CHAPTER FOUR – Customer Centric
The younger man took a seat, placed his laptop on the table and immediately went to work. The old man carried two Ventis to the table, placed the jumbo marshmallow alongside the young man’s computer and quietly snapped a photo. The younger man never noticed. The old man fiddled with his cell phone a bit, then turned it off and slipped it into his pocket.
“Take a look at this, Poobah. In the early days of Amazon, back when they were positioning themselves as ‘The World’s Biggest Bookstore,’ Amazon’s employees wrote most of the book reviews. Bezos told his people to be honest about their opinion, so naturally some of the reviews were negative. Bezos recalls getting an angry letter from a book publisher implying that Bezos didn’t understand that his business was to sell books, not trash them. ‘We saw it very differently,’ Bezos says. ‘When I read that letter, I thought, we don’t make money when we sell things. We make money when we help customers make purchasing decisions.’”
“That’s customer centricity, Sunshine.”
The younger man continued to read, “Although it seems counterintuitive on the surface – a little bit insane, even – Bezos knew that making honest reviews available on each product page was the right thing to do for the customer. Today more than half of all retail purchases begin with a visit to Amazon to look at product reviews.”
“Are you saying that Amazon.com has become the primary search engine for consumer product research in America?”
The younger man looked up and locked eyes with his inquisitor as he nodded. Looking back down at his computer screen, he said, “In this 2013 interview with Matt Kelley, Bezos said, ‘If there’s one reason we have done better than our peers in the Internet space over the last six years, it is because we have focused like a laser on customer experience.’”
The old man sipped his coffee. The server at the window caught his eye, then smiled and waved.
“Take a look at this, Poobah.” The younger man spun his laptop around so the old man could see the screen. “The top ten and bottom ten rated public companies in the Customer Experience Index at Forrester Research are called Customer Experience Leaders and Customer Experience Laggards. This chart illustrates the performance of equity-weighted, annually readjusted stock portfolios of Customer Experience Leaders and Laggards relative to the S&P 500 Index.”
“Okay. It looks like this was for the 6-year window from 2007 to 2013.”
“It’s showing us the S & P 500 Index was up 14.5% at the end of those 6 years.”
“But the stock price of the Customer Experience Laggards was down – minus 33.9%.”
“But take a look at the Customer Experience Leaders, Poobah.”
“Up 43%. So this chart seems to indicate that a company’s stock price falls when they disappoint their customers, but it rises when their customers think they’re awesome.”
“Poobah, that’s a stock price swing of 76.9 percent over a 6 year window.”
“So in the long run it pays to be customer centric,” the old man said with a smile. “Is that what you’re telling me?”
Staring into his computer screen as he typed, the young man said, “Stock price goes up when you’re customer centric. Stock price goes down when you eat the marshmallow.”
Minutes passed. The old man wandered off to the bathroom. When he returned, the younger man was waiting for him. “Poobah, I’m confused.”
“I’m always confused, Sunshine. Don’t worry, you’ll get used to it.”
“I was looking for the kinds of things Bezos might consider to be measurable inputs when I found these analytics used by Amazon’s Category Managers. And as you might expect, every one of the 4 is customer centric.” He spun the laptop around so the old man could see the screen.
Customer Analytics: Selection: 7x the category depth.
Price: 5% to 13% lower than top 5 competitors.
Availability: 20 inventory turns indicate that customers are finding what they want and are pleased with the quickness of delivery. Most orders are delivered from warehouses within the customer’s own zone or a zone directly adjacent.
Experience: 13% above the American Customer Satisfaction Index.’
The younger man asked, “But does this illustrate Customer Centricity or is it the result of Continuous Optimization? Or does it indicate a Culture of Innovation? Or is it Corporate Agility? Inputs that would create those outputs don’t line up under just one pillar of Amazon. They line under up all four.”
The old man stood up as he extended his hand and said, “Congratulations.”
The younger man stood to his feet and shook hand the old man’s hand with a confused smile. The barista was watching from across the room. “You just discovered the power of unifying principles, Sunshine.”
Sitting back down, the younger man said, “Now I’m more confused than ever.”
“As I was saying, you’ll get used to it.”
“How does my inability to categorize these metrics demonstrate the power of unifying principles?”
“Do you remember when I told you about the four unifying principles of George Eastman?”
“Of course I do.”
“Do you remember how I told you those principles helped him choose which path to take when he came to a fork in the road?”
The younger man looked at his notes. “You said, ‘Any time there was a decision to be made, Eastman would choose the solution that best aligned with those four unifying principles.’”
The old man continued, “When your thinking is split into departments and divisions, it’s easy to put things in neat columns. It feels right. It’s tidy and organized. It gives you a way to hold people accountable. It gives you someone to blame.”
The younger man looked at his notes again. “You said, ‘Unifying principles bring all the facets of a business into alignment.’”
“Do you remember what you said in response, Sunshine?”
I said, “Diamonds have facets. Businesses have departments and divisions.” Then the younger man smiled and said, “Businesses that sparkle have facets.”
“You have a bright light bulb hovering in the air above your head right now,” the old man said. “What did you just realize?”
“An option that lines up with two of your unifying principles isn’t as good as an option that lines up with three of them.”
“And an option that lines up with three of them isn’t as good as an option that lines up with four,” said the old man.
“So if the best decisions are the ones that align with all of your unifying principles, the metrics they generate will probably line up under all of your principles as well.” The younger man’s eyes became unfocused. “I get it… I believe I actually get it.”
“Very few people ever do, Sunshine.”
The younger man looked down at his notes. “We look at the numbers to see where we are and where we’ve been. Numbers show us the outcomes of all the decisions we’ve made so far. But they don’t tell us where to go.” Then he looked at the older man. “Unifying principles tell us where to go.”