Business: too big to succeed?
Original post made by Tom Cushing on Nov 2, 2011
Item: Bank offers cash back on credit card, while proposing to charge $60/year for the privilege of using your own money to shop with their debit card (rescinded yesterday, I'm told).
Same bank has interminable lines in its branches, but has a cheerful ingenue cruising the assembled multitude to ask if we'd like to open new accounts. She does not do 'teller.'
Item: movie rental company proposes to raise its streaming price by 60 (count-em) per cent, and brags that they could've raised it further.
Item: global telecom company pays its bills on a 45-day lag time (but woe unto customers who delay a day over 30 in paying their bills!)
Item: Wall Street routinely punishes warehouse grocery for failing to join competitors' race to the bottom instead, they treat their employees to certain minimum decencies -- like benefits.
What's going on here? Are these isolated incidents in a multi-trillion dollar economy, or evidence of a more general malaise infecting contemporary commerce? I submit that they represent just a few of the worst examples of one fundamental flaw: short-term thinking driven by an obsession with short-term profit performance. Business is forever claiming to reinvent itself; in my view it needs to reinvent and recall its reasons for being to serve people. How do these examples fit the big picture? Let me recount the ways.
I am guessing (admittedly) that the grocery store has either hired least common denominators, judgment-wise, or inadequately trained them, or both -- since judgment and training both cost money. Upper management may congratulate itself on the overhead expanse burdens they've attacked -- but they also have to wear appalling incidents like the one first above. I know at least one consumer who has vowed to "vote with her feet" and shop elsewhere, at least until that new lucky merchant commits a similar gaffe.
The service sins of the banksters are many and well-documented. Their arrogance and unique variation on the "entitlement mentality" (here, to profit) is reflected in misdeeds from mortgages through debit card fees to staffing. Not to go all Wonderful Life on you, dear reader, but they seem to have forgotten that being a bank-of-opportunity means having the privilege of serving people's needs, not the opportunity for a bigger manse in The Hamptons.
If you asked the movie CD CEO why he disparaged his customers, I'll bet he could refer you to focus groups and pricing points and matrices in multiple dimensions that all support his actions. But by raising his prices so quickly, he exalted this quarter's performance over the mutually-profitable, longer term good will value of his relationships with his customers. I daresay they were not first in his mind, and he has squandered his service company's first-mover head start as a direct consequence.
Finally, that telecom invoice delay is yet another example of what happens when finance is master, rather than servant, of the underlying commerce it facilitates. The delay is simple bullying -- it adds no value; it simply extracts it from small businesses who supply the giant -- because the giant can exact that tribute. Somebody, maybe a bright, young MBA from a good school, earned a bonus by recognizing that the conglomerate could reap an annual reward in the millions by extracting a bit of the time-value of money from each supplier.
The legendary statistician/guru W. Edwards Deming taught that the One key guide-star of business should be quality and that everything else follows therefrom. He was right, and still is right. When businesses delude themselves into believing that that precept does not apply to their goods and services -- or to their decisions and their treatment of customers -- then they have become too big to succeed.
on Nov 2, 2011 at 10:36 am
Dear Editor and Tom,
Simply excellent. Let me add one more.
It appears BART has taken the same marketing approach to switch discount card holders to Clipper Cards. They have cancelled card sales at retailers and put their own "Mytransitplus" locations out of stock on senior green cards. Now, try to understand how a senior buys a discount clipper card at www.bart.gov.
The reality of business is "the business of business is the moment of sale and all the rest is delivery and accounting" and therefore any business must success by answering "who asked you to do it and how and when do they want to buy?" Netflix forgot this reality and lost 800,000 customers. BofA will not provide the numbers of customers that switched to free banking at various credit unions.
Now more late than never they remembered "The business of business is the moment of sale." Customers are quite costly to gain and more expensive to retain when accountants think they are sales people.
on Nov 2, 2011 at 7:14 pm
Do arm chair quarterbacks every make anything other than comments?
on Nov 3, 2011 at 9:52 am
You lament corporate greed, ignoring that businesses are merely responding to consumer greed.
Greedy consumers demand low prices. When shopping, consumers generally don't care if their purchases are made by slave labor, or from wood illegally clear-cut from rainforests, or from factories that poison groundwater, or from internet businesses who don't collect sales taxes. I would love to know how many of these Occupy Wall Street protesters are aware of how their greed is contributing to their plight. They're so used to blaming others, it's doubtful they'd accept any responsibility.
And it's greedy consumers, not the "Wall Street" boogieman, who are "punishing" the warehouse grocery for choosing profits over employee benefits. People who buy stocks (Joe & Jane Consumer) demand profits or they'll sell your stock. And if a company doesn't produce profits, it will either go bankrupt or be bought and dismantled by a stronger company that values profits. Every company has to fight to stay alive every single day.
You lament the "race to the bottom" as if in the mythical glory days of the 1950's & 60s' we didn't poison our air and water, treat workers like dirt, discriminate, and nickel & dime everyone. Sure, back then, many businesses offered health insurance because it was cheap. Not anymore. And they offered pensions knowing most wouldn't live long enough to collect. We were just as greedy back then as we are now. All of us, both businesses and consumers alike, have always "raced to the bottom line." You think that's something new?