Giving customers what they want the way they want it often does them no favors. In particular, providing customers immediate gratification often comes at a cost to actual value delivered.  Customer empowerment complicates this issue. Not that I would ever say a bad word about customers (or clients), but they can be incredibly short-sighted at their own expense. Nonetheless, they’re really feeling their oats, and many take an “our way or the highway” stance.

Should we strike a balance between placating/satisfying and delivery maximum value―or go all one way or the other?

The latest McKinsey Quarterly reports new data that should upset those designing organizations and managing operations in O/S (office/service) settings. While manufacturing managed to reduce its expense-to-sales ratio by 2.7% over the past year, despite 90& 0f cost-cutting initiatives failing to last beyond 3 years, the SG&A (sales, general % administration – which is basically front and back offices) remained flat.  And these outcomes defy reason, because office “bloat” is virtually endemic to business and is rarely addressed, while most manufacturing operations had already been streamlined to some degree by year 2000, the starting line for data aggregating.

A quick and spurious retort might be, “Hey, we’re just taking better care of customers.” Wrong. When redesigning office organizations and process Outside-In (starting with customer needs), we routinely find clients can – and should – reduce overall office FTE count by 20%, and often more. All these extra people are standing in the way of delivering what customers want most, second only to quality products backed by quality service – dealing with well-trained, empowered employees. Also, the more hands touching work without adding value the greater the number of “fumbles.”

But those are just the facts (and the McKinsey data is corroborated by heaps of empirical evidence). Whose responsibility is it to streamline O/S workplaces? And considering at least some efforts are underway, why aren’t they improving the overall numbers, which empirical evidence also supports?

Lior Arussy from the Customer Experience side of business just relayed an interesting observation in a Customer Experience Group (Linkedin) post―that executives frequently claim only new organizations can go customer-centric because you can’t change the DNA of more mature companies. He was asking for contrary examples, and I fed him a bunch (Best Buy, UPS, USAA, most upscale hospitality chains). And I actually forgot among the toughest environments for migrating to customer-centricity―retail car dealers―where multiple regional networks have now successfully crossed the threshold from inside-out to Outside-In.

 But Lior’s question started me thinking about commonalities among companies adopting O-I versus starting that way. And after cogitating more than a bit on this question, including revisiting many years’ worth of clients―some who crossed the threshold, others that got part-way before flinching, I believe I did find the “secret sauce:”

The recipe is: one part steely-eyed recognition that customers now hold the upper hand in buyer-seller relationships; one part shrewd assessment of how to take advantage of this customer empowerment; and one part dispassionate willingness to redesign their organizations from top to bottom―and from the customer in―regardless of where the bodies fall (or fly). And BTW, not one ounce of goody-two-shoes empathy for customers. O-I is a cold, calculated business choice for companies that successfully migrate from inside-out to Outside-In.

As business professionals, you must recognize that building and maintaining customer trust creates more value for the corporation than any product or service. That’s particularly true today, in markets with more supply than demand. So I have to assume that the pain you’re inflicting on your health savings account (HSA) customers has escaped your notice. Unfortunately, that represents a severe lack of oversight on your parts.

Recently, I blogged about your failure to provide your customers proper access to their HSA account deposits―and customer inability to reach your HSA department through any communication channel. I titled the blog, “How Do 60 Minute Wait Times & 10% Unemployment Relate?” (http://tinyurl.com/2935azd) to focus on the disconnect between customer service understaffing and the high availability of skilled employees, many desperate for work. While I was using Wells Fargo as a pertinant case example, I intended a broader focus applying to the many other companies are similarly short-changing customers to save money.

However, subsequent communication from other customers plus reflection on past experiences tell me I grossly understated the problem relative to Wells Fargo specifically.

Here’s feedback to the blog I received from other customers:

“Wells Fargo turns its HSA customers off

Believe me, I’m not trying to use Wells Fargo as a whipping boy. But when customer service gets this intolerably bad, someone in San Francisco needs to wake up. Or are they dead?

My wife & I had an HSA (Health Savings Account) with Wells Fargo. I won’t bore you with all the customer-unfriendly stuff they pulled, but recently and for unknown reasons they decided to change our account number and issue a new card with a new PIN, despite our old cards being valid until 2011. Only they sent only my card, without one for my wife. Hey, not more than a minor inconvenience no? No. I tried calling them, got into a waiting queue, and waited and waited and waited. For over an hour.

While I was waiting I tried to reach HSA customer service over the web. You can’t. Then I tried to access general customer service but faced drop down fields for questions giving no appropriate answers. Should I call an HSA account an “auto loan?”Guess where that e-mail would wind up. So I tried their general “call a banker” service for telephone banking. Got through in about 10 minutes. The first question the “banker” asked? “What’s an HSA?” She finally agreed to try contacting HSA service using their internal phone numbers, and I made her promise not to transfer me back into the same queue.

A new McKinsey study reports: “Only 10% of cost-reduction programs sustain their results three years on.” What goes wrong? Two things. Companies either: 1.) ignore process and just cut bodies; or, 2.) redesign “how” work is done for cost-cutting purposes. The first approach should be discussed in a “Dick & Jane” group, not here. The second approach not only ignores the root causes of inefficiency, but it’s like pulling a coiled spring and expecting it to stay extended. Three years to spring back? Lucky if it takes three months. Or three weeks. Or even three days. 

To create lasting change, companies have to remove the spring, not pull on it. By that, I mean they have to change “what” work is being done; “who” functionally is doing it;” yes, “how” it’s done, although that’s not the most important element; and the underlying technology support. Doing all four creates sufficient change to eliminate the “recoil route,” which is essential to avoid reversion. But how does this reduce expense better than making “how” work is done more efficient – in other words, “cutting costs?” 

Companies that achieve a significant measure of Outside-In, customer-centricity are at constant risk of “organizational memory” snapping them back or pulling them back to bad-old company-centric operations. And it’s not just internal organizational memory, but new management only familiar with inside-out settings pulling their function or new companies back inside their individual comfort zone. We just saw that happen with Continental Airline and their new CEO. 

Best Buy is another example. After all their efforts to become customer-centric, they’ve now set draconian (to customers) customer service policies that reek of inside-out. The combination of these “customers-last” policies―plus the Geek Squad, which is becoming a parody of itself―has the potential to eventually unravel all the company’s good O-I work, and if service isn’t turned around it might not take long.

Through my travels across Linkedin groups, I’ve read (and received) innumerable comments saying this approach or activity or that was started by ____________ in year ____ because they wrote about it in their book, “______________.” I even had someone seriously claim our Visual Workflow approach to Outside-In didn’t exist until 2002 because there was no “academic literature” describing the underlying principles until then – despite HYM and others deploying it regularly since 1996 (actually, I had written a book describing the principles in 2000, but that didn’t count because I didn’t write it during my 10 years teaching graduate B-school). These comments come from marketing, HR (and its related components) but especially from process thought leaders regarding the starting points for customer-centric process. 

So here are the real questions:

 If an academic or a process theorist or even a heady practitioner writes about something they can’t make happen at street level with any frequency, should they lay claim to it? If so, I should lay claim to all of Don Peppers and Martha Roger’s work initiating “One-to-One Marketing” in the 1990s, because I’d been writing about it in the 1980s – without, unfortunately, popularizing it.

 Or if someone writes about customer-centricity in a Lean, Six Sigma or LSS book, has customer-centricity been part of that approach since then? 

Hey – I’ve been through this entirely too many times. At the start of the relationship marketing movement; when B2B database marketing got serious; when “micromarketing” started; with TOC (Theory-of-Constraints); and in spades with CRM. All sure bets practitioners could take to the bank. All supposed slam-dunks coopted by parochial economic interests – whether by advertising agencies, media outlets, Six Sigma & Lean, CRM software companies, etc.. Looking back on this history makes me fear O-I is ready for a face-plant.

We’re hearing too much ungrounded exuberance, too many excessive claims, too many ungounded predictions about O-I. And saying that market conditions will force business to go Outside-In ignores history. Let’s face it straight up. O-I will succede if we make it sufficiently attractive to companies, not because the market “forces” companies to go O-I. And accomplishing this will require much more from the O-I community than the community’s yet prepared to give.

We’re changing market phases now from “Innovators” to “Early Adopters.” To get there, we have to do more than prosletyzing the O-I concept. And to reach some of the penetration levels O-I aspires to, we’re going to have to move on to “Early Majority” clients – which will require an execution level the movement’s not yet close to.

To get O-I into the meat of the marketplace, I believe we have to accomplish four, difficult tasks:

We used to be a 100% HP office. Now we’re down to 1 multi-function printer (that we’d ditch if it was used more than once in a blue moon) and an oversized 90 degree pivot monitor (only HP makes them) for process mapping on a vertical screen. Here’s why:

1. HP thinks a B2B customer is a checkbook

2. HP thinks a consumer customer is a credit card

3. Manufacturing quality is in the toilet, making good customer service a must.

4. They develop HORRIBLE software and drivers, making good customer service a must

5. They’ve fired their once excellent U.S. support staff and moved service offshore

6. Now when you call for service you get non-English speakers with bad attitudes (you can’t understand them; they can’t understand you)

7. When you try accessing live chat running IE7 they lock you out, saying you’re using an unauthorized browser (listening, Bill?) 

8. They’ve cut off all channels of communication from customers so CEO Mark Hurd can claim they have no customer complaints

Other than that, HP’s just wunnerful, wunnerful. Actually, it’s the only company I know that can stick up an outhouse.