What If the Person Building Your Product Met the Customer Who Would Be Buying It?

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When Cadillac was audited by examiners for the Malcolm Baldrige National Quality Award in 1990, the examiners picked an employee at random from 7,000 employees at our Hamtramck, Michigan, plant. The man was putting in windshields. The examiners approached the worker and asked him who his customer was. He asked, “Do you mean my internal customer or my external customer?” I could have kissed him on the lips!

He proceeded to discuss how he talks to his internal customers. He talks to the worker next to him in the assembly line at every break to discuss how things were going. And he talks to the guy on the assembly line who supplies him.

He talked to the external customer, too. He told the examiners how we had arranged for each person on the assembly line to come off the line for a half hour a month to call customers who had ordered a Cadillac. In his calls, he described how their cars looked and how he had just put in their windshields. In this way, the customers got excited and the employee felt connected to the customer.

There were frequent stories of customers inviting employees to go fishing.

Have you ever thought about the idea that all aspects of the business should be able to connect to the customer, sales and profits, whether the “customer” for your work is internal or external?

Years ago, as I was learning from Bradley T. Gale and Ray Kordupleski, leading thinkers of managing customer value, this concept was known as the “Big Equation of Business.” The view was that all aspects of the business can and should be connected to customers and making profits.

Customers and competitors

When he was at National Cash Register, legendary business leader Jerry Stead once said, “If you are at a meeting and you’re not discussing customers or the competition, raise your hand and ask, ‘Why not?!'” This forms the backbone when you put the Big Equation of Business into practice. The idea is that all companies are after profits. Profits come from revenue minus cost. Revenue is, in turn, driven by market share and acquisition of market share (buying companies or assets). Market share is driven by customers’ perception of value. Value, according to Gale and Kordupleski, is determined by customer satisfaction and customer perception of the cost of doing business with you (not just price but also all price attributes).

These, in turn, are driven by internal predictive metrics. The metrics are driven by employee satisfaction. Employee satisfaction is predictable from other metrics, which are driven by management decisions. Managers make decisions based upon the data they are given, usually customer, market or shareholder pain of some sort. These relationships are shown in the graphic below.



Initially, management at Cadillac had been reluctant to execute this idea. They were worried about the employees in Detroit speaking with the types of customers who bought Cadillacs. It was thought that the employees were not educated enough to speak with our customers. They would not be able to communicate well with the customers. What did the employees have in common with the customers? In fact, everyone—employees and (external) customers enjoyed these conversations very much. Everyone felt motivated. The customers could not wait to see the car they had ordered. The employees often wrote notes and letters to put into the glove box. There were frequent stories of customers inviting employees to go fishing or to a ball game during these conversations. They employees and customers shared a lot of interests—but primarily interests in new Cadillacs.

Cadillac has traditionally had the highest customer loyalty in the industry, in part, because of programs such as this. Not only were our customers loyal to Cadillac, but also our employees were loyal to the customers. At the time, Cadillac had earned the highest customer loyalty ratings in the industry. When a Cadillac owner traded in a used Cadillac, more than 40 percent of the time, the customer bought another Cadillac. We have all heard how much better it is to keep an old customer than to win a new one. Cadillac believed this as well. The investment in these loyalty programs not only increased employee motivation but also earned increased revenue and profits from current customers.

Cadillac customers felt that the company cared about them. After all, an employee from the plant had called, right? The excitement of these customers over the telephone was palpable. With this one simple program, Cadillac had impacted several aspects of the Big Equation of Business: management’s need to build customer loyalty, the employees’ need to feel connected to the buyer, the customers’ excitement about the new car, increased revenue and increased profits.

The Baldrige examiners were impressed that Cadillac had stressed making the connection at each step in the Big Equation of Business, from the employees to customers and eventually to profits. Everyone, including the customer, benefited from the connections being made. As of a couple of years ago, this program was still in effect.

1 COMMENT

  1. What If the Person Building Your Product Met the Customer Who Would Be Buying It?
    Chris Stiehl, StiehlWorks

    Your comment on this one of the course.

    He asked, “Do you mean my internal customer or my external customer?” I could have kissed him on the lips!

    The employees are the assets we know. We ought to treat them that way we know. In fact, I go a step further that many a times the employee becomes a bigger asset as a customer. Here is one example why.
    Smith is an employee. He earns about 1200 dollars a month. He has a wife and three children. He lives a neighbour of similar earners.

    He goes to the manger of the automaker and politely put this in front of him. “Sir. I have applied for a loan for the house and I am waiting for the reply. This will give be an added benefit as I will be slightly far from the factory but I will have the peace to learn more on the industry. I want to carry on working in this industry. I have, however two problems. One. My tuition fees are due. I also need the car, as I will be slightly far from the factory. I need a car and I will pay by twenty instatements. These may be deducted from my salary, sir”.
    What is the reaction of the manager?

    The employee gets the car. He goes motivated and works harder. He goes home and tells the kids and the wife of the new car. He shows this around and he attracts not just the car but also the employer’s good value. All will lick the fingers and say, “Wow. What a good car. What a good employer”.

    You have two credits for now. Next time anyone in the neighbourhoods wants a car, where will turn to. Smith, the employee as he can, may try to get the instalments that are already in the market anyway, fixed with the company. These may be slightly two or three more. You have sold the second car via the employee without advertising.

    Employees always create the inner advertisements. Here is another example. Helen is employees and has a cold. She takes out the handkerchief and tries to clear the nose when the kerchief comes out lose with the threads not stitched properly. Jane helps her with another hander kerchief that is hers and requires from Helen indirectly, “Here take my kerchief. My mother just got three dozens form the Chinese shop. I find our clothes in our factory not very good for cleaning the nose. It is irritating. No? The treads come out fast.”

    There you have from a small matter to your diversion to the market you despise. You have a lost sale of many dozens of hander chives and bed sheets, pillowcases, other linen.

    Let us re-look at the point of, Big Equation of Business.” The view was that all aspects of the business can and should be connected to customers and making profits. I learnt the Six Sigma. Did it help me?

    No.

    I would rather have the simple equation digestible by myself not the tutors stuffing these into me and give me good marks when I cannot use the bloody thing.

    I know the simple equation. Buy for one, sale for 2, gives me a profit of one. This should be for the overheads, rainy day and my sickness. I ought to have this at least 0.10 in the bank for expansion. Worked this way in ten years time without the loans and insurance of my endowment policy, I will suffice

    Why do I have to look at the markets big and small when I have the future in my head and hands not the calculator or the Excel that will be wiped out by some users or formatted. Moreover, these days the youths ho are taking over the business of their father or learning the smart way does this exactly. Their chemistry is give more you will get more.
    Customers and competitors

    I say always learn form the competitors and who gives you the best conditions. The tired worn our out friend or the employee disgruntled who has opened up his own garage someplace and knows your other employees.

    Never ever, think of the competitors. They will tell you, “Oh we sold million units yesterday and we are shipping more today to India. You see we have the huge contract form the Mr. Patel who was here. He is a good friend of the boss. We get good orders from him. What is the competitor trying to do? Give you depression and he gets the edge, you are the price. Listen with ears closed and forget as soon as you leave him or get out form his surrounding. You will sleep better believe me.

    The reason I write in detail is simple. I read the biography of Lee Iococa and I admire him. I had the way he turned Chrysler. The Ford had the one dimension of turning one black only. That filed miserably and the demagogues had to think out of box. Not all want the black cars that look same. I want to be different.

    Cadillac has a name like the one I have a Buick. Alternatively, I use YSL perfume. Not Gillette for everymen. You see I have already simple the Gillette that is good for shaves however the aftershave lotion I use Old Spice or Tabac or Brut.

    As of a couple of years ago, this program was still in effect. Now we have the Toyota that is still a winner and Nissan and General Motors and many in USA failing to complete.

    The idea is KISS. Keep It Simple and Short whether this is the huge profit ratio or the value of the employees and customers.

    Overindulgences in every aspect inclusion the big formula for profit fails when the small brick at the bottom are lose.

    No need to state here that we look at our roof then look at the others. The exercises of the profits and equation are good for the initial lay out , once put in the gears the simple movements of the spanner help more then the larger boards telling all we want to move from direction A to direction B fast with this motto. We are the best when the employees know you are talking looking the other side.

    I thank you

    Firozali A. Mulla MBA PhD
    P.O.Box 6044
    Dar-Es-Salaam
    Tanzania
    East Africa

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