Recently our CEO Brennan was invited to a breakfast with Isadore Sharp, the founder of Four Seasons, who is also a Ryerson University alumni. One of the anecdotes from the conversation that ensued was how Isadore would walk into his hotels and regularly ask the bellhop how they could improve the customer experience, because bellhops are the most knowledgeable about customers’ needs. It’s a telling tidbit from an organization that built a reputation for excellent service through valuing and empowering front-line employees.
I believe this style of leadership is needed now more than ever. Here’s why.
Value is Moving Downstream
In Niraj Dawar’s book Tilt: Shifting Your Strategy from Products to Customers, Niraj argues that competitive advantage is moving from upstream to downstream. Upstream activities or investments involve creating new products, factories to make those products more efficiently, etc. and downstream activities are those around the customer experience — such as providing a convenient way to buy the goods or services on offer.
Put another way — the strategic question that drives business today is not “What else can we make?” but “What else can we do for our customers?” Customers and the market — not the factory or product — now stand at the core of the business. Niraj wrote an HBR blog post, When Marketing is Strategy, that summarizes his research nicely.
This means that more and more value is being created in the experiences surrounding a product or service. More pointedly, when product differentiation is hard to sustain over the long-term (i.e. competition is increasingly quick to respond), then it’s the nature of customers’ interactions with your organization that builds brand preference. Take Apple as an example. Their products and services (iTunes for instance) are good, but arguably aren’t always the best in every category for a given offering. However, the experience – from shopping at their retail stores, to getting service if something goes wrong – is exceptional. This is sustained through front-line employees that continue to help Apple differentiate itself with every interaction.
The Few Can’t Out-Innovate the Many
Second – change is happening at an ever-increasing pace. There are thousands of fun stats you can find that bear this out. I liked the HBR article Are You Learning as Fast as the World Is Changing? because it highlights the challenges leadership faces in coping with a constantly rising rate of change.
The days are gone where a small group of smart individuals can out-innovate the market in the long term. Many organizations have realized this and are embracing a more collaborative approach to innovation, getting ideas from an increased number of sources in an effort to stay ahead. GE’s Open Innovation manifesto is an attempt to crowdsource with experts and entrepreneurs everywhere to find great ideas.
So how is your organization tapping into a broader pool of ideas to forge ahead? One thing we’ve learned is that one of your most engaged stakeholders is your broader employee base. Their jobs are a significant part of their lives and something they’re passionate about improving. Look to customers, employees and others who have a significant stake in your offerings and organization (i.e. they interact with it daily) as sources of ideas being drawn from those with a vested interest in improving your business.
GE’s Open Innovation Manifesto is an attempt to crowdsource with experts and entrepreneurs everywhere to find great ideas.
Your Workforce Has Changed
Third – Millennials are having a major impact on workplace demographics.
Millennials already form a huge part of the workforce and their expectations are clearly different, as this PwC study notes. Some company cultures like Google are naturally innovative and haven’t restrained themselves by “how things used to be done.” These companies are not specifically targeting millennials, but their culture, management style and approach to recruitment and retention naturally appeal to the millennial generation. And because of that, they are able to take their pick of the best young talent around.
Having the best people is the oft-cited (and almost cliché) source of long-term differentiation – if the newest and largest generation yet wants to be managed differently, you have to ask yourself if you’re managing differently. From the study: “Millennials feel constrained by what they see as outdated traditional working practices. 65% said they felt that rigid hierarchies and outdated management styles failed to get the most out of younger recruits.” This generation is more educated than any before it and are keen to contribute their ideas and feel like they’re making a valuable contribution. However, traditional management styles may not be the best way to enable this.
What does these new business trends point to?
For me, it points clearly to the need to change how we empower each and every employee, particularly front-line workers.
A customer’s experience is often most defined by the people they interact directly with. Not only is it important that those on the front lines are engaged with the brand and passionate about providing great service, but they’re also a great source for the small, incremental innovations that can add up to a material impact on a customer’s experience. In addition, because they field customers’ questions and demands on a daily basis they’re in an excellent position to spot trends.
If we pair the increased need to engage every employee in providing innovation to the customer experience with a new and large workforce that’s keen to move past traditional hierarchy and have their ideas heard then we have key ingredients for a new style of management to augment our existing leadership skills. Namely, the idea that leadership is there to hear, support, evaluate and implement the best ideas from a wide employee base. Lastly, we have a new major demographic in the workforce that highly values dissolving hierarchy and being able to contribute their ideas.