In Search of Failure. That’s the title of chapter seven in Frederick Reichheld’s book “The Loyalty Effect” (©1996). In that chapter Reichheld points out that an investor who built a stock portfolio out of the companies profiled in the book “In Search of Excellence” (Peters and Waterman ©1982) would have seen their returns trounced by the mediocre performance of the S&P index during the ten year period following the books 1982 publication. In fact, by time Reichheld’s book came out in 1996 only one-fifth of the original companies profiled as “excellent” had remained excellent.
If success breeds success, how in the quest for benchmarking best practices did those companies lose their lofty status? In Reichheld’s opinion what really helps us to achieve excellence is actually the study of failure. It’s not exactly in our nature to seek out failure though; in fact, your career is probably linked to success, which means that getting too close to failure may feel threatening. However, most people will admit that mistakes are often better teachers than success. In fact, QA experts will attest that when one component fails, it can cast a spotlight on the workings of an entire program.
The analysis of failure is not that easy; but when the analysis leads to sustained quality the pay-off is big. In the Profit Impact of Marketing Strategy (PIMS) project the researchers (Buzzell and Gale, 1987) reported that the profitability of a business is affected by 37 basic factors. Based on analysis of information available in the PIMS database, Buzzell and Gale hypothesized that in the long run, the most important single factor affecting a business unit’s performance is the quality of its products and services relative to those of competitors.
The trick is to set up a process and system to track, test, analyze, and address potential issues, defects or problems before they negatively impact profitability. In many ways quality and value are interlocked. Customer value proposition models are based on the idea that customers with different needs require different experiences and different value propositions if the relationship between the customer and company is to be mutually beneficial. And no value proposition will succeed in delivering profit to a company unless the customer perceives the product-service as meeting their needs best.
You are absolutely right about the failure of the ISOE copanies to remain in the top-performing group. But it shoulbn’t come as a surprise. Hardly any companies do so. As Michael Mouboussin points out in a recent Legg Mason paper on Death, Taxes and Reversion to the Mean, most companies, the worst performers as well as the best, revert to the mean over any significant period of time. This is a feature in almost all open systems, whether in the biological sciences, sports or business.
And the answer may not lie in unreliable self-reported data that underpins the somewhat dated PIMS study either. As Mauboussin also points out, the data on business performance masks a large amount of financial return noise that makes identifying the causal factors that enable the winners to stay as winners very difficult.
Let’s face it. If the smartest brains in business (almost by definition, those on Wall Street) cannot work out what makes long-term winners, what chance do academics or businessmen have?
Back to the research drawing board…
Independent CRM Consultant
Interim CRM Manager
“You have to learn the rules of the game. And then you have to play better than anyone else.” Albert Einstein
Is it really difficult to identify the reasons for failure? Or is it because people are afraid to face failure, so they tend to shy away from it, which makes analysis of failure difficult?
When people achieve success, they tend to forget about how to get from the start line to the finish line. They’ve completely forgotten about the process. Process doesn’t seem to be important anymore, because it is the winning result that counts.
If planning is important, then execution is more important, because it put ideas into action. If execution is important, then evaulation is more important, because it provides the right way of getting things done.
Whether it is a success or failure, it is always important to do evaluation.
Daryl Choy, the founder of Touchpoint eXperience Management, helps firms make a difference at every touchpoint. Choy can be reached at wisdomboom.blogspot.com.
I cannot but agree to Mr. Choy’s comments: “When people achieve success, they tend to forget about how to get from the start line to the finish line. They’ve completely forgotten about the process. Process doesn’t seem to be important anymore, because it is the winning result that counts.” In airline business I now have been working for the last 26 years, the winning result together with fleet and service upgrades have indeed come nore important than the processes. Too little – if any – notice in being paid to issues of CEM ( and CRM, for that matter). Today that outsourcing services has almost totally eroded the once so valuable and important service chain, one can but wonder can this be real?