Business: too big to succeed?
Original post made by Tom Cushing on Nov 2, 2011
Item: Bank offers cash back on credit card, while proposing to charge $60/year for the privilege of using your own money to shop with their debit card (rescinded yesterday, I'm told).
Same bank has interminable lines in its branches, but has a cheerful ingenue cruising the assembled multitude to ask if we'd like to open new accounts. She does not do 'teller.'
Item: movie rental company proposes to raise its streaming price by 60 (count-em) per cent, and brags that they could've raised it further.
Item: global telecom company pays its bills on a 45-day lag time (but woe unto customers who delay a day over 30 in paying their bills!)
Item: Wall Street routinely punishes warehouse grocery for failing to join competitors' race to the bottom instead, they treat their employees to certain minimum decencies -- like benefits.
What's going on here? Are these isolated incidents in a multi-trillion dollar economy, or evidence of a more general malaise infecting contemporary commerce? I submit that they represent just a few of the worst examples of one fundamental flaw: short-term thinking driven by an obsession with short-term profit performance. Business is forever claiming to reinvent itself; in my view it needs to reinvent and recall its reasons for being to serve people. How do these examples fit the big picture? Let me recount the ways.
I am guessing (admittedly) that the grocery store has either hired least common denominators, judgment-wise, or inadequately trained them, or both -- since judgment and training both cost money. Upper management may congratulate itself on the overhead expanse burdens they've attacked -- but they also have to wear appalling incidents like the one first above. I know at least one consumer who has vowed to "vote with her feet" and shop elsewhere, at least until that new lucky merchant commits a similar gaffe.
The service sins of the banksters are many and well-documented. Their arrogance and unique variation on the "entitlement mentality" (here, to profit) is reflected in misdeeds from mortgages through debit card fees to staffing. Not to go all Wonderful Life on you, dear reader, but they seem to have forgotten that being a bank-of-opportunity means having the privilege of serving people's needs, not the opportunity for a bigger manse in The Hamptons.
If you asked the movie CD CEO why he disparaged his customers, I'll bet he could refer you to focus groups and pricing points and matrices in multiple dimensions that all support his actions. But by raising his prices so quickly, he exalted this quarter's performance over the mutually-profitable, longer term good will value of his relationships with his customers. I daresay they were not first in his mind, and he has squandered his service company's first-mover head start as a direct consequence.
Finally, that telecom invoice delay is yet another example of what happens when finance is master, rather than servant, of the underlying commerce it facilitates. The delay is simple bullying -- it adds no value; it simply extracts it from small businesses who supply the giant -- because the giant can exact that tribute. Somebody, maybe a bright, young MBA from a good school, earned a bonus by recognizing that the conglomerate could reap an annual reward in the millions by extracting a bit of the time-value of money from each supplier.
The legendary statistician/guru W. Edwards Deming taught that the One key guide-star of business should be quality and that everything else follows therefrom. He was right, and still is right. When businesses delude themselves into believing that that precept does not apply to their goods and services -- or to their decisions and their treatment of customers -- then they have become too big to succeed.
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