During a seminar last week, someone asked the following question:

“More industries than ever are experiencing runaway price and margin erosion. Why is that? More importantly, what can we do about it?”

I believe value is being lost as a result of our lack of understanding of shifting paradigms.

Economies naturally progress through value shifts. For example,

from Raw Material Economies (pre-industrial)
to
Product Economies (Industrial)
to
Service Economies (post industrial)
to
Experience Economies. (information)

Although we can still find economies at all four levels throughout the world, most of the higher systems are now Experience Economies. In experience economies, by and large, consumers place lesser value on Raw Materials, Products, or Services. Instead, they place more value and are willing to pay more for the Experience. Products and Services, although required and expected, are no longer the prime field of differentiation. Their expected high quality is simply a minimum business requirement.

Sadly, within our experience economy there are companies and entire verticals that may not have yet noticed the shifted paradigm and still offer products and/or services as their key value proposition. A perfect example is the consumer electronics sector, which continues to assert product features as their key value. Features, however, are easily copied, creating short-lived differentiation. In the absence of other differentiating value, they turn to price. And so, the cycle begins: Lower prices causes reduced margins which causes diminishing profits which creates pressure to reduce costs which causes layoffs which brings reduced purchasing power which prompts the need for lower prices. You get the idea.

A surprisingly large portion of top management I meet believe customers demand and cause lower prices, without considering the possibility we may simply be misaligned with customer values, which ultimately forces us to turn to price. After all, although lowering price is not usually the best course of action, we cannot deny it is an easy and generally effective way of getting attention; if only for a brief moment.

Maybe we should learn from others:

• American auto manufacturer’s have refused to see the new paradigm. They are still selling cars as if it were 1950.
• Nordstrom, on the other hand, sells the same exact merchandise as other department stores, but charges a premium based on the experience.

(I’ll leave more, and perhaps better examples to you – please share through a comment.)

Perhaps it’s time we listen to the voice of the customer and align ourselves accordingly.
If we don’t, our only recourse will be lower prices, outsourcing and ultimately layoffs.

Rudy Vidal
Committed to XCS

I was adjusting the FAQ portion of the blog and I came across one of the simple reasons we are doing this work. I thought I would post it, since it usually brings about considerable thought and good discussion.

The question is: Why is it that most business leadership is usually inconsistent and less than impressive in its commitment to customer satisfaction programs?

I won’t beat around the bush to give you my opinion and hope you will give us yours.

I believe reason for the inconsistency in customer centricity comes from the fact that most business leadership find customer centric programs to be short term expenses for unquantifiable, long-term results.

If we are able to show them that the short-term expense provides quantifiable short term results, I believe they will commit to changing their business and in turn changing the world.

The XCS methodology does just that.

A couple of weeks ago, I had the distinct pleasure of speaking at the quarterly gathering of Financial Women International - in Orange County Ca. This is a great organization that facilitates resources to financial professionals (not exclusively women), trying to make a difference and improve business practices.

During the talk we touched on my experience with banking and the potential need to reconsider the banking industry’s heavy reliance on fees and penalties as a source of revenue. My position, as you can guess, is the practice is inherently destructive to XCS and thereby to business value.

I left Bank of America because of poor service. And now it feels like I will have to change all my direct deposits and automatic payments again . . . .sigh!

A few minutes ago I logged on to my online banking account and found two charges on my overdraft protection account that didn’t make sense, $10 and $12.56. I had little to do while waiting for my plane at the gate so I decided to call.

“Hi, this is John” – a voice answered.

Hello? is this Wells Fargo? Yes, John replied. (I will save commentary on his greeting for another time).

I asked John about the charges, and after looking for my record, he was easily able to assess the situation. “Every time your overdraft protection account is accessed, there is a fee assessed on your account”. WHAT?

Of course, Sir you are making use of a service for which there is a fee.

John, you charge me interest for that service, isn’t that fee enough?

You also have ALL my money in your bank, which I assume is worth something.

Finally, the purpose of the overdraft protection is to “PROTECT ME FROM OVERDRAFTS !”, not to find another reason why I should get a fee. Plus, “I have this super duper platimun, high octane, VIP account with glittery cards that is supposed to separate me from the masses that actually have to deal with fees like these !”

Guess what he said? Mr. Vidal, your agreement which I can make available to you, clearly outlines these fees.

Guess what I said? John, close my accounts.

And now I have to find another bank.

This is getting old, and frankly, I don’t have the time for it.

OK, I talk about it a lot, but I actually thought I had let go of this angry side. Even though I say it’s an epedemic, institutional issue, I thought moving from my old bank to a new one would solve my problem. But I haven’t moved on on, and it isn’t solved. Why? Because it is an epidemic institutional issue.

I’m angry. Not because of the $22, but because we are losing our sense of decency for each other. We continue to sell ourselves for money, protected by the shield of corporate policy. Thinking the one who dies with the most wins.

XCS is about us, not about money.