Friday, September 14, 2007

The Value of Wearing Customer Glasses

In my September 7 blog, I noted the intimate connections between innovation, customers, execution, and profitability. I also suggested that while each of these issues is vital for organizational health and performance, a leader would be very wise to put the customer first and foremost. To illustrate this point further, I want to share with you a story about Jim McNerny’s early days at Boeing. In June, 2005, Boeing named McNerny as its new CEO. McNerny had enjoyed an impressive run as CEO of 3M, and upon his appointment he prepared to transform a financially and ethically troubled corporation that was getting competitively trounced by Airbus. Today, of course, the tables have been turned, and Boeing’s slim 787 Dreamliner is kicking some serious aerospace butt, while Airbus’s fortunes have seriously declined in the wake of the company’s disastrous forays into the monstrous 600-seat 380 jet. There are many reasons for this reversal of fortune (and to be sure, hideous Airbus execution in operations is one big culprit). But I submit that one of the main reasons is that McNerny got Boeing executives to take off their traditional “engineer” and “manufacturer” eyeglasses and replace them with “customer” eyeglasses—to view the world differently, and react accordingly. One story will demonstrate what I mean. In one of McNerny’s early senior meetings, he asked the executives to explain the value and benefits of the 787’s new composite technology. The chief technology and engineering people put together a nice Power Point on factors like fatigue life, corrosion, and such,. The manufacturing and financial people put together a nice Power Point on factors like operational and cost efficiencies and such. And McNerny responded in a bizarre way. He said, in effect, that he was aware of all those benefits, but they all were benefits for Boeing. His question was different. What he had meant was: How does the new composite technology benefit Boeing’s customers, in this case the airlines? As you can imagine, the reaction in the room was slack jaws and a “hmmm…”. But McNerny was not engaging in word play. He was trying to get Boeing's leaders to view the world from the customers’ perspectives, and act accordingly. If the composite technology would have lasting business value, the value should be reflected primarily on behalf of Boeing’s customers, and if it was, then Boeing would benefit with the kinds of customer loyalty, market share, profit margins, and sustained growth that truly delight investors. In fact, it turns out that the composite technology would very much benefit aircraft customers by significantly lowering their maintenance and fuel costs, providing them with much greater flexibility in their routing, increasing their speed to destination, and so on. Unsurprisingly, once all this sank in, Boeing people raced to develop even more customer-pleasing features into the product. McNerny’s lesson was very important in beginning the process of culture change within Boeing. He wasn’t telling the group that this was a marketing problem, a la “well, do what you’ve always done; just change your public message to something that the public will swallow”. No, he was trying to set up a new framework for decision making. His message was: You—you executives--think about your customers from the very beginning, start by truly understanding their needs, and only then build your products and organization around that knowledge. Sure, you must do everything with excellence and innovation in engineering, operations and finance, but weave everything you do around the spoken and unspoken needs of your customers. That’s where value and benefit have lasting competitive impact.It's a good lesson for all of us. We love to talk about the notion of the customer as king or queen, but are we ready to build and rebuild and rebuild and rebuild our business around their continuously evolving needs and demands?


Anonymous Jim Rait said...

When I was starting out (in the 1970's) as a humble stress engineer working on the technical aspects of components on the Big Fan engines (Rolls-Royce RB211)Ron French, chief stress engineer asked me a question that transformed my attitudes for the rest of my careers: "why are you spending 3 months calculating the stress distribution in that blade root?" I replied to ensure it doesn't break in service." He replied "Why?"
"Well to work out the fatigue life in service hours."
To make sure it doesn't overstress the disk."
Ron replied "No, its so I can have another super package holiday to Spain, without delays at the airport and cheaper than last years!" and he turned and walked off. It hit me! It was all about the passengers and their trips... and their dreams.
Rolls-Royce are doing well with the Dreamliner with an engine developed from that early RB211 platform.

1:33 AM  

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