Reengineering 2.0

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In 2012, in an article of the Harvard Business Review magazine, the dean of Rotman School of Management, Roger Martin, wrote something that started showing what companies were doing wrong in their relations with customers. In his wonderful article entitled “The Age of Customer Capitalism”, Roger Martin scientifically explains companies are not doing everything wrong but they are not focused yet on the right target.

He concluded that modern capitalism can be divided into two major eras. The first, Managing Capitalism, began in 1932, and it has been defined by the then-radical thesis that every company should have professional management. The second, the capitalism of shareholder value, began in 1976, and it is governed by the premise the purpose of every company should be to maximize shareholder wealth. If the private initiative has such a goal, according to the thesis, both shareholders and society will benefit. It is a premise tragically failed. It is time to abandon it and inaugurated the third era: capitalism turned to the customer.

Roger Martin’s thesis is summed up with the big idea: Is it time to abandon the popular thesis of which the company’s top priority should be to maximize shareholder value. The idea is both tragic and inherently fault. What is the argument? It is impossible to increase without stopping the shareholder value because the share price is driven by shareholders’ expectations in relation to the future — expectations that cannot indefinitely go on. What did the data show? The focus on shareholder value has not been beneficial to the investor. In fact, its return fell after the company adopted the shareholder value as a guiding principle. Where will we go? A better approach: making as a priority the value for the customer, as did Johnson & Johnson, and Procter & Gamble. In both, the return to shareholders is equal to or larger than the companies with eyes only for the investor.

Let us take Johnson & Johnson. Its statement summarized on purpose — its “creed” -, and the most eloquent from the business environment that has not changed since the legendary president Robert Wood Johnson founded the company in 1943. Here it is, in abbreviated version:
“We believe our first responsibility is to the doctors, nurses, and patients, to mothers and fathers and all others who use our products and services. (…) We are responsible to our employees, the men, and women who work with us throughout the world. (…) We are responsible to the communities in which we live and work and to the world community as well. (…) Our final responsibility is to our stockholders. (…) To operate in accordance with these principles, our stockholders should receive just reward”.

This Creed makes it clear what the hierarchy: the customer comes first, and, finally, the shareholder. However, Johnson & Johnson believes when customer satisfaction is at the top of the list, the shareholders will also gain.


image source: Harvard Business Review magazine

So far, the bet had an effect. Let us see how a former president of the company, James Burke, has dealt with the crisis of Tylenol in 1982 when seven people died poisoned after ingesting Tylenol tampered capsules in Chicago area. The response of Johnson & Johnson is considered a classic case of a company that “does the right thing” regardless of the impact on profit. The deaths were concentrated in the Chicago area but Burke immediately sent to collect the painkiller of all pharmacies in the United States, although this measure had not been demanded by the government, and Tylenol would represent a fifth of profits of the company. After the recall, sales and market share have dramatically dropped.

Commentators said they were surprised to see the president of a publicly-traded company play for the high possibility of profit and praised the executive by the exemplary moral posture they presented. It is only giving the Creed to see the decision was the fruitless than its moral correction and more of clearly defined objectives of Johnson & Johnson. For many, Burke simply followed the creed, as president jealous of his duties. The customer comes in the first place and the shareholder, in fourth — and Burke acted in accordance with it. He did not put the satisfaction of profit expectations in the quarter at the top of the list. In fact, he put this item in the last place.
In the long term, the decision has not hindered Johnson & Johnson. Moreover, the fidelity to Tylenol took off after the company demonstrated consumer safety was in the first place and that launched the first inviolable packing for medicines sold without prescription. In September 2009, the market value of the company was $167 billion, the 9th largest in the world. Right, Johnson & Johnson seems to have ensured the investor of more long-term than a “just reward”.

And I would add: How to change the companies’ culture from night today, and their presidents who were “trained” or hired to be great in pre-sales and not on after-sales? They were hired to be head hunters of customers, and not farmers (who take care). Finally, many companies, as S/A, so focused on shareholder value, has as its owners the pension funds and/or other large groups of investors, which, of course, aim at the profit for its investors. How to explain to the investor who is not in the day-to-day business the importance and the compensatory return investment in the end customer? Investment in the customer is the return on medium and long term, not just become a “virtual armchair” charging 20% of annual returns.

How to explain to investors that benefiting the end customer, and the staff will give a greater return in the long term? Of course, it will give sustainability to the business.

If it has been proven customers are willing to pay a little more for the quality they receive, so the difference received by the company should be constantly reinvested in process improvement and consumer experience toward the customer, and not this same received difference goes directly into the shareholders’ pockets. Remember a phrase of the renowned Jack Welch “(…) If you’re growing customer satisfaction, your global market share is sure to grow, too”.

Now, what does Capitalism has to do with social networks and social CRM? Further forward I explain.

In the evolutionary scale of enterprises and of the business world, we are faster but we are still in the infancy regarding customer service. These changes are happening for the appearance of the Consumer Protection Code, the SACs, the management of relations with the client, the sustainability actions and relationship marketing. If we look a bit back in the 1980s, Reengineering has brought us the idea of offering better products, including making companies proud of their ISO 9000certifications… It is not we don’t have improved but we were still sighted, at that point in History, we are concerned to improve only the products. The processes and products have been improved in the product vision, and still only in the perspective of the company itself.

Then, we had the appearance of the first CRM software (Customer Relationship Management) which made a lot of companies find that software would heal this still-existing myopia. Once more, in some companies, it is not there was the cure of myopia but there was a real appearance and identification of what “was hidden under the business carpet”. The processes and the entire company’s strategy was focused on products but not on the clients. And hence is born my conclusion, if we had in the past century a reengineering focused on products, now, we urgently need to deploy in companies a process reengineering focuses on the customers’ view and their consumer experience. It is a Reengineered 2.0, we can call it if so.

This can be summed up in the following sentence: there are many companies that are digital but its processes are still analog, at least, in their consumers’ view. Business processes should be the company score, where each area will give its rhythm to please customers.
We have never had so many sophisticated technologies, expensive or cheap, of Call Center, web call Center, SMS, Contact Us, etc. etc. but they are still being used in old processes that were designed in the last century and designed to deliver products, not exceptional consumer experiences to increasingly demanding consumers.

Then, for not having expertise in the healing of myopia, some companies decided to seek outsourcing as an alternative path. I have nothing against outsourcing, except when the company tries to push its process problem to be externally solved it. In this, we changed only the problem of place but not the root cause. In the United States we had to call the syndrome 4 US$, where millionaire investments were made in CRM software, in advertising, strategy, etc. etc. But one of the most important in consumer service, the employee or attendant is an outsourced employee who earns four dollars per hour there, in Asia. It loses and it does not create the extremity engagement.

With delayed processes, companies and their respective departments were doing everything right in their own vision. The Marketing field delivered its marketing plan. Logistics delivered products. Sales, sold. Production produced. And so on, each area displaying the customer only in fragmented or piece visions. However, in the customer world and its perspective, there are not departments, the company is a whole one. And the processes showed there is not governance, neither processes nor information, which seeks to serve well the customer.

Still, in search of a cure of myopia, companies used sophisticated computer systems in their phone switches (IVR/VRU), not mentioning an own 0800 number. How could not solve the problems, today there are even companies that, on their web sites on the internet, hide and it is difficult to find the option 0800 or Contact Us, exactly because it does not have a process or service capacity. On the other hand, the ability to sell and produce products remains excellent and in growth, after all, the shareholder is the focus until now.

But perhaps you can think: and the wonderful call center the companies have installed? This is not healed myopia? I reply it only served as a placebo but no a definitive cure. Operators and Supervisors were hired in stalls to act not focused on customers but in AHT (Average Handling Time) as if they were workers of the factory floor, the more products produce, the better employee becomes. And they forgot a simple thing: the customer is not a product.

Some companies have created Ombudsmen, where these, as a last resort, could impartially solve problems brought by customers. However, due to an Ombudsman have higher autonomy than the Contact Center, which eventually generating “internal tiny struggles” between these two areas, such as “why the Ombudsman can solve it and us, the Call Center, don’t???!!!!”. It is simple: autonomy and different processes.

Business processes today do not practice empathy, i.e., it is not put themselves in the customer place. We must treat customers how we want to be treated, simple like that. In their haste to product launch, customers accept companies to make mistakes. But they will only be forgiven if the same companies brought something thinking about them, customers, and not just in corporate egos.

If loyalty is an intangible asset today, who owns it is not the company but the customer. It is the customer an owner of fidelity, and where to deposit it. But then you, my reader, you can continue by asking: what does this chapter have to do with Social CRM and social networking? Finally, let me explain: social networks are just one more channel of contact as others but only stand out in this new channel the companies that have new processes and toward a new customer. Otherwise, myopia will persist. It is the past evil solved, always comes back. Let us solve it as soon as possible.

We need to connect two worlds and two corporate visions that are still rooted. The first is we need to do everything by customer!! The customer is the king! It should be the focus of everything! Antagonistically, the second state’s companies need to cut costs!! Always doing more with less!!! The only problem is that these two great maxims do not talk to the other. And that is why many customers feel badly treated by many companies, regardless of the contact channel.

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