THE I AND THOU: AN ORGANIZATIONAL DEVELOPMENT PHILOSOPHY FOR CREATING CUSTOMER CENTERED AND MARKET DIRECTED FIRM

In today's business world, there is a increasing recognition of the need to be customer focused and market directed. This recognition requires an expanded definition of marketing and service. This involves focusing on customers, word-of-mouth communications, and matching an organization's image with its reality. It requires involving customers in the development of products and services. Firms can no longer dictate customer needs. This strategy goes beyond the usual desire to satisfy customers. It suggests a total transformation in a firm's process, culture and philosophy. Executive management and their associates must transform their mind set from seeing customers as statistics on a report, to a unique person with the freedom to choose the firm that meets their needs, wants, desires and values.

Unforunately, many firms engage in image marketing, presenting consumers with advertising based on fantasy. For example, a commercial suggests that a health care center provides personal, caring attention when in fact doctors, nurses and other staff personnel are overworked, operations and tests are performed when patients don't need them.

Consumers are aware of image marketing and tend not to be influenced by it. A 1967 study by the the Harvard Business School found that 53% of respondents believe advertisements do not present a true picture of products. A 1989 survey by the Roper Organization found that that the difference between perception of responsibility and fullfillment with respect to honest advertising was -28%. In MANAGEMENT IN SMALL DOSES, Russell Ackoff points out that very few firms measure the effectiveness of their advertising. And if they did, they would discover that it makes little difference in overall sales effectiveness. In THE REGIS TOUCH, marketing consultant Regis McKenna states: "Increasingly, people are skeptical of what they read or see in advertising. I often tell my clients that advertising has a built-in discount factor....People are more likely to make decisions based on what they hear directly from other people-friends, experts, or even salespersons."

Dr. Julian Simon in his book, ISSUES IN THE ECONOMICS OF ADVERTISING, says: "There is not single piece of strong evidence to support the general belief that increasing returns exist in advertising...there are a great many studies that show diminishing returns..." Contrary to conventional thought that such advertising enhances sales, both Ackoff and Simon indicate that long term continuous advertising is not an effective marketing strategy.

What can a firm do? The answer is that the organization needs to become customer focused. Customer focus is not the same as customer service. Customer focus involves being customer and market driven. It involves the total organization. A Customer Focus Research Study conducted by the Forum Corporation indicates that customer service involves the totality of the customer's experience with a company.

Forum found that customers can see through image building marketing. Incorporated into this study was research undertaken by Texas A & M University showing that complete service quality involves five factors: (1) reliability, (2) assurance, (3) empathy, (4) responsiveness and (5) tangibles. Tangible factors were least important in predicting overall service quality. Cost was not a major factor affecting a customer's decision to purchase a product or service or to switch to a competitor. The study found that the most important factors were responsiveness, reliability, empathy and assurance.

Research suggests satisfied customers aren't necessarily retained customers. Xerox found, for example, "totally satisfied" customers were six times as likely to purchase products over eighteen months as satisfied ones.

The problem with most firms is that they are not necessarily customer focused and market driven. A study by the Sandy Corporation of senior executives of service firms found that they preceived customer service to be the responsibility of one department. The study also found that the majority of the organization did not use customer surveys. The executive's tended to preceive customer service as a series of programs and not as a paradigm for guiding their organization.

The problem for most firms is that these factors are alien to the traditions of management and organizational efficiency. For example, emphathy can be simply described as the ability to "walk a mile in another shoes." Empathy involves being in the "here and now," focusing on process and not content, being nonjudgemental and being reflective and mirroring. Empathy requires one to have the ability preceive another's experience and to communicate it back to him or her. Empathy also requires self-awareness. Empathy is at odds with the managerial functions of influecing, motivating, persuding, controlling directing and analytical thinking. Empathy is also at odds with the notions of scientic management. Empathy can not be measured, rationalized or programmed into a routine.

They are also alien to "power games" and the "me-centerness" of most enterprises. A commentary by the executive director of a professional association focused on "me" issues, "power games" and to a limited extent, staff issues. Improving the association for its members, customers, was without mention.

A firm can create a customer focused organizations. Our approach is based on the idea of creating an "I and Thou" relationship between customers and the organization. This is a very simple concept that people tend not to use. The basic idea is that people treat each other in either an "I and Thou" or an "I and It" fashion.

In an "I and It" relationship, the other person is treated like he or she is an object. For example, a person is transformed into a sale. "I and It" people talk at and down to others. An example is the use of advertising. Advertising is a one way message. They don't listen. The American auto industry was an example in the 1960s. They seek to be the center of attention, and think that everyone is either like them or should be like them. Steve Jobs attempt to impose the Macintosh on the businessworld is an example. They are constantly imposing on others. They communicate to influence and not to learn. An example is the firm that tells its existing and potential customers that they have a high level of customer service because they have received a certain award or have certain programs. This ignores the fact that service quality is based entirely on the customer preceptions. They are not empathic. They are, "sensitive/insensitive people." They are very touchy about the actions of others towards them and about their own moods and feelings. However, they are insensitive towards other's needs and desires. In the RECKENING, Hasben. discusses how Henry Ford II and Lee I. were very touchy about other's comments to them. However, they were very insensitive to the needs and wants of others.

There are two forms of "I and It" organizations: (1) Product driven and (2) Sales Driven. Product driven organizations tend to have an "I and It" relationships with their customers and stakeholders. Techsonic Industries, Inc. was an example. Techsonic was founded by a person who understood the needs of fishermen. He created a product called the Super 60, a sonar fish finder. This product was the growth driver of the firm. After the founder death, maqnagement decided that they needed to grow the enterprise. There strategy was new product development. Their only mistake was the assumption that if they developed a product that customers would purchase them. They didn't take the time or devote the resources to asking customer what they wanted. The result of this "I and It", product orientation was six unsuccessful products.

Sales driven organizations are also"I and It" organizations. The focus of a sales driven organization is not meeting customer needs. the emphasis is on making the sale. A classical example is IBM. It's selling the customer the organizations product or service. While IBM has been presented as being customer oriented, a closer examination inidcates that it is sales driven. The central purpose of IBM sales force is to sell its products. IBM has emphasized the sale pitch, relationships with customers and FUD. IBM has tended to be unconcerned with providing customers with the best products. Top management has risen from the ranks of the sales force. Sale people tend to have short time horizans. They are not strategic thinkers. They tend to lack an interest in innovation. The result is that increasingly sophicated customers are turning to other firms. Customer are interested firms that will adapt their technology to meet their needs.

"I and Thou" firms are customer centered and market directed. They recognize that they can not serve everyone. They define who their customer is. An example is SAS's focus on businesspersons. This definition allowed them to focus their energies. It also allowed SAS to make a long term commitment to the business traveler.

The "I and Thou" firms treats each customer as an important being. First of all, they talk with customers in a knowledgeable fashion. One specialized book distributor, YES Books, customer service manager reads the books offered by the firm. She is able to talk with customers about their interests and suggest other books that might be of value. She is knowledgeable about their interests. She loves to read. She is also truly interested in the topics from which the firm sells books. L.L. Bean, a catalog retailing firm, encourages associates to use its products. The firm allows associates to check out it equipment and use it for free. Sun's "selling engineer to engineer" is another example of talking with customers.

They respect each person as a unique individual. They ask questions, listen to the response, provide feedback and take action. They are sensitive to customers. Their image is also their reality. An example is Stew Leonard. Each week Stew Leonard's conducts focus groups with its customers. Suggestions presented by customers are implemented. Daniel Smith, Inc., a mail-order art supply firm, also illustrates this point. Customers complained that the firms use of styroform peanuts in shipping products had a negative impact on the environment. The firm changed its shipping materials to a substance that would not damage the environment. Dell Computer Corporation builds computers to exact specifications of customers, and also provides rapid delivery.

"I and Thou" firms are not pushovers. They recognize there are people who aren't going to be "good customers." They are sensitive to such people. They stand their ground. However, this does not cause them to create policies and procedures that affect all customers. An example is Wal Mart's policy that allows a customer to return an item without question. Wal Mart recognizes that while a few individuals may take advantage of this policy that the majority of its customers are "good people" who will not.

The "I and Thou" firm invests towards its customers. Major financial decisions are decided on the basis of how they will benefit customers. They are not concerned about investing their resources towards customer improvement activities even in times of when revenues are declining. An example is SAS' investment of $45 million dollars when the firm was suffering from a decline in profitability. The result was impressive. SAS was profitable the same year.

Some customer centered firms do not set traditional financial and sales goals because they are only concerned with serving customers. They recognize that growth goals can become ends in and of themselves. Market potential is sometimes overlooked. Meeting arbitrary sales qoutas are the management-by-objectives used to measure results and compensate associates. Overachieving the quota one year can make the bogie more difficult more difficult the next year. Achievement is penalized because personal goals and corporate goals are in direct conflict. Appropriate risk taking is not rewarded. "I and Thou" firms are vision, innovation, customer centered and market driven. These are the sources of growth, not sales and financial projections. They focus on meeting customer needs and just not making a sale. Cray Computer does not set growth goals because its CEO John Rollwagen thinks they lead to bad decision and an emphasis on filling the gap between what is and what should be. Rollwagen's focus is on finding new solutions to customer problems and new ideas.

CEO Thomas Moser of Cabinetmakers believes in meeting customer needs and not just making a sale. Moser has developed an network of associates to whom he can refer customers, who will meet their needs when his firm can not. He believes that when you show customers you care about them and not just in making a sale, they will return.

"I and Thou" firms also recognize the importance of innovation. They recognize that customers needs are constantly changing and that customer need innovative solutions to their problems. In fact, research by Eric Von Hippel presented in The Sources of Innovation on the sources of innovation indicate that in certain industries approximately 80% of new developments are customer based.

Innovation goes beyond the firm's services and products. It also involves creative ways for meeting changes in the marketplace. Customer centered enterprises recognize customers are constantly changing. For example, the elderly population is increasing. Ken Dychtwald, an expert on aging, points out that few firms have taken this change into account in their services and products. There is also a growing number of Asians and Hispanics, but few American firms have attempted to meet the needs of these new Americans. There are exceptions. For example, CEO Ron Greenspan, a San Francisco VW dealer, has designed his marketing to the needs of Asian Americans. Among other things, he conducts "Asian Sensitivity Training."

"I and Thou" firms also recognize that innovation involves developing products and services that customers have never thought about. Tandem has created the Tandem Executive Institute to learn about its customers future needs. In its sessions, customers, Tandem associates and outside experts explore the future. Tandem employs the knowledge created from these session to develop new products.

Innovation is not limited to technology. Stew Leonard has supported innovation. An example is Bethy's Bakery. This idea began as an experiment in one of the firm's stores. SAS has also supported innovation in both its strategies for serving customer and in the ways it manages. Employees have been supported in developing and implementing innovative ways for serving customers.

Being customer centered and market directed does not imply that the firm focuses on customers at the expense of other stakeholders. "I and Thou" firms recognize that the interest of customers are best served when the organization takes care of its members and other stakeholders.

Jack Stack, CEO of Springfield Manufacturing, illustrates this philosophy when he states that if a firm is to serve its customers, it must take care of itself first. Stack clarifies this principle by stating that a firm must devote resources to development, learning, equipment, community creation and celebration. He also states that having fun and being happy are important values for producing high quality products.

"I and Thou" firms consider their customers and stakeholders in a broader context than producer-consumer, management-employee and supplier-contractor. They recognize the importance of being socially responsible and contributing to the quality of life. For example, Applied Energy Services, a firm which owns and operates power plants, is involved in a tree planting project with the World Resource Institute and Care. CEO Roger Sant recognized that his firm contributes to the world's environmental problems. He decided to take action before being required to by the government.

Now let's consider the process for changing to an "I and Thou" firm. The first step is to create a vision. Vision defines the end state to be created. To this end, vision answers questions about the purposes of the firm and how it will interact with its customers in an "I and Thou" fashion.

One test of an "I and Thou" vision is asking one's self how he or she would feel being served by the firm created by this vision. Another test is to compare the vision with Maslow's B-Values: truth, beauty, self-sufficiency, wholeness, aliveness, uniqueness, perfection, necessity, completion, justice, order, simplicity, richness, effortlessness and playfulness.

The vision provides the firm with a "value direction." The firm has a set of defines values which directs its interactions with customers. An example is United Research Corporation. United Research Corporation has defined a series of guiding principles and values which are communicated to customers and associates. Customers are asked whether or not the firm is living it values through a process called "Partners In Quality."

Who should create the Vision? Since the object is to create an "I and Thou" state, everyone associated with the firm should have input. Dialogues with stakeholders will serve to attain this end.

The next phase involves learning the present state of an organization with respect to its customers. The purpose of the learning is to discover the gap between the "I and Thou" vision and the present state. To achieve this end, the technique of the Lone Ranger who sent Tonto ahead to scout the territory can be used. Executives need to dispatch scouts to explore their customers. Scouts are like the "away teams" in the TV series Star Trek. They are not "probes" which are machines sending back data. Scouts should be employed to facilitate internal and external dialogues. They should also play the role of the "court jester," questioning the current state of affairs.

Scouts can be sent out from all levels of the organization. For example, Chaparral Steel uses its first line supervisors as scouts. They are given regular sabbaticals so they can explore other plants, new technology and visit customers. Apple Computer's scouting teams discovered the "mouse" and the emerging desktop publishing market.

Learning with customer should not be considered a one shot affair. The scouting should be conducted on a continuing basis. This will allow organizational members to stay in tune with customers and the market over time.

The organization needs to engage in systems redesign at all levels. A new vision requires changes in the ways things are done. What was useful in the past may not be relevant in the present. Becoming a customer centered and market directed organization will involve major changes in people and business processes.

Once the vision has been created and communicated, the first step is to gather the members of the organization and its stakeholders together and study the structure roles, rules, positions, norms, values policies, programs and services. This group also needs to rethink and ultimately transform their beliefs and assumptions about the the nature of management, purposes of work, the value and effectiveness of technology.

The second step is to discuss what needs to be transformed. In Productive Workplaces, Marvin Weisbord provides a few helpful hints for a group engaged in this process: (1) get rid of dumb jobs and create positions that have dignity and meaning, (2) create a learning environment and (3) technology should allow people to express their creativity to better serve customers. Finally, he emphasizes the importance of being aware of the whole system and creating a movie, not snapshots of how work is to be organized.

The third step is to create the new system. The best approach is to empower functionally integrated project teams to develop an organizational system and operational processes that actualize the vision. Nothing should be considered sacred. For example, the redesign might point out that corporate jets and executive dining rooms add no real value to customers.

Finally, a plan of action to implement the new state needs to be developed. It should be simple and developed by the participants. Review sessions should take place to monitor progress and make modifications when necessary. A transition manager or steering committee can lead the transition from the old to new state.

Both the CEO and the firm needs to take meaningful actions supporting the change. A CEO has a wide variety of simple tools that will express support for the change. These include personal appearances, public statements, physical settings, and the staffing of his or her organization. The CEO serves as the role model. Carlzon supported a large financial investment in customer service. He reduced the market survey department and gave frontline employees the responsibility of discovering customer needs.

The CEO can also use storytelling. The CEO of one motor manufacturing firm continuously tells the following story to reinforce the importance of customers. The CEO went from department to department asking the members if they received checks. Each department said no, with the exception of the accounting department which receives checks from customers. The moral of the story is that only customers send us money.

The new way of life also needs to be celebrated. Carlzon held a party for all the members of Linjefly to celebrate their successful transformation to a customer driven organization. All the organization's members attended the celebration.This event symbolized the importance of the total organization in serving customers and implementing the change. The above organizational rituals need to be repeated periodically to keep momentum and to make continuous improvement a way of life.

Historically, businesses have developed products and services in a standardized, impersonal and mass production fashion. They focused on the competition and used advertising to indoctrinate customers. But today's challenge is to create a new breed of business that focuses on customer needs and creating unique services to meet these needs. These firms will allow employees to create systems that support the customer and the business. The complexion of American enterprise is evolving towards "newstreams" and mid-size companies who are willing to partner with the customer. In the Age of Choice; innovation and timeliness will be the keys to the growth of our economy. If existing businesses don't meet this challenge, foreign firms will.

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