Customers do not care about your costs

Kodak in a recent open letter to their customers announced changes to their terms of service for their Kodak Gallery on-line service. It has been hailed in the Twitterverse as an example of how to communicate change to customers.

While I admire Kodak for their openness, I have sharp criticism for the core message. Essentially, they are saying that the must raise their prices to offset costs. Who cares? Certainly not their customers, nor should they. It is not the responsibility of customers to cover a seller’s cost. Should consumers pay more for General Motors cars just because they have a higher cost structure than Toyota? (In essence, the government has told you that yes you are and oh, by the way, even if you never bought a GM car you need to pay for one anyway, but that is another post.)

Kodak should instead focus on the value they are creating through the service and create a pricing model that attempts to capture this value. Kodak is attempting to regroup after years of denial that the photo industry was going/has gone digital. They have been somewhat successful, but they clearly still do not get it. Being in business is about value creation, not cost recovery or profit without creating value.

I tweeted this last week – “The problem occurs when companies focus on increasing or maintaining profit while not increasing the value they provide to customers.” I believe the moment a company pays more attention to cost structure and maintaining profitability rather than focusing on value creation is the moment that they begin to die.

The billable hour is about cost recovery not about creating value for customers. Please take heed professional firms. You are dying you just don’t know it.

Insights Session – The Two As of Consulting: Authenticity and Altruism

At Sage’s partner conference, Insights, I will be presenting a session entitled The Two A’s of Consulting: Authenticity and Altruism (GEN28)  on Wednesday at 9:30am.

In order to begin the conversation even before the conference begins, I am posting the abstract and inviting all possible participants to share their ideas and questions.

This session will be dedicated to the possibility that consultants can improve the life and business success of their customers. Consulting (and this session) is (are) not for everyone. Achieving the goal is not easy as it requires us to look deep into ourselves and examine our beliefs as people. When you distill it down consulting is more about behaviors than technical skills. You are hereby invited to open a dialogue on the two behaviors of authenticity and altruism by Ed Kless who will facilitate this session.

Authenticity will be defined as putting into words what you personally are experiencing. Very often, this means stating your emotions in an emotionally neutral way.

Altruism in the context of this session will be defined as other-centeredness. Our willingness to help others create value is one of the high points of being a consultant, but that does not mean that this is done without recompense. In fact, George Gilder has said that, “Profit is an index of our altruism.”

These are heady topics, but necessary ones to fully understand if we are to be great consultants. In order to prepare for our dialogue, I would recommend reading Peter Block’s Flawless Consulting and George Gilder’s Wealth and Poverty.

Also, please post thoughts, questions, comments below.

An Anti-leadership Model

In my eight years of facilitating the Sage Leadership Academy, I have flirted with a dozen or more leadership models: Myers-Briggs, Emotional Intelligence, PDP, Kingdomality, Transactional vs. Transformational, generational differences and a few others.

Honestly, I have found all such models to be hopelessly flawed in their attempts to label people. Some are OK, and provide fun group exercises, but they are business’s equivalent of astrology.

In my work with small and medium business people, I have personally identified the two things that the most successful leaders do:

  1. They self regulate their own anxiety. They do not let the anxiety of others to become or heighten their own anxiety. (I have written on empathy as psychological disorder in the past.)
  2. They are masters at confronting people with their own freedom. The see beyond the surface of the particular problem or question and either a) ask a better deeper question that promotes the person to see their own set of choices, or b) state a truth to the person that the person was unable to see or willing to acknowledge.

I have not identified the “competencies” of such leaders in any formal way. All my evidence is anecdotal.

PS – I tweeted and FB’ed the lead for this post and it created a flurry of activity on my Facebook page. I am not sure if you need to be my friend in order to view it. If so, send me a request and I will add you.

Huffington Misses the Target, But She Hit the Tree

Paul Dunn tweeted about an piece posted on April 6 by Arianna Huffington in which she criticized the Obama Administration for its bank-centered approach to dealing with the current economic situation. In the article she analogizes the Administration’s banking solution with that of Ptolemy’s thinking about the Earth-centered universe, “like Ptolemy, they are really smart, they are really good at rationalizing.” The problem, of course, is that if your underlying theory is incorrect, any thinking you have done will lead to false conclusions.

While Huffington does a great job a destroying the Obama argument, she unfortunately proposes and equally faulty solution of her own, which is a variation on Keynesianism. To further her own analogy, she has replace the Earth-centered view of the universe with a Sun-centered one, but she concludes the sun is the center of the universe, i.e., all heavenly bodies revolve around the sun. She misses the fact that the sun itself revolves around the center of the Milky Way and that the Milky Way is one of billions of galaxies in a cosmos with no center.

The real solution to our current situation is to allow the entrepreneur a freer reign in an even freer market. Just like the cosmos there is no center per se. Whereas Huffington proposes a government-centered view of the universe to replace the bank-centered one. I suggest an open free moving cosmos in which entrepreneurs serve of the matter and energy, freely forming into heavenly bodies as the see fit. Some will be stars burning brightly, some planets, some comets – all influencing each other.

Like the cosmos, any attempts to organize must be self regulated and not insist on an anything-centered approach.