This month's Utne Reader has an excellent article: Big Box Panic by Michael C. Moynihan. (warning, the link gave me an error when I tried to pull it)
The first point that Moynihan makes that surprised me is he dispels the myth that corporations are just now trying to compete with local businesses. Moynihan explains that corporate businesses in neighborhoods date back to the late 1800s.
The essence of the article is that local stores are out competing the big box stores and winning big time. Moynihan compares local coffee shops, local book stores and local record stores to their super sized competition. In each example the local businesses are able to out compete their corporate competition by meeting their customers' needs.
Small businesses are in a position to respond to their market quickly, the decision makers are close to the customers and can react to customer feedback.
Corporate businesses typically have a centralized chain of command and a centralized set of protocols. Most corporations strive for consistency between their branches. Variances in practices from branch to branch cause inefficiencies. Simplifying branches by homogenizing them can create economies of scale benefits and other 'synergies'.
Think McDonalds. The McDonalds restaurants are pioneers of centralization and consistency. A customer can go to any McDonalds with the expectation that their meal will taste exactly like their last meal at aMcDonalds. This is by no accident. The McDonalds corporation has a very specific set of standards for the way their restaurants are to be run. Every operation of a restaurant has a standard operating procedure(SOP) and the employees are expected to adhere to them. Even though many of the restaurants are owned by franchise owners the supply chain is strictly controlled by the corporation.
What's good about this process? People know what to expect when they go to McDonalds. McDonalds can out compete with other restaurants by price, with advertising resources, and with name recognition.
Do you eat at McDonalds? I usually don't. If I'm on the road and want a predictable and fast meal, I'll go to a McDonalds. They're great for that, but if those things are unimportant to me, I'm going to probably go somewhere else.
My point of bringing in McDonalds is I don't believe that most adults would prefer to eat a meal at McDonalds, it seems to be a choice based on circumstances.
Neighborhood restaurants can easily win local business over a McD's. It doesn't take much for them to do it. They can offer food that caters to the neighborhood's tastes.
Try ordering a cheeseburger without mustard or onions at a drive through. Unless it's raining, you're probably better off going inside because you're going to be idling your vehicle for a while over a number while they special order your food.
Imagine you are severely allergic to onions. You'd probably never eat at a McDonalds. There is no speed benefit and their track record on special orders is not at the rate on which one would stake a trip to the hospital.
If you have food allergies you'll probably look for a place that will cater to your needs. Let's imagine a burger place called Joe's Burgers. It is owned an run by a guy named Joe. Joe is always at Joe's. When you tell Joe that you don't want onions and that you will get sick if you eat them, Joe will take steps to ensure that his food does not make you ill. Joe can probably do this just as quickly as he can without onions. Joe doesn't have any SOPs or other rules that he needs to follow. He can do whatever his customers want him to. Joe may not be able to compete with McDonalds on the basis of price, but he can easily compete based on quality of service.
Another example, cable internet service. I have had cable internet service for the last nine years through three providers. The first year of service was while I was in college. I remember I had a problem once with my service, it was after cable television was installed. The tech messed something up with the internet service. I called the local number and spoke with a technician who was a few miles away. He said that I was on his way home and that he'd stop by to see if he could fix the problem. I received a call about ten minutes later from outside my apartment to see if the service had been restored. Indeed it had.
I now own a house and use Comcast as my internet provider. Within the last year I had a problem with my cable modem. My usual course of action had been to drive to the local Comcast office and exchange modems. It was about two miles from my house and it seemed to always fix the problem. This time I found out they moved the office a few more miles from my house. Instead of a five minute drive I was looking at a 20 minute round trip. Not so good. I got the new modem and called the service number to get the modem provisioned. Accustomed to waiting on hold, I've found that cordless speakerphones are awesome. This time was no exception. I waited on hold for a good fifteen minutes.
A representative with a thick Texas accent answered. We went through the provisioning process. For most of it I heard silence broken by the occasional "One Moment". The representative asked me for the "make" of the modem. I said RCA. She said, "No, give me the make!" I told her that I was confused. I started to describe the modem. I figured out that she wanted the MAC address. This is an acronym that, until then, I had only heard pronounced as "mack". I read the address off to her. She replied with a "one moment". I tried to break the silence by asking if everything was ok. She seemed to be bothered by this. It became clear that she actually wasn't doing anything. I was talking to her and she was communicating with a technician. She eventually hung up on me without giving me service. I called the number back and did manage to reach a nice person on a static laden line. She was able to help me in a reasonable amount of time.
By the time I was done restoring service it had been over two frustrating hours of my time just to get their service to work.
If there were a viable alternative that were half as fast, twice as expensive, but with good service, I'd go with that in an instant.
Good service is letting a customer know that they are important and that their needs are important to the service provider. When organizations centralize their services they limit their ability to meet a customer's needs.
Part of the reasons that decentralized service providers can provide such excellent service has to do with what many corporate leaders would see as inefficiencies. For example, the local Cable company in college, AT&T, had customer service representative in the same office as the technicians. They knew each other and were able to use their relationships with each other to provide better service with the customers. It may be cheaper to isolate all of the customer service reps in a call center in Vietnam, but the company's ability to provide service is going to be greatly diminished.
Service is important. It wins business. It is difficult to put a dollar value on good service. If it were easy to quantify the value of good service, I think we'd see a lot more decentralized service models in corporations today.
Thursday, May 29, 2008
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Posted by Paul Wiedel at 7:13 AM