Do you know about the “Three Is?” If so, which one describes your company?
I was watching an episode of Shark Tank recently when Mark Cuban said, after one of the entrepreneurs failed miserably in attempting to lure a Shark to invest in part because of a gross over-valuation: First come the innovators, then come the imitators, then come the idiots.
This quote is an abbreviated version of what Warren Buffet said to Charlie Rose in an interview about the financial meltdown of 2008:
Charlie Rose asked: “Should wise people have known better?”
Of course they should have, Buffet replied, but there’s a “natural progression” to how good new ideas go badly wrong. He called this progression the “three Is.” First come the innovators, who see opportunities that others don’t and champion new ideas that create genuine value. Then come the imitators, who copy what the innovators have done. Sometimes they improve on the original idea, often they tarnish it. Last come the idiots, whose avarice undermines the very innovations they are trying to exploit.
The problem, in other words, isn’t with innovation itself — it’s with the imitation and idiocy that follow. “People don’t get smarter about things as basic as greed,” Warren Buffett warned Charlie Rose.
I totally agree with his three Is. We see this when it comes to customer experience. I’ve written about innovation and imitation in the past, but I haven’t written about the idiots – well, not in so many words.
Almost all absurdity of conduct arises from the imitation of those who we cannot resemble. -Samuel Johnson
Here’s where I think this – the idiot/greed part – applies to the world of customer experience: (1) focusing on acquisition, and (2) focusing on maximizing shareholder value.
Focus on Acquisition
When companies focus on acquisition (over retention), it’s all about more, more, more. At all costs. They might talk about a great customer experience or advertise a great customer experience, e.g., “Better than Amazon!” They’ve jumped on the lingo bandwagon because they’ve heard “customer experience” is important. Maybe they’ve even tried to imitate others (culture, business approach, customer focus) but have failed miserably. They do all that in hopes of attracting more customers, of growing the business. Except they fail because there’s no real stuff behind their fluff. It’s not based in reality. It’s not based on their business, who they are, and their own culture and way of doing business.
Focus on Shareholder Value
When companies focus on maximizing shareholder value, they aren’t focusing on the customer experience or making it priority #1; they’re not innovating or imitating. We know the purpose of a business is to create and to nurture a customer. We need to forget about that 1970s mindset, that the purpose of a business is to maximize shareholder value. Being customer-focused and customer-centric translates to shareholder value. Focus on the customer, on creating customers, and the profits will come. It might take a little longer, but it will happen.
I love a recent Forbes article that outlines the problems with focusing on shareholder value. I think you’ll be able to see very easily how this focus leads to the idiocy that moves companies far away from innovation (bold is mine):
- pervasive short-termism;
- diverted human and financial resources from needed investments in innovation;
- dispirited both employees and managers, leading to pervasive disengagement;
- generated “bad profits” that undermined customer loyalty;
- caused excessive “financialization” of the economy, making it vulnerable financial crashes;
- incentivized CEOs to become financial engineers and companies to lose their entrepreneurial mojo;
- led firms to pursue the extraction of value, rather than the creation of value;
- undermined the economic recovery from the Global Financial Crisis;
- drastically reduced rates of return on assets and on invested capital;
- appropriated gains that flowed from workers’ improvements in productivity; and
- led to secular economic stagnation and increasingly unsustainable economic inequality.
Customers come before shareholders. Understand their needs, your own customers’ needs, not your competitors’. Do your own thing. Nobody wins when you imitate. When there are clear, differentiated choices of products, services, and/or experiences in the marketplace, the decision is made easier for your customers. Bring your own unique value to the table. When customers’ experiences with one company stink, they have the ability to go purchase from someone else. Let them decide.
Be at the top of the food chain! Lead the pack. Innovate. Don’t imitate. And certainly don’t be an idiot.
The first generation builds the business, the second makes it a success, and the third wrecks it. -(often attributed to Andrew Carnegie)