The recent demise of the Monitor Group, the consulting firm co-founded in 1983 by legendary business guru Michael Porter, is an important event for the corporate world. Professor Porter, who has an MBA from Harvard Business School with a PhD in economics from Harvard University (where he wrote an acclaimed thesis on strategic positioning), and his writings have been part of the staple diet fed to management students the world over since the late 1970s.
Beginning in 2008, the rapid fall of the Monitor Group to its ultimate bankruptcy in November 2012 ought to have sent shock waves through the corporate world — but has it? That is a question worth pondering. Erstwhile advocates of Professor Porter’s model have been strangely silent. Unlike product recalls when defects of a serious nature have been detected, recalls of knowledge models are unheard of. Why is that so?
Since Monitor went bankrupt, numerous explanations have been offered in the past few weeks as to why it happened. Had Professor Porter’s model reached its “use-by” date? Or, in the turbulent economic times of today, when predictions of what the future holds are at best chimeras and mirages, does strategy have to give way to short-term tactics for survival? Or has Professor Porter been the latest to ignore Maslow’s warning that for a man with a hammer, everything looks like a nail?
For the past year, through these monthly columns, I have been raising questions about the applicability of management models developed from product mindsets in a world that is today dominated by services. It is from this perspective that I wish to address the question of the validity of three acclaimed management models to the service industry. Let us not wait for the advocates of these models to go bankrupt before questioning their validity.
Six Sigma is a great model for manufacturing companies, but it is of dubious applicability to organisations that differentiate themselves in the marketplace through their service. The unpredictability of customers’ changing needs, moods and expectations demands a “loose-tight” approach to the design and delivery of service. Even Keki Bote, an architect of the Six Sigma model when it was first developed in Motorola, acknowledges this. Alas, the big bucks that are to be made from relentless application of Six Sigma have made it too tempting for large consulting firms to abandon its use for service organisations.
Pay for performance has been used as a major tool for “motivating” people, even though enough evidence has been thrown up to demonstrate that customer assessment of organisational performance is a function of the ephemeral Moments of Truth experienced by them during their interactions with front-line staff — over 90 per cent of whom can be neither observed nor supervised by management. It does not require too much intelligence to understand that it is next to impossible to measure what one can neither observe nor supervise. The best service organisations have moved away from these antediluvian practices; they focus on leadership training targeted at nurturing and tapping into the intrinsic motivational energies of their staff.
Outsourcing customer contact: A recent experience I went through might be the best way to throw light on this aspect. For over eight months, I have been made to run from pillar to post and from Tom, Dick and Harry back to Tom again to have some home equipment repaired. The suppliers of the equipment had just one service technician attending to the four southern states. Having failed to get a reasonable response from the local dealer, I managed to get the cell phone number of the managing director of the parent company five months ago. He was surprised when I called him, the first question being how I had managed to get his cell phone number! After the initial surprise, he reacted well and assured me that the dealer’s service technician would contact me and do the needful. Yet, after 40-odd telephone calls and a dozen emails spread over four months, I am still waiting to have this small job completed.
From where have we learnt that this is the way to manage customer experience? Which management model? Is it from C K Prahalad and Gary Hamel’s model, by which organisations are advised to restrict themselves to their “core competence” and to outsource all other aspects, including customer experience?
Hans Christian Andersen wrote about a child who laughed at the emperor parading with no clothes on while the rest of the populace had been keeping a stoic silence, since they had been led to believe that the problem was with their eyes and not with the emperor’s attire, or lack of it. Let us have more such children, who have the guts and honesty to speak out.
Let me end by first quoting and then commenting on Steve Denning’s conclusion in his brilliant analysis of the demise of Michael Porter’s consulting firm: “Monitor wasn’t killed by any of the five forces of competitive rivalry. Ultimately what killed Monitor was the fact that its customers were no longer willing to buy what Monitor was selling. Monitor was crushed by the single dominant force in today’s marketplace: the customer.”
The customer of today has little time to waste. In the example I quoted earlier, the five months I spent to get a simple repair job done actually cost me far more than the ridiculously low cost of the parts that had to be ordered. I am not a unique customer. I represent the sizeable part of the marketplace for whom time is precious. Any organisation whose strategy does not start and end with what customers value most is doomed to fail. While their consultants will be laughing all the way to the bank – at least, till they are officially declared bankrupt – the naive organisations that engage them will find themselves being pursued by their bankers, investors and shareholders, not with laughter but with hatchets in hand.
The writer, a former corporate executive, was the founder-director of the Centre for Service Management at the University of Buckingham, and is now MD of Chennai-based VSM Consulting Services.
mahesh@vsmahesh.com
