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The Second Coming of Service

Karl Albrecht

Executives are discovering that information technology (IT) is not the magic wand they had been led to believe, and that misapplying it can lead to wasted resources, loss of focus, and even disastrous business results. Established, successful firms are making effective use of IT by concentrating on their key strategic priorities, and making technology their servant, not their master. Strategic customer focus - concentrating on customer value as the primary driving concept - can serve as a powerful organizing principle for reinventing businesses in the age of the Third Wave.

Introduction

Many firms, particularly in America, ran off their rails, strategically speaking, during the Internet craze of the late 1990s. Hypnotized by the "e-commerce story," many dot-com businesses made strategic blunders that would be unforgivable on the part of first-year MBA students. Executive teams of many established and profitable firms, gripped by the fear of "being left behind," threw money at anything that looked like it might qualify as an "Internet strategy."

Apart from the loss of billions of dollars by innocent investors and ill-advised expenditures by established firms, the biggest victim was the customer. Internet operators set back the cause of service quality by a good ten years in some sectors, and the implosion of dot-mania left an ideological vacuum in the minds of many executives.

A more realistic appraisal of the role of information technology (IT) in business has forced a return to basic principles: focus on the customer, value creation, culture building, skillful execution of quality practices, and inspired leadership. This return to basic truths may unfold as a "second coming" of the concept of customer focus.

What Happened to Service?

Following the appearance in 1985 of my book Service America!: Doing Business in the New Economy, (co-authored with Ron Zemke, which sold more than 500,000 copies) the business world embraced the concept of service management with remarkable enthusiasm. There were books, articles, conferences, seminars, training programs, videos, newsletters, consulting firms, and even professional societies and academic research programs aimed at making "customer focus" a critical and permanent part of Western management thinking. Even the established management gurus, who had made their names on other topics, were moved to declare the primacy of customer value.

Yet, the wave didn't last. The service revolution got hijacked somewhere along the road to victory. Like most other management movements before it - Management by Objectives, Human Relations Training, Behavior Modification, Participative Management, Productivity, and the Quality Revolution, customer focus became the object of intense flirtation by many firms, but ultimately the infatuation faded. The same fate befell several other "revolutions:" TQM, Re-engineering, and ISO 9000. E-commerce, hailed by many as the revolution of all revolutions, had the same fate in store for it.

The real value and potential impact of the service management model are yet to be realized. Yet, we are coming to a stage in business - world-wide, not just in America or the West - in which we will need its principles more than ever. Western management thinking has lost its way somewhat in recent years, particularly with the mindless infatuation with all things digital; it has wandered into an intellectual house of mirrors. There is a deep-lying need, only partly articulated, to return to the most basic and timeless precepts of leadership, management, and enterprise thinking.

The Tectonic Shift

At about the same time the TQM, ISO 9000, and service quality movements were fading, (about 1995), US business began to feel the pressure of a more primitive shift in emphasis. American enterprises, and to a lesser extent firms in other countries, moved into a reconstruction phase. An unprecedented period of mergers, acquisitions, and dramatic growth of retail giants got mixed in with demergers, spin-offs, delayering, outsourcing, and partnering. A growing economy, with low unemployment rates and a remarkably flexible workforce, enabled American firms to rearrange themselves to maximize their strengths.

Key phrases such as "core competencies," "strategic partnering," and "supply chain management" replaced the language of "service," "quality," and "customer value." Thus began a deep-lying ideological drift in American management thinking, toward resource-based competition rather than value-based competition. A large banking corporation finds it difficult to win more customers by adding value or reinventing its service package, but it's easy to find profit growth by buying up its smaller competitors. After all, why have two competing branch banks on opposite sides of the street? Let's just buy out the other bank, close its branches, and add its customers to our inventory.

Why should a large airline try to offer better service, when all airlines have conditioned their customers to make their choices solely on the basis of price? Why not buy up, or force out, the smaller airlines, and relieve the pricing pressure? Why mess with "customer service" programs that just fizzle out anyway?

This is not to suggest that no companies are interested in service quality as a competitive factor: surely firms like Disney and Federal Express are still in a class by themselves. However, the example set by the giant firms, namely buying their competitors and kidnapping their customers, has drawn more attention in recent years.

The Pendulum Returns?

Has the so-called New Economy lived up to its image? Or is it an intellectual chimera, a construction of the fevered minds of overzealous advocates of technology for its own sake? Has the concept failed to connect, at the most primal level of human values? Have its advocates failed to put a human face on digital technology?

Will there be a "second coming" of interest in service and customer value? Is customer focus the real "home base" we all have to return to? Have executives and managers been distracted in recent years by cost management, restructuring, and information technology, to the neglect of the basic value package itself? Have our biggest companies lost their personalities? Have they allowed themselves to become ever more homogenized and commoditized, drifting toward a state of bland sameness with no real differentiation?

Actually, there is no such thing as a "New Economy" or an "Old Economy," as preached by the Internet hucksters who managed to separate several billion dollars from investors, venture capitalists, and corporate executives who should have known better. This warped notion of two economies will eventually be seen as one of the most serious conceptual blunders in business thinking of the last fifty years. It is a cognitive-semantic distortion of great significance.

There is only one economy: the ever-new, ever-evolving economy of continuous "creative destruction" as described by theorist Joseph Schumpeter. Information is, and will continue to be, an important resource for economic development, but it is not in itself a - and certainly not the - new economy. Nor is the high-tech industry "the primary driver of economic growth," as so many business writers have declared.

Even Peter Drucker, the eminence gris of management theology, has wrongly characterized the U.S. economy as an information-based economy. When the fantasy begins to fade, economists, business leaders, journalists, and management theorists will see the information phenomenon in a more realistic perspective: an inseparable part of the economic structure, but not the magical engine of it.

Information is one of five key factors of economic growth and development: land, capital infrastructure, energy, labor, and information. Why arbitrarily declare one factor profoundly more important than the others? Consider, for example, that it is impossible to do anything with information - create it, manipulate it, store it, duplicate it, transmit it, or present it for understanding - without also consuming energy, usually in the form of electricity. Information is not free, and on a macro-scale it is not even cheap.

As business leaders return to the idea of customer value as the ultimate driving force of business success, they will find themselves turning a new page in their understanding of the potential of IT, online technology, and abundant information. Instead of trying to turn their businesses into vending machines, and building an impersonal "digital moat" around their companies by replacing people with software, they will begin to see a wholly different set of strategies for using information as a strategic weapon. This will change the meaning of the customer-value focus, and it will reshape our thought processes as they relate to the use of information in business.

Making It Happen

Please take out one of your business cards, write the following four reminders on it, and keep it in your wallet for frequent reference.

  1. Refocus on the Customer. Are you conducting customer research on a regular basis? Are you sharing the findings throughout the organization? Do people understand what customer value is in your line of business, and do they know how to deliver it? Do you have a workable system for measuring customer perceptions of value, and do you share those results throughout the organization?
  2. Reinvent the Value Proposition. What is your core benefit premise, i.e. the customer value proposition on which you base your business model, the design of your service systems, and the operation of the enterprise? Does it make sense? Do all of the people in the organization understand it and take it seriously? Is it time to rethink the business model, or realign the priorities?
  3. Build Organizational Intelligence. It's probably time for organizational psychotherapy, i.e. a comprehensive review of your operating systems, and an audit of their capacity to deliver on the business strategy. Look for evidence of system craziness, or lack of intelligence; you're sure to find enough of it to keep you interested. Align the systems, the processes, and the people to the critical success factors of the business.
  4. Re-enlist the People. Too many crises, priorities, and brush fires can distract the leaders of the enterprise and put them out of touch with the culture. How well do you understand the employees today? What do they want, what do they seek in their jobs and careers? What frustrates them, inhibits them, or demotivates them? Are they switched on, switched off, or just glowing at half-wattage? Get the energy up and get the heads all pointing in the same direction.

Conclusion

In the confusing business environment of the second millennium, enterprise leaders at all levels must learn to see beyond fads and folklore, and concentrate ever more tenaciously on the timeless truths of business: 1) make sure you're selling what the customer wants to buy; 2) concentrate your resources on the strategic advantage; 3) align the systems to meet the mission; 4) mobilize the culture; 5) make technology your servant and not your master; and 6) stay on the message.

The winning enterprises of the next decade will not be those whose leaders chase fads and fantasies, but those who can integrate new knowledge and new possibilities with their own trusted understanding of the basic truths of business success.

 

About the Author:

Dr. Karl Albrecht is an executive management consultant, futurist, lecturer, and author of more than 20 books on professional achievement, organizational performance, and business strategy.

He has pioneered a number of important new concepts in the business world. For example, he is widely regarded as the father of the American "customer revolution" and service management. His book Service America: Doing Business in the New Economy (co-authored with the late Ron Zemke), sold over 500,000 copies and has been translated into seven languages.

He is also a leading authority on cognitive styles and the development of advanced problem solving skills. His recent books Social Intelligence: the New Science of Success, and Practical Intelligence: the Art and Science of Common Sense, together with his Social Intelligence Profile and his Mindex Thinking Style Profile are widely used in business and education. The Mensa society honored him with its lifetime achievement award, for significant contributions by a member to the understanding of intelligence.

Originally a physicist, and having served as a military intelligence officer and business executive, he now consults, lectures, and writes about whatever he thinks would be fun.