Monthly Archives: January 2009
No more shopping heroism: our collective cold turkey
The GDP figures for the fourth quarter of 2008 are something I’ve never seen as an adult—a decline in growth of 3.8 percent (the number is by no means final either, and is susceptible to being revised later). It’s hard to cheerlead the economy with numbers like these, but The NYT gamely tries with its headline (“Steep Slide in U.S. Economy, but Not as Dire as Forecast “) which stands in stark contrast with the lede:
The United States economy shrank at its fastest pace in a quarter century from October through December, the government reported on Friday, in the broadest accounting yet of the toll of the credit crisis. Consumer spending and business investment all but disappeared, and economists said the painful contraction was likely to continue at an alarming pace well into the summer.
Felix Salmon thinks the timid consumer has become the new normal:
I don’t see any sign of a recovery any time soon: America’s culture of competitive consumption has disappeared entirely, and it’s not coming back.
I walked past a brand-new high-end casual menswear store last night, and it struck home to me how much things have changed in the past few months. It was always a bit weird that anybody would pay hundreds of dollars for a flannel shirt, but somehow, such shops managed to survive during the boom years. I certainly wouldn’t want to be the owner today, though, or even in the years to come, should the store survive that long.
Merrill Lynch analyst David Rosenberg (who has been calling a consumer-led recession for a while) has a similar view in this dire commentary. He argues that the debt overhang from the boom must be eliminated before there is a recovery. Consumers, therefore, will be forced to save rather than spend. Rosenberg goes further and posits a lingering shift in consumer mentality (at least for baby boomers) that outlasts this necessary debt elimination:
in this post-bubble, mean-reverting process, the ability for policymakers to re-create the credit cycle, reinflate asset values and ignite a consumer-led recovery is going to be thwarted by secular changes in attitudes towards credit, savings, discretionary spending and homeownership. In other words, even after enough debt is paid off, the baby boomers’ spending years will be focused on putting their money in the coffee can.
Rosenberg elaborates on the “secular change” in consumption habits he expects, the shift from frivolity to frugality (already a popular theme in the mainstream press).
There are lags between changes in household net worth and changes in consumer spending patterns, and the $13 trillion loss to-date is a harbinger for sustained consumer spending contraction in coming years. The reason for the lags is because households only change their behavior after a shock, negative or positive, if it is considered to be permanent or at least semi-permanent. For example, the institutional changes over the decades in 401k plans and matched employer pension contributions helped reduce the steady 10-12% savings rate of the 1950, 60s and 70s down to 8% by the late 1980s. But it was the increased boomer reliance on asset inflation for savings rather than organic income that drove the savings rate down to 2% by the time the dot-com boom was in full swing in the late 1990s.
If Salmon is right about the end of the hundred dollar flannel shirt, then maybe this depression thing really isn’t all bad. But will the same marketing ideology merely be used to promote something cheaper for the time being? I’d expect the consumerist ideology to be more tenacious than that—when we can’t spend, we don’t immediately adapt to that new reality; we just experience want more painfully. We probably haven’t been in a depression mind-set long enough for our consumer behavior to change in a fundamental way and are still in the lag period Rosenberg mentions. Collectively, American consumers could be overreacting in the short term, cutting back like crazy with the assurance that we can resume spending stronger than ever when the storm passes. (Kind of like trying to catch up on sleep all at once on Saturday rather than changing one’s habits to get more sleep every night.)
Rosenberg suggests we may well come to accept our reduced means as a permanent condition just as economic trends are reversing, causing our recession mentality to persevere and act as an added drag on recovery. BUt virtually every form of public discourse is aligned against that possibility; the commercial media may be too robust to ever allow us to resign ourselves complacently to a penny-pinching mentality.
In other words, we may never reach the soul-searching stage, in which we reject the entire set of social relations that can produce a $100 flannel shirt or makes $300 jeans seem normal. It may be easier simply to suspend our consumerist hopes, manifest in so much of the material belongings that surround us, rather than interrogate those hopes and reject them for a new way of life. The competition that had been taken place through consuming has shifted to a more fundamental level—for now we are competing to hold on to jobs. Maintaining what we had already achieved will probably feel like relative progress. But the useless ethic of status competition and possessive individualism, the endless war of all against all that capitalism breeds as an inevitable by-product, won’t disappear. We are still likely to regard any cooperation brought on by hard times as a type of humiliation, even if we are grateful.
Consumerist society has for too long emphasized possessions as the route to social recognition, not collaboration. The tangibility of objects seems to substantiate the argument—the inarguable presence of more stuff seems to testify to a richer life, and marketing gives all that stuff rich meanings and fully developed fantasies we can readily enter into vicariously. And our ability to soberly question consumerism’s role in our lives is hampered not only by our hedonism (the familiar and common-sense-seeming logic of “more is better”) but by the persuasion industry’s relentless collective efforts to invalidate ways of life that are not reliant on consuming products. Lifestyle magazines and the styles sections in newspapers help by making frugality into a trend that is marked by buying certain products and shopping at certain stores. The underlying message: We can spend less but remain consumers. So we don’t need to fear.
Taking its cue from the press, the ad business will try to sell us anticonsumer goods, goods that paradoxically promise to fit in to our new recession-minded lifestyle. This not only helps ad firms continue to sell ads in a downmarket, but also helps ads maintain their prominence in the sum of our daily thinking. Ads preserve a lever in our minds, so they can reorient us to luxury when the time comes. Then it will be morning in America all over again.
Don’t forget your customers
I stated it before. Focus on the results desired by the customer and the experience created. Deliver this at acceptable costs for the customer and be aware of the customer’s channel costs. This post has a similar approach for contact centers
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During tough times, we are all asked to take a close look at the bottom line.
However, cost-cutting alone won’t by itself see an organisation survive the downturn in a healthy state.
What’s also needed is a customer strategy. If customers feel that money is being saved at the expense of service standards then they could soon be heading for the exit door – making the impact of recession ten times worse.
So how can companies cut costs while retaining a focus on customer satisfaction?
Here are a few ideas:
1. Cut Wastage
Examine customer-facing and back office business areas and streamline all operations to cut wasted time. The time saved will equate to cost savings and better bottom line performance. It could also lead to improved service quality and more rapid time to answer.
2. Eliminate Unnecessary Calls
Look at why customers are calling and try to eradicate the common root causes of unnecessary calls. Not only will call elimination benefit your bottom line but, if your customers are calling less, it could also boost customer satisfaction.
3. Make The Most of What You’ve Got
Maximise opportunities with your existing (people and technology) resources. Sometimes you can be too close to your own operations to see what might be obvious to others. How about getting a trusted supplier to look at your business with a fresh pair of eyes?
4. Deliver Holistic Customer Management
Do your customer care, telesales, collections and service departments look at customers in a co-ordinated way, or do they have separate strategies and maintain separate customer records? By bringing strategies and records together, companies can more effectively manage the ‘customer lifecycle’ – helping spot opportunities to upsell and cross sell, incentivise customers at particular points along the ‘customer journey’, and improve service levels
5. Recognise the Value of Data
The customer contact centre is often a company’s most valuable source of customer data – yet many organisations are failing to make the most of it. That can be remedied by taking advantage of the richness of today’s analytical and reporting tools – from Datamart (data consolidation and analysis) solutions, to MI reporting and speech analytics tools. Not only can customer service operators access near-real-time feedback on what their customers are saying and doing, but they can also do so in an automated way – saving valuable management time and money.
6. Future-proof your technology
Make sure whatever you invest in today is future-ready. See if there are realistic ways to make your current infrastructure ready – and if not, take the time to determine what your ‘go forward’ strategy is. You might be surprised that newer technologies often have lower install and maintenance costs – as well as enabling higher customer service – thus providing an unquestionable ROI even in a tough economy.
7. Extend customer service beyond your contact centre
When contact centre advisors aren’t able to answer a particular customer query it’s important that they can rapidly access knowledge experts outside the contact centre in order to maintain service standards. That calls for unified technology solutions – and technology that supports ‘presence’, enabling advisors to see what experts, with what skills, are available at any point in time.
8. Ensure your contact centre operations are unified
If customers look at your organisation as a single entity then it’s important that your customer contact centres operate as a single entity too. Regardless of how far apart your offices and buildings are, ensure that you have modern technology solutions that can unify all your customer contact points, CRM systems and management reporting – ensuring that calls are answered promptly, by advisors with the right skills, and up-to-date information, wherever they happen to be located.
9. Check the financial stability of your partners
Especially during the current recessionary times. The consequences of being tied into a failing vendor for upgrades and support could have dire consequences.
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My only post you need to read: get inspired for Valentine
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Despite Harvard Business Review’s efforts to revamp their print edition (with a zippier format, hip graphics and bite-size summaries) and to expand their online initiatives, HBR has always felt behind the times. Even when HBR has addressed issues critical to my own research or summarized the research of my friends and colleagues, reading the Harvard Business Review has always left me feeling more anxious than inspired about the future of organizations.
But the February 2009 issue is different.
This month’s issue of the Harvard Business Review contains The Only HBR Article You Need to Read.
That article? Gary Hamel’s Moon Shots for Management.
Moon Shots for Management is a Valentine to progressive managers everywhere .
The article lists 25 challenges that make up the Agenda for Management Innovation, an effort to reinvent management as a concept and practice and to create new ways of mobilizing and organizing our collective activity. The list was culled from conversations among 35 “veteran academics, new-age management thinkers, progressive CEOs, and venture capitalists” at a conference sponsored by MLab , a research/practice institute co-founded by Gary Hamel & Julian Birkinshaw.
[The list is in its own post, after this one.]
The 25 goals on the list compose “a roster of make-or-break challenges — management moon shots– that should focus the energies of management innovators.”
Scanning the list, you’ll note that not a single item is new.
If you track conversations about sustainability , complexity , innovation, social networking , organizational democracy , employee engagement , social responsibility, non-profit for-purpose business , reinventing management education , changing the world, positive organization scholarship , or for that matter any other progressive organizational issue, you’ll see something from your focus area represented in this list.
What is new, though, is that these 25 items are all on an agenda TOGETHER .
Looking at the whole package of challenges encourages us to imagine working on the issues closest to us, those within our span of influence, in ways that allow our focused efforts to generate multiple values streams. That is, working on any one item with the big picture in mind can move forward several goals at once.
Imagine the future of organizations if we saw these items not as a laundry list of things we “ought” to do, but rather as description of what we could do. Talk about Saving the World at Work !!
Wouldn’t it be great to work in organizations where we “Empower the renegades and disarm the reactionaries” ? (#16)
How about working at non-profits and for-profit companies that “Enable communities of passion” ? (# 22)
Even #4, “Eliminate the pathologies of formal hierarchy” looks possible!
(I acknowledge that this one is somewhat ironic, coming as it does from HBR, a bastion of capitalist, “free-market” privilege. But I digress).
Just two things are missing from this article: (1) recommendations for how to put this agenda into action and (2) a concrete invitation to join in the work. But I hope expect that the folks at MLab have a plan. I look forward to seeing the plan unfold and to finding ways to link my work to this agenda.
For starters, we’re all invited to to the HBR site to participate in a survey where we can rate the importance of these 25 items (to our company) and report on any progress our organization has made towards each of these challenges. Then, you might check some of the links in this post to find out more about MLab and read about the progressive organizational movements that have helped to generate and sustain enthusiasm about these challenges.
And, just because this article is The Only HBR Article You Need to Read, don’t imagine that reading it is enough. You should also:
(1) Go to the HBR site (if you can get behind the pay wall),
(2) Print out/download a copy of Moon Shots for Management
(3) Share the article with some colleagues & friends, (or, send them a link to the list, using the ShareThis button)
(4) Talk about it, think about it, and then …
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Since it costs charity:water between $4,000 and $12,000 to build a well in a developing country, a donation of $20 can provide one person with fresh water for 20 years. In this spirit, Twestival New York is encouraging attendees to use “20/20/20 vision”: give $20, raise $20 and tell 20 friends.







