Avid readers of Don Peppers’ and Martha Rogers’ books on one-to-one marketing will remember frequent mentions of a Boston-based concierge service operator, Streamline. It not only delivered groceries to people’s doors but medicines, dry cleaning, videos and so on. And, not long ago, it went bust.
However, there’s at least one investor who forgives it: Dr Jim Maxmin, who gave the Chartered Institute of Marketing’s Annual Lecture last week.
In its home territory of Boston, it seems Streamline was profitable. Its problem was a lack of scalability. Launching the same service in each new city was so expensive (dedicated warehouses, relationship building and so on) that Streamline couldn’t expand and be profitable. Franchising wasn’t an option, because even though it was profitable in Boston, it wasn’t profitable enough.
In many circles nowadays, news of failures like Streamline’s generates a smug “I told you so” response. People who had begun to fear they were missing the boat can hardly disguise their relief that it sank. But Maxmin’s message last week was very different. The real digital revolution hasn’t even started, he told the assembled marketers. Most of what we’ve seen so far is just “old behaviour on new platforms”.
According to Maxmin, virtually everything yesterday’s technological revolutionaries (both start-ups and corporations) did was driven by good old-fashioned industrial-age priorities, such as the quest to automate routine operations and cut costs. Just look at the enthusiasm with which the banking industry is chasing self-service. Consumers input data and do work free that was once done by paid staff. Brilliant, but not sustainable, insists Maxmin. Initiatives like these ignore real consumer needs, which revolve not around self-service but deep service: helping me to manage complex tasks, choose goods and services, and so on: “helping me regain control of my life”.
Deep service implies a break from the past for most companies, both operationally and in terms of customer relationships. Industrial age organisations spend 90 per cent of their time focusing on operational excellence, Maxmin observes. They are control oriented, hierarchical and obsessed with maximising the profits they can make from each transaction. “For the last 80 years, you and I have lived and worked around the organisation. Now a Copernican revolution has begun. The organisation has to revolve around the customer”.
Maxmin says that to be marketing-wise we need to exorcise marketing’s roots as a bolt-on to mass production machines. “Inside the organisation we treat consumers as objects, targeting them, segmenting them, manipulating their behaviour with loyalty bribes, crossand up-selling to them. In each case, it is to a ‘them’ that sits outside the organisation’s space.”
Instead, he suggests, tomorrow’s successful companies will work inside consumer space. The objective will be to “align yourself to the consumer, to become his or her advocate.” It’s a completely different mode of operating and thinking: from institution inÃÂ to customer out. Where customers decide to ‘opt in’ to companies and their goods and services. We decide to join a business and transfer value to this business. This requires, in turn, a new measure of valuation and business models with a new enterprise logic. In summary, declares Maxmin, the digital age “is putting all of us [corporations and consumers] on an equal footing, sharing costs and sharing wealth”.
But if Streamline went belly up,why should anybody else fare any better? Here are three possible reasons. First, there is massive pent-up demand for deep service. It’s an un-met need. Maxmin talks not so much of value being created, but of releasing enormous amounts of value that remain “trapped inside us”. The value is already there, it’s just waiting to be released. Streamline, he insists, was “a piece of brilliance”. Enabling users to reclaim their Saturdays by tackling the trade-off between discretionary time and discretionary money is the way of the future. He says: “It doesn’t mean Streamline was wrong. It just means we haven’t found the right enterprise operational logic yet.” And second and third generation entrepreneurs will discover this logic, he predicts.
Second, current marketing solutions are failing, and this failure will spur companies to look for better alternatives. I
f we marketers took a dose of the truth drug sodium pentathol, says Maxmin, we would have to admit that our customer service initiatives, our loyalty schemes and our customer relationship programmes are achieving close to zero results. In fact, because they continue to treat consumers as a “them”ÃÂ they’re often counter-productive. Maxmin says: “We’re not closer to the consumer, but further away. We are alienating consumers. We are destroying value”. And sooner or later, we are going to have to face up to this truth.
Reason three goes back to those second and third generation entrepreneurs. Streamline and others demonstrate that the right business models are far more complex than the early pioneers dreamed. Take an analogy. In 1903 Orville and Wilbur Wright flew the first aeroplane for about 12 seconds. But all they really proved was that manned, powered flight was technically possible. It took another 32 years of trial and error before the first commercially successful plane left the runway.
Along the way, inventors had to perfect a whole series of new technologies (such as the variable pitch propeller, retractable landing gear, a strong but lightweight fuselage, the air-cooled radial engine and wing flaps). They then had to bring them together in perfect balance, to work as an integrated whole. Until this happened, commercial flight was just a freak show.
According to Maxmin, we’re in a similar position now with deep service. We still have to find all the right ingredients, and put them together in the right ways. What about the potential of peer-to-peer file sharing, for example? Many in the audience were deeply sceptical. Perorations like this can be frustratingly vague. As practical people, we want proof that it works. But then, if Orville and Wilbur Wright had tried to describe the air travel industry of the future, how many of us would have got it?
Alan Mitchell’s book Right Side Up: Building Brands in the Age of the Organised Consumer is available from Harper Collins Publishers, at the special price of £16.99 (rrp £19.99) including postage and packaging. Telephone 0870 900 2050 and ask for department 832D