Issue 26, Wednesday 23 August, 2000
Made in New Zealand - twice winners of the America's Cup
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"The first responsibility of a leader is to define reality. The last is to say thank you. In between, the leader is a servant."

Max De Pree, CEO of Herman Miller Inc
quoted in Managing the Dream by Warren Bennis



Award is a free fortnightly email magazine with the tools, techniques and best-practice models that deliver high performance in the new economy
In this issue
Interactivity - thud!
The 21st Century Corporation - BizWeek at its best
Customer satisfaction - perverse incentives, cynical viewpoints
Process management/customer satisfaction - here's a novel idea - listen
Quick case studies
1 - Bike shop CRM, Wal-Mart Walloping
2 - Boeing's new-economy process management
Sixty Second Snapshots
>> Workplace ethics
>> Diversity and eSisterhood
>> Dot-com customer experience
>> Sage advice - Drucker at 90
Resources - heaps. Go look

New member? Here are all the back issues - and here are our web resources - one of the world's best completely free Baldrige Award and organisational excellence web sites. AOL customers (and others who can't access web-page emails) here's the on-line version at our web site - at www.baldrigeplus.com/award26.html. Click here to send us an email.
Interactivity
“Darwin would have loved the internet,” said Susan Casey in the July issue of eCompany Now. None of that tedious waiting around to see natural selection at work. The on-line creation-to-extinction cycle is fast enough to be a spectator sport.

We're living proof. Our attempt at interactivity fell as flat as a cow pat. Even when we stoked it up with the number one cost-of-quality case study of the year – the Firestone recall – we didn't get a single response! Talk about lead balloons. But we're optimists – another iteration lurks in the wings.
The 21st Century Corporation
This you can't afford to miss. Business Week, August 28th issue, Asian Edition (and, one presumes, everywhere else that BW publishes), pages 37-123. Essential reading for anyone (and that should be everyone) with an interest in how business will happen in the near future.
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Customer satisfaction – perverse incentives
Big clueless companies find a recession to be the perfect time to cut back on customer service, wrote Dana Blankenhorn in a recent A-CLUE newsletter. Clark Howard, who makes his living exposing bad service and teaching people to demand good service, calls this "customer no service." 

There's a reason, Dana says. The biggest companies know they'll survive because they have lots of capital. By cutting all costs (including customer service costs) they maintain their short-term profits and keep that capital. Then they can buy the firms that have maintained their goodwill, add that to their balance sheets, cut the customer service costs again and move on. The fault here lies with the stock market, he says, and he's apparently serious, which values physical assets but not goodwill.

The solution is for big customers to push back. Last week The Wall Street Journal's Rebecca Blumenstein showed how big business customers are deserting AT&T in droves because chair Michael Armstrong tried to milk them for profits to buy and upgrade cable companies. In response, Armstrong is beefing up the sales force, which won't work either. The winners in this case are outfits with new gear that take advantage of Moore's Law. The new stuff costs less, works better, lets them do more business with fewer headaches (lowering customer service costs and raising profits) and gives those with older plants a headache.

The same thing is happening in the consumer space. United Airlines is being hammered for bad customer service (and it can't happen soon enough – I was on a United shuttle 18/12 ago where two boarding passes were issued for the same seat – one of them was mine – MM), putting its merger with US Airways in doubt.

Retailers understand that customer service can be a matter of survival. Comp USA once had the best customer service in its industry. When that disappeared so did the company.

“A decade ago,” Blankenhorn wrote, “my late father came to visit for a few days, and we took him to a seafood restaurant. He didn't like the lobster and although it wasn't their fault the waiter gave him a free slice of key lime pie. It was one of the best evenings of his life - he told everyone he knew about it. The restaurant is still in business.”
Process management strategy
Understand your buyer's perspective, or else!
After an ON THE FRONT LINE article by Randy Harris (managing partner of Global Peak Performance) in CRM Insights, v3.25, August 10

Sales and marketing folks think of procurement as an upstream thing, something that their supply chain people do, Harris says, but don't forget that the (downstream) customers that sales and marketing deal with also do procurement. He sees the growing popularity of buyer's marketplaces as evidence of customer service failure. Otherwise, wouldn't they be content with the status quo?

”Last year,” he wrote, “we performed over sixty buy-cycle analyses for major North American corporations. We confirmed that, in a B2B environment, the buyer's processes are far more complex than the linear sequence of events that drives the seller. The procurement process is highly inefficient, costly, and impacts their ability to reduce their production costs and improve their competitive position. Yet as sellers, and under the banner of Customer Relationship Management, we continue to seek more creative ways and powerful technologies to blast our message into a noisy market. Most buyers don't hear and don't care.”

Almost every major industry is committing significant resources and funding to establish a procurement marketplace that will dictate how you will sell to them in the future, he says. “It's time to start doing what we've been only been talking about for years - understand the customer's buying process, needs, and engagement strategies. Otherwise, consider what you're going to do with all of those power-hitting sales people, all of that cutting-edge technology, and the miles of redesigned process. These approaches only work when customers agree to play by your rules.”

Resources
VALUE PROPOSITIONS
Five propositions to help companies create value for their customers. Responding quickly to customer choices requires a new approach to business design -- the creation of "value nets." http://www.fastcompany.com/online/37//ideazone.html

CRM MEANS MORE than "customer relationship management"; it also stands for "customers really matter," was the underlying message of the National Conference for Database Marketers (NCDM). http://www.catalogagemag.com/Content/Weekly/2000/2000080301.htm

IDC PREDICTS BIG GROWTH IN CRM MARKET
Research firm IDC predicts enormous growth in the CRM market during the next four years, especially in data warehousing aspect of closed-loop CRM systems. http://www.entmag.com/breaknews.asp?ID=3043

DIRECT SELLING INTRODUCES NEW crm CHALLENGES FOR HP
Traditionally selling printers and computers through middlemen, HP investing in CRM technology in an attempt to become more customer-savvy. http://www.internetwk.com/story/INW20000726S0001
Quick case study 1 – Customer Relationship Management
After an article by Don Peppers, Inside 1 to 1. Published August 17 by the Peppers and Rogers Group, Inc.

Bike shop CRM
Peppers and Rogers are pioneers of CRM – one-to-one marketing is their trademark and religion (and the basis of their international consulting and publishing business). This story, about Wal-Mart walloper Chris Zane, owner of Zane's Cycles in Branford, Conn, is typically upbeat. But interesting. And instructive.

Zane, who has weathered the arrival of Wal-Mart and a sports superstore by "building trust with customers on a one-to-one level, and treating individual transactions as an opportunity to guarantee future transactions,” has doubled his business in two years to $3.5 million, capturing 65% of the bike market in surrounding New Haven County. He's not attempting further, physical, expansion, but moving into corporate sales and growing 'share of customer' instead. Items:
- a customer database of 27,000 is used to up-sell and cross-sell. "If you know what products your customers are buying and why,” he says, “when new products come out, you can sell them as well."
- Because the store has nearly saturated the local retail market, Chris has turned to the B2B (Business to Business) arena, focusing on selling to corporate clients such as Diner's Club, Subaru, and AT&T for employee and customer incentives
- B2B sales are 50% more than retail sales – Zane's Cycles grew 56% as the result of 15,000 units shipped last year.

Chris says his success is due to:
- offering customers a free lifetime-service warranty that covers all repairs, building trust and generating business that far exceeds service costs
- capturing customer information with each transaction. This means if a customer purchases a baby seat for a bicycle, he knows to contact the customer in a few years with an offer of a child's bike
- maintaining lifelong relationships with customers. Each has a Lifetime Value worth about $6,400 on average, based on a calculation that includes the customer's age at the first sale, potential family size, and changing needs
- partnering with UPS, so that the minute a bicycle is mailed, the customer receives an email detailing shipping information and the arrival date.
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Quick case study 2 – Boeing and new-economy process management
After an article by Tyson Brown, Staff Writer at Inside 1 to 1

Baldrige category six, Process Management, examines the key aspects of an organization's process management, including customer-focused design, product and service delivery, support, and supplier and partnering processes. Have you noticed – by the way – how the Baldrige wording is beginning to look a bit dated – missing are all those new-economy phrases that have slipped into the language over the last couple of years. The year 2001 re-write is gonna be interesting! Back to business.

Boeing, as you'd expect, are not bunnies at this process management stuff, and they have some in-house Baldrige expertise as well (here's our case study of Boeing Airlift and Tanker Programs). So what are they up to?

The firm has been offering its airline clients and maintenance providers electronic access to information like technical drawings and service bulletins since 1995. Its most recent online undertaking, myboeingfleet.com, consolidates almost all of Boeing's e-services into one B2B vortal, making it easy for customers to serve themselves.

Sidebar - what's a vortal?
A “… targeted vertical portal or 'affinity portal,' according to Peppers and Rogers, and that's as good a definition as any. For instance, outdoor furniture makers Lakeland Mills and Tel-O-Post, and household product and tool manufacturer Black & Decker, sell on homeowner-homebuyer vortal RealHome.com. Some companies, Raytheon for example, create their own vortals where buyers may purchase competitors' products as well as their own. Raytheon's B2B vortal features its own aircraft parts, plus those of other manufacturers. No matter what the scenario, vortals should be designed to sell products, to solve customer's problems, and to develop relationships with them.

Launched May 6, Boeing's site acts as a single customer-accessible source for online maintenance, engineering, and flight operations data (more than 1.5 terabytes of data, the equivalent of 3 million 350 page books). The password-protected site lets customers specify access to relevant documents, information, and updates. An airline maintenance engineer, for example, might ask to be notified when new service bulletins are published for certain airplanes or specific sections of an airplane. Myboeingfleet.com will automatically post those notices on the engineer's page.

It also provides access to the Boeing PART Page, an online service launched in 1996 for ordering and tracking spare-parts shipments. The page supports nearly 75% of the world's jet transport fleet in spare-parts-related business, processing roughly 20,000 transactions per day from 250 airlines and 675 other companies. Only 13% of Boeing's orders are still handled manually.
Sixty second snapshots
Brutally short summaries of material too valuable to junk.

>> SSS 1 - Workplace ethics
You'll have noticed that we think Jeffrey Seglin (Assistant Professor, Magazine Publishing, Emerson College; Business Ethics Columnist, Sunday New York Times) is the bees knees.

Here's a hi-lite summary of his August 20th New York Times “THE RIGHT THING” column, “When the Boss is a Stealth Bomber.”

What should you – an ethical person – do, Seglin wondered, when your boss asks you to work on a secret project that might lead to your colleagues losing their jobs?

Nothing wrong with exploring new ideas, he says, and keeping them locked up in a skunk works until it's clear they'll bear fruit. The key question is why. Rushworth Kidder, president of the Institute for Global Ethics in Camden, ME, agrees that motivation matters – “Was the boss trying to get rid of the employee, but simply lacked the courage to say so?"

Secrecy might be signposting a dysfunctional workplace, where discussions of such issues are often avoided on purpose. Instead, innuendo rules under the guise of "an obvious necessity for secrecy" or "for the sake of the good cause." This creates a workplace culture with upside-down values – where honesty about underhanded tricks is considered worse than the tricks themselves.

"Sunshine is a great disinfectant," says Laura Nash of the Center for the Study of Values in Public Life at Harvard. "When such behavior is opened to scrutiny – even in a confidential setting – the stench becomes clear. If you can't develop a product without cannibalising your own team, there is something wrong with your managing or your morals, or both."

>> SSS 2 – Diversity, and eSisterhood
It's official: A woman's place is online. So say Greg Sherwin and Emily Avila at ClickZ.com, Friday, August 18,

A recent Media Metrix and Jupiter Communications study shows that for the first time, in the US at least, there are more women on the internet. This news has tremendous impact on online marketers, they say, particularly those operating in traditionally male-dominated markets like music and electronics.

Why? Well, for a start, women make most of the large household purchasing decisions:
- bout 75% of health-care decisions
- 80% of car purchases are influenced by women

Women shop differently. Privacy and transaction security, for example, are more important:
- Almost 90% of online women say that transaction security influences their repeat visits to online shopping sites, and
- 67% report that published privacy policies encourages them to return to online shopping sites.

In his article, The Feminine Net ClickZ writer Martin Lindstrom says, "We have reached a level where the quality of what we are saying, how we are saying it, and at what time we are saying it, is beginning to be important - more so than the quantity of sites and pages dominating our assessments." Women are more interested in establishing those relationships with sites they can trust.

“Women are still hanging out in the equivalent of the self-help aisle of the Internet,” these writers say, but “the more important issue to remember is that women will be better customers if your site is a better provider of service, community, and security – regardless of your business.”

>> SSS 3 - Strategy – dot-coms and the art of customer experience
With the recent tightening in the market, it has become even more important for dot-coms to show some results, according to ZDNet, August 4: like “higher revenues, more customers, perhaps even a profit.”

Resisting the temptation to say 'we told you so,' may we point you to our own, first-quarter 2000 assessment of the need for some dot-com quality? Just like our little international team, all those months ago, ZDNet fingers customer experience as the key strategic issue.

We've compiled heaps of tactical best practice tips, they say, but “it's important to remember that the customer experience is a strategic issue, and not just an accumulation of tactics. In fact, it's the most strategic issue an e-business can work on. A dot-com's strategy should be directly based on the customer experience.” Well thanks, we were there months ago!

But let's not be sore losers. ZDNet make some important points. Relevant just as much to your bricks and mortar business as to any dot-com:
- many companies don't see customer experience as part of their strategy and instead confuse it with usability, a much more tactical concern
- customer experience is the holistic combination of everything that the customer sees, touches, feels or interacts with on a site
- part of this is usability but so are the site's business goals, its merchandising, wording and messaging, the use of graphics and color, the flow of pages in core processes, choice of features, and the dot-com's own team processes.

It all should come down to one question: Is it good for the customer? It's essential to view customer experience as a central, ongoing, strategic priority, not a tactical concern to be farmed out in a couple of user tests. Get the strategy right first, and then, and only then, begin to address the tactical concerns of the customer experience.

Improving the customer experience can lead directly to higher revenues. On an e-commerce site, building a great customer experience makes it quicker and easier for customers to buy, raising the conversion rate. On high-volume e-commerce sites, raising the conversion rate by one tenth of 1% can add as much as $10 million in incremental revenues per month. Find out more by reading ZDNet's Dot-Com Survival Guide.

>> SSS 4 – Sage advice; Drucker, the new economy, and quality
Ok, so we've wandered into the new economy. We'll leave you to carry on. Read what the editor-in-chief of new-economy magazine Business 2.0, one James Daly (forwardslash@business2.com, full article available on line) discovered during an extended discussion with Peter Drucker “the pre-eminent business philosopher of the 20th century.” In more than 30 books (go to the on-line article for a list of the milestones), Drucker has written lucidly on many of the crucial business trends of the past 50 years. He might be 90, and thinking about retiring, but he's still, Daly says, the management guru.
Resources
COMPETITIVE INTELLIGENCE
Knowing what the competition is up to is key to your organization's success, says an APQC email. “Competitive intelligence (CI) is one of the most powerful tools available to businesses today.” Here's APQC's links to articles, publications, and web sites; a list of best-practice institutions; and additional resources about competitive intelligence http://www.apqc.org/free/hot/hot0800.htm. For more, go to Award 22.

BEST PRACTICES IN CALL CENTER OPERATIONS
Last issue, John Seddon, this issue, APQC. “Gain a comprehensive understanding of what it takes to achieve excellence in your call center with Call Center Operations, one of several books in APQC's Passport to Success Series,” their on-line promo says. “Based on our years of research examining leading-edge organizations - and supported by examples of best practices and tips from actual practitioners - this book guides readers in their own call center efforts. It provides mechanisms to gauge current status, understand the components of successful call center operations, and determine how to proceed. It addresses strategy, positioning, customers, employees, technology, and measurement. Call Center Operations is available through APQC's online bookstore at http://www.store.apqc.org. See what else APQC offers related to call centers at http://www.apqc.org/best/callctr.

APPLICATION OUTSOURCING
Companies are finding that using application service providers (ASPs) can help them quickly and cost effectively implement complex enterprise software applications. Britton Manasco, a research fellow and special adviser for APQC, explores the emergence of ASPs in "The New Wave: Application Outsourcing." Read this article at http://www.apqc.org/free/articles/asps.htm.

PLUG INTO THE HBR
From the Harvard Business School comes, they say, a cutting edge collection of management information “to sustain leadership in a fast-moving business environment. Thirteen regular topics (including globalization, innovation and change, and leadership, strategy & competition) contain snippets of articles by such luminaries as Michael Porter, Gary Hamel and Rosabeth Moss Kanter, most of which are excerpts from Harvard Business Review publications but offer great value nonetheless, running for several screens and retaining all the pithy information. A dedicated link connects to the latest issue of the Harvard Business Review, but only the article summaries are available free. Updated weekly, presents regular feature articles plus the opportunity to participate in interactive surveys or get involved with the 'Professor's' weekly philosophical challenge. All in all, a highly professional, accessible and useful business tool.” And who are we to argue?

KNOWLEDGE MANAGEMENT
http://www.intelligentkm.com A knowledge management hub, this site pools collective wisdom, offers it to visitors as extended Internet resources, current news and events and features. In-depth analyses will suit the professional already working in the knowledge management field who may be looking for new methods and tools. Also provides a non-threatening introduction for new-comers.

UKHRD
"Keeping trainers in touch." This is the daily digest of messages to UKHRD - a free service provided by Training Journal magazine  - Britain's original and best training journal (so they say).
Interested in hiring a coach?
Give us a call. We'd love to talk to you about it! Or any other proposals. Here's Malcolm Macpherson's resume.
Next issue 5/6 September. Reader contributions warmly received!

Copyright © 2000, Macpherson Publishing
All rights reserved. But if you found this eZine useful we strongly encourage you to email it intact to a business associate, friend or acquaintance. Award and EDGE FIRST are trademarks of Macpherson Publishing. Contact us at macalex1@xtra.co.nz; visit our web site at www.baldrigeplus.com
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