Several years ago I heard Horst Schultze, then President and COO of Ritz Carlton Hotels give a speech after which he was asked to rate Ritz Carleton's service on a 1 to 10 scale with 10 being outstanding and 1 being poor. I'll never forget his response: "about a 4; we have a long way to go to get to where we should be."
In the past few weeks there have been a spate of companies that have acknowledged that they were not doing a very good job of delivering what customers wanted. The interesting thing about this trend is that it involves some of the strongest brands in the nation. Let's look at some examples:
Dell Computers - - Last month Michael Dell, the founder of Dell, was quoted in Business Week as saying that the company had "lost the intense focus and drive" that made it an icon. He promised that the company will fix its customer support problems.
In each of these cases, it is the founder or a relatively new chief executive who is pointing out the company's flaws, admitting that the company has lost its way, neglecting to focus on the core concept that made the company successful. Let's examine these case studies in a little more detail.
Starbuck's Schultz cited several examples of decisions the company had made to facilitate growth and efficiency that had negative effects on the customer's experience. First, the use of automated espresso machines, while making service faster, removed the drama associated with watching the baristas making the coffee manually. The new packaging for coffee beans created the "loss of aroma," which eliminated what was "perhaps the most powerful nonverbal signal we had in our stores." Getting rid of the process of scooping fresh coffee beans and grinding them was a change that "is stripping the store of tradition and our heritage" he concluded. He acknowledged the "desperate need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience."
In the late 1990's, the Gap went trendy and alienated its core khaki customer. The Gap's interim CEO, son of the company's founders, has stated that in trying to widen its customer base it didn't stand for any particular style, thus confusing potential customers. "Bottom line, we were not clear about who we were." He says the company is "going to be grounded in khaki and denim, as that's where the roots of this business are." The target market also will be narrowed.
Under Bob Nardelli, Home Depot invested billions on new technology, while replacing thousands of full time store employees with part time workers as part of the company's cost cutting efforts. Meanwhile, the University of Michigan's Customer Satisfaction Index research showed the company in last place among major retailers. In addition to increased staffing levels in the stores, the company will spend $2.2 billion this year to remodel many of the older stores to make them more customer-friendly. Significantly, Mr. Blake has consulted with Bernie Marcus and Arthur Blank to get their ideas on how to regain the customer-focused culture that made the company so successful.
Delta's leaders have promised new improved seats, better lighting, and an improved customer experience. In other words, it's back to the basics. A big effort is being made to regain employee morale, with the expectation that this will translate into happier customers.
Dell had succumbed to complacency and underestimated the competition. Michael Dell has returned to the helm to right the ship. In last month's Business Week article he says, "I think that Dell's core strengths historically will be its core strengths in the future." Again, a return to the core is needed to turn around a company that had lost its way.
So what are the lessons learned from these recent examples:
- Maintain the focus on the company's core strengths and core customer and ensure that the company's products are consistent with these.
- A company's leaders should do a "culture check" every year or two to ensure that the company is staying true to the roots that built the company.
- It is critical to stay close to what customers are thinking. An early warning system can identify problems before they have a negative impact on the company's sales and profits.
- When engaged in cost-cutting efforts, make sure the customer experience isn't compromised.
- Don't be lulled into a false sense of security. Hubris and complacency are a company's worst enemies.
Too often, companies pay too much attention to what competitors are doing and not enough attention to what their core customer base is thinking. It may be true that what got the company to this point isn't what will get it to the next level, but remembering what got you here is even more important.
