Culture [A bit of a prologue this week before I start with today’s subject at hand.  This current blog post was inspired by a comment I got on my last post (although the comment was left on the LinkedIn version) – so I definitely read all the comments left by you all, and greatly appreciate those who take the time to write them.

 

Not only from the fact that I get more ideas on future things to write about (incorporating “Customer Feedback” into my writing – how revolutionary of me for someone in the customer experience field); but also it is good to know that some of you enjoy the scribblings of my thoughts enough to take the time to provide your insights as well – so appreciate all your guidance and help….

Now on with the show…and warning — it is a bit of a lengthy one this week]

“Culture eats Strategy for breakfast”

Most of us might recognise this as a famous business quote by famed management consultant Peter Drucker.  I love me some Drucker as well – for one, I use his “The purpose of business is to create & keep a customer” line in my company introduction deck.

But I also believe that Drucker might have met his match when it comes to the role, intentions and actions of the Chief Customer Officer (CCO) when you use his “culture eats strategy” quote literally, as most business people seem to do these days.

(There is some debate whether one should use it as words to live by — on two different fronts:

  • Whether Drucker actually ever said this quote at all – it was apparently something he uttered while consulting for General Motors — and the CEO of GM debuted it as a quote painted on a wall in their offices…which is where everyone first saw/heard it
  • Whether Drucker meant it directly verbatim as the quote makes it seem – or the interpretation was an “either/or” proposition as outlined here.)

If you want to define “culture” in business terms, I did a bit of research online and this example from Fast Company seemed to be a good representative of what it might mean in the business world

“Culture is a balanced blend of human psychology, attitudes, actions, and beliefs that combined create either pleasure or pain, serious momentum or miserable stagnation. A strong culture flourishes with a clear set of values and norms that actively guide the way a company operates.

Employees are actively and passionately engaged in the business, operating from a sense of confidence and empowerment rather than navigating their days through miserably extensive procedures and mind-numbing bureaucracy.

Performance-oriented cultures possess statistically better financial growth, with high employee involvement, strong internal communication, and an acceptance of a healthy level of risk-taking in order to achieve new levels of innovation. “

Now all that being said, most Fortune 500 companies will see the role of a CCO as a strategic placement/hire – probably because of the listing of “Customer Strategy” as part of the remit of the role – along with almost every senior position filled within a Fortune 500 company is classified as a “strategic hire” these days.

Adding fuel to that particular fire, most initiatives outlined and delivered by C-level executives are also listed as strategic in nature.  So seems to be a lot of strategy flying around within companies – and not much “culture” – modification, attention to, or nursing of.

What is the role of a CCO & CX in “Drucker’s World”?

I would argue that an effective CCO balances delicately on the border between strategy and culture — making it a necessary strong symbiotic relationship rather than one facet consuming the other – and a worthy CCO has to remain a stable curator of both to be successful with their CX program.

But that being said, who creates, improves and maintains the “culture” of a company initially?  I would, as most sane people will, argue it is the founder(s) of a company — the CEO — who defines what the preliminary “company culture” looks like in the context of their organisation – at least at the start.  (more on this a bit later…)

It is then somewhat reformed and adjusted by each CEO afterwards (provided the company is a long-term survivor – not bought, merged, Chapter 11, shut down, etc.)  There is most likely a heavy dash of input from the HR folks once the company reaches a certain magnitude (particularly in terms of Employee Engagement, hiring practices and the “culture of daily life” at a company.)

But like I recently discussed about the role of the CEO in Customer Experience, the “culture” is almost completely defined by the original CEO (Bill Gates with a recent example – with the recent disturbing revelation of his “memorising license plates in the parking lot” as a way of keeping track of his employees in the early days at Microsoft.)

He and Steve Jobs (amongst many others at the time) also made more than a few of their employees burst into tears during their tenures as well with ill-timed and ill-advised temper tantrums.  Part of the heady days of “Type A” personalities running tech companies in the 80s and 90s – an era where HR was not the first call one made when the boss yelled at you.  So there was seemingly a dash of the abnormal injected into those particular company cultures from the start.

But, for the most part, each successive CEO has to recognise that they have less effect on changing a company’s culture than the one before them, as “culture” seem to become ingrained in its early days, and seems to be highly resistant to drastic, or even slight, changes over time.

“Radical surgery” to fix/repair/implant a new culture is often a terminal exercise when not handled correctly and careful consideration – like most radical surgeries to a patient.  You are more likely to kill the host – or, in business terms, the central tenets of a company — than reach the expected outcomes of improvement.

If you happen not to kill the company, the CEO is most likely fired before finishing the implementation of the new culture is complete.  Those who manage to get the culture on the right path tend to get extensive case studies illustrated on how they were able to pull it off (also more on this a bit later) – and the simple fact is that success stories of this ilk are few and far between.

Where is CX on the Culture/Strategy Spectrum?

So, once again, we ask ourselves where does Customer Experience lie in this “strategy vs. culture” spectrum?  If one was to take the Drucker quote literally – I would have to say that effective CX is a “cultural shift in tandem with significant strategic modification” (which would be at odds with the rest of the C-level executive suite, as mentioned earlier, who seem to be solely focused on piloting a company’s strategic direction.)

This may be just my theory at this point, but it may be a solid reason as to why CCOs generally have a hard time fitting into the classic organisational chart of a Fortune 500 C-Suite — as the objectives of CCOs, and the inclusive intentions of CX as a discipline, are not the same as their counterparts.

There is a bit of the aspect of “salmon swimming upstream against the current”about the CCO role to the rest of those watching in the C-suite; as the complicated practice of developing/improving/introducing successful Customer Experience for global corporations can be a tricky endeavour at the best of times – and from the outside, it is viewed in a variety of ways that would seem truly revolutionary (or at least “highly illogical”) within the context of a Fortune 500 company structure.

Again, while culture may take the reins in both a company’s direction and Drucker’s quote, a symbiotic relationship has to exist within the context of CX to be successful.

Although it can depend on the formation of the company, you are going to have to have massive change culturally to re-orientate every employee to think, plan and execute to the needs of the customer (be it individual, group or company) rather than execute to the standard and rigid “strategic plan.”

Let’s go with a Human Medical Analogy to illustrate

To put it in human medical terms, CX is like the “blood” of the enterprise, it must flow through every part of company for that organisation to live, thrive and survive (whereas the other silos of the business can be considered the organs – vital, but replaceable for the most part.)

If parts of the company get cut off from the blood supply for even a short period of time, they will eventually wither and die (we’ll introduce a couple of medical terms in the post today – because education is important — so the “withering and dying” of human tissue is a process called “necrosis.”)

If you try to inject a new culture without exceptional care, it is the equivalent of injecting a different incompatible blood type to that of the host (medical term is called “acute hemolytic transfusion reaction” – and that is not a pretty reaction to idly contemplate.)

In keeping with the medical analogy, an excellent doctor is one of the only people in the world who can save you from this type of shock to the system.

In business terms, this is also true of the role of a valuable CCO in Customer Experience — a solid CX practitioner who can help you learn, orientate and adjust the culture/strategy mix to get the best out of all parts of the business without meeting catastrophic failure along the way.

So who does this well?

I personally beat these company names to death at points these days when discussing CX – but Amazon is up for reference again at this point.

It was a company formed, curated and executed in Jeff Bezos’ sole vision since its inception in 1994 in Seattle.  It takes shape around a massive consideration for the current and on-going needs of its customer base.  When he leaves – and whatever the succession plan is – it is going to have Bezos’ fingerprints all over it.

The company that started, struggled and then thrived on both a culture and strategic plan of providing excellent Customer Experiences is not going to change – and it will continue to have a major influence on how Amazon operates and conducts themselves going forward.

It is both the combination of their culture and the strategic vision of Bezos to deliver excellent Customer Experience along with the products, services and content that Amazon are held in high regard.

Amazon and Bezos is not the only example of this….

Virgin…. Richard Branson

Nike…. Phil Knight

Starbucks…. Howard Schultz

Costco… James Sinegal

Apple (although not a great CX company as they are cracked up to be, in my opinion)…. Steve Jobs

All of them take on the singular vision of their founders – and with a massive dose of Customer Experience (culture + strategy) taken into account at the time of the company formation that continues on to this day.

To this specific point, Costco has a “new” CEO now (appointed in 2012) — W. Craig Jelinek — who is a 28-year Costco veteran who began his career as a warehouse manager in 1984 in Costco’s early years.  Before he was CEO, he was President in a role created by the Costco Board of Directors as a succession plan.  He subsequently served in every major role related to Costco’s business operations and merchandising activities during his tenure beforehand. So the transition to CEO was well planned and considered seamless.

Culture & Strategy Case Study – The Home Depot

The best example of CX being a “culture + strategy” may be The Home Depot though (and this is just one small example of how Home Depot has gotten Customer Experience “right” over the past almost four decades.)

The Home Depot, founded by Arthur Blank and Bernard Marcus in Atlanta, GA in 1978, was well renowned for its orange-blooded entrepreneurial culture and outstanding customer service from the beginning.

From its foundation, the retailer took a long-term approach by training its associates to form enduring customer relationships rather than push for incremental sales gains.

As a result, the company grew very quickly becoming the fastest retailer in history to reach sales milestones of $30 billion, $40 billion, $50 billion, $60 billion and $70 billion in revenues.

Blank stepped down as CEO in 2001 with the thought that to continue to grow and expand the business to a global force, the company needed new leadership and a new vision (i.e. – a new strategy in combination with the established culture) – so Robert Nardelli was hired as the new CEO.

Nardelli introduced many new initiatives (all of them seemingly strategic in nature) to the company such as, centralized buying, company-wide analytics and improved information systems, which were essential for the company to remain competitive in the marketplace.

Many of his other changes, however, led to significant dissatisfaction, low morale, high turnover, reduced productivity, and general discontent among the associates that seriously derailed the company from the customer-centric approach that made the Home Depot such a success story during the Marcus and Blank era.

The result was the most dramatic decrease in customer satisfaction in retailing history. In 2001, the Home Depot and Lowe’s both had customer satisfaction scores of 74 on the American Customer Satisfaction Index (ACSI). By 2005 however, customer satisfaction at the Home Depot fell to 67, becoming the worst performing retailer on the American Customer Satisfaction Index (ACSI) that year.

As Claes Fornell (founder of the ACSI) aptly stated: “Home Depot had devalued its most critical asset: the health of customer relationships.”

In turn, they lost a both significant market share, and the designation of market leader, to their main competitor – Lowe’s Home Improvement.  This drastic decline in satisfaction led to a significant deterioration in financial performance for the company, as well.

By the fourth quarter of 2006, earnings for the company decreased by 28 percent and comparable store sales declined by 6.6 percent. This represented the first period of financial decline in the history of the Home Depot.

Nardelli was summarily fired by the end of that year (another victim of an ill-advised business-related “acute hemolytic transfusion” – while focusing almost solely on the strategy, he neglected what made Home Depot – “The Home Depot” – which was the successful blend of both strategic vision and its strong customer-centric culture.)

As mentioned, The Home Depot was built around the delivery of goods and services along with outstanding Customer Experience (which would be the main mission of a Chief Customer Officer.)

So by radically changing strategies without taking into account Home Depot’s culture (as, once again, the culture and the strategy work hand-in-hand from the point of Customer Experience) – Nardelli almost killed the company.

Frank Blake was appointed the new CEO at the beginning of 2007 – and returned the company to the embracing the founders’ vision of delivering excellent customer service (along with a host of other measures to un-do a lot of the work that had gone wrong under Nardelli.)

Blake treated the existing culture and the introduction of new strategies as a symbiotic relationship – to take the founders’ vision of good Customer Experience and marry it with a solid strategy to fuel growth.  The first step was the recovery of Home Depot with both its customers and its place in the market.

Under Blake’s leadership (and with significant consultation with both the founders — Blank and Marcus), the company finally experienced notable advancements in many important areas. For example, customer satisfaction increased by 11 points on the American Customer Satisfaction Index (ACSI) between 2007 and 2011; and voluntary associate attrition dropped by 20 percent by the end of 2010.

Blake was praised for producing a very strong management team during his time at the Home Depot (he retired as CEO in November 2014 — but remains as Company Chairman.) One of the key members of this team in 2007 was Marvin Ellison who was promoted to executive vice-president of U.S. stores (Ellison now serves as the current CEO of J.C. Penney.)

Ellison was the de-facto CCO of Home Depot in 2007 – working in conjunction with Frank Blake (as every effective CCO needs to do given the size, scope and importance of the role); to develop and foster the right blend of strategy and culture to promote The Home Depot’s recovery in the marketplace and eventually its growth.

Over the course of a four-year period (2007-2011), Ellison, in his CX-focused role, instituted a number of strategic changes that took into consideration the culture of the company (again: symbiosis) – and while not done overnight (as effective CX has to be a long-term commitment, not considered a “project”) — it eventually paid off.

As a result, The Home Depot’s focus on improving the shopping experience paid off in terms of several important customer purchasing metrics and financial results in 2011.

Total sales at the Home Depot increased by 4.2 percent; and only 1.3 percent at competitor Lowe’s in Q2 2011. Similarly, comparable store sales growth increased by 4.3 percent for the Home Depot and decreased by 0.3 percent for Lowe’s. Operating margins were 11.3 percent for the Home Depot and 10.3 for Lowe’s.These margins helped the Home Depot improve profitability by 14 percent in Q2 2011.

There are a number of graphs, charts and spreadsheets that go along with confirming all these developments – but the simple fact is that if you want to do CX work, you must be prepared to buck some of the “conventions” of business to be successful.

In this case, it is a lofty Drucker quote – but it is only a small stepping stone into the type of radicalisation that you’ll need to be a success at Customer Experience.  It is quite a journey you can find yourself on with improving Customer Experience – sadly for most companies, it’s the job that’s never started as takes longest to finish.

 

Thank you for reading this blog post, I hope you found it interesting and thought-provoking.  I’d love to hear what you think so please feel free to add your comments, suggestions or other ideas below. 

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