UNEXPECTED CONSEQUENCES

Technology will, I believe, smash my firm's historical role in the payments industry. Without a vision of how to "put ourselves out of business" before the digital revolution does, we will be nothing more than fodder for a business school case study.

I wrestle with this challenge every day and have spent many sleepless nights trying to visualize a path from today to tomorrow.It was, therefore, with both great interest and intrigue that I read Chunka Mui's "Unexpected Consequences" article. For, while I have a broad sense of what awaits us in the digital world, I have lacked a process or a roadmap to move Banc One Payment Services into this new world. Imagine the smile that came across my face when I saw Mr. Mui's suggestion to "cannibalize your markets"—another way of saying, put yourself out of business. Even more compelling is the promise for identifying killer apps through the design principles articulated in his book [Unleashing the Killer App: Digital Strategies for Market Dominance].

So I'm intrigued and hopeful. Intrigued by a process to help our firm chart its future in the digital economy. Hopeful that the process and design principles will not only help us come up with great ideas, but most importantly, help us ". . . do something about them!"

—Jeffrey P. Neubert
Chief Executive Officer
Banc One Payment Services

PETER'S PRINCIPLES

We have endorsed and implemented many of the ideas of Peter Drucker [Peter's Principles, Spring 1998] over the years, so I was not surprised to find myself in agreement with him again. I was especially taken with his insight about knowing those who aren't our customers. Just as we measure customer satisfaction to determine the value we render to customers, so we need to know non-customers and understand the value our competitors are providing to them.

Over all, I have always found Mr. Drucker's business and management philosophy to be helpful. This interview expands upon his consistent focus on the customer, and customer to be!

—Robert Martini
Chairman
Bergen Brunswig

I think Mr. Drucker's thoughts on leadership are extraordinary, but I would disagree with his thinking that "know thy customer" is obsolete. I feel that Frederick Reichheld's "loyalty-based cycle of growth," from his book, The Loyalty Effect, offers debate. Mr. Reichheld's growth cycle demonstrates how contented employees who have the right attitude can create value through superior customer service, which translates into customer loyalty, i.e., repeat sales and referrals. A shift in customer retention of as little as five percentage points (say from 93% to 98%) accounts for more than a 20% improvement in productivity. The cycle concludes with profit following productivity. (This cycle is most effective when management's motivation is fair treatment of all people, rather than simply a profit motive.)

However, one must also realize that many customers reach a saturation point, so it is equally important to consistently provide new products and services and to reach new customers. Therefore, I believe that it takes both mantras, "know thy customer" and "know those who aren't your customers," to survive in business, particularly with the savvy customer base of today.

—Vickie Corbitt
Research Analyst
Safeguard Scientifics

In today's Information Age, most of us know who our customers are. Knowing those who aren't represents the opportunity-pretty basic stuff! The real question is:
If I try to serve those who aren't, will I alienate those who are?

—Patrick Kennedy
Vice President, Home Products
Blair

Drucker presents excellent logic [with his advice "know those who aren't your customers"]. Even with a large market share, generally there is a higher percentage of customers who aren't buying your product. It is incumbent on the successful executive to know why these customers do not purchase your product. The simple answer is that in some way—performance, service, price—you aren't meeting expectations and they are buying from someone else.

Drucker's dictum can be carried into other strata of business with equal gains in knowledge and understanding. Why don't certain suppliers want to deal with you? My experience has taught me that I didn't want to buy from certain suppliers at any price. Their requirements were too onerous. Their approval processes were too slow. Their products weren't good enough.

Similarly, it is useful to consider who aren't your competitors and why. Are they working on a new technology that will make your product obsolete? Are you absorbing too great a level of credit risk?

You can also look at who aren't your investors. Is your firm's performance being tracked by the most successful financial management firms, or are your investors the second string?

Each of us can learn from those who "aren't." We can do so by gathering data but, most importantly, we must question our mindset. Are we satisfied or dissatisfied? Successful firms recognize that only by being dissatisfied can they succeed in the long run.

—Gerald G. Garbacz
Chairman
Nashua

Any time Peter Drucker speaks, we all should listen. His recent article in your magazine is no exception. However, I'd like to offer a differing view on one aspect of Mr. Drucker's thesis.

In my opinion, you really do have to know your customer, most especially if you are in a service business; and all businesses should be treated as service businesses. The cost of obtaining a new client far exceeds the cost of keeping and expanding a relationship with an existing client. Thus, I place great value on knowing the customer.

—Donald M. Carlton
President
Radian International

THE LAST WORD

As a new reader to your new magazine, may I start by congratulating you on your fresh insight and opinion in a very important area? May I also praise the graphic design, which is modern and colorful without the migraine-inducing excesses of others?

As a senior manager in a European country, I did want to steer the debate on thinking globally to a wider perspective. You say [The Last Word, Premiere Issue] that things that are going on in Europe now are not as sophisticated as the things going on in the U.S. and that [the U.S.] is a statistically rich country.

Putting aside my chauvinistic response to this delinquency of Europe, I thought more deeply about the problem. There are very many analogies in evolution, gaseous diffusion, and even diet where the quick fix does not yield a lasting cure. It could be argued that exposure to a deluge of data may provide the edge in financial markets where completing a deal is a split-second activity, but it is not a universal fix. Deming recognized the need to understand profound variation and not respond to noise in the system, and how much is an obsession with data merely noise? I would not wish to defend European tardiness and cultural dogma, but I appeal to you to present a second dimension on the issue.

—Roger James
Business Systems Director
Napp Laboratories