I have long been fascinated by how good, maybe even great companies can fall flat on their face. In spite of a strong market position. Enviable customers. Decent products. And the considered advice and strategy of internal executives and often high priced outside experts. And yet they flop. They go from great to gone in just one generation.
Sometimes there is an unavoidable external factor. Sometimes there is catastrophic mismanagement. But those instances are rare. More often, businesses fail because their customers evolve and the business doesn’t.
The BBC recently commented on the precipitous decline of Sears. The retailer, where America once shopped, had as many as 3,500 stores on the main streets of America. This year, that number has declined by 85% to just 570 stories. No one can say when–or if–the decline will stop. Sears, J.C. Penney, K-Mart, Montgomery Ward, and others were casualties of an America that moved on without them.
To a greater or lesser extent, this happens to many businesses. They wake up one morning to find that a supposedly good customer has been lost. Perhaps they go to a direct competitor or an alternative solution. But a consistent thread is that the incumbents are almost always surprised and rarely actually understand why the customer left.
This is why I believe that one of the most important steps that any business, large or small, can take is to figure out how to bring the voice of the customer into their decision-making in as honest and unvarnished a manner as possible.
You might ask, “doesn’t this always happen?” The answer is no. Although many companies send out web surveys and emails asking “how did the we do?”, the reality is that very little customer input finds its way into the decision-making process.
There are three reasons why businesses don’t hear their customers:
- They don’t ask the right questions
- They don’t talk to ALL of the customers
- Management twists the finding to suit their own narrative
Let’s look at these problems one by one.
Not asking the right questions
There is an old research canard that “people use research like drunks use a lamp post, more for support than illumination”. I believe that’s true. Research projects are designed to help people earn their bonuses. They often avoid asking questions that will unearth bad facts. Also, many companies infer that continued usage implies loyalty. Jim Minervino, a former head of research at Microsoft, made a great observation. He suggested that companies drill deep on the difference between active brand loyalty—I am advocate for the brand— and passive loyalty where one just expects to use the brand again.
Not talking to ALL of the customers
Clay Christensen captured a great truth when he said that successful companies regularly disenfranchise customers in the process of optimizing their business. It is these disenfranchised customers that are typically the entry point for disruptive competitors. Titanic changes such as the rise of the PC were ushered in by unhappy users that were ignored by big computer companies. Plus executives like to talk to people that are like them and speak their same language.
Management twists the findings
People work to keep their jobs and collect their bonuses. I have seen executives ignore or even bury threatening data rather than be forced to confront and act upon it. It’s human nature to kick the can down the road. Some one or some group (maybe the CEO or board of directors) needs to look out for the long term interest of the business. They need to demand the truth.
Think about Theranos. Their board not only supported their CEO in committing a fraud, they persisted in defending her. The product NEVER worked and they lied about it. The checks and balances failed badly.
Not listening to customers opens the door to disaster
Good businesses can only make good decisions based on good data. Failing to listen to the voice of the customer opens the door to disaster by disruption.