However, despite these ambitious aims, Centrelink has not always been as successful as desired (see Chapter8).
The growth trajectories of companies such as Wal-Mart, IKEA, Starbucks and Virgin reflect the power of something more than an ambitious goal orientation. Each company was propelled forward by a founder with a compelling, infectious vision of what the business should and could become. There was no simple formula, but a shared characteristic was an emphasis on core values. In the case of Sam Walton, the founder of Wal-Mart, there was the home-spun philosophy of treating the customer as a guest, backed up with the appointment of ‘people greeters’ at the front door of every store. Both Sam Walton and Richard Branson believed strongly in the importance of injecting a spirit of fun into their communications and dealings with people. Indeed, Branson has made his own personal philosophies the mission for the Virgin Group as a whole, which includes an emphasis on adventure, learning from failure and having fun at work.
A capacity for self-ridicule, combined with the ability to earn respect, has contributed greatly to the culture-building contributions of leaders such as Walton and Branson. It has helped them to communicate to every level of their organisations, and to the wider commu- nity as well. By bringing themselves down to earth, by ‘walking the talk’, and by their own examples of humility, they have demonstrated that people matter and that no one is more important than the customer. The same demonstration of democratic values has helped to reinforce the primary business objectives of companies such as Wal-Mart, Virgin and IKEA, of providing quality goods and services to a mass market.
The democratic vision of IKEA’s founder, Ingvar Kamprod, has permeated the com- pany’s culture. It radiates from the business mission to the front-line staff. There is mini- mal hierarchy, and everyone, from top to bottom, has the title ‘co-worker’. The way people are treated at IKEA has engendered an impressive culture of trust, which is reflected in the empowerment and discretion given to all staff, as well as in the way products are described and displayed. The same connection between respect for people and trust in the business lies at the heart of the remarkable success of the Skippers Group in Western Australia. By putting the onus on his sales personnel to confirm that they have won the trust and respect of every customer, as measured by five core values, John Hughes has clearly demonstrated to his staff and his customers that his business goals are in fact his business values. As Robert Dilenschneider, the former CEO of one of the world’s leading public relations firms, put it: ‘When culture and vision are well matched, magic can happen’ (Dilenschneider, 1992, p. 27). At the most superficial level, every organisation has a concept of the service it pro- vides and the customers it targets. Of course, some organisations achieve greater success than others because of their marketing capability. In Western Australia, for example, as in most cities, there are car dealerships that have flourished for many years due to their competence in managing basic business operations, especially sales and marketing, and their ability to retain distribution rights for a popular brand of vehicle. However, the Skippers Group has achieved a unique status and level of success due to its reputation for superior service quality. Similarly, in very different ways, both Singapore Airlines and Virgin have created a unique market space by providing a special and distinctive kind of service. Both Virgin and Standard Chartered target customers who seek both minimum service and maximum self-service options. Their success underlines the point that, in services, quality is defined by the ability to meet or exceed the customer’s needs and expectations, rather than by indiscriminately pursuing a ‘more is better’ strategy.
There is a close connection between service quality and innovation. An obsession with providing customers with new, better and frequently unexpected sources of added value is the hallmark of outperforming companies. Singapore Airlines’ success has been attributed to its commitment to ‘set standards of service that others can only follow’, the latest of which is the first regular, direct scheduled flight service from Singapore to Los Angeles. From his ear- liest vision of Italian coffee bar culture taken to every corner of the world, Howard Schultz of Starbucks has transformed what is basically a commodity product into a universal coffee- drinking experience by educating the market to appreciate quality coffee standards in a mul- titude of forms in a congenial social environment. Quality service can only be sustained by constant innovation, which, in turn, relies heavily upon a deeply ingrained learning culture. Just as Richard Branson has built a business empire upon the ability to learn from the mistakes
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of others, as well as his own, so Sam Walton before him instituted Wal-Mart’s weekly ‘Saturday Morning Meeting’, which is attended by all regional field managers to compare notes and debate current issues. This meeting has become the centrepiece for collaborative strategic decision making which ‘helps calibrate and adjust the vision in a constant cycle’.
All of the companies under discussion have maintained an impressive level of bottom- line performance over long periods. They have been ruthlessly goal-oriented; however, in each case, growth and profits have been secondary outcomes, rather than primary points of focus. Higher-order motivation has inspired exceptional levels of staff loyalty, perfor- mance and pride, which has had a positive impact upon customers, suppliers and other stake- holders. Howard Schultz frequently startles financial analysts by refusing to discuss ‘commerce’, and by insisting that Starbucks’ priority is with ‘making the human connection’ based upon ethics and values. In an earlier era, Kamprod of IKEA devised his brilliantly suc- cessful business model around a philosophy of offering lower prices by cutting costs, but never cutting back on innovative ideas or quality. Inevitably, all companies are under pressure to pursue short-term advantage by ignoring the implications for long-term reputation. But, as even great companies such as Nestl´e, Nike and Shell have found to their great cost, betrayal of ethical standards not only erodes the value of the company but also diminishes the self- respect and pride of major stakeholders, especially the employees.
Conclusion
As discussed in Chapter1, the continuing classification of goods and services into two clearly separate categories is an increasingly artificial and misleading exercise. The previous two chapters emphasised the complex and dynamic impact of the business environment in which service providers operate. They highlighted the importance of stakeholder relationships and the many management challenges associated with building quality stakeholder networks and relationships, and the many management challenges involved in building and maintaining them. For managers today, instead of regarding goods and services as separate categories, it is more realistic to consider them as overlapping and interdependent.
As this chapter has demonstrated, from the customer’s perspective it is important for managers to think in terms of a goods and services continuum. What matters most to cus- tomers is the perceived benefit of the total value position. It is of no consequence to the customer whether or not the offering is visible or invisible. As managers move towards a value chain mindset, goods and services increasingly become integrated and inseparable ele- ments. The transition from a services marketing to a value chain mindset requires a new way of thinking about strategy. Instead of focusing narrowly upon market conditions and behaviour of competitors, managers need to concentrate much harder on their customers and on the customers they seek to create in the future. The design and delivery of an innovative and compelling value chain, and translating it into a viable business model, goes far beyond push- ing an aggressive marketing plan on confused and bombarded consumers. Instead, it involves the careful creation of an integrated business model, which includes all of the elements that combine to satisfy and exceed customers’ expectations, while taking account of the variables that could conspire to undermine it. As the ISM model (see Figure4.1) clearly indicates, an
innovative business model requires the creative input and performance accountability of all the management functions working as a team, generating new ideas and taking responsibility for corporate outcomes (Johansson, 2004, pp. 79–80; Kleiner, 2004, pp. 30–32).
Without the critical core competencies, continuous coordination and a corporate cul- ture committed to serving the customer’s needs and priorities, the business model is just a theory or a concept. Without the capability of learning from insights into past experience, knowledge about current trends, and foresight as to where the future is heading, managers will lack the essential ingredients for reviewing, refreshing and reinventing the value chain. Without the leverage and warrant of a powerful brand that captures and communicates the values and benefits that its stakeholders expect, an organisation will fail to fulfil its true potential.
It is important than managers fully appreciate the strategic significance of a consumer- based approach to branding, because it is the key to building a loyal, long-term customer base. A well-branded value chain is much more than the sum of its parts, because it creates the premium that customers are willing to pay for, including invisible attributes such as safety, reliability, prestige and elegance. Regardless of whether one is involved in managing profes- sional, personal or domestic services, on the one hand, or service elements of consumer or industrial products, on the other, the strategic management challenge lies in creating, com- municating and consistently delivering a unique value proposition to the customer.
An effective brand is the foundation for building and maintaining a long-term relation- ship with stakeholders, and its credibility is based upon the fulfilment of promises. A repu- tation for integrity and quality is an organisation’s greatest asset and must be managed with consistency and care. What ultimately differentiates the financial adviser, or the car dealer, in the mind of the customer is not just the ‘physical’ products they sell – the investment funds and the motor vehicle – but, rather, the reputation values that the customer associates with their brands. Brand values can communicate very directly and deeply, and impact in an extremely personal and subjective way, but they are constantly being tested against the blowtorch of individual expectations and experience.
Finally, as a template for analysing cases and as a guide to practitioners, this chapter puts forward a strategic management framework (Figure4.2) developed by the author. It provides a model that stresses the need for an integrated and balanced approach in managing strategy. It incorporates both short-term and long-term strategic imperatives, the equal importance of sustainability and renewal objectives, and the need to address simultaneously both the critical organisational functions of operational management and the leadership roles that are vital in translating business model priorities into the attitudes, norms and practices of a positive corporate culture.