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3.0 out of 5 stars
Adding Economic Value through Customer Relationships, 6 May 2004
I like books that combine qualitative and quantitative techniques to describe what must be done. Customer Connections takes on the challenge of providing that perspective. The book's basic point is that logical thinking can be applied to developing better economic results through analyzing and pursuing the potential of different ways to have relationships with various customers. For example, some customers buy more, more often, and of higher margin products or services. Find ways to attract more of their business and your enterprise is going to be more profitable and valuable. An example of Scrub-a-Dub the car wash company explores this idea. You are encouraged to think through this opportunity by analyzing your mix of customers, the ways that you can add value for these customers, the risk involved in acquiring them, and ways of sharing risks and rewards with customers and suppliers. Then, you create a solution that combines all four elements to produce more economic value (discounted cash flow) for your company. To do this, you are going to need to know more about your customers than many companies know today, keep them better informed about what you are doing, and use technology to strengthen your connections in economically beneficial ways. So, there's a basic knowledge management issue to be resolved. Like many consultants, the authors propose a complicated model that requires lots of data-gathering, analysis, building of new data bases, and improved IT systems. Ultimately, the benefits can only be estimated in advance. A set of interviews with 200 Fortune 1000 executives suggests that knowing more about customers is associated with higher growth. In the last four years I have done a lot of research into ways that companies have changed their business models to be more successful. In that research, I was struck that the kinds of thinking described in this book were hardly ever used. So although there are lots of examples in the book of applying these concepts, I really wonder if the process to be followed is the one described here. Ultimately, the book's process reminded me of the kind of mechanical "left-brained" planning that failed for so many companies in doing their strategic thinking. The methods I have seen used were based much more on inexpensive experiments, gut feel, and rapidly rolling out the successes. The approach here is more of the opposite. Find something that should be great. Make a big bet on it. Keep your fingers crossed that your one expensive experiment will work. The value thinking in the book is also very primitive, basically only describing the expected discounted cash flow. Every enterprise has many different economic values at a given time (depending on its value form), and expected discounted cash flow is only one. You could have removed all of the "value" references and equations in this book and not lost very much. Ultimately, I was concerned about the book's basic concept -- that you should be customer-based in your thinking rather than customer-driven or customer-led. Being customer-based in doing value calculations can be very misleading. Few market innovations have followed from understanding customer profitability better. You still have to understand customers better . . . as they see and feel themselves. Create more beneficial results for all those you meet!
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