When you step into an Apple Store, you notice the sales associates walking around with an iPod Touch. No, they are not listening to music on the job – they are using the iPod Touch to bill the customer and deliver the product right where the customer is standing. It sure is a customer delight, but it is also an advertisement for their product. Apple is using its own product to make its operations efficient.
But it does not stop with the iPod Touch. A whole set of iPads are placed next to the products on display so the customer can view the corresponding product information on the iPad. All of a sudden my interested is also piqued in the iPad even though my original intent was just to purchase the iPhone.
So Apple, by adopting its own products in its operations is benefiting on 2 counts:
1. It is creating a customer within the Apple organization – that helps tremendously with immediate feedback on the product.
2. It is creating a sales channel for the product right next to another product.
In Business School we are taught that business entities can be innovative, operationally excellent or customer centric.
However, to be leaders in their respective markets, companies have to be all three. Their core focus can be one, but to be leaders, they need to be innovative, customer centric AND operationally efficient.
Innovation without customer focus:
Innovation is the key to survival in the long haul but even an innovative company cannot be successful if it doesn’t have the customer in mind.
Motorola in 1998 introduced Iridium to the global telecommunications market. It launched 77 satellites in space to provide a global satellite phone to the customer. There was just one problem – the customers needed to rent two mules to carry the support equipment and have a ton of money to use the service. It was a novel idea at that time, but grossly impractical from the customer’s perspective. Motorola ended up filing for bankruptcy protection in 1999 because of the Iridium disaster
Innovation and customer focus go hand in hand. You cannot excel at one and suck at the other. But the business world often confuses customer focus with pandering to the customer – “tell us what you want and we will build it for you.” This is usually the strategy pursued by consulting companies or business partners. But they are just being paid contractors, not customer centric.
Customer focus really is about innovation – fulfilling tomorrow’s needs of the customer today – thinking ahead in time. Many times the customers themselves do not know what they want. As Henry Ford once said – “If I had asked people what they wanted, they would have said faster horses.”
Innovation and customer focus without operational efficiency:
Innovation and customer focus set the platform for a company to be successful. But the revenue growth can continue to elude under an inefficient operations infrastructure. Innovation and customer focus ensure that the customer’s interest in the product is piqued. An efficient operations infrastructure ensures that the time lag between interest and the actual purchase is as small and efficient as possible. Operational excellence too has to be focussed around the customer.
Netflix – during the peak of DVD rental era set an excellent example of operational excellence in the industry with its dvd deliveries which ranged between 1 to 2 days. It maintained an efficient network of regional distribution centers and a close relationship with the US Postal Service to ensure timely and accurate deliveries to the customer. (Watch: Netflix’s Distribution Center operations)
Once again, its operational excellence was focussed on maximizing value to the customer and thereby enhancing the customer’s overall experience.
So we can safely conclude that both innovation and operational efficiency have to exist in tandem, but must revolve around the customer. An innovative product that does not bring value to the customer is as useless as an operational infrastructure that cannot provide timely delivery of product and services to the customer.
But why do we see very few Apples and Netflixs and lots of Iridiums? Do organizations deliberately ignore one aspect of the competitive equation or are they too focused on their core competency that they ignore the rest?
Most of the time, it is the latter. And it is mostly a function of the culture of the company, which in turn is driven by its longest serving group of personnel.
Organizations go through various stages in their evolution. An innovative company starts with a bunch of geeks with ideas all over the place. But when one idea sticks and becomes a hit, the same geeks sometimes end up managing operations. The net result – the entire operations chain is all over the place.
Innovation and Operational excellence are paradigms that are poles apart and organizations are successful at both when they keep these functions and their respective personnel, poles apart.