The C Word

One of my favourite posts, from the middle of 2008

The c word is customer. An amazingly powerful, emotive and oft-misunderstood word.

The customer lies at the heart of the Global Solutions business model (with technology, people and our operation around the edges). We have become very familiar describing ourselves as a business providing services (and products, especially catalysts) to customers. By contrast, whenever I am in a meeting with anyone Shell EP, using the c word throws them into paroxisms. Trust me, it has to been seen to be believed. "We don't have customers, we have partners". Right then, partners it is then, shame it is now to late for you to listen to anything else I might have to say.

It wasn't ever thus. A quote from GS' first VP finance, Art Brussel "Shopkeepers have customers, professional firms have clients". That nuance still occasionally gets an airing. Could have done well in EP, that guy...

In my opinion, introducing the concept, the attitude, the discipline around by a provider to a customer has been the single biggest agent of positive transformation for GS. There are some pitfalls, which I'll come to, but overall it is a top enabler, an essential starting point for any service business.

Here is what I mean and why I find it so important.

Take delivery of a service first. What does a healthy customer supplier relationship mean? There has to be some clarity of expectation. That is the customer who signs off on its definition and its delivery, and the customer who has sanction about changes and complaints and consequences. If satisfied, the customer hands over her money. The customer is king.

The supplier does well to remember this and does well if he does. Customers can choose - so suppliers are aware of and scared of competition. The supplier can't arbitrarily change the rules without consequence. The supplier can also refuse to provide the service in the first place, but that decision point is clear to both sides.

Healthy. The smart supplier consequently has humility and respect, and communicates and probes. (In old fashioned commerce, there were such practices of giving just a bit more than what was bargained for or some bonus). The supplier may know the customer is thick and ignorant and not know the professional subject of the service to be provided, but this does not override the basics of humility and respect.

It is not much different in acquisition. The supplier woos the customer, wary of competition. A smart supplier seeks out an understanding of sweet spots for the customer. A relationship forms. A bargain is struck. Both sides understand who stands where.

Wow, this stuff is so basic. Why would any provider of service ever contemplate a different mindset? We can all see, whatever our culture, the difference between smart, humble, respectful, suppliers and the other sort. We can also see the corrosive impact of the wrong approach - the abject level of service and innovation from monopolies and public sector firms and the like, and the stench of corruption where principles are violated. Yes, it can lead to exploitation and "have a nice day" shallowness, specifically where the supplier has many layers and the boss and the one delivering the service are not of the same attitude. But it is generally the best model for the customer, and, of course, the best model for the supplier as well.

So why on earth would we want any other attitude in GS? Beats me really. The most common reason is arrogance, snobbery, disrespect. Behaviours you can get away with in a monopoly or nationalised industry for a while, but which always lead to misery and decline even there after a while.

There are a couple of pitfalls. The first is the mercenary pitfall. The Alan Sugar syndrome maybe (does anyone else see a similarity with our immediate former GS president?). Supplier sees customer coming. Can get away with for an extended period poor quality or unjustifiable margins. Sees goal as maximising profit at the expense of customer value. Actually, in the business world, these guys get their comeuppence pretty fast. There is some false perception that Walmart or Tesco play this game, but no real evidence. They provide wonderful customer value generally. But, fair enough, this risk is especially dangerous in the special circumstance where the customer is also the shareholder. There, any sort of mercenary behaviour is a disaster. It shouldn't happen, but it might where the customer is half asleep and the supplier gets greedy. GS circa 2001 really. Hence our emphasis on customer value as our dominant driver nowadays.

The other pitfall is blind subservience pitfall. The supplier stops thinking about what the customer ought to ask for, but just rolls over and gives them what they demand. In delivery phase, this is pretty well what should happen (though with half an eye to the next opportunity), but in acquisition phase this leaves value to both sides on the table. Again, the market should punish the supplier long term, as someday a competitor will offer that value and take over the customer. In my view, GS has recently flirted with this pitfall in its relationship with many Shell businesses. The model where the customer takes all the risk and sets the agenda for R&D is not ideal, according to me anyway. We have not always had the courage to drive innovation and to really convince our customer of what could be best for them (in acquisition...in delivery we do it too much!). One day, that may come and bite us. Hence "valued shaper" etc etc.

But both pitfalls are avoidable, and both are preferable anyway to losing the basic discipline of a customer attitude. Most of GS finally gets this. Before 1998, our predecessor organisation didn't. Well done third party business, smart leaders, courageous customers, Key Moments of Truth, you are the real secret of our success. And, sorry, so long as any service business stays in denial of this number one basic, they are doomed. No ifs, no buts, not nuances, no "customers AND partners". Simple as that.

Why is it called service anyway? Suppliers offer a word which is inherently respectful and humble. That is how it should be. And the logic goes beyond business. What are the key characteristics of the best politicians? The best religions and religious clerics? The best parents? The best lovers and spouses?

Here endeth the lesson. Is this too simplistic?