The Big Kahuna Tanks – But Will Business Really Understand What Happened to Citi?


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I don’t want to crow. Okay, yes I do. For a couple of years now I’ve been predicting Citi’s demise (and Circuit City’s, too). The events of the past week affirmed my predictions. But remember, the toxic mortgage mess didn’t surface until a year after I called Citi’s number. So what triggered my gloomy forecast for Citi? What I saw is what I hope a helluva lot of senior managers take away from this debacle: When the buyer falls out of the seller’s business equation, the seller is the one headed for a rough–if not fatal–crash landing.

Citi’s financial supermarket business strategy incorrectly viewed “bigness” as a customer benefit. Obviously, a whole lotta senior execs failed to judge objectively whether Citi was constantly adding new value to customers–or treating customers as a prop that would help them generate more and more revenue, instead. Definitely the latter. And that flawed judgment goes back to original CEO Sandy Weill, who glued this conglomerate together, to be continued by successor Chuck Prince and then Vikram Pandit, who’s now forced to “unglue” it.

But wait, didn’t dealing in risky mortgages doom Citi? Yup. But what’s the underlying enabler of making money over customers’ dead (or broke) bodies? Nothing other than putting the customer last. If Citi cared about its customers it would have damn well realized that it was caught in a lethal trap–attempting to make money without adding value to customers. Too late now, because last week the trap snapped closed. Citi will be writhing in its death grip for a good long time.

But hey, Citi’s in good company. Few hedge fund managers give a rip about customers. Detroit is dying because the “little three” waited too long to start caring. And you can add the health insurance industry to this bunch. In fact, I’ll make another prediction. When the U.S. finally fixes our deplorable health care system (hopefully starting this year), which player will lose, and lose big? Health insurance providers, which long ago dropped the customer from its business model.

You betcha.


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