Most organizations fail. The vast majority of new restaurants don’t survive two years. Over 90% of the car companies that existed in the early 1900s were gone by the 1940s. At least a few of today’s most successful enterprises appear to be going down the same path.
Examples abound of how success creates size, market power, and an entitlement culture, all of which, in turn, create an inward focus, a lack of understanding of external reality, and a total lack of urgency to correct the problem.
A Dangerous Complacency
In the supermarket business, one regional chain was the very first in its geographical area to offer a broad selection of packaged goods, meat, and produce, all with a level of service found only in its best smaller competitors. Customers loved it. As a result, over 40 years the chain grew from two stores to 62. The size of each new facility increased, economies of scale grew, margins were kept exceptionally high, and national supermarket chains chose to stay away from a difficult competitive situation.
Then a younger and more innovative competitor encroached upon the firm’s territory with stores that were brighter, with wider aisles, a broader selection of fresher produce, and easier checkout. Amazingly, the successful chain practically ignored those developments!
Sitting in on the company’s management meetings, as did this observer, you would rarely hear any discussion about the new competitor. The talk instead was all about the firm itself: margins in store 42 were off budget, renovations at one of the locations were coming along fine, and so on. If you asked elementary questions about the new competitor — how big it had become, its competitive strategy, its current growth rate — most executives did not know nor did they show any great concern that they did not know.
Creating Outward Focus
An inwardly focused organization inevitably misses new opportunities and hazards coming from competitors, customers, or changes in the regulatory environment. Here are four actions that companies can take this week or this month to bring the outside in.
1. Listen to customer-interfacing employees.
Whether customer service employees at an auto dealership, clerks at a bank, or sales representatives for large computer systems, frontline employees, if encouraged, can collect masses of external information simply as a part of doing their jobs well.
Some of the world’s most successful entrepreneurs rely on this method with great success. They regularly visit offices, stores, and factories and ask frontline employees questions about customers and customer reaction to their products or services. They listen carefully and look for patterns, and encourage other managers to do the same. They encourage or require that frontline supervisors engage in some form of this activity as an ongoing part of their jobs.
Sam Walton was a prominent example of someone who used this practice. And Wal-Mart, during his years, was the most successful organization of its kind in the world. The same was true for Herb Kelleher at Southwest Airlines.
The method typically requires the following:
A small leap of faith at the beginning. That means believing that frontline people are intelligent and motivated enough to be a source of useful customer information, even if past evidence suggests they are not.
Treating these employees accordingly. Very few people will help, regardless of what you say, if you treat them without respect.
Asking questions, listening closely to answers, and not giving up if employees don’t respond immediately.
2. Use the power of video.
A firm manufactured large, made-to-order containers. They were «high quality» in the usual way we think of the term: the steel and rivets were always according to specifications, the tolerances were right, the product did not break down or require unusual maintenance.
But some of the detailing did not fit the specific needs of a major customer, which had to make changes in the product to fit its requirements. The modifications were not expensive, but, in light of a made-to-order contract, they were irritating. The customer had told some people at the plant about this problem. The plant personnel listened politely but didn’t alter what they were doing. If you had confronted them, they would probably have pointed out that they had set the standard for their industry, that they knew what the product should be, and that if the customer wanted to make modifications on its end, that was its choice.
The firm’s CEO convinced the customer’s president to be filmed while explaining his needs and showing his growing frustration. The video was shot inexpensively and edited to 15 minutes.
Groups of 20-30 plant employees were then brought into a conference room at the factory to be shown the tape. Because most plant personnel never talked to customers, they were shocked, first, by the facts of the case and, I suspect, even more so by the emotion pouring out of the TV screen. Some became defensive: this is not a typical customer; we make a quality product; is this his way of negotiating a lower price? But a core group of employees said, in effect, we need to do something about this, and fast. And they did. As a result, a tradition-bound factory was reinvigorated. And customers loved it.
One lesson I have learned again and again is the power of video when it is honest and human and deals with a topic of importance to individual or organizational performance. Because of the control possible with shooting, editing, and showing the material, it can sometimes be more powerful than a live person.
There is another lesson here, and one that applies broadly, not only in the use of video: «Show them, don’t tell them.» For the most part, we have been taught to tell people the facts, and as logically as possible. But there is another method and one that is arguably more powerful. Show them. Let them see with their own eyes, and not only through aggregated, abstract data. The latter might be much more rational, because you can summarize in aggregate far more situations than anyone could possibly have the time to see. But «rational» misses the exceptionally important point here about the effect of thinking on behavior versus the effect of emotions on behavior.
As with the case of importing information through frontline employees, you can systematize the use of video as an urgency-raising mechanism. The most obvious way is to make, as a part of the job of any communication department, finding and creating and displaying powerful video on a regular basis a priority. The task may be difficult, but it is not beyond the capabilities of a competent communication group.
3. Don’t protect people from troubling data.
The boss in the made-to-order containers company shared what he had learned from a customer with every single individual who worked in the plant. He judged that the behavior of plant personnel would not change unless most people became less complacent. His actions, I think, were very smart. They were also unusual.
Usually top management shields people from disquieting news. Then when they try to initiate significant changes, a low sense of urgency within middle management makes execution painfully difficult. The change effort eventually fails or falls far short of top management’s aspirations.
They resist sharing outside information broadly with managers or employees either because (1) they believe most people are not smart enough or experienced enough to understand it, (2) they worry about being unfairly blamed when the information does not make them look good, (3) they fear that leaks to analysts and brokers will cause a drop in stock price, and (4) they worry that a broader distribution of troubling information will hurt morale, increase turnover, and, in general, turn damaging contentment into even more damaging anxiety and anger.
With conviction and some sophistication, you can deal with all these issues. The solution starts at the top:
Top management sees an opportunity and not only a problem.
Executives clearly see the goal and the error to be avoided — the objective being to move complacency to urgency and not inadvertently to a flurry of anxious or angry behavior that is mistaken for urgency.
They give as much of the disquieting information to as many people as is practical.
They make it clear that external data offers an important opportunity to galvanize action to help make changes that are necessary to strengthen the organization.
They make it clear in word and deed that a blame game will not be tolerated. They make it clear that a prosperous future is the only issue.
The top managers act with self-confidence and little visible fear, anger, or arrogance.
They try to anticipate who will react in what ways. For groups that will be inclined to react with anxiety or anger, top management visibly demonstrates passion, self-confidence, and a steely resolve to help channel that fear and anger into a determination to act and win.
The choice is clear. Do you want to risk short-term problems, or do you want to shield people from relevant external information, allow complacency to remain too high, and ultimately to undermine an organization’s future? Stated as such, this question sounds so stark as to be simplistic. A decade ago I would have said «too simplistic.» Not today.
4. Send people out.
The idea is simple. Send out «scouts» to bring back new information about the world and a newfound determination to do something with that information.
Based on a suggestion from a midlevel marketing manager, the CEO of a sporting goods company asked his two top IT executives to accompany sales reps on calls to key retail accounts twice a year. At first, he found little enthusiasm for the idea from either the reps or the IT people. But the CEO persisted, making sure the technology managers were paired with sales personnel who did see the point of the exercise.
The first year, both IT executives visited three cities and 12 customers in three days. The face-to-face conversations, facilitated by the sales reps, were most revealing. The IT people learned what the customers liked or did not like about the electronic interfaces between the customer and the supplier. They learned more about how customers rated their shipping, billing, and customer service systems and, just as important, why. Systems that looked B+ or A to the IT executives looked different from the customer side.
Perhaps most important of all, the visiting executives learned about the demands placed on the retailers by their customers, the challenges created by their retail competitors, and life inside the customers’ firms. Much of this information was not new but some was. And even «old» news, or «not my problem» news, when heard in face-to-face conversations with outsiders, often affected thoughts and feelings in new ways. With live interaction, questions could be asked spontaneously. Feedback came from more than words — from how the visitors were treated and other nonverbal information. The overall experience was powerful. The two executives brought information and feelings back to their managers and employees. A sense of urgency for improving IT went up.
As this story shows, urgency can be increased by sending people, judiciously, to any of an organization’s constituencies. Insiders learn about the outside and invariably bring some of that back when they return. Information gathered in this way tends, quite naturally, to be given to other insiders not as antiseptic facts but with stories and with an excitement or distress that affects more than thoughts. It affects how insiders feel, which is crucial.