The Search for Growth Through Innovation
General Electric CEO Jeffrey Immelt is willing to face what most CEOs are still hiding from: Efficiency has come at the expense of the customer. The business press continues to cover G.E.'s efforts to find growth through innovation. The company once known for absolute efficiency (Six Sigma--based processes) has finally discovered that having a good product is simply not enough these days. Tightly designed, efficient processes and methods alone just don't seem to catch a customer's eye.
The search is not exclusive to G.E. Growth-and-innovation is today's mantra; the pendulum has swung from cost reduction back to growth in the past few years. Executive management is rushing to find ways to drive growth and innovation. The question is, how do you drive growth?
The incorrect answer is to raise sales quotas. The problem with that is, selling more of the same to customers will be met with resistance and reluctance, unless companies can offer amazing experiences that delight cusless sellers can also delight and surprise customers--simply increasing quotas won't do it. Another possible answer may be to create a new product, but do you have the customers willing to buy it? Less than 10 percent of new products actually cover their development expenses or last for more than three years. The reasons for that failure rate is lack of product values and the inability to meet customer needs.
As corporate leaders focused over the past decade on reporting their successful streamlining, cost reduction, and layoff efforts, they neglected to inform their investors about who is actually paying the price. The customer has long been asked to pay more money for boring, has-been products and services. Companies have finally discovered that they have diluted their own value proposition in the name of efficiency, and in the process have reduced their customer relationships to the lowest common denominator: price. They have, efficiently, become commoditized.
Innovation, growth, and customer centricity are interdependent. One cannot flourish without the others. Despite the corporate slogans regarding the importance of the customer, however, efficiency-based efforts have prevailed, damaging customer relationships and reducing the company's ability to grow. Growth results from selling more to happy customers.
G.E. has launched an aggressive campaign to transform itself into a new-idea-generating innovation machine. The effort is commendable, and as G.E. is learning, it's difficult to teach potatoes to become carrots. For years the company hired people who were less creative and more confirming. It hired people who fit the efficiency-driven culture it had so carefully developed. Immelt's new incentives and requirements won't be easy to establish, because the majority of the employees Immelt has to work with are not innovators.
While Immelt ponders the road map toward growth and innovation and becoming more customer-centric, he may also want to include a few new measurements in his plans. Tying executive pay to customer satisfaction is a good start, but to build long-lasting, profitable customer relationships Immelt will also need to report on the status of his customer-related initiatives to investors. Compelling customer stats may include customer longevity, the number of unprofitable
customers kept on by G.E., and churn-rate-per-business-unit. It is these numbers, reflected within the status of customer relationships, which will truly reflect the state of the company and the viability of its business. Unlike many other corporate leaders who remain in denial, Immelt has recognized that efficiency is appealing, but not the goal, and that efficiency-related efforts will most likely damage customer values and customer willingness to do business. It is a great start for a revolution, but long overdue. Add reporting and the measurement of customer trends to those efforts, and G.E. will have a revolution in the making.
Lior Arussy is the president of Strativity Group and the author of several books, including his latest,
Passionate & Profitable: Why Customer Strategies Fail and 10 Steps to Do Them Right! (Wiley & Sons, 2005)
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