Saturday, March 16, 2013

Corporate America, You're Doing it Wrong: Part 2

So how do you fix it? Last post, there were three things that have gotten pooched: products, employees, and clients.

Let's fix the most important part first.


A lot of Corporate American heads like to say, "I'm a profit center along with my vaunted staff of silver-tongued gilded warrior salesman. Even Peter Drucker said so. The rest of you are shit, er, I mean, cost centers."

According to a Google search [full disclosure: blogspot is owned by Google], Drucker indeed coined the phrases "cost center" and "profit center." And yes, he used the terms to split a company's resources into two camps; the revenue generators and...the rest. And his book was probably on the corner of a lot of coffee tables in a lot of executive suites, so of course everyone believed it. It wasn't totally ridiculous and Drucker presented it professionally, so there you have it.

But years after that, Drucker himself relented from this divisive concept, calling it the worst mistake he'd made. He offered a correction and identified that there is really only one profit center, that being the paying customer. Everyone else, from the CEO down, is a cost center. Painful though it may be for a lot of fat heads to accept, this new line of thought from Drucker makes more sense and is much more truthful about the whole business equation. As I said in an earlier post, if an executive thinks IT workers can easily be replaced by remote resources in India, or better yet, robots, then the other side of that is true too. An Indian PhD in business ought to be a lot less expensive than the typical American executive (and possibly a lot smarter).

Every bit of effort in a company by all its resources should be about ultimately serving the customer. Not the board. Not the executives. Not the rest of the employees.

Make great product; not an ok one, not a good one, make a great one. Then stand behind it and fix it, but make a product good enough that your customer support and production support costs are low because it works right the first time. Charge a fair price, adjusting for competition. I know, the competition includes companies from China that don't respect intellectual property so they copy your product and use cheap labor to build clones for cheap...and those damned customers will buy them. First, fix that attitude because the customers are doing exactly what you'd do if someone gave you two comparable products and had a lower price on one of them. Second, compete the best way you can: with innovation. They can copy your product but they can't quickly copy your initiative, your customer knowledge, and your customer relationship. Keep innovating and they will always be playing catch-up. How to innovate? More on that when we fix your employees.

But putting the customer first isn't how it is. Maybe in a few companies. Maybe in the past it was more like that. But not in the contemporary world. Stockholders only care about returns, and that causes boards to put pressure on getting results faster and faster. This in turn leaves company leaders to resort to putting the most obvious metric at the front of all decisions, project evaluations, and employee evaluations: the date. Get it done by a date. If it's imperfect, thats ok, we'll fix it later. And thus is endorsed a philosophy of not accepting technical debt as a necessary evil but as a strategic option. It comes from the top and it works its way into all ranks and pretty soon delivering broken shit or half-assed shit is ok.

Of course, not all companies have the same leeway here. Compromised safety standards will injure people and ultimately sales. Established companies like Toyota and BP would therefore never do such corner-cutting for the sake of short-term sales.

Looking at these pressures, you have to wonder if perhaps they're at least part of the reason Dell has chosen to revert from being a public company back to a private one. Dell offers another example here; at one time the company tried to outsource all its technical support to India, but backlash from customers caused Dell to retain US technicians for corporate customers. In the latter case, Dell recognized it had to keep its largest revenue generators satisfied. Of course the rest of the little customers got screwed, but at least some of this corroborates the Drucker correction. But it remains to be seen what Dell will do with this recovered initiative.

"The customer comes first" is an old tenet of business. For a lot of companies it's also a forgotten one.

You're doing it wrong.

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