Entirely Irrelevant but I Just Can’t Stand It department: “High-paying jobs are available for people who learn how to run a key software program used by retail companies, several executives told Gov. Mark Dayton on Friday. And they’d like to see the state establish a training program.” (“IT execs tout Oracle software, ask state to help train workers,” Adam Belz, StarTribune, 10/26/2012).
Want to bet that next week the same characters will be complaining about too-high tax rates and the need to shrink government? And here’s a surprise: One of the companies making the pitch provides exactly this sort of training.
Speaking of retailers …
Not Entirely Irrelevant, but Close and I Can’t Stand It Either department: Just last summer Best Buy’s board of directors paid four of its top executives millions of dollars in “retention bonuses” (“Do retention bribes make sense?” Keep the Joint Running, 7/2/2012).
Here we are, less than four months later, and Hubert Joly, Best Buy’s new CEO, has provided an exit-door instruction manual (“Don’t let it hit you in the glutes on your way out of it”) to three of the four executives bribed by the board to stay.
I don’t know whether Joly made the decision for the right reasons, the wrong reasons, or no reasons at all. It does seem likely the executives whose names are all over Best Buy’s current mess aren’t likely to be the right ones to guide it out of its current mess.
I’m skeptical, though, that Joly is the right person to guide it, either. He comes out of the hospitality industry, and is emphasizing improved hospitality (read “customer service”) at Best Buy as its path to success. And like it or not, (I don’t), customer service seems to have fallen by the wayside as a business strategy.
Consider air travel. Do you choose the carrier that provides the best flying experience? Pay for the first-class upgrade? Or buy the cheapest ticket? Since industry deregulation began, ticket prices have fallen more than 40% according to the Air Transport Association, while the air travel experience has become 247% more unpleasant, according to everyone I know who travels a lot.
Want something more provably quantitative? Economy-class seats are 17″ to 18″ wide. The average male human is 21.7″ wide. Do the math.
More math: Women are 15″ wide on average, so the airlines are causing men to victimize women by overlapping into their seat space, whether we want to or not.
Next consider Pricegrabber.com. It’s quite successful; all it does is let you comparison shop so you can buy from the lowest-price provider that isn’t likely to swindle you.
But this is all business-to-consumer … B2C for we acronym-besotted denizens of the 21st century. How about B2B? My one-word answer: China.
Before the advent of the world wide web, business supply chain theory focused on forming stable, long-term, trust-based relationships with suppliers. Now it focuses on shopping for the low-cost provider.
Some high-service exceptions remain. The Apple Store, for example, is legendary for its superb customer support. Bose has a similar reputation; I experienced its reality personally some years back. Apple and Bose can afford great support through a simple expedient: They don’t have to discount, or at least, they don’t have to discount so much that their margins are squeezed.
Quite the opposite: Apple and Bose products are perceived to be unique. For plenty of consumers they have no direct competitors.
Where is this taking most companies? Into a world where price and convenience are what matter most. The customer experience, no matter how phenomenal, will be the tie-breaker, nothing more. It won’t support much in the way of higher prices or better margins.
Which loops us back to Best Buy and Hubert Joly. If price and convenience are what companies win on, shouldn’t Joly be focusing on making Best Buy the best buy again, like it used to be?
Here’s why this all matters to you as an IT leader: Like it or not, our primary job in most companies is going to continue to be what it has been for decades — helping to keep incremental costs as low as possible in every part of the business.
All that other stuff — business intelligence, improved decision-making, participation in strategy and so on? That still matters. It still matters a lot.
But it’s the surround, not the core, or at least, that’s how it is and will be everywhere IT supports businesses that win on price and convenience.
Sadly, that appears to be a growing fraction of the total.
Bob,
.
Are you familiar with Gresham’s Dynamic. We saw it’s results in 2008 with the financial collapse due to systemic fraud in real estate and banking because bad ethics drove good ethics out of the market. You are describing a race to the bottom if companies aren’t careful. Beer drinkers are seeing the quality of their beverage suffer in the name of corporate profits:
http://www.businessweek.com/printer/articles/78040-the-plot-to-destroy-americas-beer
What happens if IT goes the same route?
John
Messin’ with beer? It’s time to take action!
Fortunately, this is one of those cases where the action needed is simple. There are so many terrific microbrews these days that it’s very easy to simply take your business elsewhere.
Let ’em rot!
Hate to break it to you – almost all ‘microbrews’ are owned by the big brewers
There are some of us that look for quality goods and value quality over price – cheaper to get it right the first time. The problem is that too many companies advertise themselves as quality and turn out to have defective products (either they don’t work as advertised, are made cheaply, or are not designed ergonometrically) – which means that we are paying more for the same end result. There are also fewer of us that can afford to “pay a little more” than there used to be. A large part of that is the rush to bigger and bigger houses and newer cars along with monthly bills for cable TV, cell phones, etc. which are new, health care and education which are rising faster than inflation, etc.
Apples and oranges, or at least, shoulders and hips…
If women were consistently narrower than men in hips, the USMC would not have labelled their troop carriers (which used to double as school buses on occasion) as
Capacity: 42 M, 40 W
Au contraire. I am not sure quality and service are necessarily better or worse than in times past (shall we talk about the quality of American cars from 1950to present?).
Let’s talk about “value proposition.” In a commodity market, service will get you an edge. But charging $0.025 per unit will too.
But once you step out of that market, the competitive advantage changes entirely. Wal Mart and Nordstroms are both the best at what they do and they are retailers. That is all they have in common. People do not shop Nordstroms because of the low prices (they probably jack up their prices to keep people like me away).
So the question for Best Buy is “What do you want to be?” If they want to be in the commodity market, they have to contend with Wal Mart and Amazon. And they have to create a business model that will let them be profitable in spite of people test driving the equipment in the store, then purchasing elsewhere.
Now Southwest Airline has managed to combine two value propositions, low price and excellent service. So it can be done…perhaps Best Buy can figure out how o do both.
Disagree on SWA. Part of customer service is the overall experience. Their model is that the overall experience doesn’t matter if the flight attendants dress in casual clothes and make jokes during the security briefing. I still feel like a cow amidst casually dressed, wisecracking cowherds.
But people other than me seem to consider that excellent service.