David Siegel is a writer, thinker, entrepreneur, and consultant who travels the world offering advice on corporate strategy, organizational change, and the Internet. But the title on his business card reads "provocateur" — and he likes to live up to his title.
Consider this scene from a meeting of the Direct Marketing Association that took place last October. In a banquet room in Toronto, before an audience of roughly 2,500 people, Siegel is introduced as one of the world's leading Internet strategists. Rather than begin his talk from the podium or unveil a deck of PowerPoint slides, he walks around the room and asks to borrow a nice watch. A volunteer named Ted offers his Rolex.
"Thank you, Ted," Siegel says, taking the Rolex. "Now, this watch represents your existing business model: It's finely crafted, and it runs like clockwork." Then he takes out a clear plastic bag. "And this, Ted, represents your current distribution network. It completely surrounds the business model." Siegel places the watch in the bag and then places the bag on the stage. Then he puts on a pair of safety glasses and takes out a sledgehammer. "And this, Ted, is the Internet." He asks Ted if he thinks that his current distribution network can protect his business model from the impact of the Internet. Ted reluctantly says no. "Right!" shouts Siegel, as he brings the hammer crashing down. Then he removes his glasses and holds up the bag, which is now filled with hundreds of watch pieces. "Now, what have we learned at Ted's expense?" he asks.
It's a shattering message — figuratively, at least. But David Siegel, 40, has the credentials to deliver it. For one thing, he wrote the book on Web design: "Creating Killer Web Sites" (Hayden Books, 1996), now in its second edition, became an instant classic and has been translated into 15 languages. He followed it up with "Secrets of Successful Web Sites: Project Management on the World Wide Web" (Hayden Books, 1997), which has been translated into 6 languages. In 1995, he founded a San Francisco-based Web-design firm, Studio Verso
(www.verso.com), which he sold to KPMG, the worldwide consulting giant, last year. He's advised such companies as Cisco Systems, Sony, Lucent Technologies, Computer Sciences Corp., and Office Depot on their Web strategies. In his new book, "Futurize Your Enterprise: Business Strategy in the Age of the E-Customer" (Wiley, 1999), Siegel takes the focus off technology and puts it back where it belongs — on the customer.
His argument is as tough-minded and clear as it is disruptive: "The Web gives customers what they've always wanted: a chance to express themselves, to get honest answers to their questions, and to share their interests and passions with other customers. And it requires every company to behave differently — to let information flow freely, to participate in genuine conversations with customers, and to treat customers not as 'segments' or 'categories' or 'eyeballs,' but as human beings."
In an interview with Fast Company, Siegel offered a short course on using the Web to connect with customers — and to build a company of the future.
Companies have gone mad for e-commerce. In doing so, what are most of them losing sight of?
Last year, one of the world's largest auto companies called me. Its marketing people wanted me to conduct an analysis of what its competitors were doing online. I asked, "Wouldn't you rather know what your customers want you to do?" They said no. They were mainly concerned with how they rated in comparison with other Web sites. The company's Web team had one basic mission: to make sure that the site didn't make the company look bad. Many car companies are in a similar state of paralysis: They don't want to listen to their customers, because they're afraid of what they'll hear if they do. Because of California's Lemon Law, lawyers advise car companies not to solicit email from customers, since any negative messages would have to be treated as bona fide, actionable complaints.
Why don't companies want to listen to their customers? It's a crazy mind-set. The Internet isn't about incremental tactics; it's about entirely new strategies. It's not about "keeping up with the Joneses"; it's about thriving in a completely new world. It's not about transactions; it's about communications and relationships. E-commerce is a false god. Focusing on e-commerce is one way to deny the new reality of business — the reality of a more interconnected group of customers, a group of customers with more choices than ever before. E-commerce is about nothing more than automating sales. It doesn't change a company fundamentally, and that's the real problem.
This problem is not specific to car companies or to older, established companies. It also exists in young companies. Right now, everybody is following the "product-category.com" model: lightbulbs.com, pants.com, Pets.com. There's even a Web site called JustBalls.com, where you can buy tennis balls, golf balls, and so on. Does anyone actually think that I, as a customer, have loyalty to a site that serves as the front end of a supply chain for balls? But that's what passes for e-commerce these days.
What's the right way for companies to think about the Web?
Business leaders need to stop thinking about the Internet as a bunch of computers connected together. The Internet is millions of people connected together. If the Net were to blow up tomorrow, those people would find another way to reach one another. We're in the midst of a customer-led revolution. Your customers are determined to find one another. Your only option is to encourage them to do so.
Take, for example, one of my experiences in the physical world. I was recently in the market for speaker cables for my stereo system. Believe it or not, you can pay $20,000 for one pair of the cables that connect your speakers to your amps. At one store, the cable "expert" said that for my speakers, he wouldn't recommend any cables that cost less than $1,300. I was looking through a 20-page brochure for these expensive cables, when a fellow customer walked over to me. He had read a head-to-head comparison of the cheapest cable brands and the most expensive cable brands. The conclusion? The average person can't hear the difference between $100 cables and those that cost thousands. Now, this is a person who reads all of the electronics magazines, who is really into this stuff, and who has no stake in my decision. Which guy am I going to trust — him or the so-called expert? I bought a pair of fairly cheap cables, and I'm quite happy with them.
Multiply my little experience by a factor of millions, and you'll get an idea of how the Net reinvents relationships — among customers, and between companies and their customers. Let the inmates run the asylum! Let the passengers steer the bus! Don't redesign your Web site. Redesign your company.
Isn't it dangerous to let your customers use your Web site to say anything that they want to say?
It's dangerous not to let them. These days, just about every customer is becoming an e-customer. (Soon, I hope, we'll be able to drop the "e" and just call everyone a "customer" again.) E-customers aren't loyal to a brand, or to a product category, or to a supply chain. They're loyal to other customers and to company employees with whom they've established relationships. The role of a Web site is to serve as a magnet for customers. And you can't create a magnet without the pull of open, honest conversation among customers.
Any company that thinks its customers aren't finding ways to connect with one another is smoking Web crack. Any company that thinks it "owns" its customers isn't going to be able to handle the G-forces that are sweeping through the marketplace. Any company that really believes that the information on its Web site corresponds to what customers want is in for a rude awakening. How many times have you sent an email to a friend saying, "You've got to check out this site. The message from the CEO is awesome"? Zero.
I can't name a single company that wouldn't claim that its customers always come first — no matter what.
But the reality is that most companies have an allegiance not to customers but to existing products and services. I've consulted on a couple of hundred Web sites. And whether the company that I'm working with is a startup or an industry giant, the people around the table always have a "vision" for their site. I hear phrases like "authoritative source" and "market leader" and "reinforce our brand." Where's the customer in all of that? If you don't start with the right questions, then you'll end up with the wrong answers.
Over the next five years, every company will have to answer two questions. First: Who are our most important customers? And second: How do we put those customers in charge of our company? Answering both of those questions will require a radical shift in strategic assumptions and leadership mind-sets. Most companies believe that the way you grow fast is by saying yes to as many customers as possible. In fact, saying no is the new growth strategy: Think hard about who your best customers are, and do everything you can to serve them — even if that means saying no to other customers.
Wait a minute. You want companies that are obsessed with growth to start rejecting customers who want to do business with them?
Customers today are incredibly demanding. There's no way that any company can serve more than five target groups well. So the best companies will be very particular about who they want their customers to be. The customer is always right, but not all customers are always right for you.
The reason why so many companies are willing to do business with so many kinds of customers has nothing to do with wanting to provide good service. It has a lot more to do with locking up their physical distribution channels. Have you been to a big sporting-goods store lately? There must be hundreds of models of Nike sneakers on the shelves. Why? Because Nike wants to dominate the shelves at such retailers.
The logic is simple: By generating more products, a company can occupy more shelf space, thereby denying that space to its competitors. As the big physical retailers get even bigger, companies like Nike need to make even more products in order to maintain their power position. It's a business strategy that's completely distribution-driven, rather than customer-driven. Because the Web breaks the distribution bottleneck — it has unlimited "shelf space," after all — it forces companies to think harder about what they can do to serve their customers better, rather than about what they can do to dominate a particular distribution channel.
Let's discuss the second question: How do you put your customers in charge of your company?
Once you figure out who your best customers are, those customers can then lead your company in new directions — if you let them. But that will require you to rethink the very nature of your organization. You have to give your employees and your customers a set of tools for working together, and then get out of the way. That's the corporate culture of the future.
If you really care about customers, if you really want to put them in charge, then you have to reorganize your entire company around customers. A car company should have a division for commuters, a division for families, and a division for sports-driving enthusiasts. I want to see consumer-products companies create job titles like "director of kids," "vice president of seniors," and "chief parents officer." Sure, you still need departments like engineering and HR, but the customer divisions should be the power players: They should be able to partner with anyone to get whatever their customers want. By creating customer-led divisions, a company can encourage conversations that will allow its customers to "gang up" on it and pull the company in the direction that they want it to go.
Perhaps the biggest difference between how we do business today and how we'll do business tomorrow is that in the future we'll all have to be better listeners. And that means that people will have to change the way that they define their jobs, their responsibilities, and what's important to them.
In a customer-led company, people should work themselves out of a job every 18 months. If you're doing what customers want you to do, there's no way that you'll be working the same way 18 months from now. By then, customers will be on to the next thing, and you'll need to be there with them. In a customer-led company, rank-and-file employees have more freedom than ever before. They're not just executing someone else's 10-month-old vision; they're bringing customers into every process and every planning session. They're constantly trying out new ideas on their chosen customer group — starting fires and adding fuel to the ones that seem to be catching on. Any customer-led team that sees results will become that much more attached to its customers — and will be that much smarter the next time around.
Are companies beginning to embrace these ideas?
We're starting to see two models emerge: the customer-led company, and the company with customer-led divisions. Volkswagen is an extremely customer-led company. It focuses primarily on people between the ages of 28 and 38 — singles and younger parents — rather than trying to do everything for everyone.
Priceline.com is another great example of a company that follows its customers' lead. Priceline's customers aren't business travelers; they're low-budget travelers — in other words, the customers whom nobody else wants. Of course, if you get a lot of them and you keep costs down, you can make some real money. Priceline monitors customer demand closely and tries to offer whatever people want: airline tickets, hotel reservations, phone service, and so on. Do you ever hear people talking about how sophisticated the priceline.com site is? No. It became a great company by building its business model around its customers' wants: "Tell us what you want and how much you're willing to pay for it. We'll try to help you get it."
The other model — the one that most large companies should look at — is the company with customer-led divisions. Microsoft has made the internal change from organizing around products to organizing around customers. The company has built its operations around four distinct customer groups: information-technology decision makers, knowledge workers, software developers, and consumers. The people at Microsoft realized that somebody using a spreadsheet in Bombay is very similar to somebody using a spreadsheet in Flint, Michigan. And that's a very important insight.
I'm much more excited about startups like Families.com [Family-Education Network] than I am about startups like buy.com. Companies like priceline.com and Volkswagen — companies that target a specific market segment — will grow much faster than old-fashioned supply-based companies that try to serve multiple markets. I think that we're going to see the emergence not only of many new single-market companies but also of holding companies that have a common "manufacturing" base but separate markets to chase.
Does this approach really change the way that companies think about their Web sites?
Today's mentality is simply to transfer existing documents and processes online — without thinking about the changes that the online environment requires. This is true of most new media: The first books were nothing more than imitation manuscripts, and the first films were a lot like stage plays. Online, companies are using HTML to re-create their physical stores and processes. And that makes for a lot of bad customer experiences and missed opportunities.
I have an account at Charles Schwab. Now that I'm trading online, I've managed to make several mistakes — often (but not always) losing money in the process. For example, Schwab's system lets you buy $1 million worth of stock even if you have only $2,000 in your account. The company just assumes that you'll get the extra $998,000 into your account within the next 24 hours. It doesn't consider that your order might be a mistake — that maybe you typed in a few more zeros than you meant to. There is a confirmation page, but it doesn't ask whether you have the resources to back up such a huge order. Because the people at Schwab are all advanced traders, they act as though their customers are too. Whenever I call the people at Schwab's customer-support number to complain about the site, they tell me that if I make a mistake, it's my fault. They tell me that fewer than 2% of all trades involve mistakes. So they think that they deserve an A+. But do the math: A rate of 2% means that thousands of Schwab customers make trading mistakes daily.
You can't just automate your old-world sales process: You have to differentiate your customers, their needs, and their experience levels. Every customer group includes beginners who need support, intermediates who like to help one another, and experts who want your site to function their way.
How does all of this change the way that companies need to think about strategy?
Once you know who your customers are, you want to help them in every way that you can. That puts you in the business not of selling products but of solving problems.
Think about Hallmark, a company with a wonderful brand and a very limited business proposition: "We make cards." What if Hallmark had a broader view of its strategic opportunity? Say that a customer says, "I need help. A relative just passed away." Or, "I need help. My girlfriend's birthday is coming up." Or, "I need help. I forgot that Mother's Day is this Sunday." Today, you have to go to one place to buy a card, someplace else to buy flowers, yet another place to buy a gift, and so on. Couldn't Hallmark use the power of its brand and the convenience of the Web to reconfigure itself as a trusted partner? Why is Hallmark so attached to cards? Why isn't it attached to mothers, sons, and boyfriends instead?
What are the biggest barriers to embracing these changes?
Fear is the biggest obstacle — specifically, the fear of moving from an organization that's built around products, services, brands, and important executives to one that's built around customers. That is the critical transformation that business leaders must go through, and it is a transformation that most leaders are afraid to undergo.
The second biggest barrier is learning to tell the truth. Thanks to the Web, we now live in a "truth economy." People are talking to one another all the time. They're telling one another the truth about whether a certain hotel in Bangkok is as good as its ads say it is, whether the food on one cruise line is as good as the food on a different line. In a world where customers are telling one another the truth, the old PR practices of "spin" and "damage control" are going to backfire — big-time. Telling the truth is now the best defense for every situation, even when it feels uncomfortable to do so.
Today, every customer that a company has is part salesperson and part watchdog for that company. Given that reality, you as a business leader need to be hearing from dissatisfied customers before anyone else does. Either you work with them to make your company better, or they work together to tear your company down.
What are a few of the things that all of us should be doing differently because of the Web?
Every person in every company should spend at least 10 minutes a day answering customer email. Senior executives should spend even more time doing that. You need to keep your finger on the pulse of your customers. Most executives have a hard time admitting that they don't know what their customers really want. Some of them even think that they create demand for their products! Responding to email is one of the best ways to listen and learn. Let your customers start the conversation.
You should also encourage your people to embrace the Web in the same way that 13-year-olds embrace it — as if it were no big deal. Thirteen-year-olds use the Web for the same reasons that they use any reference tool: to find what they're looking for and to enjoy the process. If they have questions, they get answers. But they also meet people. They collaborate. They communicate. All employees in a company should surf the Web for at least 20 minutes every day. They should look for new Web sites, discover new tools, assemble their own links, and share those links with their colleagues. That way, everybody is a scout. Everybody is a spy.
Don't treat the Web as this superserious, supersober, "mission-critical" technology that gets controlled by a small group called the "Web team." Treat it as an everyday tool that's useful, fun, and a great way to connect people. If it takes seven days to make a change to your Web site, then you're in trouble. How about putting a staff telephone directory on your site? How many companies do that? So many companies use the Web to put their product catalogs and marketing collateral on their customers' desktops. Instead, they should be putting their employees on their customers' desktops.
How can you tell if your Web site matters to your customers?
Here's the acid test: Take your server offline and see what happens. I mean it. Come in on a Monday at 8 AM, unplug your Web server for two hours, and measure the reaction. What should you hope for? Phones ringing off the hook! Death threats! Volunteers coming out of the woodwork offering to help! If that doesn't happen, then your customers are going somewhere else to get what they need.
The bottom line is that your employees must be passionate about coming to work every day, and your customers must be passionate about interacting with your company. But there's no way to force passion. The job of a leader is to create the kind of environment in which passion flourishes on its own — a customer-led environment that helps to keep the fires burning.
Katharine Mieszkowski (email@example.com) , a Fast Company senior writer, is based in San Francisco. some of the sidebar information is adapted from David Siegel's new book, "Futurize Your Enterprise". Visit the book's companion site (www.futurizenow.com) , or contact David Siegel by email (firstname.lastname@example.org).
Sidebar: The Truth Economy
If you're not willing to talk about an issue, your customers will take on that issue as a crusade.
The more you ignore your customers, the stronger they get.
If there is one person on Earth from whom you want to hide a certain Web page, that person will see the page within 24 hours of your putting it online.
If you have something to hide, you may not want to put it online. That's okay: One of your disgruntled customers will be more than happy to do it for you.
Visit Yahoo!'s list of "consumer opinion" sites to find out if your company has a protest site.
Sidebar: Web Rules I
You Know You're in Trouble When ...
Your CEO has an assistant print out emails.
One of your executives can name only three online businesses.
Two of those businesses are Yahoo! and Amazon.com.
Only 10% of your executives know how to open an email attachment.
Your CEO assumes that your CTO isn't getting calls from venture capitalists and headhunters.
Your CTO isn't getting calls from venture capitalists and headhunters.
Sidebar: Web Rules II
II. The Web Team Shall ...
Become a conduit for customers who want to reach employees.
Have access to the resources of the entire company.
Become a catalyst for change.
Lead the way in reorganizing the company around core customer groups.
Transfer online skills to the entire company over time.
Forget about the company's current vision of the Web.
A version of this article appeared in the April 2000 issue of Fast Company magazine.