Question 3
What Does the Customer Value?
Peter F. Drucker
- What do we believe our primary and supporting customers value?
- What knowledge do we need to gain from our customers?
- How will I participate in gaining this knowledge?
The question, What do customers value?—what satisfies their needs, wants, and aspirations—is so complicated that it can only be answered by customers themselves. And the first rule is that there are no irrational customers. Almost without exception, customers behave rationally in terms of their own realities and their own situation. Leadership should not even try to guess at the answers but should always go to the customers in a systematic quest for those answers. I practice this. Each year I personally telephone a random sample of fifty or sixty students who graduated ten years earlier. I ask, “Looking back, what did we contribute in this school? What is still important to you? What should we do better? What should we stop doing?” And believe me, the knowledge I have gained has had a profound influence.
What does the customer value? may be the most important question. Yet it is the one least often asked. Nonprofit leaders tend to answer it for themselves. “It's the quality of our programs. It's the way we improve the community.” People are so convinced they are doing the right things and so committed to their cause that they come to see the institution as an end in itself. But that's a bureaucracy. Instead of asking, “Does it deliver value to our customers?” they ask, “Does it fit our rules?” And that not only inhibits performance but also destroys vision and dedication.
Understand Your Assumptions
My friend Philip Kotler, a professor at Northwestern University, points out that many organizations are very clear about the value they would like to deliver, but they often don't understand that value from the perspective of their customers. They make assumptions based on their own interpretation. So begin with assumptions and find out what you believe your customers value. Then you can compare these beliefs with what customers actually are saying, find the differences, and go on to assess your results.
What Does the Primary Customer Value?
Learning what their primary customers value led to significant change in a homeless shelter. The shelter's existing beliefs about value added up to nutritious meals and clean beds. A series of face-to-face interviews with their homeless customers was arranged, and both board and staff members took part. They found out that yes, the food and beds are appreciated but do little or nothing to satisfy the deep aspiration not to be homeless. The customers said, “We need a place of safety from which to rebuild our lives, a place we can at least temporarily call a real home.” The organization threw out their assumptions and their old rules. They said, “How can we make this shelter a safe haven?” They eliminated the fear that comes with being turned back on the street each morning. They now make it possible to stay at the shelter quite a while, and work with individuals to find out what a rebuilt life means to them and how they can be helped to realize their goal.
The new arrangement also requires more of the customer. Before, it was enough to show up hungry. Now, to get what the customer values most, he must make a commitment. He must work on his problems and plans in order to stay on. The customer's stake in the relationship is greater, as are the organization's results.
What Do Supporting Customers Value?
Your knowledge of what primary customers value is of utmost importance. Yet the reality is, unless you understand equally what supporting customers value, you will not be able to put all the necessary pieces in place for the organization to perform. In social sector organizations there have always been a multitude of supporting customers, in some cases each with a veto power. A school principal has to satisfy teachers, the school board, community partners, the taxpayers, parents, and above all, the primary customer—the young student. The principal has six constituencies, each of which sees the school differently. Each of them is essential, each defines value differently, and each has to be satisfied at least to the point where they don't fire the principal, go on strike, or rebel.
Listen to Your Customers
To formulate a successful plan you will need to understand each of your constituencies' concerns, especially what they consider results in the long term. Integrating what customers value into the institution's plan is almost an architectural process, a structural process. It's not too difficult to do once it's understood, but it's hard work. First, think through what knowledge you need to gain. Then listen to customers, accept what they value as objective fact, and make sure the customer's voice is part of your discussions and decisions, not just during the self-assessment process, but continually.1
What Does the Customer Value?
Jim Kouzes
Everything exemplary leaders do is about creating value for their customers.
That is exactly the perspective Patricia Maryland, now president, Healthcare Operations and COO of Ascension Health, took when she came on board as president of Sinai-Grace Hospital in Detroit, Michigan. When Maryland arrived, she found a hospital in distress. Sinai-Grace was the one hospital remaining after a series of mergers, and all the “slashing and burning” had left the staff feeling angry and distrustful. But even after all the cuts, the hospital was still losing money. Sinai-Grace was an organization not only looking for new leadership but also searching for a new identity.
One of the first things Maryland noticed was that employees mostly related to the way things had been done in the past and that breaking this deep-seated paradigm would be one of the first tasks she and her team needed to tackle. For example, one obvious challenge was the long waits that patients—the hospital's customers—experienced in the emergency room (ER). “When I first came here, it took people an average of 8 hours to be seen and admitted to a hospital bed,” Maryland said, “and this was clearly unacceptable.”
Another challenge was the way the community perceived the hospital. According to Maryland, there were individuals who lived within a block of us who tended to go to other hospitals. It was clear that the physical environment was a big part of the problem. These long-standing and accepted issues demanded immediate action, and resolving them required experimenting with fundamentally new approaches.
To address the unacceptable ER wait times, the team challenged the hospital's traditional departmental structure. A separate area for chest pain patients was created so patients would be triaged immediately, and the urgent care population was moved to another area called Express Care. In Express Care, the hospital built examination rooms with walls, improving privacy and confidentiality. These simple changes reduced wait time by more than 75 percent.
Building on this success was a $100,000 foundation grant to upgrade hospital decor. Fresh paint, new carpets, and new furniture can do wonders for the morale of both patients and staff. Doctors donated artwork, and the environment took an immediate turn for the better, beginning to look like a contemporary medical center. “I really felt it was important to create an environment here that was warm, that was embracing, that would allow patients coming in the door to feel some level of trust and comfort,” Maryland explained.
The staff was also challenged to look at the way they related to patients: “If this was your mother or your father, how would you work with them? How would you talk to them? How would you feel if someone was cold, unfriendly, and treated you like you're a piece of machinery rather than a human being?”
These first few changes at Sinai-Grace Hospital started an outstanding turnaround. Customer service scores went up dramatically—from mostly 1s and 2s on a 5-point scale to mostly 4s and 5s. Today staff morale is high, and there's a new vitality and enthusiasm at Sinai-Grace. And the hospital is now doing quite well financially. Most important, said Maryland, “There's confidence from the community, and they are feeling more comfortable coming back here.”
An unyielding commitment to listening to and creating value for the customer drove all these improvements. It was Maryland's dedication to first understanding how the hospital's customers experienced Sinai-Grace and then responding to their needs—and enabling staff to do the same—that supported each innovation to restore the health and well-being of the organization and the morale and pride of the staff. All of this was possible because the entire team, with Maryland leading from the front, not pushing from the back, had one fundamental purpose in mind: to create extraordinary value for the customer.
So, what does the customer value? Clearly customers value an organization that seeks their feedback and that is capable of solving their problems and meeting their needs. But I would also venture to guess that customers value a leader and a team who have the ability to listen and the courage to challenge the business-as-usual environment, all in service of the yearnings of the customer.
Creating Customer Value: How Well Is Your Brand Helping Customers?
Michael and Kass Lazerow
Welcome to the customer revolution, where you are no longer in charge.
Social networks, mobile devices, connected products, and cloud computing have forever changed your relationship with your customers and potential customers.
The customer revolution is a radical shift of power from companies to their connected customers. Armed with one's phone, the power and influence of each customer is contained only by the size and influence of his or her network.
The customer revolution is a quiet revolution. Billions of people influence their family, friends, and colleagues seamlessly thanks to text messages, Facebook, Twitter, Pinterest, and other social apps.
Companies that ride this revolution will thrive. Companies that stick their heads in the sand will die. Yes, it's that binary.
So how does your company join the customer revolution?
Simple—by connecting in a whole new way. And the most powerful way to do that is to help your customers every step of the way in their journey with you.
Yes, to connect is to help. That's not a new concept. What's new is that companies need to provide that help when the customer wants and how the customer wants that help provided. And it's never been a more exciting time to do just that.
Yesterday, customers needed to go into a store for help. Yesterday, customers needed to do it at the time the company said (9 am to 5 pm) and at their own expense.
Today, customers expect to be helped at the time when they want to be helped and on their terms. Companies that get this are already reaching new heights and many are revolutionizing their industries.
Take Uber, whose mobile app is blowing up the local transportation business today and most likely more in the future. Its stats are staggering.
It now serves 43 percent of the U.S. population—all without owning any vehicles! Uber is creating the equivalent of about 20,000 jobs every month. And in our hometown of New York City, each of those jobs generates a median income of more than $90,000 a year. A Business Wire press release estimated that Uber contributes $2.8 billion to the U.S. economy every year.
All of this is made possible because of the mobile phone and cloud computing. Without mobile devices, there's no Uber.
The help Uber provides is simple: We need to get from here to there. That help is provided when we want it: We need a ride now! And the help is provided how we want it: Press a button and the car comes to us! Date night will never be the same!
This framework is why Uber, which was not around a few years ago, now generates hundreds of millions in revenues and was recently valued by smart, professional investors at $18 billion.
Let's take another industry, automobiles. In the past, the red light would go off in the car, and you would freak out, not knowing what was going on. You would reach for the manual and try to figure it out. You wouldn't figure it out. So you would spend 30 minutes making an appointment to bring it in to the dealer for service. You would miss an hour of work dropping the car off and then another hour later in the day picking it up.
So you're getting the help you need—but not when you need it or on your terms.
Now almost every new car is connected to the network. Tomorrow, when something breaks, a message will pop up on the dashboard that says, “Hi Mike and Kass. You have driven 8,000 miles on your filter. It's time to change it. Press this button to schedule the appointment.” The dealer will come to you to pick up the car and then drop it off when it's done. Why? Customers will expect that thanks to all the on-demand products and services willing to provide that level of help.
What we are witnessing is the rapid convergence of sales, service, and marketing. Every interaction with a customer is now marketing. Marketing was once focused on the destination—and that destination was most likely a purchase. Marketing is now about the customer journey, and customers expect you to be there to help them every step of the way—before, during, and after the purchase.
We buy products because they help us in some way. We now expect that help is delivered on our terms.
Welcome to the customer revolution, where customers are now in charge.
Millennial Takeaway
Nadira Hira
It's so tempting to believe that we know better than ever before what our customers value. In these connected times—a twenty-first-century world where I can tweet @Delta about a travel problem before my fellow fliers even figure out where to line up with questions—organizations, brands, and leaders all have access to a constant stream of feedback.
But do we use it effectively?
I can't count the number of times an executive has told me, laughing, that he's “got no idea” about Twitter. Or confessed how annoyed she is by flip comments on the company's Facebook page or Instagram feed. Or, perhaps worst of all, shared with pride that their organizations are directly plugged in to what customers want because of, well, social media!
We are in a moment of unprecedented consumer engagement tools. But the tools themselves are nothing more and nothing less than how we use them. Ignore them, and you're missing a tremendous opportunity. Exalt them too much, though—relying solely on whatever insight they provide—and you'll likely see only the barest contours of your customers' wants, needs, and frustrations.
So take a lesson from one of the industries I've most enjoyed covering: innovation. It's common wisdom in this field that customers don't actually know what they want. But that isn't innovation practitioners denigrating consumers; it's an example of dedicated professionals reminding themselves that, when it comes to providing the very best product or service, they should never stop at the first, simplest, or most available answer. They dig; they frame, and reframe; they explore all the angles they can imagine to help customers discover deeper truths about their ideal experience. From taking quick advantage of every bit of technology around, to doing as Peter F. Drucker did decades ago—talking, live and in earnest, to real customers old and new—they interrogate.
That's our challenge as leaders, and if we meet it, there's no limit to what we can do for those people who honor us with their business.