Service-Ability E-Book

Kevin Robson

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 420

Veröffentlichungsjahr: 2012

Beschreibung

Times have changed.

Long gone are our days of being kings of the manufacturing industry, we are now immersed in the world of ‘service’ where the relationship between an organization and the customer is an integral part of the "product" offering. The nation is suffering from a widespread lack of truly customer-satisfying service. We lack the very thing that we need to make this new paradigm work efficiently: service-ability.

Organizations of all kinds are facing high customer churn, serious customer antagonism, loss of consumer confidence and plummeting customer satisfaction. Research shows that totally satisfying the customer is the only thing that will secure loyalty and offer significant competitive advantage. Yet still, on a daily basis we encounter service that frustrates us.

Whilst the emergence of technology has no doubt brought efficiency to many areas of business activity, including the third sector, it has led to the standardised and indifferent service we regularly receive. We appear to have lost sight that people do business with people. Through efficient technology, our organisations may be serviceable but they are not service able.

The arrival of Generation Y and the developments in social media, provide businesses with a whole new way to engage with their customers, but also provide a new way for customers to rate companies, products and services: not always in a positive manner. 'Like' or '#Fail' have become part of our social language.

Organizations that refocus on the need to treat customers in a way that satisfies them, and not the technology, will have better customer retention, lower costs of replacement and will build their brand value through better reputations.

Service-Ability delves deeply into these areas to show how today's managers need to re-think the way we structure, manage, lead and organize our companies to achieve total 'customer-centric' work cultures that develop lasting relationships with customers.

Leseprobe

Table of Contents

COVER

TITLE PAGE

COPYRIGHT PAGE

CHUANG-TZU

PREFACE

FOREWORD

1 CONNECTEDNESS

Migram and six degrees of separation

Dunbar’s number

Gladwell and Granovetter

Web 2.0 and word of mouth

Apostles and Terrorists

Feedback loops

Reflection on United

2 CUSTOMER SATISFACTION AND ITS LINK TO PROFIT

Non-rational man

The rational organizaion

All people, all levels

Moments of truth

Customer relationships built on trust

Totally satisfied customers

Loyalty = profit

Internal service quality

3 OUR INDUSTRIAL LEGACY

The Industrial Revolution

Weber & bureaucracy

Fordism

Fayol and the human relations school

Jump 70 years

New approach to management

4 OUR SERVICE ECONOMY

A difficult birth

The service economy

Commercially dangerous

The effect of technology

British disease

Demographics

Lower pay/inequality

Employment ‘contract’

Opportunity

5 SERVICING CUSTOMERS IS NOT CUSTOMER SERVICE

Porter’s value chain

Balanced scorecard

Car body repair shop story

The customer is king

The cost of quality

The Bottom Line interview

Call centres

Customer value triad

Summary

6 UNDERSTANDING SERVICE-ABILITY

Engagement

Initiative

Professionalism

Involvement

7 GETTING THE PEOPLE RIGHT

Recruitment

Intellectual capital

Inappropriate management

Rules and regulations

Greed and financial incentives

Pink on reward and motivation

Strategic HRM

Nissan and Google

Summarizing modernized management

8 APPROPRIATE ORGANIZATION

Power of the office desk

Coercive bureaucracy

A real-life example

Inappropriate technology

Form follows function

Small is beautiful

Organismic vs. mechanistic

Teamwork

Autonomous, self-managing teams

Complexity theory

Summing up appropriate organization

9 EFFECTIVE LEADERSHIP

Leadership concepts

Corridors of power poem

Sources of power

Distributed leadership

Servant leadership

Primus inter pares

Empowerment

Practical wisdom

Winterbourne View

Re-moralizing work – Schwartz

Hierarchy

Collective wisdom

Honesty without fear

10 CLARITY OF PURPOSE

Mission, vision

Obliquity vs. narrow strategy

Engagement

Purpose

Purposefulness

Purposeful systems

Values – The fuel tank that never runs dry

Matshushita on purpose

Systems integration and process clarity

Total service quality

Approaches to quality

Total Quality

11 BRINGING IT ALL TOGETHER

INDEX

This edition first published 2013

© 2013 Herbert Kevin Robson

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Library of Congress Cataloging-in-Publication Data

9781118345566

A catalogue record for this book is available from the British Library.

ISBN 9781118345566 (hardback) ISBN 9781118457856 (epub)

ISBN 9781118457863 (emobi) ISBN 9781118457870 (epdf)

Chuang-Tzu

(4th Century BC)

‘I have heard my teacher say that whoever uses machines does all his work like a machine. He who does his work like a machine grows a heart like a machine, and he who carries the heart of a machine in his breast loses his simplicity. He who has lost his simplicity becomes unsure in the strivings of his soul.’

(Morgan G. (1993) Images of Organization. Sage. London, p.19)

PREFACE

We live in a much changed world from that which prevailed in the post-Second World War era. Britain (and to broadly the same extent, the countries of the EU and the USA) is now regarded as a service economy. At least in terms of employment, our manufacturing base has been progressively eroded. Coal mining no longer exists and heavy engineering such as ship building and steel making has gone abroad where labour is cheaper.

The term ‘service’ embraces a wide definition, including the provision of a ‘pure service’ such as knowledge, expertise and experience as, for example, in the financial services provided by the City of London, and hybrid services, such as restaurants, that provide a tangible product but with a heavy element of personal attention as part of the overall package. However, falling within this definition is a vast array of organizations of all kinds, commercial, public and third sector (including social enterprises as well as charities) in which the relationship with the consumer now, more than ever before, has to be an integral part of the ‘product’ offering.

In this fundamental shift in economic stance, however, with a few notable exceptions, the practice of organizations of all types has failed to keep up with the actuality. Britain is now suffering from a widespread lack of truly customer-satisfying service. We lack the very thing that we need to make this new paradigm work efficiently: service ability.

Today, customers are becoming increasingly discerning: demanding even; and the need for absolute customer focus is paramount. Organizations of all types are facing high customer churn, serious customer antagonism, loss of consumer confidence and plummeting customer satisfaction. Research is showing us that whatever the type of organization, only totally satisfying the customer is the thing that will secure loyalty and offer significant competitive advantage by differentiation in this new kaleidoscope world, and yet poor or indifferent treatment of customers is widespread.

The rapid emergence of new technology is undoubtedly bringing incalculable benefit to organizations of all types (this is emphatically not a Luddite book), but the argument is that, in our gold-rush fervour to apply computerization willy-nilly, people and processes have become conformed to systems thinking and this is depersonalizing both the employee and the customer to such a degree that it is preventing truly customer-satisfying interactions. The design of customer interaction processes has become standardized and characterized by indifference. Machines are increasingly being used to mediate the customer relationship and organizations of all kinds have lost sight of the basic principle that people do business with people. Today, through efficient technology, our organizations may be serviceable but they are not service able.

Increasingly, organizations, whether private, public or third sector, are facing the reality that their poor customer service is being mediated through social media. (Many firms are now monitoring Twitter and Facebook for negative chatter and pouncing on it to mitigate damage.) The case of ‘United Breaks Guitars’, the YouTube video that since 2009 has spread that damning message to over 10 million people worldwide about United Airlines’ appalling treatment of their customer and his property, is a classic example of this phenomenon.

As this trend continues, however, a major opportunity for sustainable competitive advantage is opening up. Organizations that challenge this emerging paradigm and refocus on the need to treat customers in a way that satisfies them, not the technology, will have better customer retention, lower costs of replacement and will build their brand value through better reputations. We must put the technology behind us as a support, not between us as a barrier to the customer.

Customer satisfaction is about a depth of relationship that extends from the very centre of the organization to the loyal satisfied customer, through the loyal satisfied employee and this book is about the skill of the organization as a whole to deliver strategic customer-satisfying service capability through ‘Service-Ability’. It is of little use simply to improve the skills of customer-facing employees: training people in customer service is only part of the answer. You cannot bolt-on service skill to an organization that is unable to nurture and sustain it without ensuring an organization-wide, dedicated culture of service.

The term ‘marketing mix’ was first used in 1953 when Neil Borden coined it in his presidential address to the American Marketing Association. Later, in 1960 E. Jerome McCarthy proposed a 4 P classification (product, price, place, promotion), which has become deeply embedded in the study of marketing ever since. It appears in every textbook and teaching paper, and is the framework of choice of marketing practitioners the world over. No doubt in response to the inexorable shift from a manufacturing base to a service base in the economies of the developed World, the last ten years has seen the incorporation of another 3 Ps: people, process and physical evidence.

The adoption of these additional elements, in particular the P of People, signalled the point at which marketing spilled over into the much broader world of management and organizational theory. Process, for example, is informed by organizational design and physical evidence (essentially the ‘packaging’ of the intangible service-product) is intended to enhance the customer’s experience and to enhance service quality, which is a production operations strategy.

The definition of Marketing is also subject to change. The current definition officially adopted by the Chartered Institute of Marketing of the UK in 1976 is: ‘The management process responsible for identifying, anticipating and satisfying customer requirements profitably’. This puts emphasis on marketing as a management process with, as its ultimate end (and appropriately) the aim of satisfying customer requirements profitably.

Seven Ps marketing mix

However, a debate underway in the Chartered Institute seeking a new definition to reflect the modern era resonates even more with the message of this book. The draft definition under consideration at the time of writing is:

The strategic business function that creates value by stimulating, facilitating and fulfilling customer needs: It does this by building brands, nurturing innovation, developing relationships, creating good customer service and communicating benefits. With a customer-centric view, marketing brings positive return on investment, satisfies shareholders and stakeholders from business and the community, and contributes to positive behavioural change and a sustainable business future.

It is more wordy and, no doubt, will be honed to a more concise form, but herein lies the central thesis of what is being put forward here: the need to structure, manage, lead and organize in order to be able, holistically, to develop relationships with customers and to be totally customer-centric; all with the aim of return on investment both financial and, in the broader senses we know today, societal. That is why this book has been written.

This is not a book about how to do customer service, neither is it a book about marketing per se. It is a book about people and process in organizations, and how to get them aligned to deliver effectively what the customer needs, wants and expects, and that makes it as much about management as about marketing. It seeks to explore the reasons for the lack of Service-Ability that seems to be widespread in all our organizations, and to provide a framework for thinking, intervening, training, and organizing, so that this inherent disability can be better understood and rectified.

Service-Ability is a structured idea, underpinned by an understanding of morale (esprit de corps or team spirit). High organizational morale is necessary for success, it sustains purpose and it is a matter of strategic intervention, but it needs four key elements:

trust in leadership;

trust in, and meaningful relationship with, colleagues;

being well-fitted to your job and having pride in doing it; and

knowing, believing in, and espousing the aims of the organization.

These respectively result in initiative, involvement, professionalism and engagement in the individual employee, and I argue that these attributes are needed in every employee, at all levels, not just those in customer-facing roles.

These attributes are inferred back into the organization and classified into four core values: ‘Effective Leadership’, ‘Getting the People Right’, ‘Appropriate Organization’ and ‘Clarity of Purpose’.

Drawing on latest thinking on leadership, management, organizational design and strategy, the argument is that effective leadership derives from the emerging understanding of the servant leader; that getting the people right comes from a management approach that draws on modern thinking about reward and motivation; that an appropriate organization is one whose form follows function, and that facilitates people to work well together, not militates against it; that clarity of purpose is achieved by having a purposeful strategy and ethical values, and communicating these effectively so that the people, who are the organization, become imbued with its aims, objectives and values, and a clear sense of direction.

The whole idea is illustrated by a quadrant model that is useful for analyzing, thinking, intervening, training and organizing for Service-Ability, and this forms the framework for the book’s four main chapters in which implementation issues are discussed and remedies offered.

FOREWORD

As technology and customer knowledge and expectations have changed, the demands on business to go beyond merely meeting needs and create a transaction based on requirements have changed – and continue to change. Customers make choices using the internet, see what is available across the world, and gain feedback from other commentators and customers, sometimes live,real time.

These go beyond the product or immediate service and establish a new realm of the interface between customers and businesses – one that will be about exceeding expectations. This can very rarely be about solely product, physical or service – it sees and expands the less quantifiable aspects of the emotional bond formed from always ‘being there’ for the customer, and anticipating what will please.

These behaviours by your business, or more accurately the people in your business, are becoming the most significant element in creating a lasting customer relationship of value in world where the internet and immediate 24hr order capabilities tend to promote grazing and ‘promiscuity’ in customers.

A few exceptional businesses have already recognised this and built levels of loyalty, belief and reputation that others can only envy. The success of Apple in anticipating customer desires,and the relationships built by a number of Japanese brands with consumers are matched by the customer loyalties being developed by FreshDirect in New York. In contrast, regular car manufacturers and food supermarkets in Europe are seeing customers not differentiating between them and treating them as ‘all the same’ – disposable suppliers of a product or undifferentiated service.Given the costs of customer acquisition and the growth of social media encouraging experimentation by customers , businesses that do not adopt change in their view of service will be commoditised, where the only factor affecting choice is price on the web on the day.

Kevin Robson has captured, explained and codified this trend so that management can understand what their businesses need to do to survive and succeed in a new and more demanding service environment. He shows us how to look differently and more comprehensively at what it is that businesses must do to build the loyalties with customers.

He correctly identifies that this is not solely about product or service design and provision, but needs the whole organisation to see their role differently, and to realise that marketing/service disciplines are neither the only location for a structural solution, nor an adequate engagement of the organisation as a whole.

This book provides not just the rationale for and explanation of the changes, but goes beyond to lay out for executives the changes in corporate behaviour and structure that are the underlying enablers of new forms of anticipation and response to customers. For managers it shows the tools they need to identify what’s missing, and how to develop their organisations and people to create a customer interface that wins, rewards, and brings loyalty.

Kevin has described what I think is one of the most significant changes of the next 10 years and gives those that follow the guidance in his book the chance to be not a survivor but a ‘thrive –r’. It is timely, thoughtful and important.

Sir Ian GibsonChairman of Morrison plc

1

CONNECTEDNESS

In July 2009, a musician, Dave Carroll, released ‘United Breaks Guitars’, a music video he had produced with his band, Sons of Maxwell, in which he stars. He did this in response to an all-too-common experience for many air travellers: irresponsible baggage handling followed by an almost unbelievable arrogance by the company concerned. The video rapidly became one of YouTube’s greatest hits and caused a media frenzy across the internet, which was picked up by major global networks including CNN, the Los Angeles Times, the Chicago Tribune, Rolling Stone Magazine and even the BBC on the opposite side of the Atlantic. Here is Carroll’s story, slightly edited for simplicity:1

‘On March 31, 2008 Sons of Maxwell began our week-long-tour of Nebraska by flying United Airlines from Halifax to Omaha, by way of Chicago. On that first leg of the flight we were seated at the rear of the aircraft and upon landing and waiting to deplane in order to make our connection a woman sitting behind me, not aware that we were musicians cried out: “My God they’re throwing guitars out there.” Our bass player Mike looked out the window in time to see his bass being heaved without regard by the United baggage handlers. My $3500 710 Taylor [guitar] had been thrown before his. I immediately tried to communicate this to the flight attendant who cut me off saying: “Don’t talk to me. Talk to the lead agent outside.” I found the person she pointed to and that lady was an ‘acting’ lead agent but refused to talk to me and disappeared into the crowd saying “I’m not the lead agent.” I spoke to a third employee at the gate and when I told her the baggage handlers were throwing expensive instruments outside she dismissed me saying “but hun, that’s why we make you sign the waiver.” I explained that I didn’t sign a waiver and that no waiver would excuse what was happening outside. She said to take it up with the ground crew in Omaha. When I got to Omaha it was around 12:30 am. The plane was late arriving and there were no employees visible… Air Canada gave me a phone number to start my claim with United. When I called the number United said I had to return to the Halifax airport with the guitar to show the damage to someone and open a claim. When I returned to the Halifax airport I met with an Air Canada employee, because United has no presence there, and that person acknowledged the damage, opened a claim number but “denied” the claim because Air Canada would not be responsible for damage caused by United employees in Chicago (which still makes sense to me). I took the claim number and called United back. They never seemed to be able find the claim number on several subsequent phone calls but at the last minute it would always surface. I spoke several times to what I believe were agents in India who, ironically were the most pleasant, and seemed genuinely sorry for what had happened. Three or four months later I got directed to the Chicago baggage offices of United and after several attempts to speak with someone was told to simply bring in the guitar for inspection… to Chicago… from Halifax, Canada. When I explained that Halifax is far from Chicago someone then said my claim needed to go through Central Baggage in New York and they gave me a toll free phone number. I phoned that number and spoke to someone. She couldn’t understand why someone in Chicago thought she would be able to help me but she seemed to feel for me and asked me to fax her all the information. I did and a few weeks passed with no reply. I called back and the lady said she’d never received the fax. Then I asked her to look for it and surprisingly, there it was. When she found it she asked me to give her a couple of days and to call back. I did, and by the time I phoned again two days later, the number had been discontinued. I had to start all over again with the same 1-800 # to India, where they were as sorry as ever for what happened, couldn’t find my claim at first, and told me I needed to bring the guitar into Chicago’s O’Hare for inspection. Six months had gone by and the guitar had now been repaired for $1200 to a state that it plays well but has lost much of what made it special. I spoke to a customer service manager in India who promised to forward a note to have someone in Chicago contact me. I received a letter about month later from Chicago with no name or contact info, saying someone would be contacting me about this. Another month went by and I received an email from a Ms Irlweg in Chicago I believe. It basically said she was sorry this happened and denied my claim. Some of her reasons were: I didn’t report it to the United employees who weren’t present when we landed in Omaha; I didn’t report to the Omaha airport within 24 hours while I was driving to places that weren’t Omaha; It was an Air Canada issue; Air Canada already denied the claim (as I mentioned because Air Canada would not pay for United’s damages), but I’m still unsure as to why I needed to report it in Omaha within 24 hours if it was clearly Halifax’s responsibility; someone from United would need to see the damage to a guitar that was repaired. So after nine months it came down to a series of emails with Ms. Irlweg and, despite asking to speak to her supervisor, our conversations ended with her saying United would not be taking any responsibility for what had happened and that that would be the last email on the matter. My final offer of a settlement of $1200 in flight vouchers, to cover my salvage costs repairing the Taylor, was rejected. At that moment it occurred to me that I had been fighting a losing battle all this time and that fighting over this at all was a waste of time. The system is designed to frustrate affected customers into giving up their claims and United is very good at it but I realized then that as a songwriter and traveling musician I wasn’t without options. In my final reply to Ms. Irlweg I told her that I would be writing three songs about United Airlines and my experience in the whole matter. I would then make videos for these songs and offer them for free download on YouTube and my own website, inviting viewers to vote on their favourite United song. My goal: to get one million hits in one year. To date I have written “United: Song 1” and “United: Song 2” and I’m proud to now release the first video in the trilogy. The response has been incredible so far. Everyone involved in the recording of the track and filming/editing of the video has volunteered their time and pre-production work is underway for the filming of “United: Song 2” (hopefully to be released later this summer). United has demonstrated they know how to keep their airline in the forefront of their customers’ minds and I wanted this project to expand upon that satirically. I’ve done being angry for quite some time and, if anything, I should thank United. They’ve given me a creative outlet that has brought people together from around the world. We had a pile of laughs making the recording and the video while the images are spinning on how to make “United: Song 2” even better than the first. So, thanks United! If my guitar had to be smashed due to extreme negligence I’m glad it was you that did it. Now sit back and enjoy the show.’2

Song 1 was posted on 6th July 2009. Within 24 hours it had drawn 461 comments on YouTube, most of them maligning the airline. However, it went viral after that with The Consumerist website reporting more than 24,000 views by the following night. When the YouTube count exceeded 150,000 hits, the international news media picked up the story and ran it around the world. Today, it has received over 9.2 million views on YouTube alone.3 Let no one be in any doubt that we live in an age where information technology is empowering consumers and massively leveraging inherent social networking capability. Bad news can spread easily. As with United Airlines, with the leverage of social networking, it can spread like wildfire, and so an organization that fails to satisfy its customers, whether it is big or small, courts disaster.

Migram and Six Degrees of Separation

Even if we discount the power of the internet, society is amazingly connected. We do not live in discrete cells in which information is contained. Our personal real-life, life-built social networks are extraordinarily connected and have always been effective in the transmission of information.

‘Word of mouth’ has always been the most effective way of disseminating social information for the good of the whole of society, and it can make or break those whose behaviour is socially unacceptable. It was ever thus.

As long ago as the late 1960s, the American social psychologist Professor Stanley Milgram of Yale University carried out what became known as: ‘The Small World Experiment’. Milgram4 sought to examine the average path length of social networks in the population at large. He had collaborated with other academics in the University of Paris in the 1950s who had been working on mathematical models of social contacts and influences, and whose ideas had probably been triggered by a Hungarian, Frigyes Karinthy (around 1910) who laid down a challenge for anyone to find another person through at most five other people.

Milgram’s team of researchers ran an experiment in parallel, with two targets: one a stockbroker who lived in Boston, and the other the wife of a divinity graduate student who lived in Sharon, Massachusetts. The names of 160 people in Omaha, Nebraska were randomly obtained, and a similar number living in Wichita, Kansas. Both of these cities are more than 2300 kilometres away from Boston. Milgram wrote to each person enclosing a packet that contained the name and address of the chosen target in Boston, a photograph of that person, and a letter asking them to take part in a social contact study in American society.

The respondents were specifically asked to send the packet directly to the target only if they knew him or her on a personal basis. Otherwise, they were asked to send it to a personal acquaintance whom they thought more likely to know that person. In each case, they were asked to put their name on a card that was to accompany the packet throughout, and to send a pre-paid card to Harvard University as they handed the packet on. Sixty-four packets arrived at the target destinations and the tracking mechanism revealed that whilst some had take nine or ten referrals to complete the journey, many had done so in only two hops. The average path length (a measure of how easy it is to negotiate a network is) was 5.5.

Despite the size and complexity of society, in theory we are only separated from any other person by five or six others.

This famous experiment, with its astonishing results, led to the term ‘Six Degrees of Separation’ which has fired the imagination of writers and filmmakers as well as sociologists and marketers ever since.

Dunbar’s Number

How many Christmas cards do you send? If you’re unenthusiastic about Christmas, the chances are it will be 15 or so. If you are more into it, maybe you have around 50 people on your list. If Christmas is a major event in your year, the chances are it could be up to 150 although it is highly unlikely to be more than that. Robin Dunbar, Professor of Evolutionary Anthropology at Oxford University has concluded that in common with all primates, humans have a natural limit to the number of relationships they can reasonably handle. This, he argues, is based on the size of the neocortex,5 that highly developed part of the brain in higher mammals where social awareness is present. In the case of humans this is about 150 and it is called ‘Dunbar’s Number’, more popularly known as ‘The Magic Number’.

One hundred and fifty appears to be the optimum size for human social groups. Beyond that level, relationships are not easy to make and maintain, and in support of his theory, Dunbar points to communalistic fundamental Christian sects such as the Amish and Hutterites of America whose communities are about this size. He also cites the average village size as recorded in the Domesday Book, which is 150 there or thereabouts, and the size of the smallest standalone unit in modern armies, the Com­pany. Interestingly, he points out that around 150 is also the level at which businesses start to need formal management structures, hierarchies and rules if they are not to fall apart as they grow.

There is an optimum size of social group beyond which people cannot easily relate, therefore. Peer pressure and personal loyalties, together with the ability to know a leader personally and a sense of belonging to a whole entity, disintegrate beyond this point but, crucially, Dunbar also demonstrates that a person’s social network expands in layers, and that is governed by multiples of three.

We tend to have about five or six close friends, 15 or so not-so-close ones, then around 45 wider acquaintances until we reach the neocortex manageable limit, the magic number, of around 150.

Dunbar’s work suggests that social networks in our modern societies ripple out from the individual in a series of layers, or circles, tripling in size as each layer is added. He also suggests that these layered networks become fragmented with time and social movement:

‘The trends towards urbanization, economic migration and social transience that have come to dominate modern life have changed all that. We grow up in Huddersfield, go to university in Brighton, get our first job in London and move (or are moved by our employer) to Glasgow a few years later. At each step, we leave behind small groups of friends until time and distance eventually dim our relationships with them beyond the point of rescue. The effect of all this is that our networks of 150 people become increasingly fragmented, consisting of small clusters of friends who are forever associated with a particular time and place. These clusters rarely overlap; indeed, our social network only partially overlaps with even that of our partner, despite the fact that we live in the same house and share a life together. The core clusters of best friends and family may overlap, but we tend to have separate friends for work, hobbies and so on.’

It is this layering and fragmentation in people’s networks that opens up the opportunity for a broader societal connectedness whose extent and power is truly awesome.

Gladwell and Granovetter

In nature’s networks ‘Birds of a feather flock together’. Malcolm Gladwell, in his book The Tipping Point,6 points out that people not only associate with people they live close to (including family of course), but they also associate with people who have like interests and engage in similar activities: who work in the same company; who are in the same golf club; who move in the similar social circles, etc., and each of the people they associate with has his or her own extended networks too, just as Dunbar observes and network theory explains.

This was proved in 1973 by sociologist Mark Granovetter at Johns Hopkins University, in his seminal paper, ‘The Strength of Weak Ties’,7 which explored the way people got jobs. He showed that the diffusion of influence and information in social networks happened through relatively loosely connected, dyadic (based on two) ties between individuals each of whom moved in different social circles. Granovetter demonstrated that networks link through acquaintances (the ‘weak’ ties) as opposed to the strongly tied family and close friends. Milgram’s packets had leapfrogged over 2000 kilometres in only five or six steps because people were linking their weakly tied networks of acquaintances, not their families and close friends.

Social networks do not comprise a fixed number of nodes with an average number of links; they are dynamic systems that change constantly, adding new nodes and links and losing others as circumstances change. Animals, chemicals, cells, as well as people, link in ways that are neither straightforward, random nor democratic.

Evolution, the survival of the fittest, means that all living organisms exist in a competitive environment. There are winners and losers in the social process. Politicians strive for opportunities to be heard, companies compete for customers, people vie with each other for social links because it gives them greater influence and security. Unlike the spider’s web or the fisherman’s net with their broadly similar numbers of nodal links, social networks are ‘scale free’,8 i.e. the number of their linkages follows the principle behind Pareto’s 80:20 theory, also known as the Power Law, where the vast majority of nodes have only a very few links and a small number have a disproportionately large number.

Scale-free social networks tend to cluster, and these clusters become richer because they become more interesting and active, which makes them more able to grab more links and grow very quickly. The ability to make links relative to every other node in the community is called ‘fitness’. Fitness, measured by the number of links a node has, is a quantitative measure of the ability to stay ahead of the competition and it doesn’t necessarily favour those who have been around the longest. (Google’s domination of the internet search-engine market and its trumping of the early pioneers such as Yahoo! and Alta Vista demonstrates this vividly.)

Fitness accounts for why a company is more successful than its competitors to attract and keep customers, or why someone has a greater aptitude for being liked and being more memorable relative to others. In business, the earliest into the market isn’t always the winner.

It is likely that some of the individuals involved in both Milgram’s and Granovetter’s research were what Gladwell calls ‘Connectors’. Con­nectors are super-networkers. They are naturally social creatures who, as Gladwell puts it, have big Rolodexes: they are extremely well-connected individuals who have mastered the art of Granovetter’s weak tie. Con­nectors are often charismatic individuals who energize other people. They are memorable and influential and they have a talent not only at building large numbers of friendly yet casual connections, but for keeping in touch with them. As individuals, they possess fitness and are able to attract many connections.

Milgram’s packets leapfrogged over 2000 kilometres in only five or six steps not only because people were linking their weakly tied clusters of acquaintances rather than their families and close friends; they were almost certainly facilitated by connectors who have always been around in society, and massively effective even in the days before we had the internet and social media connecting billions of people worldwide. Most of us don’t posses that ability, but the social media has given it to us. By being part of these super-hubs, any one of us can now spread a message amongst many people in a very short time. Today, we are all, potentially at least, socially powerful connectors who can use the new technology for good or ill; especially when it comes to product, brand and service reputation.

Web 2.0 and Word of Mouth

Immediately after the so-called ‘dot-com’ bubble burst in the late 2001, a new term came into our vocabulary. ‘Web 2.0’ was a reappraisal of the way the web worked, its culture and its ethos. People were using the web differently, adapting it in ways that no one had predicted hitherto. User-generated content became widespread and the internet came to be seen as a service to the community. Amongst a number of observable characteristics of this new paradigm, emergent behaviours rather than predetermined ones became apparent, and under Web 2.0, massive decentralization of power took place and freedom of communication was born.

In a sense Web 2.0 has given birth to ‘Communications 2.0’ where the act of communication has taken on a new dimension, and that oldest form of human connection, word of mouth, has become massively leveraged.

Thoughts, ideas and views can now be shared openly, and passing these on is aided by the ability to ‘tweet’ and ‘like’ what you see. Tech­nology now allows people spontaneously to broadcast what they feel and think, linking those comments and the people who make them.

People’s opinions, shared hitherto at most with only a narrow social circle, are now one-to-many, and this is permanent. The perishable verbal social tittle-tattle of pre-web days is a thing of the past. Now we have written-word communication, with all its permanence, its easy searchability, undiluted by ‘Chinese whispers’, and capable of being read asynchronously when it suits the reader, or across time zones. Comments on company performance, for example, can last.9 They are no longer ‘nine days’ wonders’ – and they can flash around the world in seconds.

The days when organizations could control what information about them was disseminated to the public are gone. The brochure-ware websites of the early period of the web, where organizations of all kinds spoke to their markets in conventional ways, controlling and dictating what was said about them and their products, are a thing of the past. The control of brand reputation and image has largely been taken from their owners, and made or broken by people interacting with each other online. In this brave new world, customer service quality is becoming mediated in cyberspace, and organizations of all types need to beware. In a 2010 marketing trends survey carried out by the Chartered Institute of Marketing of the UK, more than half of respondent firms expressed themselves afraid of venturing into social media. Only the brave, the blind, or the squeaky clean are engaging with it.

Apostles and Terrorists

Intuit is one of the world leaders in accounting software, its product Quicken has millions of users across the world and it is famous for its attention to its customers. However, in marketing circles, its CEO Scott D. Cook is more famous for identifying what he calls ‘Apostles and Terrorists’ amongst customers. Apostles are customers who are so satisfied that they go out of their way to convert others to a product or service; they see themselves as converters of the uninitiated. On the other hand, there are customers who have had such a bad experience, who are so unhappy and disaffected, that they speak out against an organization at every opportunity – they become commercial terrorists who go out of their way to spread the bad news by word of mouth. Because they are so passionate, and because of the power of social networks, they can easily reach hundreds, and in many cases thousands and more, of people with their story of woe discouraging others even from trying a product or service.

As we shall see later, Service-Ability (or the lack of it in the case of United Airlines) is easily capable of producing these extremes of customer response.

Get your service delivery right and it can result in the creation of unpaid, voluntary marketers, apostles, who evangelize throughout their networks; get it wrong and you might get commercially destructive terrorists who can wreak enormous damage far beyond imagining.

Feedback Loops

Anyone who has used a microphone and amplifier will know about feedback. Get the position of the microphone wrong relative to the speaker, and sound will be picked up, fed into the amplifier, which feeds more sound into the speaker, only to be picked up by the microphone again, re-amplified and the whole cycle keeps repeating and growing until what is known as ‘howl round’ takes place: that painful screech of infinitely re-amplified sound that sets your teeth on edge.

Norbert Wiener, an American mathematician who died in 1964, formalized the notion of feedback, which describes how an output of information about an event will influence an occurrence of the same event in the future when it is part of a cause-and-effect chain: the event is said to feed back into itself. Today, social networking sites such as Facebook and Twitter leverage this effect enormously. So-called ‘friends’ become engaged in a constant feedback loop, updating their status in real time in a loop of information between ‘friends’; a chain of action and reaction where one posting triggers another, which in turn triggers a third, and so on. Feedback in sound systems can produce a deafening and uncontrollable noise, and so it is with the social media if a viral feedback loop is induced. That’s what happened to United Airlines in the Dave Carroll incident.

In a completely different context, Barack Obama used this multiplying power of social networking using the internet for the first time in history for political purposes when, in 2009, he engaged with the social media in his campaign to become President of the USA. At the height of the campaign, Obama had more than three million friends on Facebook, and his social media campaigning staff, largely drawn from the generation to whom this medium is second nature, were using Facebook, Bebo, Myspace, YouTube, Twitter and a host of other such sites in such an innovative way that they managed to create what ultimately became a viral campaign. Creative fans of Obama were even re-editing official campaign videos and redistributing them using YouTube to friends who, because of their novelty, passed them on. Obama’s people were acting like connectors but using viral marketing through the powerful hubs of the social media to leverage that enormously, and they were so successful, their work is widely attributed as being a major cause of Obama’s election.

Reflection on United

Let us reflect on that salutary tale about United airlines. ‘United Breaks Guitars’ is the consumer fighting back with tools that are now available in power and abundance. That airline’s incomprehensible lack of even a modicum of customer service not only perfectly illustrates the desperate need for what is being argued for in this book, but shows how even hard-won good practice developed over years through basic common sense, let alone experience and cleverness, can be frittered away in the kaleidoscope, anything-goes, culture of our current times. United’s experience doesn’t just show how far organizations can fall away from even the basics of hard-won good practice, developed over decades, and often born of bitter experience, it shows that organizations today are being forced to have their customer relationships mediated in the eco-system of social media that has leveraged word of mouth by factors of thousands or even millions. According to The Times of London on 22 July 2009, under the title: ‘Revenge is best served cold – on You Tube’, United’s share price plunged 10%, wiping $180 million off its value as a result of this colossal service failure. This is equivalent to well over 50,000 replacement guitars for Dave Carroll.

Companies both large and small and in all sectors of our economy are trying to find ways to harness social media for marketing communications, but they should heed that old adage from the Indian sub-continent: ‘He who rides the tiger is afraid to get off’. They must wake up to the downside of what it means to ride roughshod through their customers’ needs and rights.

Poor or nonexistent service can result in reputations that have taken years to build being destroyed in days through the power and reach of the connector-hubs of the internet social networks. It is often said that we live in a small world: today, it is a frighteningly small world.

Notes

1  For the full story and to view the video, go to http://www.davecarrollmusic.com/ubg/

2  For the full story and to view the video, go to http://www.davecarrollmusic.com/ubg/

3  For a spoof response by United, visit this YouTube link: http://www.youtube.com/watch?v=xDoSFqqL4WI&feature=related

4  Milgram was also influenced by the events of the Holocaust and sought to prove the relationship between obedience and authority. He is famous for his highly controversial experiments in the early 1970s in which he demonstrated that human beings were able to dissociate themselves from the consequences of their actions. He devised a method whereby he was able to get people to administer apparently lethal but pseudo electric shocks to actors posing as human guinea pigs; all under the orders of his researchers who wore white coats and carried clipboards, thereby appearing to be expert and authoritative.

5  Dunbar, R. (1992) Neocortex size as a constraint on groups size in primates. Journal of Human Evolution 20, 469–93.

6  Gladwell, M. (2000) The Tipping Point: How Little Things Can Make a Big Difference. Abacus. London.

7  Granovetter, M. (1973) The Strength of Weak Ties American Journal of Sociology, Vol. 78, Issue 6, May 1973, pp. 1360–1380.

8  Barabási, Albert-László (2002) Linked: How Everything is Connected to Everything Else and What it Means for Everyday Life. Plume, Penguin Group (USA).

9  The celebrated example of ‘United Breaks Guitars’ has an ever growing list of viewers on YouTube. Two years after it was published, the hit count stands at over 12.3 million and rising steadily.

2

CUSTOMER SATISFACTION AND ITS LINK TO PROFIT

On the BBC News website of 28 May 2010, reporter Lucy Rodgers1 published an article entitled ‘Retailer W H Smith is ranked joint bottom in a customer satisfaction poll by consumer watchdog Which? So has the former High Street favourite fallen out of favour?’ Apparently the consumer organization had named the company worst for service and quality alongside Currys.digital with a 48% customer satisfaction score2. A comment left on the BBC site by a reader said this:

‘Smith’s [sic] can’t compete on price so has to compete on service but it doesn’t. It used to do so; only a couple of years ago I sent a letter of praise about a particular assistant in a local branch to their manager but sadly that assistant has now gone (as has her welcoming smile and her small-talk which was friendly and not intrusive). This has been replaced with ‘bargain offers’ on chocolate bars and a charge on wrapping purchases. The latter is only a small fee but if it’s raining outside I want my newspaper to stay dry and in any case if I’ve just spent £18.99 on a hardback book I want it protected from knocks & dirt. It’s a cheap way to treat loyal customers – so like many others I’m no longer loyal and increasingly do most of my shopping for books, music & DVDs online.’

(Leigh Williams, Buckinghamshire, UK)

This is damning stuff for a long-established British firm: a household name, that was founded 218 years ago and built its reputation over 200 years to become a high street name equal to the best, and it serves to illustrate how easy it is to lose sight of core values in the pursuit of profit under a narrow strategy whilst ignoring the enormous value of serving and satisfying the customer.

Some years ago, the United States Chamber of Commerce3 carried out a survey that sent shock waves through the business world. It showed that, of all the customers an organization loses, 1% die, 3% move away to another town, 5% develop other business transactions, 9% move to another product because of a recommendation, 14% defect because they are dissatisfied with the product or service, but a staggering 68% go elsewhere because they feel the business is indifferent to their needs.4

That consumers form opinions and make judgements about an organization based on the employees with whom they interact is just a simple truth. Psychologists know that humans are stimulated by the offer of attention and become much more vulnerable to false messages if the person they are dealing with is not attentive to them and focused on their needs.

The process is packed with all the basic issues that exist in human relationships and interactions and, in a world dominated by technology that is creating ever more distance between the organization and the customer, getting this right is more important than ever before. People do business with people, after all. Customer service is about how the customer experience is dramatized: how it is acted out on the stage of the customer interface.

Non-Rational Man

Economists study the behaviour of people through the lens of their economic behaviour. However, economics has at its heart a flawed assumption: that people behave rationally in markets; in particular, that their behaviour will always be directed ultimately toward wealth maximization given the availability of perfect information and low transaction costs. So-called Economic Man is deemed to be a rational calculator of his economic self-interest: a wealth-maximizing robot acting rationally and only for maximum economic utility. Not so. Marketers have know this for years in their appeals to the emotional aspect of the buying decision process.

Daniel Kahneman is 2002 Nobel Laureate in Economic Sciences for having integrated insights from psychological research into economic science. He is also co-recipient of the 2002 Bank of Sweden Prize in Economic Sciences in memory of Alfred Nobel, and he points out how judgements and decisions of individuals in uncertain situations can systematically depart from the common assumptions and predictions of traditional economic theory.