May 27, 2023
May 27, 2023
by H.N. Bali
The Weakest Link in Indian Management Chain
Continued from “Organizational Dropsy: Dreaded Disease of Organizations”
Managers Galore – Part IX
One of the profoundest insights of Peter Drucker was the definition of the purpose of business. He famously said: “There is only one valid definition of business purpose: To create a customer.” (The italics are Drucker’s, not mine.). He further added:
“It is the customer who determines what a business is... The customer is the foundation of a business and keeps it in existence. He alone gives employment.”
Marketing and Innovation
Let me illustrate this by what’s referred to as the Japanese Miracle. In the early 1950’s, Japan – or rather the Japanese business interests – decided, like the proverbial Phoenix, to resurrect themselves from the ashes of World War defeat. They didn’t forget the lessons of their venture, in the 1930’s, to enter international markets with low quality low-priced goods, which earned them the reputation of cheap copycats. They resolved never to repeat that. So, they turned to the two world famous war-time quality control specialists – Joseph Juran and W E Deming. They not only absorbed their teachings but further refined them to produce goods of the highest quality standards.
For how to gain entry into world markets, they turned to Peter Drucker who told them “the business enterprise has two, and only these two, basic functions: marketing and innovation. Marketing and innovation produce the results; the rest are costs.” And the Japanese took this maxim to their heart. Thereafter, there was no looking back for them. And to understand how they made the impossible possible, revisit the autobiography of Sony Corporation, Made in Japan by Akiro Morita.
The marketing function encompasses everything that affects the exchange of products and services for money. Innovation is continuously finding new ways to do that better. Marketing and innovation, thus, are the only basic functions of the entire business. Neither of them can be assigned to functional units within the business operations such as the Marketing Department or the Engineering Department. Everyone in the business has a direct or indirect role in marketing and innovation.
And that presupposes a customer-oriented organization, which places customer satisfaction at the core of each of its business decisions. Customer orientation is an approach to sales and customer-relations in which staff focus on helping customers to meet their long-term needs and wants. Here, management and employees align their individual and team objectives around satisfying and retaining customers. This contrasts, in part, with a sales orientation, which is a strategic approach where the needs and wants of the firm or salesperson are valued over the customer.
Can a CEO get his whole company to think and breathe customer? Indeed, it can be done. Jan Carlzon, the famous head of Scandinavian Airlines System (SAS), did it by getting his entire workforce to focus on the customer. He described it in his memoirs, Moments of Truth. He used to emphasize at meetings that SAS handled 5 million customers a year and the average customer met about five SAS employees in connection with a single journey. This amounted to 25 million moments of truth, moments to deliver a positive brand experience to customers, whether delivered in person, over the phone, or by mail.
Carlzon went further. He embarked on changing the company’s structure, systems, and technology to empower the workforce to take any steps necessary to satisfy its target customers.
CEO must show employees, in financial terms, how much more affluent they and the firm would be if everyone focused on delivering great value to customers. Everyone would benefit by rendering outstanding customer service.
The task begins with hiring the right people. You have to assess whether job candidates have not only the right skills but, more importantly, also the right attitudes.
Those whom you hire need good training. Disney, for instance, runs a training program that lasts a week in order to convey what experience the company wants customers to have at Disneyland. A customer mindset doesn’t just happen. It has to be brought about. It has to be planned, implemented, and rewarded
Attitude of Indifference
The worst shortcoming of our managerial practices has been – and it continues to be – the lack of customer orientation in business operations. Till early 1990s our economy represented a classic definition of the seller’s market. With most of the imports banned or attracting very high tariff, the sub-continental size market was catered to by those who could manipulate licenses and could sell to ready customer whatever they could turn out. Thus developed the manufacturers’ cussed indifference both to quality standards and customer service.
Let’s be honest enough to face the reality. Customer orientation in our society is the least cultivated attribute of our management scenario.
Ask a cross-section of Indian businessmen and self-declared industrialists: what’s the over-riding consideration that launched them into the world of business? Of course the successful ones will invariably camouflage their answers behind tired clichés and high-sounding shibboleths like employment creation and service to society. The truthful answer is just to make money and more money.
Now back to Drucker. He famously said: “The purpose of business is to create and keep a customer.” What do the Indian businessmen think of the customer? Again, the blunt truth is: intrinsically worth nothing, but a means to make money.
You must have run into words like Shubh (auspicious) and Labh (profit) emblazoned on the walls of the business premises and on the books of account. Have you ever seen the term Grahak (customer) ever mentioned by an Indian entrepreneur?
However, the customer is, and will always remain, the kingpin of all business activity. Our hitherto production orientation manufacturers are finding it difficult to cope with conditions of competition. The protectionist policies and the practices of the past did not let the orientation of marketing to develop.
Unfortunately, most of our manufacturers and their retailers in the market are not prepared to think in terms of customer satisfaction. Two preconditions alone can bring about the right marketing orientation. There must be genuine competition in the market-place to meet customer needs and the customers too, on their part, must be demanding. These two preconditions have been, in our society, conspicuous by their absence in the last fifty years.
What we need, instead, is an orientation that Gandhi had exhorted his countrymen to adopt. On display in many an organization in India, is the following five-fold statement of his:
Although an inordinately delayed beginning has been made to transform the perception of customer, it is a painfully slow process. At any rate, it is not possible without stiff competition in the market place where those who cannot live up to the consumer’s expectations have to put their shutters down. It will take us time to reach this stage.
As of now, the customer is treated with utter indifference, bordering on insolent indulgence. Unconsciously, the shabby treatment received at the hands of proprietors of the PDS outlets or the babus of our monopolistic public utilities is passed on to customers that shopkeepers interact with. You visit an office. There is on display a lofty statement of the Company Mission assuring “Customer Satisfaction” but you are received as an intruder or supplicant or worse.
How is it elsewhere? In the West, most especially in North America, customer satisfaction, today, is the cornerstone of business operations. You can take back a worn pair of Levi jeans six month after purchase and return it in case you find a manufacturing defect. (In our set-up receipts are issued that stipulate that goods once purchased can’t either be returned or exchanged).
You must have some time or the other wondered what’s the explanation of this lamentable attitude of indifference to customer orientation.
Allow me to narrate a story to explain what went wrong, and so egregiously. No, it’s not apocryphal. I heard it from horse’s own mouth.
It was in Delhi winter of 1947. Refugees in lakhs had poured into the city. Still more were arriving by the day. Things were extremely unsettled and the already over-stretched government agencies were doing all they could to cope up with the situation fraught with extreme uncertainty. Essential commodities were in short supply. Under the spell of Jawaharlal Nehru’s socialist thinking, was devised the rationing system for distribution of daily essentials like wheat and sugar through what is called these days as fair price outlets.
Since Gandhi was camping in Delhi he had to be informed about it. He wasn’t a part of the government but he could never be ignored either. So, Nehru asked M K Vellodi, then a senior civil servant in charge of civil supplies, to go to apprise Gandhi. Vellodi went to the Mahatma and explained the government decision to start rationing system. Gandhi heard him out but kept quiet.
Vellodi ventured to request for his reaction. After a little thought, Gandhi told him: “Yeh karne se to desh ka nash ho jaye ga” ( By doing this, you’ll ruin the country.) Vellodi was flabbergasted. He thought the old man had turned senile who didn’t understand important economic issues.
Vellodi lived to reflect later in life on Gandhi’s terse observation. When he saw the consequences that flowed from the rationing system as opposed to free market mechanism, Vellodi realized that it was not the Mahatma but his young followers who had turned senile.
You may still wonder, how? Statuary rationing was responsible for almost completely destroying our centuries old cordial buyer-seller relationship rooted in mutuality of interest. You may question, how? I remember - and people of my generation also will - how rudely were we treated by the ration shop owners. And in life we almost unfailingly tend to pass on to those we deal with, what we receive from others. This sense of being regarded as intruders rather than customers still characterizes the behavior of many shop-keepers. It is disturbingly evident in all Government owned utilities like the postal services and other public utilities.
Japanese are, I think, the best practitioners of customer orientation. And this is borne out by how the concept of customer satisfaction (CS) is viewed by the Japanese who pioneered the customer-focused total quality revolution. This is brought out tersely in Relentless: The Japanese Way of Marketing by Johny Johansson and IkujiroNonaka. As per the Japanese conception, “the buyer is God, and that the marketers are the servants of God – if God accepts them”. Johansson and Nonaka further explain:
In terms of quality from a customer viewpoint, the Japanese distinguish between functional quality (atarimaebinsbitsu) and emotional quality (miryokutekibinsnitsu). Functional quality is largely a product of manufacturing and its emphasis on zero-defect. It is assumed to be taken for granted by the Japanese customer. The emotional (“feel good”) quality refers to more subjective criteria, including brand image, status, and style. Since Japanese companies are generally very competitive in terms of product design, engineering, and manufacturing, the competitive edge of a company tends to be found in these softer factors.
If the above Japanese concept of marketing is the international benchmark of the global economy of tomorrow, we are laggards who have a very long way to go. The first few half-hearted steps taken so far on the arduous path ahead, add up to a pathetic start.
Howsoever disheartening the above deficiencies of our management practices may appear, one cannot deny the tremendous resilience of our economy and its ability to cope with the pressures it is exposed to. We must, however, be deeply aware of our shortfalls so that necessary corrective measures can be devised and implemented.
Image (c) gettyimages.com
More by : H.N. Bali
|A superb article! I really enjoyed reading it.|
“The purpose of business is to create and keep a customer.”
"A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him.
He is not an interruption on our work. He is the purpose of it.
He is not an outsider on our business. He is a part of it.
We are not doing him a favour by serving him. He is doing us a favour by giving us an opportunity to do so."
All the objectives of the enterprise including sustained profits and growth are met by wisely embracing it.
I also liked the part about Mahatma Gandhi's comments on rationing.
| "Customer is King", is true to a large extent. However , we Indians in our eagerness to please our customers overseas, indeed become the slaves of the customers. Atleast in the IT sector this is the case (As i am also in the IT industry I have some knowledge and experience of it). The best example of this is Mr. Narayanamurthy, of Infosys, who , on Aug 15th, in his eagerness to please his overseas customers visiting India, stopped the National Anthem from being sung and instead played the instrumental version of the national anthem, simply because the the foreigners could not understand "our" National Anthem. (I always thought Indian National anthem was meant to be understood by Indians and not the foreigners). Taken to extreme this concept can be debilitating and let the customer dictate anything and everything.|
To understand the genuine needs of customers and providing service to the customer accordingly is agreeable and necessary. Being a slave is not.
And profit motive can not be severed away from individuals. Even Swami Vivekananda once said the world is based on the law of give and take. It is impractical to expect all industrialists/ service providers to be unselfish and work only for the welfare of society. All people are not Gautama Buddhas and Vivekanandas and Shankaracharyas or Gandhis.
|Customer is a King. Innovation makes this King follow you for his new needs and this stage the King becomes partner which is win win ideal situation. it is long term relation. Companies has to spend money on innovation, needs, etc. to remain in market. In competitive bidding market, the problems comes when product and services are evaluated by Kings with low price - L1, L2 etc, or favoritism, etc, the ethical concept stated in the article may not stand. With such complexities only ethical companies have difficulties.|
|You make it clear that business should be customer orientated; but what you do not clarify is how this is done: by customer involvement with product design, so-called co-creation, whereby consumers in large groups are consulted for their expectations, which management then applies in production and marketing of the product. In the Indian case it would involve the same method. |
In all design, from art to architecture, there is an element of 'knowing what the public desires' without direct consultation. This used to be the criterion of a good manufactured product, the level of spontaneous public appreciation for a good design, just as a good work of art is. The difference is that with consumer consultation an 'emotional' element', which can tend to be overdone these days, though excused for being 'lovable' as in the cartoon and animal characters featured in advertising, renders the product directly subjective in its appeal. I disagree with you that the customer -based approach to business doesn't have at root maximum profit - as witness the billions made by the computer industry - whereby the said approach is just as much a means to an end, and adopted for that reason.