Web Sight - Let Your Customers Lead

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.