Loyal customers do more than keep us profitable and provide invaluable feedback. They give us perspective and purpose.

Mr. Zane, CEO of Zane’s Cycles, a $15 million dollar a bicycle business in Connecticut, and the author of Reinventing the Wheel: The Science of Creating Lifetime Customers,explains how his firm strives to create lifetime customers, and why it is important to culture and branding.

“These types of relationships are not easily formed nor are they formed overnight. They require exceptional care, attention, and a focus on continuously exceeding expectations. At Zane’s, where we have chosen to compete on service rather than on price alone, it means providing unparalleled customer service. We can never accept an unhappy customer, nor look at unsatisfied customer as an inevitable part of doing business. This method goes beyond the mindset of making an unhappy customer happy or simply matching the offers of our competitors. Creating lifetime customers requires that you offer every customer or potential customer more service than they consider reasonable. Further, it means that you actively solicit customer feedback about what you could be doing better and use that information to expand and tweak your offerings to best service the customer.”

Reinventing the Wheel: Creating Lifetime Customers
Chris Zane
Wed, 05 Oct 2011 15:00:00 GMT

But no matter what brand is nurtured, every firm needs at least some lifetime customers. And the reason is simple and goes beyond segmenting, profiling, feedback, profits, loyalty or any other traditional business and marketing concepts; it gives the firm perspective.

Customers for life

Perspective

Perspective is not the same as segmentation or profiling. Sure, we hope that our best customers are our most profitable customers, and also in the customer segment that we are targeting. If they are not, we have cause for at least some introspection and even concern. In fact, if your most loyal customers are loss leaders, there is more than just cause for concern; the whole business proposition is in question. But perspective is more than that. Lifetime customers can give us a viewpoint that goes beyond feedback, in the same way that advice from your best friend is more than feedback from your neighbor. Perspective from a lifetime customer implies honesty and closeness with just enough distance between you to let in the sunlight. Perspective frames accomplishments and errors. Perspective encourages humility. Perspective is as important as a thousand impersonal surveys.

On a related note, a firm I know sent its senior executives to meet customers 2 days a month, chosen by local branch offices. The customers were of all sizes and profitability, some happy, some disgruntled. I thought it was one of the most effective and inspiring programs they ever enacted.

Belonging, purpose and organizational structure

Lifetime customers

Relationships that ripple outwards compound security and belonging, a sense of purpose, and increase learning curves and bolster self-esteem. See more about Belonging from Maslow. The benefits of an ever widening circle of friends and contacts are endemic to our social instincts for good reason. We avoid the drive to connect to our detriment. Think of it as an experience in prolonged and challenging stimulation. And that sense of belonging is just as important to organizations and teams as it is to individuals.

Recommended Reading: Customer Loyalty: How to Earn It, How to Keep It Jill Griffin Most books in this genre, like most business management books, are ‘feel good’ stories with little practical advice to recommend them. Griffin hits the sweet spot here.

There is evidence that organizations will continue to decentralize beyond multi-disciplinary teams and matrix structures. For it cannot be coincidence that technology continues to find its value in individual empowerment.  When it introduced the personal computer (PC) in the early 1980s, IBM threatened its own existence by subcontracting its birthright to Microsoft and Intel in one of the most spectacularly failed bets against empowerment in the technological age.  It marked one of the only times it did not use its own internally developed hardware and operating systems.  IBM quickly headed towards bankruptcy as the PC and the resulting explosion of technology forced the computer industry into a massive restructuring that left the mini-computer industry in a shambles; companies like DEC, Prime, HP, Control Data, Wang and TI saw their product lines obliterated with their own viability along with them.

IBM under Louis Gerstner saved itself from ruin in one of the most astounding turnaround examples of decentralization ever attempted. It may be that IBM’s present structure now mirrors many organizational fundamentals laid out on this website partly because it at one time so firmly rejected them.  The organization restructured from a hierarchical, unidirectional corporate culture to a broader based, decentralized one in less than 5 years.  They rejected their blue suits, sold buildings and ended up with almost half their workforce working from home in their pajamas.  They re-centered and refocused, and reversed their services and hardware mix of business on services, and sales and profits exploded.

Now IBM has obliterated most of its corporate hierarchy.  It relies on multi-disciplinary teams that reflect combinations of geography, function, customer segment and industry focus, depending on the situation.  They involve themselves in the open source communities which would have been unthinkable in their proprietary days of yesteryear.  But surely none of this expansion of adaptability and profitability and productivity would have occurred if their competitors and the markets had not forced them to react to preserve their viability.

To be fair, who could have predicted the explosion of creativity and innovation of turning millions of PC users into active entrepreneurs? After all, computing economics clearly show that centralized networks with dumb terminals are much less expensive to design and maintain.  That was the overwhelming organization of the computer industry even in the mini-computer world.  That hierarchy looks great on paper and proves more inexpensive to produce, purchase, maintain and deliver computing power.  Those economics remain true to this day.

But one huge factor was left out of the equation.  What was missing was the idea of autonomy. What was missing was the degree that control suppresses creativity. What was missing was an understanding of developmental psychology. What was missing was an in-depth appreciation of just how intrinsic complex systems (in this case free markets) are to innovation.  What was missing was just how incredibly productive users could be if they weren’t sitting around waiting for centralized IT department programmers and instead could themselves develop applications and mash-ups and innovations.

Corporate organizational structure is still hampering productivity, creativity and reliability.  Organizations both in their structure and their strategy often make bets against the individual, and they continue to do so in pendulum like swings in both micro and macro trends. They always eventually lose.  If you don’t believe me, ask IBM.

References

Photo courtesy Wikipedia Commons

The above picture symbolizes both technology and organizational change. Still wet behind the ears, in 1991 I was purchasing used mini-Vax systems as servers for Novell networks. They were faster and more inexpensive than PC’s, and cold room costs were sunk. Those pricing trends foreshadowed mini-computer markets.

If I remember correctly, we were the first in the state to cobble Vax systems together with Novell networks. Back then Peter Norton, not Bill Gates, was a G~d to teenage nerds everywhere, driving Microsoft and Intel innovation, and no self-respecting 80286 PC went without a QEMM-386 to make it effective.

This period also marked the last attempt by IBM’s misguided proprietary corporate policies regarding PS/2, which all nerds knew would inevitably fail.  It signified IBM’s continued denial regarding the structural change PC’s represented for technology.  No programmer I ever knew willingly dealt with it.

Maslow considered physical needs as the most basic. Obviously if a person is hungry or cold, they have no time for higher conceptual arguments, friendship or philosophy.

Physical needs, or base needs also presuppose a stable, holistic foundation, and it is in this analogy that we wish to develop our concepts. We wish to stress the holistic qualities of physicality. We think first of our bodies, and then its parts.  Our bodies are a wondrous example of a complex system evolving through time to its nature and environment.  Humans well know the penalty of depriving one of its components;  the whole system pays.

Connected with this concept of physicality, there is the concept of adaptability, potentiality and expression. Our bodies are not only what we make them; they are the extension of our lives and purpose. The strategies and tactics of those purposes change and so must our physical bodies to react to the realities and practicalities of our lives.

In terms of an organization, we immediately draw attention to the associated idea of multi-disciplinary groups. As we shall see, it is a key component of how we learn, and how we think about learning. We naturally see the whole as a sum of discrete and component parts.

However, our physicality goes beyond that. Our physicality demands we act. It means our organizational structures matter a great deal. It means they are likely not nearly as fluid as they should be. It means without our explicit exercise, we shall surely decline.

Specialization

The world is increasingly specialized. However, various disciplines have been researching and learning about essentially the same phenomena for decades, incubated by the silos of their own disciplinary languages and research.

Too often, our executives no longer think in terms of the whole organization. They cannot. There is little formal training to do so. The Renaissance man is dead.

Perhaps part of the challenge is not to train the executive to consider the organization, but to bring the organization to the executive. The organization, the hive must begin to act like one. It must structure itself in order to do so. It must divest itself of its hierarchy even while it buttresses it in a much more aggressive manner, not so much in developing strategic endeavors, or financial decision making, but in the spiritual and emotional well being of the organization.

What does that mean?  What does the individual need to learn to increase their effectiveness? For starters, we must begin with the idea of meaning or mission.  Rarely is there an effective map of the organization that describes its purpose as an organism. Functional departmental organizational structures give almost no clue about an organization’s purpose, much less how it accomplishes its goals. A leg cannot be an effective leg until it understands how it relates to the rest of the body. Besides understanding the meaning or essential purpose of the body, components must understand how they fit. No real meaningful or creative contribution obtains until it does.

To illustrate, each cell contains all the DNA necessary to replicate the entire organism.  No manager or queen or sergeant must give instruction to the ants in a colony.  No manager needs to give instructions to the pipe team at Nucor Steel.

We speak of empowerment as an action rather than as a natural state of the organism.  No ant needs to be empowered.  Neither does any human unless constrained in the first place.  No cell or Internet node needs to be encouraged to become engaged.  Neither does any human unless constrained by conditioning or organizational structure in the first place.

This idea fits well with what we know about creativity; to imagine something new, we need to understand the big picture. However, specialization obscures the big picture. Many of our disciplines demand a level of specialization that will only grow deeper through time. Therefore, our structures must accommodate those specializations. We individually will never know everything.

To paraphrase Frankl, we must stop asking ourselves what we wish to do to enrich ourselves, and ask ourselves what the organization demands of us. What does the organization need to do to fulfill its meaning? If it does so well, it will do so profitably.

We therefore come back to the idea of engendering each associate, each team member, each component of the complex system, with the fairly simple meaning or purpose of their team. The specialists learn together driven by a common meaning or purpose, just as the purpose directs our body cells. Interestingly, that concept also describes one of the ways we learn.

Cognition as Distributed

The components of our physicality exhibit comparisons to one of the ways we learn. There is a well-known story going around the Internet that describes the wondrous and surprising tale of making a pencil; the tale describes the fact that no one person can make one.[i] No single organization makes it. It is the product of self-organizing specialists:

My family tree begins with what in fact is a tree, a cedar of straight grain that grows in Northern California and Oregon. Now contemplate all the saws and trucks and rope and the countless other gear used in harvesting and carting the cedar logs to the railroad siding. Think of all the persons and the numberless skills that went into their fabrication: the mining of ore, the making of steel and its refinement into saws, axes, motors; the growing of hemp and bringing it through all the stages to heavy and strong rope; the logging camps with their beds and mess halls, the cookery and the raising of all the foods. Why, untold thousands of persons had a hand in every cup of coffee the loggers drink!

In his research on cognitive learning, Hutchins describes distributed cognition in the navigation of a U.S. Navy ship out of the harbor, where six people using sophisticated tools made it possible to accomplish tasks beyond the capabilities of any individual member.[ii] The active distribution itself allows adaptability and excellence that no individual can perform.

Another familiar example is of the specialized members of a sports team. The team requires the input and contribution of a highly interactive group; in hockey, positions consist of goalie, defense, wing and center. There are six players on the ice and four specializations; this high degree of specialization relative to the number of players is common in sports, music, and teams in general. It is interesting to note that in football, where specialization is the most advanced, one of the key methods of confusing the opponent is to rearrange the specializations in new configurations and duties so the opponent cannot predict actions or outcome. Incidentally, doesn’t that sound like an effective business tactic?

Further, cognition is not merely distributed. As the psychologist Moreno noticed in self-organizing groups, as complexity theory stipulates, and as Adam Smith described in ‘the Invisible Hand,’ individual actions often occur within situations where spontaneous order evolves.  No central plan or construct could possibly envision a blueprint detailed enough to replicate it. The order is the product of a never-ending series of adjustments made by individuals to the constantly changing environment in which they participate.

The creators of the group depend on this adaptability or reaction. A basketball team depends on the creative forces of this group dynamic. The game is not a never-ending series of pre-arranged plays and pre-choreographed ‘chess moves,’ so-to-speak, it is the artful positioning of the team that through its coordination and reactions creates successful situations.

Likewise, innovation in free markets is the product of members interacting in continual searches for improvement, survival and efficiency. No planner can reproduce this activity. They can only nurture the circumstances or environment.

Lastly, no parent engineer an adult. A person grows through a unique experiential journey, tempered by meaning and personal choice. Individual, group and organizational behavior exemplify these dynamics.

The conclusion to our examples is that organizations heavily dependent on hierarchical structures must be fully aware of the naturally suppressant effect that top-down choreography has on adaptability and creativity.  The physical organization of a firm and its attendant culture exerts a fundamental effect on the complexity and ability of its members to successfully perform.

Synergy of the Physical Body

Perhaps because of a synthesis of the apparent dichotomy of components and the whole, Maslow noticed that actualized people exhibited an ability to appreciate a freshness or renewal of well-worn experiences and events. They appreciate their environment in new and wonderful ways. They find solace and beauty in familiar places. They rejoice in situations that for most of us inspire only semi-conscious awareness. The actualized person, on the other hand, finds at times an almost mystical wonder in these habitual and well-known circumstances.

Organizationally, the recurring theme of team actualization, the synergy of each specialized body part, of each specialized player, inspires well-adapted and sometimes new methods and approaches. Our psychology demands cohesive groups and our functional hierarchies often stand in its way.

References

[i] Leonard E. Read, I, Pencil: My Family Tree as told to Leonard E. Read (Irvington-on-Hudson, NY: Foundation for Economic Education, 1999), http://www.econlib.org/library/Essays/rdPncl0.html.

[ii] E. Hutchins, “The Social Organization of Distributed Cognition,” Perspectives on socially shared cognition (1991): 283-307.

Introduction to Organizational Development

Yes Questions | No Questions | References

Productive, profitable organizations do not just share a communal sense of direction, inter-departmental team goals, enterprise wide understanding of customer segments, or unified profit drivers.  They have consistent messages.  They communicate well.  They are also empowered, engaged, and spiritually cohesive.

Organizational development

signs of alignment

Organizational development is (OD) is the process of improving organizations with an emphasis on systems and holistic perspectives.  It is centered on improving the whole organization, as opposed to protecting or preserving coalition interests.

OD’s major opportunities remain primarily centered in five components which greatly affect performance, profitability and productivity.  This statement is compounded in today’s rapidly changing environment.  In today’s world organizations must view OD through the prism of continuous improvement as opposed to a project to be completed.

Astute observers will notice a strong MBO and scorecard or measurement component below.  In no particular order, the five major disciplines are:

1. Organizational structure, roles
2. Compensation and incentives
3. Job description, development and evaluation
4. Communication and story telling
5. Power, coalition, and authority

These five disciplines are holistic in nature.  Issues in the above disciplines have common signposts or tells which signal them.  These five components are portions of a larger holistic experience but often treated separately with less effect.  The proverbial horse may actually not be thirsty at all, but exhibit stomach problems because the bowels are not working properly.  The compartmental approach then becomes part of the issue.

Organizational development buttressed by technology has the potential to double organizational productivity.  Just as importantly, it offers organizations highly engaged employees with high morale and an esprit de Corps.  It is not possible to directly effect these emotional states;  they must be results of productive and fulfilling environments.

Productivity questionnaire

Following is a questionnaire to help you determine if your organization would benefit from a formal review and option analysis of your organizational development.

YES Questions:

1. Do you believe that your organization could be more effective if it realigned the five components listed above?
2. Does your organization tend to consider each new endeavor as a blank slate?
3. Does your organization find itself ignoring its business plan?
4. Do you have the sense the organization keeps re-inventing the wheel?
5. Does fire fighting define more than 20% of your management group’s time?
6. Is Upper management a bottle neck?
7. Do you often feel that departments hold each other up from getting their work done?
8. Do you sense that your organization jumps from one large project to another with no real sense of connectivity between them?
9. Do you believe organizational alignment is primarily a common sense endeavor?
10. Do you sense there is a process to develop or approach new ideas, if only it were roomy enough to handle a spectrum of situations and variables?
11. Are your project estimates often inaccurate?
12. Does your organization have a Management and Employee mentality, even though it may no be adversarial?
13. Is it common practice to work heroic hours to complete projects within budget?
14. Is it generally accepted that longer hours are the primary means to increase productivity?
15. Are your performance reviews primarily manager ratings across a broad array of topics?
16. Is your management group over 70% homogeneous; sharing any one of common industry, experience, or job function?
17. Are the challenges of your organizational alignment primarily a function of your unique organization?
18. Does Upper management provide new direction and policies that employees had no idea they were working on?
19. Is your subjective assessment of employees and potential an informal process?
20. Do you see one job function (e.g., sales) as dominant, and therefore heavily favored (virtually excluding all others) in promotions?
21. Is your turnover high?
22. Are your job descriptions difficult because your organization is so unique?
23. Does the organization’s business plan need major revisions every 6 months or so?
24. Do you believe high turnover is inevitable?
25. Is there a formal process to determine employee strengths?

NO Questions:

1. If you do poll others for subjective assessments of employees, do you formally record them?  Do you invite employees to respond to others’ subjective assessments of them?
2. Is there a process to discuss, record, assimilate and communicate lessons learned for group and project activities?
3. Is your organization’s morale high?  Have you conducted a survey lately?  Was it detailed enough to give you actionable next steps?
4. Are your performance reviews tied to objective, measurable performance criteria?
5. Does your organization have extensive experience in organizational development?
6. Does upper management fully understand your department’s job?  If you are upper management, can you unequivocally describe departmental function and their inherent conflicts?
7. Does your organization insist on formal participation at all levels of the organization in forming and revisiting policies and ideas?  If so, does it have a process for it?

These questions are in no way exhaustive.  If you saw your organization in the ‘yes’ questions, or answered ‘no’ to any number of the ‘no’ questions, your organization would benefit from professional consultation.

Significant productivity gains are possible without just working longer and harder.

References

Field Guide to Consulting and Organizational Development: A Collaborative and Systems Approach to Performance, Change and Learning Carter McNamara

Reframing Organizations: Artistry, Choice and Leadership (Jossey Bass Business and Management Series) 4TH EDITION (Hardcover) Terrence E. Deal Lee G. Bolman

Artwork by Annoi

Individuality and Team Dynamics to Innovate

Creativity is not born in a boardroom or a meeting. Brainstorming is vastly over rated. There is nothing quite so laborious and ineffective as ten people sitting in front of a blank page, even if they have a goal in mind. When it comes to first ideas, it is more productive to allow one or at most two people to first produce a straw model. They are encouraged to obtain as much input as they wish, with the caveat that ownership of the kernel of the idea always remains theirs to develop. A straw model has at least fleshed out major headings, and preferably more than that.

The strength of a well informed, collaborative group comes after the straw model stage, where different viewpoints in a collaborative setting can innovate and critique a defined idea. As with all group and meeting activities, facilitation ensures the group remains controlled and focused. Especially in incubation periods, groups are susceptible to scope creep.

How does the Lightbulb go on?

Emotional Investment and Avoidance on Change

The human mind is extremely powerful and emotionally preservative. Only a very small minority of management groups acting alone and of their own volition change course during turbulent times, even when they’re on the verge of bankruptcy. This is a normal human response. Like the seven stages of grief, the first and most enduring emotions are shock and denial. Especially in emotional situations, it is inspiring, logical and helpful to seek specialized consultation. There is nothing wrong or embarrassing about it. It is actually the appropriate response given what we know about the human condition.

In an example closer to home, it is interesting to note average golfers’ reasons for not taking lessons. They also mirror the seven stages of grief, with embarrassment an additional factor. Virtually all of them are in contrast to the fact that professional golfers rely on trainers and coaches throughout their career. We are reminded of the male stereotype that refuses to ask for direction, preferring to drive around lost.

It is difficult to over-emphasize the value of emotionally detached feedback. Seeking advice or consultation does not mean you are mediocre or untrained or uncreative. It means you are intelligent enough to realize how emotionally difficult it is to critique yourself and be creative in situations where you are attached. Psychologists have psychologists, and PR firms often hire PR firms. It is an essential foundation of the idea of mentors.

If your organization does not employ consultation on a number of levels, it would be at least a helpful exercise to understand why you do not. You may well find your reasons are predominantly rationalizations of Shock (paralysis), Denial (Avoidance), Anger (Emote), Bargaining (way out), or Depression (realization of the issue but feeling alone or unique). Getting to Testing (beginning to seek) or Acceptance (finally finding the way out) with consultants jump starts the creative process and speeds up progression through the other stages(Kubler-Ross, 1997).

Tension between New vs Existent Products

The examples above also give us some idea of the psychological hill to be climbed when it comes to developing creative atmospheres in organizations that are already thriving. Even in failure, or abstract mediocrity, the human mind tends to balk. And original thinking both to create and re-engineer is first and foremost an act of destruction, with all the emotional and psychological inertia that implies.

Creative destruction has implications on existent programs, along with its attendant failures in their attempts. Occupationally, creativity must find safe harbor. It is illogical to ask Associates invested in current products or programs to create their own demise. It would be like giving tax dollars to oil companies in an effort to invent alternate fuel sources. There is a foundational and psychological reason Microsoft is not the driving innovator of web technology. Their priority and strength lies in preserving and optimizing existing annuities.

Existing product managers may be expected to actively participate in model revisions or re-engineering efforts rather than eclipses. Besides, in an era of change optimizing current revenue streams will occupy all of a product managers’ time, and define the organizational corporate culture. That is entirely appropriate, and a worthy occupation.

True creation is effectively accomplished in separate multidisciplinary project groups dedicated to the task. Notice we are explicitly describing a network architecture of specialized participants; not a silo approach with administrative and technical support ‘on loan’ or ‘on call’ from various departments. That traditional organizational structure inevitably leads to bottle necks and inordinate management intervention.

Separating new and existing functions has many benefits outlined below, not least of which is avoiding the cognitive dissonance and emotionality of destruction. If performed in organizations of considerable existent annuities, it may be necessary to occupy separate building and hierarchical space in an effort to divorce cultures and provide safe quarter. Reporting directly to the President is also a practical alternative.

10 Benefits of Creative Segregation

The benefits of separate and distinct development or ‘creation’ groups are immense. Notice that if separate accommodation is not arranged, and adequate resources allocated, the costs to the organization are the mirror of the benefits itemized below:

1. Nurtures the learning curve and specialization required for creativity and re-engineering, as well as the process of doing so. Separation means speed, production, and excellence. It also means less cost.
2. Measurements of current product management and creative investment is more accurate.
3. Encourages consistency and timeliness of deliverable.
4. Acknowledges workloads and priorities. While very small projects in maintenance positions may work, the emotional preference for the present over the future relegates even high priority projects down the list as the work day progresses.
5. Acknowledges the psychological difference between process requirements and projects.
6. Reinforces different talents necessary for detailed, repetitive work vs. project and creative work.
7. Allows different incentives between line and project work.
8. Creates safe psychological and cultural harbor by separation from existent product management hierarchy. Notice that reporting to the President or a suitable Senior Executive may be necessary if the organization is consumed with current annuities.
9. Allows a convenient and appropriate discussion for adoption or denial of ideas by the organization. Failure to approve does not mean failure of the work.
10. Provides a welcome berth and process for new ideas to aggregate.

Organizational structure or best practice is characterized by dedicated teams formed of varying number and disciplines depending on need supplemented from various organizational positions for exposure and training purposes. Detach the hierarchy from existent product management. Depending on the size of the organization, separate roving groups by specialization; re-engineering, product development, market enhancements, strategy development, etc.

Other Articles in this Series

Creativity

Practical Implications of the Biology of Creativity

7 Ways to Stifle Creativity and Innovation

My Personal Discoveries Exploring Creativity