Category Archives: Silos

Can Nokia regain its customers and former glory?


As Nokia’s new chief executive, Stephen Elop, took over in September 2010, he faced a formidable task: to regain the company’s lost ground in the smartphone segment of the global phone market, especially in the United States, while maintaining its worldwide dominance as the largest maker of mobile phones.

His biggest obstacle, according to Mr. Hakkarainen, a former manager responsible for marketing on the development team, as well as two other former employees and industry analysts, may well be Nokia’s stifling bureaucratic culture. In interviews, Mr. Hakkarainen and the other former employees depicted an organization so swollen by its early success that it grew complacent, slow and removed from consumer desires.

“Nokia in a sense is a victim of its own success,” said Jyrki Ali-Yrkko, an economist at the private Research Institute of the Finnish Economy. “It stayed with its playbook too long and didn’t change with the times. Now it’s time to make changes.”

Elop’s assessment of Nokia in February 2011:

“We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind.
“There is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.”
“The Shenzhen region of China is able to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally – taking share from us in emerging markets.”
“Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem.”
“We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally”

During the last 2 years Elop has swept away many layers of Nokia’s previous organisational structure. He has refocused the business on leadership (managers taking decisions and responsibility) and markets (innovation driven by people competing in key mobile phone segments). Decision-making has been delegated to local/national teams rather than relying on decisions by an overly-centralized senior management team. Goals and incentives for the senior leadership team are now more transparent. The new strategy brings clarity and a sense of direction to Nokia.

Nokia’s recently launched new 620, 820 and 920 Lumia Windows 8 smart phone range has succeeded in garnering generally positive reviews. It is changing the perception that the embattled company may yet regain its former glory as the world’s premier mobile phone maker says Ray Shaw who provides a review of the pros and cons of Nokia phones compared with its rivals.

But will this be enough? In order to survive and prosper against Apple and Samsung in the smartphone market, Nokia will need a customer-focused culture throughout its entire business (not just at the front end) to drive innovation and sustained growth and profitability. This requires embedded behavior change that goes beyond restructuring, beyond a refocused strategy and beyond decentralized decision making. It requires a completely new mindset where there is an understanding and belief, translated into behavior, that’s what is best for the customer is best for the business.

Imagine your business faces the challenges that Nokia faces. What would your priorities be?

Customer Metrics: Measure what matters most to customers

Key Customer Metrics

As business leaders we tend to pay a lot of attention to the metrics important to the business, that is, revenue, cash flow, profitability, growth and so on… but the real drivers of these business outcomes are customers.

So the obvious question becomes what customer metrics should I be tracking to make sure my business metrics continue to head in the right direction?

Well there are a number of key customer metrics that must be considered for every business:

1. Customer Satisfaction

As a first step it is important to track customer satisfaction, this will provide some inputs as to how well the business is performing on delivering what it promises. But remember customers have already paid for satisfaction, they expect to get what they paid for. So high levels of dissatisfaction are an obvious and immediate cause for concern.

Satisfaction is not enough, even highly satisfied customers can and do switch to alternatives so it is important to also look at Loyalty and Advocacy. That brings me to the next question (Fred Reinhold calls the “Ultimate Question“) How likely are you to recommend us? Loyal customers not only bring you repeat business, they also expand your customer base through positive word-of-mouth.

2.Net Promoter Score

The net promoter score is a simple tool designed to identify 3 types of customers, promoters (advocates with strong positive word of mouth),  detractors (negative word of mouth) and those in the middle. The goal is to drive up the number of promoters as a way of driving business growth.

Many of the most customer-focused businesses in the world use NPS, see below a list of the current top 10 Netpromoter scores in the US:

USAA – Banking = 87%
Trader Joe’s = 82%
Wegman’s = 78%
USAA – Homeowners Insurance = 78%
Costco = 77%
USAA – Auto Insurance = 73%
Apple = 72%
Publix = 72% = 70%
Kohl’s = 70%

Source: Satmatrix

3. Customer Value Analysis

This is a more advanced metric specifically looking at the value a customer places on what you offer. Value consists of an equation that includes CUSTOMER PERCEPTIONS  of price,  service and product quality. Customer value analysis looks directly at how customers view your business vs. your competition and provides you with valuable information on what you might need to adjust in terms of both product and service quality, as well as price, to increase market share and revenue.

4. Life Time Value of Customers

I talk about this in some more detail in these two posts:

Part 1: Understanding Lifetime Value of Customers

Part 2: Calculating Lifetime Value of Customers – a simple example

Something not covered however was some of the inputs to Customer Lifetime Value which in themselves are useful metrics:

Customer Acquisition metrics include customer awareness levels, the information sources customer use to make purchase decisions, and cost of acquiring a customer.

Churn (%)  measures how many customers are leaving, that is, customer attrition.  Churn is a commonly used metric related to customer retention. Specifically, this is about knowing how many customers are defecting and why.

Customer Complaints are usually an early warning signal that something is wrong. Most customers will not complain they will just take their business elsewhere. Complaints although often difficult to hear are a gift that can help course correct.

5. Your own Customer Culture

How customer obsessed is your organization? How would you know?

This is the question we received from a CEO of a Global 1000 company a number of years ago. It led us to the development of the Market Responsiveness Index (MRI) to answer that very question.

This is an organization-wide metric design to measure the behavior of employees and the level of attention they pay to customers in their daily work.

It is a one of a kind tool that allows you to benchmark your company versus the best in the world, you can check it out here.

What Criteria should I use when deciding on Customer Metrics?

  1. The metric drives business results
  2. The metric correlates strongly with business results
  3. The metric is something you can influence
  4. The metric can be measured accurately
  5. The metric can be measured consistently
  6. The metric can be measured cost effectively
  7. All the stakeholders agree the metrics meet these criteria

Ultimately you want to choose the right metrics for your specific business, they should be tailored to the unique business drivers and business strategy.

Why implement customer metrics?

Tracking customer metrics is important for many reasons, but the most important reason is cultural. It gets everyone on the same page, aligns people across the different parts of the business, and leads to a customer-focused culture of success. You should celebrate wins when a key customer metric reaches a new and important milestone. Choosing the right metrics and celebrating progress against them are incredibly important to building a strong customer culture that can work together and grow rapidly.

What customer metrics are you using?

Breaking down silos – one of the keys to creating collaboration around the customer

Is your leadership team really a team or a collection of individuals running their own teams?

When the team at the top of the organization is fragmented and mis-aligned this trickles down to everyone in the company. If the hard discussions and debates related to what customer focus means for the organization are not taken at the top, confusion reins.

Ultimately there is only one customer, the customer external to the company that pays the bills, when silos develop inside organizations these customers have an inconsistent experience at best.

Have you ever had the frustrating experience of being sent from one department to another when contacting an organization? This is often the result of silos that retain the only authority to make decisions related to their turf. This sends a clear message to the customer:

“your time is not important, you have to navigate our systems to get your issues solved.”

This situation is also the result of not having a customer focused culture. One that recognizes ownership, accountability and empowerment are critical to creating loyal customers.

True team work at the top is hard work, it involves the willingness to sacrifice department resources and personal time to help the team overall (the company) succeed. Depending on the company’s strategy it could mean allocating more funds to customer service and less to marketing or more funds to IT and less to HR.

The only way to make these tough decisions effectively is for the top team to collaborate around what is creating most value for the customer in the short and long term.

What GM Couldn’t Learn From Toyota and Why

GM has been losing market share for more than 50 years. It has known about its reliability and quality problems for many years and has not been able to do anything about them.

The source of this story is “This Amercian Life”, here is a quick summary:

“A car plant in Fremont California that might have saved the U.S. car industry. In 1984, General Motors and Toyota opened NUMMI as a joint venture. Toyota showed GM the secrets of its production system: how it made cars of much higher quality and much lower cost than GM achieved. Frank Langfitt explains why GM didn’t learn the lessons – until it was too late.”

There were 16 high potential managers that were sent to NUMMI to learn the lessons and take them to the other GM plants around the country. What they found in the other plants was a corrosive culture so embedded and change resistant that most of them decided to leave GM, the challenge was just too great.

Some of the culture related issues they faced included:

Change resistant – the workers liked things they way they were, they were well paid and did not necessary have to work hard for their compensation, why change?

Seniority – the managers like things the way they were, compensation was linked to a hierarchy and many workers had waited years to be moved into management. When they became managers they did not want to accept any change that may reduce their seniority. More people reporting to them meant more power, Toyota’s team based approach would undermine these hierarchical structures.

Team Work meant telling on each other – there was a perception that team work meant calling out under performers and this was seen as unfair and negative.

GM was very departmentalized (silos) – there was a lack of ownership and connection between individual department success and overall success. When plants tried to implement “Toyota” methods they were not supported by the broader GM organization. GM simply did not understand the deeper system Toyota had developed around the factory floor.

Combative nature of relationships with suppliers. GM was used to aggressively competing with suppliers to get the best terms not working on collaborative solutions where both parties maximized their benefits from the relationship.

GM’s Market share went from 45.5% to 22% over the past 30 years – it was a significant but slow decline that did not generate real urgency. Complacency had set in.

GM’s decline is an incredible example of a corporate culture so internally focused that decline was an inevitable and it seems almost unstoppable.

Was this inevitable? What could have been done to turn the situation around?

The short answer is strong leadership that connected everyone’s role with customers and clearly articulated the individual benefits of being customer focused and market-driven.

Why corporate culture is the canary in the coal mine

In days gone by it was possible for larger businesses to hide their corporate culture from customers. There were less interaction points, no social media, one way communications that could be carefully orchestrated and controlled.

Those days are well and truly behind us, corporate cultures are exposed to the elements and many of them are not pretty. What often stands out to customers is the lack of co-ordination between departments, “am I talking to the same company?”. This is usually the result of a lack of understanding of the real customer experience and how to manage that across multiple departments.

A tool we have developed as an early warning signal (our Canary) for executives is called the “Market Responsiveness Index”

This tool helps executives gain some insight into how the organization’s culture maybe enhancing or hindering its strategy implementation and ability to drive business performance. It specifically addresses collaboration (1 of 7 market-driven behaviors), and allows executives to benchmark their performance against top firms around the globe.

Results indicating issues in collaboration act as a signal and catalyst for executives to address these issues or face the consequential poor business performance.

What is your canary in the coal mine?


For those of you unfamiliar with the term, here is an explanation from WiseGeek:

“Life for an actual canary in a coal mine could be described in three words – short but meaningful. Early coal mines did not feature ventilation systems, so miners would routinely bring a caged canary into new coal seams. Canaries are especially sensitive to methane and carbon monoxide, which made them ideal for detecting any dangerous gas build-ups. As long as the canary in a coal mine kept singing, the miners knew their air supply was safe. A dead canary in a coal mine signalled an immediate evacuation.”

Why Toyota needs to refresh its culture

Toyota is headline news this week for all the wrong reasons. It is accused of putting profit ahead of people, not just people but customers and their safety, the ultimate business sin. It has been described as slow moving, secretive and perceived as trying to cover up problems rather than address them head on.

It points to a number of cultural problems that appear to have developed as Toyota has grown aggressively on the back of what has been a very successful market-driven strategy which involved putting customers at the center of their business and constantly innovating and improving quality. In fact Toyota has been until very recently held up as a great example of what the Detroit manufacturers should have been doing all these years.

So what went wrong?

At some stage poor decisions have been made that have resulted in a very serious problem developing known as unintended sudden acceleration (Lawyers even have a website dedicated to the problem….). What happened at Toyota to create the environment that made those decisions possible? Was there a subtle shift in the focus from customer first to growth/be number 1 in car sales? Did this cause additional pressure to cut costs to reach price points that would drive volume?

We won’t know for sure but certainly something has gone wrong in a major way and it has been going wrong for a number of years by the many accounts from customers of these problems surfacing as long as 2006/2007 see this video testimony from a Lexus customer today

CEO, Toyoda will need to redouble efforts to revitalize Toyota’s old strong customer first culture to make sure he does not reinforce the culture that created these unprecedented (for Toyota) and very damaging customer and PR issues.

Will Toyota survive? Will it still be number 1 in US car sales? Time will tell

Having the best and the brightest employees is not enough: Lessons from Microsoft Image thanks to Seth

I read an interesting article today written by a former Microsoft senior leader describing some of the challenges he observed while at Microsoft and that appear to still exist today.

Microsoft, without doubt is one of the great success stories of the last 25 years, they have a ubiquitous platform and have attracted some incredibly talented and hard working employees. It seems strange then, almost paradoxical, that it has not been able to really innovate since its early days.

Dick explains in his article that Microsoft struggles from significant internal competition that simply slows it down and kills internal innovation.

Ultimately this is a cultural issue, they simply are no longer as market-driven as they once were. The heads of existing businesses simply kill off any internal threats that arise by pulling funding or refusing to support them. Dick sites the example of ClearType a new font that would allow users to more clearly read text on screen and the fact it was not supported by much of the internal leaders despite its clear customer value. The result was it took 10 years to finally get to market…..

If companies like Microsoft want to compete in the future they are going to have to change this culture to allow internal innovation to flourish. Buying small innovative companies won’t work as they will ultimately get eaten up by the Microsoft culture. As we have seen with Apple you can’t buy innovation you need to create the environment for it to happen.

Microsoft its time to become market-driven again!