Chapter 1: Stop, Look, and Listen – Customer CEO: How to Profit from the Power of Your Customers

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Stop, Look, and Listen

Key Customer CEO Question:

What would you do if you had lost eight hundred thousand customers and $11 billion of your investors’ money in a period of a few short weeks? Hold a press conference to issue a heartfelt apology? Relocate to an undisclosed location? Resign in disgrace?

None of those were viable options for Reed Hastings, founder and CEO of Netflix. Upon suffering one of the worst business debacles in recent history, he chose to provide a nonresponse via an unfunny joke he posted on his Facebook page: “In Wyoming with 10 investors at a ranch/retreat. I think I might need a food taster. I can hardly blame them.”1

Rather than soothing the nerves of outraged stockholders, employees, and customers, Hastings enraged them even more. After raising prices a whopping 60 percent and trying to split his company into two pieces with no advance notice, Netflix saw its stock price plummet over 75 percent. Later, in the understatement of the business year, Hastings told ABC News, “We moved too quickly. We didn’t give it enough thought. We didn’t give it enough explanation, enough integration, and you know, that’s legitimately caused our customers to be angry.”2

Somewhere along the way, Hastings’ arrogance went into overdrive. He quit listening to his paying customers and stopped trying to understand what they wanted or needed. Not content with just two disastrous decisions, he compounded matters by failing to communicate with customers in a timely way. He never explained why he thought raising fees so much at one time was a good idea. His late apology seemed insincere and disingenuous. He didn’t give his customers anything other than cheap talk. And he didn’t bother to provide a way to communicate with the company. In the eyes of those affected by Hastings’ poor decisions, the CEO was missing in action.

I Should Have Listened

Back in the 1970s there was an ad campaign for Southwestern Bell Telephone, one of the so-called “Baby Bells” that proliferated in the days before deregulation. Southwestern Bell emblazoned its service trucks and billboards with the letters WMBTOPCINTBWTNTALI, which stood for “We May Be The Only Phone Company In Town But We Try Not To Act Like It.” The campaign was a disaster because it was idiotic for a monopoly to pretend that it provided a great customer experience. It acted like the only phone company in town because it was. Today, companies like Netflix revel in their ability to foretell what their customers want and need based on what is now called “big data.”

A modern version of the old Bell campaign might be expressed as WKEAYTYRDWUTK, for “We Know Everything About You That You Really Don’t Want Us To Know.” Tens of billions of dollars have been spent by companies tracking, collating, summarizing, dashboarding, and predicting customer activity. But the problem is that the information is the size of a tsunami, too vast for companies to analyze and use efficiently. This wave of information is killing both IT and marketing departments that have to try to keep up. But, in the end, big data merely reflects the “what,” not the “why” of the customer experience. In other words, there has never been a time in human history when people knew so much about other people that was incomplete. It’s like having a jigsaw puzzle with many missing pieces. I believe understanding why people do the things they do is the most important part of the customer experience equation.

Fortunately, I haven’t been in Reed Hastings’ shoes. I’ve had the good fortune to help great people solve some big business problems along the way. To be fair, I have made my share of mistakes as well. Some of them have been small detours; others have been bigger bumps in the road. But I can say that my biggest mistake was wasting too many years listening only to my own ideas. I liked the sound of my own voice way too much.

I should have been listening to my customers instead.

Admittedly, my radical view of hyper-listening is considered heresy in many business circles. There are business leaders, academics, and consultants who regularly warn their audiences of the folly of wasting time gathering insight from customers. “What do they know?” is the unwritten theme of many business and innovation conferences and white papers, as the experts sniff at the inability of the masses to have any clue whatsoever. The gurus sternly admonish their audiences and readers that customers don’t know what they want, and wouldn’t know if it hit them in the gluteus maximus. Their message is to quit wasting valuable time and money asking customers for their opinions. They believe customers are incapable of sharing anything meaningful enough to result in product innovations. They remind us that customers don’t know what they don’t know. To many in this prevailing business culture, customers only exist to keep consuming stuff and sending along their money; they are not to be consulted about why a company might actually keep deserving it.

Faster Horses and Fickle Customers

Two business icons are often used to support the theory that customers don’t truly understand what they need. If this “Ignore the customer” philosophy was good enough for Henry Ford and Steve Jobs, shouldn’t it be good enough for you? Experts often attribute this statement to Ford: “If I had asked my customers what they wanted, they would have said a faster horse.”3 They also point to various rehashed versions of statements by Jobs. Here’s a quote from a 1989 interview Jobs did with Inc. magazine, in which he explained, “You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.”4

Who am I to question the genius of Henry Ford and Steve Jobs? In my opinion, both were visionaries who saw things the average person could not. But there are two problems with these quotes, other than the fact that they oversimplify a complex subject. While the faster horses line is very clever, there is actually no record that Ford ever said such a thing. In his blog, Quote Investigator, researcher Garson O’Toole casts doubt on Ford as originator of the remark.5 But the Ford “quote” makes a great presentation slide; everyone can nod his head in agreement.

In Jobs’ case, it is true that he made various versions of this statement about customers’ wants over a long and prosperous career. But the irony is that, because of the vision of Jobs and other technologists, nearly everything in the business world has changed since 1989. At that time, the flow of information went only one way. Technology companies’ creations have empowered a new world of customers who rule companies with an iron fist. As Reed Hastings learned, today’s customers can wreak havoc by destroying your carefully constructed business model in only a few hours, days, or weeks. Customers are no longer pigs at the trough, waiting to be slaughtered.

It is a myth, however, that Jobs was a one-man band. In addition to the hundreds of Apple designers who contributed to the company’s success, Apple Store staff monitor the daily, almost real-time barometer of customer opinion. Also, public filings in Apple’s 2012 Samsung patent lawsuit revealed that the company actually did customer research. Apparently, the research was a decisive factor in key strategic business decisions. Phil Schiller, Apple’s senior vice president of global marketing, testified that Apple, in fact, conducted customer surveys of iPhone buyers that were considered “important trade secrets.”6 So the truth is, even Apple has an active and ongoing customer intelligence pipeline.

The Customer Isn’t Always Right

Don’t get me wrong. I don’t subscribe to the old adage that customers are always right. They are often wrong. Sometimes they are mind-numbingly wrong. In 1916, the Edison Monthly cited people’s reluctance to purchase newly designed electric fans to cool their homes when its editors wrote, “Old and tried ways of being uncomfortable proved more acceptable than new and strange comforts.”7 It is true that customers are often confused about what they believe about brands they either use or reject. That’s the funny thing about perceptions; they aren’t always correct. But, it’s not the customer’s job to be accurate in his assessments. As businesspeople, it’s our job to gain customers’ constant insight, feedback, and criticism in order to create better products, services, and experiences for them.

It’s important to remember where we have come from. There have been three distinct marketing eras. (By marketing, I mean the activities necessary to acquire and retain customers.) First there was the production era, during which we witnessed that a good product would sell itself. With greater competition we moved into a sales era, driven by creative advertising designed to overcome customer resistance and to convince people to buy the next big thing. Today, we are rapidly entering the social era, when customers rely more upon the recommendations of their friends than on messages from the brands themselves.

As businesses, we must seek ways to more clearly understand our existing and potential customers. Some business strategists combine the end-to-end relationship between a brand and a customer into a process often called “CX” (shorthand for customer experience). Ultimately, it’s how a company delivers on the total experience that drives customer loyalty and trust. In their book Rules to Break and Laws to Follow, Don Peppers and Martha Rogers, PhD, lay out some of the key questions every business has to answer about its customer’s experience:

What’s it really like to be your customer? What is the day-in, day-out ‘customer experience’ your company is delivering? How does it feel to wait on hold on the phone? To open a package and not be certain how to follow the poorly translated instructions? To stand in line, be charged a fee, wait for a service call that was promised two hours ago, come back to an online shopping cart that’s no longer there an hour later? Or what’s it like to be remembered? To receive helpful suggestions? To get everything exactly as it was promised? To be confident that the answers you get are the best ones for you?8

In a nutshell, you need to think about the customer experience as no different from any successful relationship in terms of how it makes the other person feel, from beginning to end.

There are many quantitative and qualitative methodologies available for obtaining valuable insights from customers, an area often called voice-of-the-customer (VOC) research. I am proposing that you take a systematic approach to listening to and observing how your customers live their lives. Paying attention to the way they live will give you great insight into how they use your products. By stepping outside the office and into the field, you will either gain a completely different viewpoint or confirm your long-held beliefs. It is also important to invest time in learning about those who aren’t your customers, because they represent potential new market opportunities. Ultimately, customer insight is where you must start in order to profit from the power of your customer.

Not Soothsayers

When discussing the idea of understanding customers, I ask my clients to remember a simple saying from childhood: Stop, look, and listen. First, stop seeing things through your own eyes. Second, begin to look at things through your customers’ (and noncustomers’) eyes. Third, listen to them proactively. The only truly effective way to solve your business problems is to start by discovering the truth. Then you can change your behavior and move ahead. What you learn will likely amaze you, because the truth is that customers are now in control. Really in control. It is self-delusion to believe we are soothsayers who can somehow divine what customers need. Maybe Ford and Jobs were clairvoyant. But what about those of us who aren’t geniuses? I am talking about business for the rest of us.

If you want more profitable growth and a consistent pathway toward innovation so you can stay ahead of the competition tomorrow, you must gain a deeper understanding of your current and future customers today. Customers are in control because of an unstoppable force: the free flow of information. Technology means companies can no longer control what people know about anything. There are no secrets. If you think there are, check out WikiLeaks. The government cannot even protect its most valued secrets. At the same time, there are more global producers of goods everywhere we look. Upstarts seem to be opening for business every day. This reality means commoditization, price wars, and shrinking value for stakeholders. Isn’t the better way forward to understand customers?

By this point, you might be wondering why I am qualified to tell you how to think about your customers. First, I’m a businessperson with thirty-plus years on the front lines, where I worked to create and retain customers every day, primarily as a serial entrepreneur and marketer. I have started companies in the manufacturing, media, advertising, technology, insurance, and consulting industries. Second, I have helped my clients sell billions of dollars of their products and services. And third, in my consulting practice, I have interviewed, observed, and surveyed more than a hundred thousand customers for my clients in virtually every type of industry. That Johnny Cash song “I’ve Been Everywhere” describes my travels over the past years to ask questions and deeply listen. I’ve talked to all kinds of people. Professional wrestling fans who believe it’s real. Elvis impersonators. Italian symphony lovers. Skinny tuba players. Food truck buffs. Metaphysical vegans. Future farmers. Striking airline pilots. Overworked police detectives. Reformed criminals. Engaged, disengaged, and reengaged CEOs. In every case, some company wanted me to climb inside the heads of these customers to figure out ways to sell them something or serve them better.

Return on Insight

Customer CEO is not an economics, business strategy, market research, history, branding, or marketing book per se. While I touch on all of those important subjects, I have written the book to challenge you to think differently about your customers, your employees, and your business. This book is really a storybook intended to help guide you through the murky waters of business growth with ideas, practices, and examples that have given successful companies a decisive competitive advantage.

In this book are stories of almost three dozen companies that look to their customers as their CEOs—they are what I call Customer CEO companies. These companies understand the new power of their customers. They are winning because of their ongoing, real-time customer knowledge and engagement. As much as I love innovation and technology, I believe customer insight is the primary driver toward a profitable, sustainable company. It is also extremely cost effective. I think you will find that your most efficient ROI is what I call Return on Insight. Of course, the irony is that your best insight really comes from outsight; the simple act of getting outside of yourself long enough to see and hear how your customers behave and what they believe.

Figure 1–1: Return on Insight

If customers were food, they would be onions. After we peel back a few layers, it’s amazing what we discover. The deeper we go, the better the chance we’ll cry, especially when we recognize the gulf that often exists between our perceptions of our customers and theirs of us.

I believe that if you understand customers better, you will profit in top-line growth, bottom-line results, and organizational excellence. All too often we have a static picture of our customers based on information made obsolete long ago. Today we must embrace a fresh and dynamic vision of our customers, a vision that shows us how they are changing and what we should do about it.

It doesn’t matter if your business model is designed to serve consumers, businesses, or government agencies. If you have customers, this book is for you. Customer CEO will introduce you to a new way of discovering how to connect more deeply with your customers. I will introduce you to a new business strategy I call The Customer Thinking Solution. These ideas and strategies apply to you if you run, own, or are thinking about starting a company. If you are in sales, they will help you sell more goods or services to more customers. If you engage in that magical world called marketing, there’s plenty for you on every page. I will share lessons from the field with actual quotes and observations by customers we have interviewed from coast to coast.

What’s in Your Water?

The late writer David Foster Wallace told a story about two fish meandering down a little river when they came across an older fish headed the other way: “‘Morning, boys. How’s the water?’ And the two young fish swim on for a bit, and then eventually one of them looks over at the other and says, ‘What the hell is water?’”9 The point of the fish story, of course, is that the most obvious things are often the hardest for us to see.

Customer CEO is a book about change. But it is hard to see your “water” when you are so busy struggling in the world of “what is.” You have to find ways to lift yourself to a “what if” mind-set. Whether you make your living in big business or small, our times are both confusing and challenging because the rules have changed. Despite the barriers we face in business today, and there are many, we must always keep moving forward. I assure you that your competitors want the upper hand. They want to defeat you and shut you down. You are playing a hardball game. You must put the power of the customer to work for you before your competitors harness that power for themselves. Your customers want and demand better customer experiences and interactions from you. If you actively engage them and provide what they need, your customers will help you achieve your dreams. This is your wake-up call. It’s time to meet the Customer CEO.