About Martin Dowson

I believe that business exists to create meaningful experiences for customers. I also believe that business has a duty to operate profitably and sustainably. I help organisations become customer-led so that they can find, once again, their true purpose. I am Director of Customer Experience at Comotion and I write personally at ExperienceZen and on Comotional's Blog You can also find me on Google

Customer-Led: Has the focus on “Delivering Shareholder Value” actually done the opposite?

I recently found this very interesting article from the Washington Post outlining the case for the erosion of Shareholder value since the 1970s because of, ironically,the focus on the ‘Cult of Shareholder Value‘.

The precis is that the management ideal of running companies in a way that ‘maximises shareholder value” has done more harm than good when looking precisely at the very metric it seeks to enhance.  I’m not sure if the variance in return over two different ‘ages’ of capitalism (managerial 7.6% vs shareholder 6.4%) is significant but it warrants a good read of the article and his reference articles.

All of this is not to say that shareholders should not expect to get a return on their investments, just that the focus on shareholders throws the management focus off what actually creates the best return for everyone.  That this focus on shareholder value ignores a fundamental principle immortalised by Peter Drucker:

The purpose of business is to create and keep a customer

The article acknowledges the very complex landscape over the period of comparison, points to globalisation and deregulation as likely forces creating this new norm of Shareholder Value and points out that it is difficult to rapidly change an embedded norm.

He highlights a number of indicators which common sense tells you Shareholder Capitalism is creating a short-term focus at the expense of most stakeholders.

  1. CEO Tenure of Global Companies down from an Average of 10yrs to 3.5 yrs (this stat varies wildly depending timescales, listed exchange but ALL stats are declining)
  2. Executive Compensation :  “the ratio of chief executive compensation to corporate profits increased eight-fold between 1980 and 2000. Almost all of that increase came from stock-based compensation”
  3. Expected Performance Timescales: “80 percent of top executives and directors reported feeling most pressured to demonstrate a strong financial performance over a period of two years or less, with only 7 percent feeling pressure to deliver a strong performance over a period of five years or more.”

and then goes on to suggest some structural changes to our political and market environment that might help establish a better norm.

I intuitively feel that short CEO tenure creates short-term thinking however there are HBR arguments that this is more about right CEO for the right phase of the company.

Executive Compensation could easily be seen as market dynamics in place – you pay for quality – however if shareholder value is actually eroding then it seems the metric isn’t working.  We already know that we need a balance of metrics not just financial ones even at CEO level – so I think this actually goes deeper than actual CEO compensation

Of course there are some companies and CEOs who are just getting on and running their companies in a more long-term sustainable fashion – with an inherent focus on the customer – the article name checks Apple, Johnson&Johnson and Proctor & Gamble as some, there will be many more but the analysis is hard to make ‘from the outside’.

I think this is an interesting read, to be understood thoroughly, and is complementary to the studies that are showing Customer-Led organisations outstripping the returns of S&P500 companies without that culture.  Two more articles to come on precisely that – I will link to them once they’re up.

In the meantime use this article as evidence wisely but use it as a discussion point freely – do you believe a focus on shareholders is actually eroding long-term sustainable value – do you think business should even care about long-term sustainable value?

RyanAir: What happens when you just don’t care…

Michael O’Leary announced a couple of weeks back that he wanted to turn around the ‘abruptness of RyanAir’s culture‘.

So those of you who have heard me speak over the last few years will know that I use RyanAir as a great example of Customer Experience Management done well. Whilst this was initially shocking to many (a few years ago) most people have more recently cottoned on to why and audiences are now beginning to quote RyanAir back to me when I’m looking for examples of CX management.

However the vote as to whether people would invest in them has always been split into two camps.

  1. Just look at their results – they are a successful business, they are profitable and you said it yourself Martin – they have managed their CX very well – we know what to expect when we travel with them and there is a market for their product. So yes I’ll invest – I think they will continue to provide a good return
  2. They treat people like [insert your preferred strong words] – of course I wouldn’t give them my money

Personally I believe it really is as simple as Camp Two ultimately being the right answer however the problem is that Camp One were also ‘right’ – at least on the face of it.  From a short term investment point of view it was easy to see why money should be put into RyanAir.  The reason I believe Camp One have some faulty thinking is explained in my blog post earlier this year on where the money really comes from and why that model is not sustainable in the long-run.

RyanAir have issued a profit warning and are receiving a lot of bad press for their poor customer service.   I believe that this is the beginning of the end for RyanAir being a business that makes a profit out of consistently managing their ‘below benchmark’ CX.  Their business model is cracking (rising fuel prices, regulatory challenges to their revenues and competitive pressure on price) and their customers have no reason to stay other than for price.  We’re not going to see them go bankrupt anytime soon but I think that we will enter an era of discussion of RyanAir as a struggling airline in the face of tougher competition on both price AND service.  It is the latter that RyanAir just has no idea how to respond to.

It’s interesting to watch this unfold because it is, for once, shareholder pressure that is forcing Michael O’Leary to address his poor customer experience and also because I believe that despite his declarations he still doesn’t get it.

O’Leary has said that he wants to stop ‘pissing customers off’ and that this also shouldn’t cost any money.  From anyone else I’d take that as a simple statement of good practice.   From him I can’t help but feel that if it HAD cost any money he wouldn’t have bothered.  I simply don’t believe he cares.

Fundamentally he has a company built on his own personal set of values which show no regard for his customers or employees.  Changing that culture and turning around RyanAir, is going to require that he leaves or has some kind of personal revelation.

Now this HAS happened before with smaller companies but typically with the big ones the CEO moves on and a new culture comes in.  If you want to hear about what a big difference culture CAN make I’d encourage you to watch the video testimonial from Roma Mouldings who attended a 3-Day bootcamp with Zappos Insights – who know a thing or two about Culture’s impact on performance!

NetFlix : a bumpy ride to understanding their customers

I’ve always thought NetFlix was an interesting company.   At one point we were lauding them for the transformation they brought to the home-movie-watching market and the amazing insights they could generate about their customers.  They had a DVD and Streaming service that were much loved by their customers.

However roughly two years ago their stock was worth $70-80 having crashed from $300 following a series of poorly judged communications with customers.  A combination of the CEO’s arrogance (his words) and a focus on explaining to shareholders (as opposed to customers) why they were making major changes in their company strategy led to an almighty back-lash from customers.  It has taken them a good 2 years to fully recover.

But recover they have and I can’t help feel that they have learnt something from the debacle.

You will see this awesome Customer Service exchange around over the next couple of days but do pause to ask yourself – is this just a bunch of really great people at the front-line who have been given some latitude to be themselves or has the organisation itself, the management, the CEO fundamentally changed to the extent that this is a natural result of their strategic direction.

It’s hard to tell, we can only guess, however I would argue that long-tenured CEOs have more of a chance to develop, learn and transform an organisation into a truly customer-led business than short-tenured stock-market focussed CEOs – precisely because they get the chance to learn from their mistakes and/or invest in their ideas.  There is so much more strategically to NetFlix’s recovery to a $300 share price but I hope that being more connected to their customers at a human level will help them avoid repeating mistakes of the past in responding to the ever-shifting landscape ahead of them.

Awesome Customer Service from NetFlix

This  exchange between a NetFlix CSR and a customer over web-chat (found on Reddit and gone ballistic on US sites in the last 24 hours) is a great example of plain and simple human interaction – something USAA, SWA and Zappos know all about in terms of maintaining great customer loyalty.

Our CSR – Mike – engages our customer Norm in a bit of geeky banter while they look to solve Norm’s problem – read as our customer fully enters into the spirit of it.  I love how this screenshot ends with one simple question “were you satisfied with your Netflix experience today” – I think it was missing the ‘Hell Yeah’ button!

I’ve included the screenshot of the full exchange below and it has been verified by NetFlix as real. This kind of interaction is a long way from where NetFlix were perceived to be at just two years ago – you can read my thoughts on that here  but enjoy this Geek-out in the meantime and ask yourself what would it be like to let my CSRs truly be themselves?

 

 

Culture Trumps Strategy with Amazing ROI

I’ve been talking a lot recently about Zappos where the corporate culture is a central pillar that drives everything they do.  Their clear sense of purpose, shared values and strong sense of identity are credited with their success – but as a privately held company the tangible ROI is hard for outsiders to prove (could it just be that they are operationally excellent?) – I don’t believe so but a detailed evaluation of Zappos is an entirely different post.

I came across this very interesting article re-acquainting us with research from 1992 which found that a company’s Culture was a linked with a significant difference in overall financial performance.

In particular the type of culture quoted as being so effective was one that

highly values employees, customers, and owners and that those cultures encourage leadership from everyone in the firm.

This type of culture was responsible for an average net income growth of 756% versus 1% for a company without this culture.  

These values were credited with enabling the companies to respond to ever changing customer needs and therefore remain relevant in the marketplace – I suspect though and the article strongly implies that there is a deeper connection that this.

If you’re looking for some stats to justify the ROI of Culture then I highly recommend you dig out their book Corporate Culture and Performance and read the original research.  The authors remain convinced that their study was robust.

So what IS going on?  There are already studies linking CX Leaders with outperforming the S&P 500.  Do we need any more bottom line proof?  What’s holding back the CEOs now?

RyanAir delivers consistent CX but would you invest?

Another cracking post from Comotion Associate Ian Golding – the RyanAir and Customer Experience debate is one I’m all too familiar with and use in many of my conference speeches.  During these talks and the questions that inevitably follow we debate whether RyanAir are any good at Customer Experience, invariably the audience are split 60% saying No and they, like Ian would never fly with them.  40% say yes – because, as Ian says, they do exactly what they promise – they consistently meet expectations (that have been set very low).

ryanair plane

So clearly RyanAir are competing mostly on Price and to some degree destination.  RyanAir would argue that there is a big enough demand for this combination of Service and Price.  So, my final question to the audience (and to you today) is always

 Would I invest in RyanAir?

to which I would have to answer a resounding no. 

Their business model is not sustainable

  1. A great majority of their revenue is dependent on airport/government based subsidies for bringing volumes of passengers through airports.  This is under regulatory review and extremely volatile income.  The plane rides themselves are not proftiable.
  2. It is too easy to replicate and better their service offer

 

RyanAir – Cattle Class

It is so important to understand the business model behind a company because there must be a sustainable strategy in order to continue to exist.  You need permission from customers to make profits and ultimately RyanAir bribes passengers to fly on their buses so they can make money out of the towns they fly to – If RyanAir could fly cattle on their planes instead – they would their business model does not care at all about the passengers except for the revenue they make elsewhere from them.

If another low-cost airline can exceed those same expectations customers will leave in droves. Because this is a business that only knows how to ‘meet’ expectations it will not be able to respond to that competition.  But most importantly – even if it tried – because this is a business that does not appear to care about it’s employees and customers – who would care if they did try?

Mobile Wallets, Identity Security and Banking Digital Maturity

My iPhone is the least valuable thing I carry. I like it that way – William Lovegrove on e-Consultancy

… having been through this recently myself I would concur… my iphone5 had a security flaw in it that meant it could be unlocked, you hardly ever recover a stolen iphone because once the sim is out it’s untrackable and the identity theft risk is very tangible in a society that is ‘risk-innocent’ and not protecting itself appropriately. 

It’s a race between a ‘few’ people who are looking at device security and a tipping point of security issues that wake people up to the risks…  that tipping point will get closer once banks implement mobile wallets – the device will be a much bigger target.
I’ve been involved with or around a few Mobile Banking strategies for UK banks over the last few years.  Banks are very keen to get in on the mobile wallet space and get ahead of Google, PayPal, Apple etc.  However banks are not traditionally innovators, certainly in technology.  They have been slow to wake up to the realisation that MOST companies now are enabled by technology (even in somecase have become primarily technology companies).  No one was really discussing the issues highlighted in this article (some did but were cut down because ‘we have to be in on this’)
My experience is that the Banks, whilst rushing to develop cool mobile strategies that ‘position’ them for innovation and marketshare, are absolutely not going far enough in considering the wider impacts of this technology.  Many have a good intent with making things easier for customers and increasing customer engagement.   However if you are involved in enabling a technology to become so intrinsically more intimate (yes finances are intimate) and thereby also making us a target for crime without considering how to mitigate this then you are not really making it better for us.
Here’s what I need (with this particular subject lense on)
  1. Give me somewhere safe to put my money
  2. Make it easy for me to access (unless I want to lock it away in exchange for some upside)
Very much in that order!
Fraud departments of Banks need to be ahead of the game here (a lot are using old standards for new channels), technology groups need to be on top of the latest thinking/developments (a lot are outsourcing the development of mobile channels to 3rd parties).
If Banks are going to be truly serious about being involved in mobile payments and wallets there needs to be a step change in how they go about being drivers of technology and innovation – across all operations in the bank.
After my phone loss – I’ve locked my new phone down now, changed all my passwords to a very secure system, backed everything up, removed financial information from the phone, set findmyiphone to track (to no avail), downloaded hiddenapp for future protection, reviewed my mobile phone insurance – that’s all easy enough right?
I mean – EVERYONE does that right?

Shaking up the UK Banking Sector – I’m cautiously optimistic

So Virgin Money are having a showcase week following their acquisition of the ‘good’ Northern Rock.

I am personally very excited about

a) Virgin Money’s ‘full’ entrance to the market
b) The next 5 years of the UK Banking sector

Virgin have been hankering after the opportunity to transform this industry for a long time now and they stand a very good chance of being able to do so… but they are not the only change shifters around and they are not ‘automatically’ going to be THE people to change the industry necessarily!

What IS wrong with UK Banking?
When bankers or those in the industry survey customers about their opinions about banking we get answers back about interest rates, charges and fat-cats.

What we don’t get is what are people trying to do with their money (that means they want better interest rates), how are people managing their money (such that they incur charges) and what do people understand about the banking industry such that they perceive ‘Fat Cats’ as being unfairly paid…

The banking industry is just generally not used to being customer-centred in it’s thinking. It has never had to be.

Well that is certainly changing now. Rightly or wrongly the banking crisis has made us all say “Enough is enough… something has to change” and there are now new entrants to the industry who are clamouring to offer us alternatives in an industry numbed by sameness.

When I look at the new entrants the ones that excite me are the ones that I know are thinking about us as human beings (and yes consumers), our lives and what we want to achieve ‘through’ banking – as opposed to those who are just thinking ‘what is a better banking product’ or ‘what does mobile banking mean for a customer’.

The lens of change has to be wider than this.

My pick of ones to watch… and why some obvious names don’t make the list

  • [my out on a limb prediction] – Royal Bank of Scotland
  • [the favourite but with caveats] – Virgin Money
  • [The Industry Usurpers] – Apple/Amazon/Paypal
  • [The Surprising Innovator] – Standard Chartered
  • [The disrupter] – Yodlee

Who didn’t make the list

  • Aggregators/Online ‘layers’ – Bank Simple/Moneydashboard/Mint
  • The incumbants – The other high-street banks

So why is the perpetrator (as defined by the red-tops) top of my list?  Not just because the only way is up ;-) but because

  1. The new starts are struggling with actually implementing the technology behind a bank.  Don’t expect current accounts or mortgages from Tesco Bank anytime soon the FSA is far too busy scrutinising them on why they couldn’t robustly deliver Savings and Credit Cards [their core business]Virgin Money remain on the list because they have at least acquired a fully working bank but they may still have serious integration challenges (based on the same technology Tesco Bank is struggling with)
  2. The incumbants have already got a fully working bank system, are experienced at delivering change into it and rolling that out to their staff.Their challenge is a cultural and organisational one – their key change they need to make is to decide to be more customer centred and do everything they already know how to do – but with THAT focus.  They COULD move very quickly and deliver to their already hefty market share a great experience.

The disruptors may well be the ones that kick one or two of the incumbants into action (the jungle drums of customer experience suggest this is happening within at least three major UK retail banks)

There are so many ways to cut your predictions – and I may well change my mind in a years time – there is one thing that for me remains absolute though.  The winner will be one who works out what it really means to be customer-led from the inside-out, who can demonstrate a genuine sense of connection and understanding with their customers.

Steve Jobs – Don’t Settle

Today the world lost a truly inspirational leader who has changed the lives of everyone whether directly or indirectly.

My friend Richard Harris had the pleasure of working with him and shared today a great summary of what made the man the man…

I can think of no higher praise than to remember him as a deeply and inspiringly unreasonable man, one who would never take, “…because that’s how things are” as an answer – there was always a better way.

He had the inspiration to think differently, the tenacity to not accept anything less than his vision and the charisma to attract talented people around him to deliver that vision.

On a professional front I think it’s worth taking a moment to consider how much can be achieved when you are truly uncompromising about the importance of excellence in product design and customer experience.  Apple is not without it’s flaws, it does not produce ‘perfect’ experiences or products but when the world wants to benchmark against you… you’re clearly doing something right.

On a personal front I would encourage everyone to take 15 minutes to watch his Stanford Commencement Address and gain some inspiration in your own life to not “Settle” for anything less than your dreams.

We will all continue to draw inspiration from his work for many decades to come and I’m sure that Apple will continue to provide new inspirations even now that their visionary leader has passed.  I’m looking forward to the future that he has contributed to so much to enabling.

Mike Butcher @ TechCrunch:- European Startups are not out to lunch – My speech at Le Web

European Startups are not out to lunch – My speech at Le Web:
Excellent Article from Mike Butcher@TechCrunch about the resilience of entrepreneurs, especially European ones! I have to agree.. I don’t remember the last time I was “out to lunch”…

The comments about the challenges for US business expansion are spot on…

There is a reason many US businesses hit a brick wall when they enter Europe – its complexity. They are used to a big, single market. The best European companies use this diversity to their advantage. If big US companies, grown fat on their large home market, are forced to buy the European player because they can’t break in, who is the winner here?

I’d like to see more European to US expansion though if this is the case… although with their federal system of states taxes and regulations can be difficult to sort out, especially where they fundamentally affect the consumer proposition (I’m thinking about GetThemIn for the States where Alcohol sales regulation/taxes can vary between states so much that it’s difficult to get a consistent pan-country proposition out – but we’re on it!!!)

Either way the message is clear – for Entrepreneurs – the downturn is just a different type of challenge to find innovative answers to…