There are two kinds of errors that you can make: errors of commission and errors of omission. An error of commission involves doing something that you should not have done. A good example of this is the money that large companies invested in implementing complex CRM systems on the assumption that these would engender customer loyalty and drive revenues and profitability. Closing down Napster and thus allowing the likes of BitTorrent to rise was an error of commission made by the music labels. If you take a look at mergers & acquisitions you find that the research shows that these almost always destroy value and are not a good idea: the AOL and Time Warner merger is the one that sticks out for me. If you look at this at a global level then the deregulation of the financial services industry was the big mistake that has brought the western economies to their knees. Errors of commission are easy to spot in hindsight.
Errors of omission are the more important ones. These errors occur when you fail to do something that you should have done. Did Nokia indulge in an error of omission in sitting on smartphone technology (insiders tell me Nokia had this technology) and not introducing it and thus letting Apple steal the show? Did the music industry make an error of omission in not setting up online music stores allowing customers to download individual songs? Did the offline book stores make an error of omission in not embracing the internet aggressively and thus allowing Amazon the premier seat at the table?
So where is this leading? In the Customer field there is a whole bunch of stuff that companies should be doing right now and yet they are not doing it. As such these companies are making errors of omission. Allow me to give you some examples.
The words have changed yet the mindset is the same. The mindset continues to be about finding clever ways of getting customers to do what we want and reducing costs. The mindset has not shifted to a relentless focus on creating superior value for customers and figuring out how we get a fair reward for doing; time after time I hear something to the effect “How do we make more money out of our customer base or reduce the cost of servicing our customers?” I really hear “How do we create more value for your customers?”. Yes, it really does matter which comes first because what comes first determines the whole context for what happens. It requires one kind of mind, one kind of organisation, to ‘extract’ value and grow this years financials. It requires a fundamentally different mind and organisation to create value for customers, cultivate relationships and secure a lifetime income stream.
Effectiveness is doing the right things. Efficiency is doing things right. To cultivate long term relationships organisations have to focus on effectiveness: doing the right things as viewed from the customer perspective. Yet the organisational focus continues to be on efficiency. The relentless focus on efficiency means that I had to spend ten minutes or so hunting around for a telephone number to contact Sky. It is also the reason that after four phone calls to BMI I was not able to pay my bill because my call was important to them yet they could not answer it even after five minutes. It also means that human-human encounters are being replaced by human-technology interactions and so the opportunity to build emotional bonds is being sacrificed. As a famous systems practitioner pointed out “The righter you do the wrong things the wronger you become!”
The organisational design is the same. The functional organisational design and the associated management system was and is designed for a manufacturing centred organisation operating within a command and control operating system. To be a customer centred organisation requires a fundamental change to the way that the organisation is designed. It requires recognising that the front line people (those interacting with customers) are the most important actors in the organisation and the role of managers is to support these ‘actors’ in putting on the best performance they possibly can. If you take segmentation seriously then it requires operational changes and not just sending some communications via email, others through SMS and the rest via direct mail.
I could go on and on and I am sure that if you put your thinking hats on then you can complete the list yourself.
Is your organisational focus on errors of commission? Then who is looking out for errors of omission? Please remember that the errors of commission rarely kill you. Yet, errors of omission do exactly that even if it takes a little while for the results to show up.
