Waning Competitiveness!
According to the WEF Global Competitiveness Report, 2013-14, “India now ranks 60th, continuing its downward trend that began in 2009 (rank 49).” Once ahead of Brazil and South Africa, it now trails them by several places and is behind China by a margin of 31 positions”.
The devil, they say, is in the details. Embedded in the list of over 100 parameters that WEF uses to calculate overall global competitiveness index of a country is an ‘indicator’ described as ‘Degree of customer orientation’. India’s ranking on customer orientation has been a perpetual drag on its overall competitiveness because the ranking on this count has always been lower than the overall ranking. For instance, while the latest WEF Report places India at rank 60 (among 148 countries) in overall competitiveness, its rank on ‘degree of customer orientation’ is 78. What is more, India’s rank on this parameter has gone down by as much as 21 positions—from 57 in 2009, to 78 in 2013. One may question the extent by which ‘degree of customer orientation’ impacts the overall index of competitiveness, it is not possible to run away from the reality that in the perception of world community, India has a long way to go on customer orientation.
I have carried out considerable empirical research work in the recent past culminating in an off-beat management book. The research was specifically carried out to explore why, even well-equipped, customer-centric companies end up in wide gaps between the quality of service as promised at the policy level and what, in customer’s perception, gets actually delivered at the operating level? Why do gaps come up between intent and implementation?
Since MCCIA wants to see Maharashtra as a ‘globally premier destination’ for industry and trade and since it wants ‘to enhance the abilities of the members to ‘forge ahead in the competitive world’, I strongly feel that MCCIA should consider using its platform to bring the subject of customer orientation up for a serious re-think at the appropriate senior management level. I had a chance of meeting Mr. Sardeshmukh recently and I have readily agreed to share my research findings with the members of the MCCIA. This article is a first step to briefly present the background of my empirical research.
The Freedom to Compete
It is important to look at the recent history for the readers to appreciate the context in which customer service gained strategic importance and why there is a compelling reason for the companies to retain customer care under a sharper focus.
Referring to the economic reforms of 1991, in his book Reinventing India, Dr. Raghunath Mashelkar says: “To me, 24 July 1991, was the day on which India got its second freedom, namely, the freedom to compete”. Indeed, it was the freedom to compete that would put India on a fast track for economic growth and bring the Indian industry face-to-face with the challenges of global competition.
‘Freedom to compete’ brought in its fold, yet another long-awaited freedom for the Indian customer—the freedom to choose. It was on this 24th day of July, 1991, that a stage was also set for transformation of the comatose Indian customer into a strong and wilful proverbial king. The Indian customer would now have the ‘freedom to choose’ from competing alternatives rather than accept whatever was handed down over the decades.
These watershed economic reforms were a bold and clear writing on the wall that forewarned the Indian businesses of the mounting pressure for improving competitiveness in all its manifestations, including the quality of customer care. By the end of the year 1994, as many as 79% of the CEOs had begun to consider ‘customer satisfaction’ as one of the top three strategic priorities and 38% of the CEOs ranked ‘getting close to the customer’ as priority number one.
The Freedom to Choose
A widespread and well directed effort on the part of Indian companies, resulted in quantum jumps in product quality, waste reduction, productivity improvement, stability of processes, better use of information technology and knowledge management. As all this added substantial competitive muscle, Indian companies came face to face with a drastically changed customer—better informed, more demanding, and less indulgent.
Paradoxically, as the economy revived after a dip that lasted a couple of years, particularly in manufacturing sector, attention to quality of customer care began to wane. High-pitch posturing and investments in high technology operating systems, including upgraded CRM, continued unabated . Processes were improved but passion among the people using these processes began to fade way. In extreme cases of lack of management attention frontline customer contact employees became so subservient to systems that use of common sense was put on moratorium. What followed was mere lip service, raised to the level of a fine art – all attention, all empathy at display but no meaningful action.
For instance, a top notch bank went too far in blaming me for a bounced check only to find that the bank had committed a serious mistake. A major automobile dealer deliberately used an outdated price list and collected more money before delivering the car to me. An “ethics driven” insurance company generated a fake letter to justify three months delay in refunding a double payment. A “friendly” housing bank took more than 150 days to pay an overdue interest on a term deposit.
In the process of resolving my complaints I experienced, what I call as schizophrenic behaviour at different levels of hierarchy within the same company. The whole scenario defied any logic and I decided to empirically explore why even well-intentioned and well-equipped companies end up in wide gaps between policy and practice?
The targeted empirical research gave birth to an offbeat book—Organisational Schizophrenia: Impact on Customer Service Quality. Going beyond customer policy and processes, the book delves deeply into the human and organisational dynamics in this age of strongly emerging customer capitalism.
The Way Forward
The book spells out in good details how internal disconnects erupt in the areas of communications, leadership style, review processes, employee engagement and contradictions in behaviour at different levels of hierarchy. However, I would like to bring to the notice of business leaders that all the gaps and disconnects are the ramifications of two fundamental operating approaches. To create and sustain a strong and positive customer focus the companies would do well to review these approaches and modify them as necessary.
Customer First—In Word and in Action
Evidence suggests that shareholders actually do better when firms put the customer first rather than focusing on maximising shareholders value in the short term. Nonetheless, executives have continued to work on profit maximisation as their top priority. On the other hand, customer satisfaction has also acquired strategic priority in the current business scenario. Companies, therefore, also want to maximise customer satisfaction as a tool for competitive differentiation. According to the optimisation theory, a firm cannot maximise both customer value and shareholder value at the same time. You have to make a choice upfront. Any attempt to do otherwise can only result in internal conflict within the company. This perpetual conflict cascades all the way down to the front line employees and allows organisational schizophrenia to creep in.
Culture of Discipline
A culture of discipline requires people to be self-disciplined and passionate about their responsibility. It requires people to take disciplined action religiously consistent with the company’s mission and core values. A culture of discipline is not a ruthless culture. It is a rigorous culture. To be rigorous means consistently applying exacting standards at all times and at all levels, especially in upper management.
’Many companies all over the world are beginning to accept that ‘maximizing shareholder value at the cost of negating long-term customer relationship is an inherently and tragically flawed premise’ and that it is time we abandoned it[1]. In an interview in March 2009, Jack Welch—who was once considered the embodiment of the idea that a company’s sole aim should be maximising returns to its shareholders—said, “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers and your products.”
Organisational Schizophrenia has been endorsed, both by business leaders and the academia as extremely relevant to the managers at various levels of hierarchy in different functions including the CEOs. (See www.gkgureja.com for contents, reviews and availability).
(Indeed) The strongly emerging age of customer capitalism demands an urgent re-think on the part of the top management in each company. I would be happy if my book can make some contribution towards meeting the MCCIA mission. I would also be too happy to join for any group interaction.
Gopal K Gureja,
Gopal K Gureja, is a former director of Thermax Ltd and can be reached on gopalgureja@gmail.com
[1] Roger Martin, ‘The Age of Customer Capitalism’:Harvard Business Review, January–February,(2010).