgiving when it comes to its people making mistakes. Instead of focusing on finding the root cause, and letting everyone learn and grow from it, they focus on finding the guilty party, which causes everyone to cover up or run from it.

For a customer focus to succeed, people need to feel comfortable about making thoughtful decisions and acting in the absence of complete information, without fear of punishment. Obviously, repeating one’s mistakes is not learning and that’s not what we’re condoning here. But few things will derail a customer focus faster than a blaming environment. Especially when it’s obvious enough for the customer to pick up on it. The enemy is the competition—the enemy is out there. You can’t afford to be taking pot shots at your employees as they learn and improve—get the guns aiming outside, at the real enemy.

Something else we mentioned earlier bears repeating here. Remember that customer focus is a process, and as such, it never ends. Hand in hand with that notion is the importance of continuous improvement. As long as your customers’ businesses, markets, and needs change, your ability to create value for them will have to change as well. To sustain a customer focus, a supplier has to have a commitment to continuous learning and improvement. That means the ask and act approach has to become a way of life—part of the culture.

There’s one parting comment we need to make before leaving this section about acting. In addition to requiring a learning culture, customer focus also requires a culture of execution (i.e., acting on your plan). Too many organizations dive into some aspect of a customer focus effort thinking it’s going to rescue them from their operational or execution problems. The fact is, a company that struggles with execution in general, is similarly going to struggle with implementing a customer focus. Focusing on the customer won’t in and of itself “fix” a company that has ineffective management practices. We’ll say a bit more about that shortly.

Build Alignment Across Your Company

As we’ve noted before, customer focus can’t be viewed as the responsibility of one department, but must be viewed as everyone’s responsibility. It’s not enough for just one or two departments to be good at asking and acting; the entire organization must be aligned around this model and its emphasis on value creation. (See Figure 8.5.)

Alignment has two dimensions to it when it comes to your customer focus. The first, internal alignment, is to create an alignment of purpose, process, measures, and accountabilities throughout your organization—across all functions and at all levels. The second, external alignment, is to build that same alignment across your value chain. We’ll delve into internal alignment here, and cover external alignment later in Chapter 10.

When we talk about internal alignment, there are several ideas we’re striving to make real. One that we’ve already discussed is the idea that there can only be one definition of “customer” in your organization—and that is the customer who buys your products and services.

There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.

—Sam Walton

Another aspect of internal alignment is to ensure all employees realize that the reason you exist, and the reason their jobs exist, is to create value for the customer. Earlier we talked about empowering and expecting every employee to ask the tough questions when he or she sees or hears something that might create a customer experience problem or opportunity.

In effect, you need every employee, regardless of title, to see sales and service as part of his or her job. (See Figure 8.6.) Sales and service are mindsets as much as they are departments. Every employee must be able to represent (sell/market) your company in a favorable light, and every employee must be alert for ways to support your customer focus efforts (serve/support).

Figure 8.6 Sales and Service: Mindsets in Customer Focus

In essence, you want every employee being an advocate or ambassador for your company and brand promise, and you want every employee looking for and seizing opportunities to deliver on that promise. We really appreciated the reaction from the CEO of one company when we explained the above concept to him and his executive team. As he explained: No one is so high up on the organization chart that they can’t pick up a piece of paper on the floor or answer a ringing phone in the lobby. And no one is so far down on the organization chart that they shouldn’t be able to describe how we help our customers. Well said!

Still another aspect of internal alignment is to help every employee understand the way your company makes money, the impact the customer has on that money-making process, and the many ways the customer experiences or is touched by your company in that process. This, too, we discussed in earlier chapters, but here’s an example that illustrates several of these points.

The connection Grainger wants and helps its employees to make—the connection that links customer satisfaction, company success, and personal contribution—is the exact mindset sought by customer-focused organizations. It’s a consistent understanding—a persistent view—that permeates the entire organization.

Unfortunately, some senior leaders view “mindset” or “alignment” as consultant babble or some soft, intangible term that everyone talks about but no one can really demonstrate. To those leaders, we ask: Would you be willing to let your customers wander through your company’s halls or facilities, unescorted, talking to any employee they wish about anything they wish? Probably not! The reason you wouldn’t take that chance is that you aren’t sure about or comfortable with the things the customer might see or hear. You lack that certainty and comfort because you know there isn’t a unified or shared focus on the customer within your organization—at least not at the shop floor or cubicle level. Call it whatever you want, but you know when you lack it. We call it alignment, and while it might be difficult to describe or grasp, it’s fairly obvious when it’s missing. It’s equally obvious when it exists in any organization.

A great example of alignment can be found at Harley-Davidson with something they call “Freedom with Fences.” That’s their approach to employee involvement and engagement. They want their workers suggesting improvements and making decisions within reasonable parameters (i.e., fences).

They have flattened the organization so those closest to the action have the responsibility, and authority, to get things done. Their management organization chart is made up of three overlapping circles: Create Demand (Sales and Marketing); Produce Products (Engineering and Manufacturing); and the Support Circle (Legal, Financial, HR, and Communications). The circles nominate nine people to their Leadership and Strategy Council, the group that looks at issues cutting across all three circles.6

Ask employees about their views on working for Harley Davidson. They won’t recite the Harley credo or talk about core values. Instead, they mention the importance of the “team,” and the pride they feel in their work. As one fellow put it—“I don’t own a bike, but there are five Harley owners who live in my neighborhood. Everyone knows where I work. When your neighbors use and talk about the bikes you make, you can’t help but pay attention to your job. And I expect the rest of these guys (the crew) to do the same. Anything else is unacceptable.”7

That’s alignment! There’s not a potential customer, potential investor, or prospective employee who you wouldn’t want to hear that message if it were coming from one of your people about your company! We said earlier that while strategies are conceived at the executive level, they are achieved (or not) at the entry level. No matter how committed a senior leader genuinely is to the customer focus, or how committed they appear to be, the employees are the ones whose commitment matters the most. They can touch and impact far more customers and potential customers than any senior leader can. That’s what makes this Level III culture so important to optimizing and sustaining the benefits of a successful customer focus.

Someone once said that your company’s culture is what your people do when you’re not around. In our view, compliance is what they do when you are around. A customer-focused culture is created by your employees’ beliefs and actions even when you’re not around. The more aligned those beliefs and actions are, the more consistent your customer focus will be. Which would you rather have—compliance with your customer focus, or a culture that embodies it?

To achieve the kind of end-to-end consistency typical of Level III companies, you need to have internal alignment around three key principles:

We’ve spent some time in this chapter emphasizing the importance, impact, and examples of a customer-focused culture. What we haven’t yet discussed is how to go about building such a culture or mindset. In the next chapter, we turn to that with a detailed look at the internal management system needed to make this all happen and continue happening.

1 Rob Morton, “Disney Institute Case Study–Humana.” Retrieved from www.trainingindustry.com.

2 Lorraine Grubbs-West, Lessons In Loyalty: How Southwest Airlines Does It—An Insider’s View (Dallas, TX: CornerStone Leadership Institute, 2005), 111.

3 Ron Ashkenas et al., The Boundaryless Organization: Breaking the Chains of Organizational Structure, rev. ed. (San Francisco: Jossey-Bass, 2002), 170.

4 Don Peppers and Martha Rogers, Rules to Break and Laws to Follow: How Your Business Can Beat the Crisis of Short-Termism, (John Wiley & Sons, Inc., 2008).

5 Ron Ashkenas et al., The Boundaryless Organization: Breaking the Chains of Organizational Structure, (San Francisco: Jossey-Bass, 1995), 68.

6 Gina Imperato, “Harley Shifts Gears,” Fast Company 9 (June/July 1997): 104.

7 Kansas City Harley-Davidson plant tour and meetings with work teams; May 2003 in conjunction with the annual Customer-Supplier Division Conference for the American Society of Quality.