The B2B playbook is well known: B2B don’t focus on selling specific products, they are mostly focused on listening to customers and meeting their needs. Let’s say you are selling Cloud Computing. You have to identify first why a customer would like to switch: Lower computer and/or software costs, improved performance, improved document format compatibility, unlimited capacity, increased data reliability. In addition, sales people need to identify why customers might be hesitant to make the switch: Reliability, specific location of data is unknown, personal identifiable information can be distorted and a switch might disrupt the organization for a specific time. These insights allow you to organize your enterprise and sales organization based on customer needs, fostering long-term relationships by promoting whichever of the company’s products the customers values most at this moment in time.

Compare this customer focus to the current B2C landscape: Most companies still use the top-down method to develop products: Develop a new product based on (often) flawed customer research, such as focus groups or surveys. Hand the new product over to the marketing department which identifies segments to target, sets the price and promotions and develops the communication plan. The whole organization is set up to push products out, transact as much as possible. A short-term strategy that is showing decline in performance due to the need of consumers to develop relationships with brands.

Instead, brand have to focus on building lifetime value by humanizing the brand-people relationship and create a culture (followed by structure) to execute this new strategy.

One of the major changes in human relationship organizations is the elimination of the CMO position and transferring all responsibilities to the Chief Customer Officer. Forrester’s briefing titled “Customer Experience thrives with executive leadership” found that “firms with these leaders view customer experience as more important, have more enterprisewide customer experience efforts, report having fewer obstacles, do more primary customer research, and score better in all three areas of Experience-Based Differentiation.” Executive stewardship is imperative to implement the next steps:

• Move CRM out of IT and into the customer department.
• Use market research throughout the organization to improve customer lifetime value. As an example, R&D needs to work directly with people to develop products that answer emerging needs.
• Sales and Marketing should be merged into one division, reporting to the new Customer Division. Sales needs to step up and help marketing develop communications because they are closer to the ground and understand what consumers desire.
• Let your best sales people (your greatest fans) in and collaborate with them throughout the product development process.
• Suppliers and other stakeholders should not deal primarily with procurement, they are customers as well and should be treated as that.
• Develop new metrics that focus less on short-term goals and more on customer profitability and lifetime value. Extend these new metrics to financial reporting, helping the markets to understand that stock prices should reflect this new model. Focus on market share should be replaced by focus on customer equity value.

Transforming an organization to focus more on customers is a challenging task. However, continuing on the current path is not an option. Unless brands consider extinction an option.

The once admired Toyota brand is in deep trouble. Not one day passes without another recall and frightening insights into the culture of the rapidly expanding brand. If any company was ever the banner child for business management strategies and lean manufacturing, it was Toyota. Kaizen (Japanese for improvement) was the buzzword for Toyota’s business system, continually improving all functions of their business, from manufacturing to management and from the CEO to the assembly line workers. Key elements of kaizen are quality, effort, involvement of all employees, willingness to change, and communication. Most see kaizen from an operational point of view. That’s where the disconnect is. At its core, kaizen is about cultural change and unless this change is implemented none of the tools and technologies will work. Kaizen is about focusing less on short-term goals and shifting the cultural focus to long-term goals and stability. And that’s where Toyota lost its way.

They were so focused on grabbing the title of world’s largest automaker that they completely forget about their principles that made them such a respected brand: Focusing on gas-sucking vehicles because Detroit owned that market. A secretive and bureaucratic culture, centrally controlled after Jim Press left for Chrysler. Resting on their laurels and believing in their own corporate speak, not connecting with their stakeholders, purely focusing on expansion and shareholder value.

It’s just maddening to read how for years Toyota tried to skirt the issues, not dealing with the real problem, just trying to avoid bad PR. Compare this to Johnson & Johnson’s Tylenol recall: the first death occurred September 29, 1982. 6 days later Johnson & Johnson pulled 31 million bottles, with a retail value of $100 million. They also advertised that nobody should consume any products containing acetaminophen. Their market share collapsed from 35% to 8%, just to rebound within a year.

Why was Johnson & Johnson able to react so promptly and why is Toyota acting like Bill Clinton, debating the definition of ‘is’?

A look at Johnson & Johnson’s credo is very revealing:

“We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit. We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfill their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical. We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens–support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources. Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.”

J&J’s primary goal is to satisfy their customers. Not the shareholders. The shareholders come last. Shareholder value becomes an organic result of good customer experiences and valuable relationships with stakeholders. Toyota went exactly the opposite way: Cutting prices for all their suppliers, not reacting to dropping customer satisfaction scores and disregarding customer complaints that lead to the devastating recalls.

Sure, there is the Toyota Way. While J&J lived its credo throughout tough times, Toyota got sidetracked. Joseph Jaffe gives good advice to the marketing and PR department at Toyota. But that’s the second step. The first step for Toyota is look deep inside and change their culture. It’s getting late. Kaizen made you the admired brand you once were. Kaizen as a cultural change system can do it again.

In a world driven by human and intellectual capital, traditional Org Charts, Employee Handbooks and most traditional tools that used to help enterprises to run their business have become increasingly unreliable and ineffective. High performance and value creation doesn’t originate from to traditional enterprise tools or new technologies, it originates from focusing on the human side of business.

Jack Welch had it right when he said: “The essence of competitiveness is liberated when we make people believe that what they think and do is important – and then get out of their way while they do it.”

Enterprises face the biggest challenges to humanize their business since their organizations are driven by spreadsheets and shareholder value. As we’ve learned throughout the Great Recession, many companies leveraged their future away by focusing on short-term gains, destroying long-term value over time.

While shareholder value will remain a dominant metric, businesses have to focus their attention more and more on their relationships with customers, employees, partners, and all other stakeholder groups. By investing in these relationships, businesses will be able to create long-term value and, ultimately, shareholder value.

We believe that those organization aspiring to succeed in the current socio-economic environment have to understand holistically who their key stakeholders are and what they want. They have clearly defined strategies to ensure that constant value is delivered to these stakeholders. They have implemented processes to support this strategy and understand the necessary capabilities to execute processes. And they have thought through and communicated what the organization needs from its stakeholders – Loyalty, profitability, investment, etc.

Too often, metrics are derived from strategy. It seems so obvious. But it’s a trap. You can go from A to B directly, pass by C or go from A to D to C and end at B. Strategy is not a destination, it’s a choice of one path you’re going to take. Metrics help you track whether you’re moving in the right direction. Most corporate initiatives are focused on incremental improvements – expand your business to a new market, grow your product line, find new consumers. All these initiatives are developed with the belief that they will enable the business to deliver better value to all its stakeholders. That’s why focusing on the stakeholder perspective is imperative to deliver replicable value, choose the right strategy and exact metrics. When formulating strategies, businesses need to consider the wants and needs of all their stakeholders. This is not limited to primary stakeholders, the view needs to be expanded to the general public, special interest groups, legal and regulatory community. If this broad view of stakeholders is not adopted, businesses run the risk failing to satisfy the needs of their stakeholders, opening themselves up for revenge on multiple Social Media channels.

So, what is the best path for businesses to increase stakeholder value?

1) Stakeholder Satisfaction: Who are the most influential stakeholders and what do they desire?

2) Performance Strategies: What strategies should the organization adopt to ensure the desires of stakeholders are satisfied?

3) Measurement: Metrics are required to track if the chosen strategies are actually implemented. Metrics help to communicate strategies throughout the organization. Metrics combined with incentives help to speed up implementation. And, ultimately, metrics help you determine if the chosen strategy was the right one and if not, why. When the measures are consistent with the organization’s strategies, they encourage behaviors that are consistent with the mission and vision of the business.

4) Align processes with strategies: What processes do we need to put in place to allow the strategies to be executed?

5) Capabilities: What capabilities do we require to operate these processes? Today, tomorrow and in the future?

6) Stakeholder Contribution and Collaboration: What contribution does the business require from its stakeholders to succeed? How can we maintain and enhance these capabilities?

This complex exercise will help your business to face the challenging socio-economic environment and adapt efficiently. Or as Jack Welch said:

“An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.”