New Year Resolutions
Amid all the warm feelings of Christmas, Hanukkah, and the holiday season, it’s easy to forget that in 2022, short-term shareholder value is still not only seen as good, but prioritized, welcomed, celebrated, and lavished with massive wealth. It is endorsed as the norm, with often more attention paid to extracting value rather than creating it. Making money for money’s sake has become a cult. Stark inequality is not only tolerated but explained as the result of poor people’s laziness. When we come upon such hard-heartedness, it can be tough to view the future of business—or even our entire society—with enthusiasm.
Management Re-Imagined
Yet within this sea of seeming greed, there swims a different kind of fish—corporations that give every sign of loving their customers as themselves. These firms are a different breed of creature from those that dominated the corporate landscape for much of the last half century. They move to a new kind of music—the music of customer capitalism.
Figure 1: Re-imagining management
These firms have grasped that true prosperity comes from creating value, not extracting it. These firms combine empathy with digital technology to create value that is more specific to a customer’s need, and more immediate, than ever before—value that is instant, frictionless, intimate, and incremental, at scale, and free, or nearly free.
To most of us, the changes have been magic. Very quickly, these firms transformed how we work, how we communicate, how we get about, how we shop, how we play and watch games, how we deliver health care and education, how we raise our children, how we entertain ourselves, how we read, how we listen to music, how we watch theater and movies, how we worship; in short, how we live. The transition was accelerated by the ongoing Covid pandemic. The changes have been so quick and effortless, it’s easy to forget how amazing the changes are.
Whereas the industrial era was largely based on scarcity, the new economy of digital services is built on abundance. Exponential technologies can generate an almost infinite array of digital services. It has become possible to make instant contact and converse with anyone from anywhere, buy anything anywhere, access the entire world’s information, listen to almost any piece of the world’s music, take, share and view unlimited photographs, and create and stream videos, all at zero, or a near-zero cost.
The Core Idea Of Customer Capitalism: Loving Your Customer As Yourself
How is this possible? The new breed of corporate creature gives primacy to creating value for customers, while not ignoring other stakeholders. When firms embraced the new, more agile ways of creating value for customers, they found that they could shift direction more nimbly, create great workplaces, get better talent and use it more effectively, win over customers more quickly, attract more finance, do their share in meeting social and environmental goals more readily, and generate more long-term shareholder value.
The core idea of customer capitalism is simple to understand. Love your customer as yourself. This is not only ethical. It is also very effective. People do best when what they do is in the service of delighting others. When they are able to work on something worthwhile with others who love doing the same thing, the group tends to get better. By working in short cycles, everyone can see the outcome of what is being done. When communications are interactive and everyone is open about what is going on, problems get solved. Innovation can occur. Customers are surprised to find that even unexpressed desires are being met. Work can become fun.
Three New Year Resolutions
Like children dismantling clocks to try to find the time inside, reform-minded managers often request playbooks, frameworks, or game plans, to enable the re-imagining of management, as if such mechanical gadgets could create in us the change of heart needed to operate differently. Such requests miss the anomaly of thinking that such robotic tools could possibly restart our hearts.
Instead, firms must tackle the “why” and the “how” of their own behavior, not just the “what.” Three New Year resolutions can help pave the way.
1. Start With Getting The ‘Why’ Right
Customer capitalism is about human beings co-creating value for other human beings. Different firms have different formulations of the same core idea, including, “zero distance to customers,” “the experience economy,” “the permissionless corporation,” and “the ecosystem economy.”
Staff working in small self-organizing teams can have a direct line of sight to the customers who use the firm’s products and services. This way of working is not only effective. It feels right. Firms pursuing customer primacy, such as Amazon, Apple, and Microsoft, have become the most valuable firms on the planet. They got the “why” of business right.
2. Don’t Forget The ‘How’
Yet getting the “why” right is not enough. Firms also need to execute on the “how.” In order to create people-centered organizations, organizations need people-centered processes. They need systems that keep the organization focused on systematically achieving people-relevant outcomes, rather than merely the production of outputs. They need processes that continually push the organization to delight and enchant their customers routinely and signal when this is not happening. They need arrangements that enable the organization to draw on the full talents and creativity of the people doing the work.
Today’s winning firms are far from perfect. Amazon got the “why” of business right, but has made mistakes in the “how.” As Jean-Louis Barsoux and colleagues write in Harvard Business Review: “Take Amazon. In its determination to be ‘customer obsessed,’ it was blind to the needs of another constituency: its merchants. It squeezed them on fees, forced them to compete with other vendors and its own knockoffs, restricted their ability to customize virtual storefronts, and limited their access to payment options.” Similarly, many of Amazon’s lower level workplaces, including some fulfillment centers, do not reflect the creative aspects of its higher level workplaces.
3. Don’t Get Lost In The “What”
The greed implicit in maximizing shareholder value constitutes both a performance, and an ethical, problem. But pleading with managers to establish cultures of psychological safety, set up ethics committees, have training classes in ethics, or appoint managers with more character and integrity, all risk getting lost in the “what” of the firm’s behavior. Unless firms get the “why” and the “how”, reforms at the level of the “what” will be ineffective. Firms must align all three.
The Allure Of A New Future
Implementing these three New Year’s resolutions can help us exit from the business hard-heartedness of the last half-century and create the allure of a new and better future.
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