Robert M. Donnelly

Robert M. Donnelly
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Robert M. Donnelly is CMO of Flo-Tite Valves & Controls, a U.S. based supplier of valves and components to the process control industry in North America. A coach, educator, and advisor to founders/CEOs of growing firms, he is a serial entrepreneur, having started, grown and sold several technology based businesses. Previously he held executive positions at IBM, Pfizer and Exxon.

Marketing by Assumption

Where did the Edsel, the Chevette, and more recently the Aztec and Phaeton come from?

Certainly not the customer, but more likely from a committee who never spoke to a customer.

Success is built on a passionate pursuit to change the world. Failure, typically, is the result of the arrogance of making assumptions as to what customers want and then creating products for which there is no demand.

Who in their right mind would produce a car with a grill that looked like it was sucking a lemon? It turned out to be a lemon. Or a car that actually fell apart as you drove it? How about one of the ugliest cars ever – the Aztec? Or, a $60,000+ SUV called the Phaeton with VW badges on the front and back?

Once company’s starts to “market by assumption”, decline will quickly follow. It usually happens when the management team gets lulled into a false sense of security as a result of unprecedented success. History indicates that this happens when management stops talking to customers and instead starts talking to each other, and in the process begins to believe their own publicity. 

Business is about customers. Solving problems for customers are the underlying factors that create success in the first place. This is the realm of the passionate entrepreneur.

When the entrepreneurial spirit leaves the company or turns day-to-day management over to administrative bureaucratic executives, the seeds of decline have been planted.

Look at the rise of Starbuck’s under its visionary founder and its rapid decline once he turned the business over to his management team. Now it’s tagged as the “$4 cup of coffee” company and is struggling to shake that image.

How about Delta’s misguided launch of their Song discount airline. Was it Delta? Was it Song? What did the Song brand mean? It was an expensive foray into a segment where management had no passion for success. Song had a short life and a quick death trying to unsuccessfully compete with the passionate and entrepreneurially driven founder and soul brothers at Jet Blue Airways, and others.

Success is about treating your customers as appreciating assets and migrating with them into the future modifying your product offerings to meet their changing requirements. The only way to do that is to communicate with your customers and be innovative enough to delight them with solutions before they even realize that they have the need.

Did you need an iPhone? 

Instead of developing new products that you “think” customers will want involve them in the new product development process so that the next generation is presold before it comes to market. Otherwise you are faced with having to try to sell something that you created, not the customer.

Who wanted a Phaeton? Obviously, not too many people based upon the few that were actually sold. That was an expensive lesson. Who asked customers if they wanted such a vehicle or if they would buy such a vehicle at that price?

Hopefully, now that we can communicate with customers more directly via the internet and we have more information about current trends, these kinds of marketing mistakes can be avoided for the future. However, that assumes management is attuned to the immense amount of information that gives us a new understanding of ourselves and the global marketplace we now live in.

For example, there are about 200 million face book users and growing, as well as over 300 million e-mailers. These collections of customers and their digital friendships create profiles of us that can lead to profitable insights.

Obviously, friends share interests and tend to behave alike. So if you want to keep up to date you have to be tuned into where prospective customers work, live and play, as these are valuable inputs for trends in their consumption patterns and product characteristics they are interested in.

If you are struggling to tap into the latest trends for your new product development planning let’s start a dialogue.

Bob Donnelly, is CEO of VAAS Americas, the U.S. unit of the Chennai, India based maker and distributor of industrial valves. A coach, educator, and advisor to founders/CEOs of growing firms, he is a serial entrepreneur, having started, grown and sold several technology based businesses. Earlier in his career he held senior management positions with IBM, Pfizer, and Exxon.

He has developed an online MBA program in Entrepreneurship for Rushmore University with managers from global firms enrolled in the program. Since 1998 he has served as a venture mentor at New York University’s Stern School of Business Berkeley Center for Entrepreneurial Studies, where he advises start-ups on business plan development, marketing strategy, and presentation skills.

He writes the online Entrepreneurial CEO column for Chief Executive.

Innovation for CEO’s

Innovation is one of the most misunderstood concepts; time to clear things up

Two CEOs, One Strategy

Innovation is becoming the lens through which leaders are directing a laser-like focus on business transformation. It's easy to see why. Margins and product life cycles are shrinking, competitive pressure is growing, and the need for customer responsiveness has never been more important. Every company needs an edge. Enterprise innovation is not the sole domain of the entrepreneur. It can be practiced by CEOs of large firms, too.

Two CEOs in very different industries have applied the same basic innovation template with dramatic results. Doug Conant, 56, president and CEO of Campbell's Soup, and Fred Hassan, 62, chairman and CEO of Schering-Plough, changed the culture of their firms by engaging their management teams in a focused concentration on customer sensitive innovations. Their similar leadership styles and focused emphasis on driving their business unit managers to come up with new solutions for customers' problems not only improved returns to shareholders, but also won recognition for each CEO (Hassan in 2006 and Conant in 2007) by Fairleigh Dickinson's Rothman Institute as "Leaders in Innovation." 

Before Conant and Hassan assumed control in 2001 and 2003 respectively, both companies had allowed their brands to lose luster and were in a downward spiral in their respective markets. Campbell's declined to the point where the Torrance Family, owners of the majority of the 140-year-old company, decided on a complete reorganization. Schering- Plough was losing patent protection for its leading product, Claritin, as well as experiencing a sharp decline in its $1 billion hepatitis C business. Both CEOs approached their similar situations with determination and a belief that the right team and the right focus on innovative customer solutions could reverse these trends.

Building a Team

While using different acronyms and employing different tactics, both CEOs saw team building as the cornerstone for their transformation strategy.

Based in Camden, N.J., and employing 23,000, Campbell's is an $8 billion maker of simple meals, including soup, baked snacks and beverages. Its products, representing 20 brands, are sold in 120 countries around the world. Doug Conant, who brought 25 years' experience from General Mills, Kraft and Nabisco, used a concept perfected by the Gallup Group called the Engagement Ratio. The theory is that to have a team dedicated to the company vision and mission of total customer satisfaction, the majority of the employees must be fully engaged in their respective jobs.

Gallup's premise is that to reach world-class levels of productivity you need to have 12 engaged people for every one actively disengaged. Conant reckons Campbell's engagement ratio in 2003 was no better than 2 to 1. By 2007, this was changed to 9 to 1.

Fred Hassan, on the other hand, began by developing a document on Leadership Behavior that he shared with all employees. It was a motivational explanation of how to approach individual day-to-day responsibilities so that Schering-Plough would be delivering the best customer experience possible. This document captured his philosophy on a variety of critical management issues like teamwork, customer focus, quality, engagement, leadership, culture, competitiveness and communications.

Hassan prepared his treatise because, when he took over in 2003, he found the behavior of the team he inherited, compared to industry standards in terms of quality, engagement, leadership, working climate, competitiveness and communications developed by Towers Perrin, was negative on almost all points. As a result of implementing his team-building strategy, by 2006 all of the critical management factors were positive and growing.

In terms of the management team, Conant replaced 300 of the top 350 leaders in the first three years. But of this group, 150 were promoted from within. His initial observation of the team he inherited upon taking over was that the only reason they were still there is because they could not find jobs anywhere else. This was also evident in Gallup's initial survey of engagement ratios.

Hassan replaced the entire top management team he inherited in his first 18 months. After carefully evaluating each position he felt that to save the company and transform it he needed a very strong set of new executives that he hand picked, function by function.

Innovation at Campbell's

Conant developed a 10-year plan called "The Campbell's Journey" around his concept of focused, mission-driven innovation. Broken down into three phases beginning in 2001, the first was the Transformation Plan from 2001-2004, the second was the Quality Growth Plan, and the last, currently under way, is the Building for Extraordinary Growth Plan from 2008 to 2010.

The mission is to build "the world's most extraordinary food company" which he equates to "a sustain-ably good company." In the first three years, Campbell's went from being non-competitive to competitive by upgrading the management team, improving employee engagement and working on innovative product improvements. In the next three years, the target was quality growth through enhancing the overall value proposition for customers and above average total shareholder returns. As a result, earnings per share has improved every year for six straight years in a very competitive marketplace.

Today, the goal is to deliver the best total shareholder returns in the food group. Since 2005, Campbell's has delivered a higher return to shareholders than the S&P Packaged Foods Group. Campbell's set the following targets: to grow sales by 3 to 4 percent, adjusted earnings before interest and taxes by 6 to 7 percent and adjusted earnings per share by 5 to 7 percent.

The biggest problem Conant's team faced was the overall deterioration in the company's biggest volume category-soup sales. The company was selling basically the same old soup packaged in the red-and-white cans that generations of moms and dads grew up on. Competition, on the other hand, was offering healthier, more wholesome soup packaged in more attractive, easier to use cans and in sizes more in keeping with current customer consumption requirements. Campbell's was stuck in a mass-market mode of thinking, while competitors like Progresso and other specialty soup makers were successfully implementing niche market strategies.

Conant's team noticed early on that supermarket customers had difficulty finding their favorite soup on the shelf. The competition, how- ever, had visible shelf space that appealed to consumers. A time study revealed that customers do not want to spend more than 20 seconds looking for a particular soup. But the same study indicated that it took consumers 70 seconds to find a similar Campbell's soup.

Furthermore, the arrangement of its soups was confusing and labels were hard to read as compared to competitive brands. The solution: a new shelving system, easier to read labeling and healthier soups. In addition, the team added simple innovations like pop-top cans that increased sales of their condensed soups 8 percent in 2005 and another 5 percent in 2006. They also introduced lower sodium soups with natural sea salt. Campbell's current portfolio consists of 43 varieties of reduced sodium soups with over $400 million in sales. The team simultaneously began to upgrade product quality. By 2003, the company launched a new line of products, starting with microwaveable healthier soups that are now a $300 million business. In addition, the company rebooted its international marketing strategy by targeting two giant foreign soup markets: China and Russia. The two largest soup consumption markets in the world, both are dominated by homemade soups. Campbell's put researchers in homes in both countries to conduct ethnography sessions to determine these customers' deeper cultural values associated with soup. As a result, the company came up with a way to create a consistently higher quality broth that saved between two to six hours in the household soup preparation process. This gave the firm another successful major new market entry strategy.

Conant's goal is to increase total shareholder returns by achieving exceptional employee engagement. Doug says, "Extraordinary things are achieved by people determined to leave a legacy." Among the top managers, Campbell's 2007 engagement scores were 35:1, up from 8:1 in 2003. Campbell's was also awarded the Gallop Great Workplace Award, which recognizes the most engaged and productive companies in the world. From 2002 to 2007, sales grew from $5.8 billion to $7.9 billion with a 6 percent five-year CAGR.

For Campbell's 2008 fiscal year, while soup sales increased by only 2 percent in a tough economy, beverage sales increased more than 10 percent, resulting in overall profits of $1.17 billion, up from $ 854 million in 2007. Based on these results Conant reiterated his expectations for a 5 to 7 percent earnings increase in the coming fiscal year. Given the economic circumstances since then, it will be challenging for any company, including Campbell's, to achieve these expectations. However, Conant and his team are positioned to weather the economic storm with a line of food products for the masses. We all have to eat, even if it is more hearty beverages and healthy soup than before.

Innovation at Schering

Fred Hassan was working his plan during this same time period. Although operating in a highly regulated industry with technical constraints, he was, like Conant, focused solely on customers. "The most critical engine of innovation in any organization is a passionate attitude of customer focus and people who are liberated to pursue that passion," he said.

His team started by studying the market for Claritin, which had switched from a prescription to an over-the-counter (OTC) product in December 2002. Claritin had been the No. 1 product in the prescription market, bringing in more than $2 billion in annual sales. By the end of 2002, Claritin sales in the U.S. had declined significantly due to patent expiration.

In 2003, Hassan and his team focused first on restoring the company's top line sales and product market shares. Their goal was to put themselves in the shoes of the consumer and to communicate in ways that resonated. An important early step was to build more brand equity in OTC-Claritin through a new consumer campaign in the U.S. called "Claritin Clear."

The campaign was launched in 2004 with a series of commercials that illustrated the patient benefits of the product. Building on consumer insights around a "foggy-to- clear" presentation, the innovative messaging contributed to Schering gaining market share in the U.S. This campaign was followed by a series of similar innovations designed to deliver a better consumer experience. The team broadened the Claritin product franchise through a series of line extensions and product re-formulations, such as a new chewable form, improved syrups for children and a greater emphasis on Claritin Redi-Tabs (easier to swallow because they dissolve in the mouth).

Hassan also focused his team on prescription pharmaceuticals R&D. The average commercial life of a branded portfolio product in pharma is about 10 years. So renewing the product portfolio became the key driver. Hassan inherited an R&D spend of less than $1.5 billion. By the end of 2007, he raised that to nearly $3 billion.

One beneficiary of this investment was Remicade, a product first launched in 1999 for rheumatoid arthritis. By investing in clinical research to investigate new applications, Schering identified and received regulatory approval for six additional indications; psoriatic arthritis, adult Crohn's Disease, pediatric Crohn's Disease, ulcerative colitis, ankylosing spondylitis and plaque psoriasis. As a result of these indications and growing demand, Schering-Plough's sales for Remicade increased from $349 million in 2003 to more than $1.6 billion at the end of 2007.

The company revived another older product, Nasonex, a spray for allergies. Research indicated that patients wanted an unscented form of the product. Working side-by-side, scientists and manufacturing teams reformulated the product without the rose-scented alcohol ingredient. The marketing team then focused on an overall brand transformation- building a blockbuster in just a few years.

By educating patients on allergy symptoms and promoting the unscented formula with a series of "Bee" animated commercials, the product generated over $1 billion in 2007 sales globally, more than double the sales in 2003. The work on Claritin, Remicade and Nasonex demonstrated the power of listening to customers and close collaboration among research science, marketing and other parts of the company.

The overall cultural change implemented by Hassan's leadership behavior model and emphasis on innovation has proved successful, especially at a time when the industry is seeing a drop in the productivity of more traditional R&D work. From 2004 through 2007, Schering delivered a total shareholder return of 41 percent, the best among its peer group. Sales went from $8.6 billion in 2003 (when Fred Hassan arrived) to $15.2 billion in 2007, a CAGR of about 15 percent.

The recent economic downturn pulled 2008 3Q profits down 23 percent, to $551 million from $713 million in 3Q 2007. But revenues are up 63 percent in 3Q, to $4.58 billion from $2.81 billion, suggesting that Fred Hassan's business model makes good strategic sense in facing both turbulent economic times and stiff competition from generic drugs threatening Schering's cholesterol drug franchise. "The company is on track with a cost-cutting plan that will trim its staff, while keeping it in a solid position financially in a turbulent market," Hassan said. "Schering-Plough has more than $3 billion in cash on hand, with no need to access capital markets and no debt maturities upcoming."

Focus + Innovation Works

What these two CEOs accomplished working independently of each other after inheriting similar circumstances speaks to the power of team building and motivation by CEOs with a vision and steadfast focus on innovation. This is not to say that either CEO doesn't have continuing issues with competitors. The global marketplace never stands still, and technology always evolves. Campbell's continues to have a serious competitor in industry giant HJ Heinz. Last year, Campbell's sold off Godiva, a line that did not "fit" its mission, and purchased the complementary Wolfgang Puck line of soups, but there is more work to be done to achieve the goals Conant has set for the future in a U.S. soup market where it already has a 70 percent share.

Schering, on the other hand, has had a few bumps recently with the recent disclosure that its cholesterol drug Vytorin does not achieve the expected results, as initially promoted, against the cheap generic form of Zocor. Sales declines resulted in job losses and may impact forecasted future results.

Leadership Engine

1. Set challenging but realistic goals with your people

2. Expect the best-challenge good enough

3. Care about your people-and show them that you care

4. Build faith among your people in Schering-Plough

5. Actively coach and develop your people

6. Constantly measure performance and raise the bar

7. Celebrate victories-large and small

8. Recognize and reward success

Changing the culture of an organization is not easy, and the larger the company the more difficult it is. These two CEOs did it, largely through getting the people aligned with expectations. "You may have a technology edge today, but somebody else will have the same thing tomorrow," Conant told a group at NYU's Stern School. "The real competitive advantage is your workforce and its ability to be agile and deal with dynamic markets and situations."


Bob Donnelly writes the online "Entrepreneurial CEO" column for Chief Executive.

The CEO’s Lament

What to do when growth sputters?

The CEO Scorecard

I've visited with a lot of CEO's who were interested in knowing what to have on their radar screens at all times. 

I call these critical issues that are the drivers in any business - Key Performance Indicators (KPI's). Frequently, all I see CEO's looking at are the typical financial results at the end of the month, quarter or year. 

Granted these are the common measuring sticks of the results of managing your business, but they are historical facts not indicators of the underlying dynamics driving the company into a more profitable future. 

Successful firms concentrate more on the market dynamics associated with achieving their long term strategic goals than the current short term historic financial results. These CEO's realize that if they are successful in growing the value of a customer, good financial results will just be a natural byproduct of this strategic customer focus. 

What should you be watching? If you think about any business - what is your purpose in being? To deliver good value to your customers in a way in which they will have a pleasing and memorable experience. As a result, they will return time-and-time again. Much like what's happened at Amazon where there customer loyalty ratio and value is at an all time high. 

This should be the basic premise of any business. That means that your customers have great value to you, and in reality that's all that's going on. Isn't it? 

With that in mind I always recommend that any CEO should be watching the average value of a customer as the most important key performance indicator. If the goal is to continue to grow the average value of a customer then that better be the most important KPI you have. You need to watch it every day because if it starts to flatten or decrease you need to find out why - right away. 

Starbucks was tracking the average value of their best customers for quite awhile and knew how much their best customers were spending every day, week and month, and even their average customers. Then apparently they stopped and assumed it would continue to grow. It didn't! Why? Their value proposition became "fuzzy" and some of their best customers came less often and bought less, or went elsewhere. Apparently, to McDonald's and Dunkin Donuts, or a local coffee merchant with a better value proposition. 

If the average value of a customer goes flat or declines only a few things can be happening even in a down economy. Like at Starbuck's either existing customers are buying less, you are adding customers who are buying less on average than your existing best customers, or customers are going elsewhere. 

Any one, or all of these customer related events may not show up immediately in your financial results, and by the time they do it may be too late to do anything about it as a dangerous trend has already developed that probably will have long term financial implications, like happened at Starbuck's. 

With all of the advances in IT these days collecting information on customers and tracking their activity should be part of your management information system and automatically displayed as part of your KPI's, or scorecard. All of the most important indicators that you should be watching should be available at the touch of a key, or appear on your monitor periodically throughout the day. Likewise, when you cross over the break-even point for each month that information should appear, as well. 

If they are not don't be surprised if you are surprised like Starbuck's was. Minute-by-minute tracking of key performance indicators is part of our lives these days whether it is a global statistic like on the NYSE, at Walmart or Amazon. 

I guess the question you need to ask yourself is what am I watching? And, is it what I should be watching? Most importantly - is it current? 

If you are wondering what to watch or how to get information on the value of your customers let's start a dialogue. E me at: rmdonnelly@chiefexecutive.net

An entrepreneur himself, Bob has spent most of his career involved with starting, growing and selling businesses. Having held managerial positions with IBM, Pfizer and Exxon, he draws upon extensive organizational experience with large and small companies in advising CEOs of growing firms. He is available online to answer questions from Chief Executive readers, as well as offer workshops, tips, books to read and a monthly online column about common issues facing CEOs of growing firms. Bob has been featured in USA TODAY for his work with Inc 500 firms and is associated with NYU's Stern Graduate School of business in their Center for Entrepreneurial Studies where he is a Venture Mentor, Marketing Strategist and Business Plan Reviewer.


He is the author of GUIDEBOOK TO PLANNING - A Common Sense Approach to Building Business Plans for Growing Firms, which has recently been reprinted. He is a past contributor to Chief Executive and one of his articles was featured in The Best of Chief Executive.  Email Bob at: rmdonnelly@chiefexecutive.net

Brand Equity and the CEO

Brands exist in the mind and our minds are full of familiar images that we instantaneously recall when prompted by sights, sounds, smells and other stimuli. 

How do these imprints get etched in customer's mental product grids? And, what is the role of the CEO in this process of creating and maintaining these brand images or positions in the mind? 

Marketing authors Reis & Trout described the mind as a dripping sponge. They maintain that the only way to build brand equity is to replace one brand value perception with another in the mind. 

This is really what marketing is all about isn't it? Creating a brand value proposition in the mind and keeping it there by constantly reinforcing that value position with the investment in the total marketing mix of promotions day-in day-out. 

Once you stop investing in maintaining your brand position in the mind you are giving your competition a wonderful opportunity to replace your brand with theirs in the customers mind.

Since customers requirements are constantly changing, maintaining your value proposition and position in the mind is a perpetual challenge for any CEO. There are many examples of this, most recently with Starbucks. 

When CEOs and their management teams become complacent with the status quo and start to take the customer for granted, or fail to realize that customer requirements have changed, they are surprised to find out that other brands have replaced theirs in the minds of many of their now lost customers.  

Needless to say, this has been the signal for demise of many inattentive CEOs. General Motors is the classic example of this tenet of marketing 

Likewise, the market is littered with company's that realized this situation when it was too late for them to do anything about it. I'm sure you still recall retail brands that no longer exist like Woolworth, Bradlees, Caldor and maybe even EJ Korvettes. The retail wars almost squeezed out another familiar brand - K Mart, until they merged with Sears. But even now their collective share of mind is shrinking. 

We are all conscious of the ongoing cola, beer and car battles for share of mind. Even the master of brand identity marketing P&G came to this realization as it entered the new millennium. It was able to reestablish its pre-eminence as the consumer product leader under its customer conscious CEO, A.G. Lafley, who was honored as the 2006 Chief Executive of the Year for reinventing his company by Chief Executive magazine. 

 You may want to read about his process in his new book "The Game Changer" where he emphasizes that the key to innovation which he acknowledges as the source of all organic growth is understanding changing customer requirements, or in his words "what customers want" by "keeping the customer at the center of all of our decisions".      

How do you really "value" brand equity? The ultimate measure is what someone is willing to pay for the stock or the acquisition of the brand. Not too long ago Dunkin Donuts was sold for $2 billion and now Absolute for $8 billion +. Conversely, Chrysler and the Jaguar/Land Rover collection of car brands were sold for less than their owners paid to acquire them. 

How much do you think Apple or Nike is worth? Haven't we been seeing the red and white Target bullseye everywhere along with the unforgettable bull terrier? As a result of Target investing $1.2 billion last year recent surveys indicate that an unbelievable 97 percent of us recognize the Target brand. Wow - what a share of mind! 

Target's investment in brand identity over the past decade has grown their revenues on average 12 percent a year to $63 billion last year.  

In their market segment an interesting fact is that the brands that compete directly with the Target brand, namely Wal-Mart and Kmart, all started in the same year - 1962. Interestingly, 45 years later all three are now fighting for basically the same share of mind. 

Let's see what value proposition resonates best with their customers and consequently, which brand stays or is replaced in the respective minds of more or less of them over the next years, as each brand competes for share of mind.    

The question is what is your brand worth?  And more importantly what are you doing to maintain your position in your customer's mental product grid as their requirements change? Lastly, what are you doing to replace competitive brands with yours in the minds of their customers? 

In this age old battle for share of mind your role as CEO is the driving force to create brand equity for your stakeholders.  

Let's start a dialogue on this issue by emailing me any questions that you have on how to win the battle for the customers mind. 

An entrepreneur himself, Bob has spent most of his career involved with starting, growing and selling businesses. Having held managerial positions with IBM, Pfizer and Exxon, he draws upon extensive organizational experience with large and small companies in advising CEOs of growing firms. He is available online to answer questions from Chief Executive readers, as well as offer workshops, tips, books to read and a monthly online column about common issues facing CEOs of growing firms. Bob has been featured in USA TODAY for his work with Inc 500 firms and is associated with NYU's Stern Graduate School of business in their Center for Entrepreneurial Studies where he is a Venture Mentor, Marketing Strategist and Business Plan Reviewer.


He is the author of GUIDEBOOK TO PLANNING - A Common Sense Approach to Building Business Plans for Growing Firms, which has recently been reprinted. He is a past contributor to Chief Executive and one of his articles was featured in The Best of Chief Executive.  Email Bob at: rmdonnelly@chiefexecutive.net

Instilling the Value Proposition

One of the greatest challenges for any CEO is to get his  entire organization to "walk the talk"  in order to make every customer experience enjoyable as well as satisfying. 

It's true that many firms have mission statements that incorporate  their  credos about  customer satisfaction. Some even  post these throughout all their locations as well as  on their web sites. 

But, as a customer you know first-hand that what actually happens in many  shopping experiences doesn't come anywhere near to what is expected. So why  do some CEOs inculcate a  desire to "delight"  customers in their employees while others do not? You would think that after reviewing the myriad of reports and published articles on the most and least admired companies year-in year-out some CEOs would get the message. 

One CEO who is receiving plaudits for his success at instilling in his team  excellence in product development and translating that into delightful customer experiences is our old friend - Steve Jobs. 

In a recent interview with Fortune, Steve said "we don't get a  chance to do that many things, so every one should be really excellent. Because this is our life" ! I've always wondered about the same thing. If we have decided to work for a company and spend most of our time, and sometimes most of our life, with the firm then why wouldn't you want it to be an excellent experience? 

Excellent for you. Excellent for the customer, and excellent for the team. And, in turn, excellent for society.  

Steve also said "let's make something really great - then everybody will want to use it". And he went on to say "let's make a great phone that we fall in love with". Voila - the iPhone. 

All of Apple's recent products fit that same philosophy. The iPod, Nano, Shuffle and soon the Touch. How about the latest "thinnovation" - MacBook Air. 

If you then create the insanely successful chain of Apple Stores that I wrote about in an earlier column staffed with wildly enthusiastic iHeads who want to please, delight kids with a variety of computer games, and with a genius bar for their parents to get answers from techie nerd wizards, you have the ultimate formula for delighting customers and satisfying their needs. 

Like Pixar, Apple is now a "dream factory" challenging engineers to really create disruptive products that in turn redefine the business models in their respective industry's. As a result everybody is "walking the talk" at Apple. The result - Apple was recently enthroned as "America's Most Admired Company" by Fortune. 

Is Apple alone in this quest for the ultimate accolades in customer service and satisfaction? The delight index? No, not by a long shot. 

Let's look at a few other well known companys - Costco and Fedex. How do they fare in customers eyes in terms of customers rating the best company experiences? Best being defined as "enjoyable experiences", "ease of doing business with", and "satisfaction of needs". 

In a recent survey by Forrester Research of about 5,000 customers who were asked about their experiences in terms of "enjoyability", "usefulness" and "usability" with over 100 firms in about nine different industries, Costco grabbed the  number one slot--ahead of book store giants Borders and Barnes & Noble (who are very customer oriented), Target and Staples.  

Costco employees also "walk the talk" by consistently delivering the company's clearly defined value proposition. Costco says "our employees are ambassadors on the floor and we make them feel like they are part of a company that cares about them and its customers". Obviously, the cultural credo works at Costco. 

How about Fedex. Their employees are guided by what they call the Purple Promise - to make every customer experience "outstanding". This value proposition has not only become inculcated at Fedex so that it permeates the entire organization, it's also become a way of life. 

The result of this total employee dedication to delivering excellent service is also reflected in the growth of revenues every year for the past 5 years from $22.5 billion in 2003 to $35.2 billion last year. 

The indoctrination to the Purple Promise starts on the first day of employment with a tutorial that explains the Fedex customer-centric culture. It continues with a video series and frequent purple promise stories. After four  weeks of training on the company's total service offerings, employees areindoctrinated into the language of Fedex - its phraseologies,  and the "team" culture concept of working together globally to make each customer experience outstanding. 

To ensure that Fedex folks stay on message the companyemploys  an independent research firm that randomly selects calls and surveys a sampling of customers every day. If a less than outstanding result is recorded, the firm calls Fedex immediately and they contact the customer to determine what they could have done better. 

Their customer satisfaction index is famous. Fedex rates their service on a scale of 1 to 10 based on a weighting system geared to different kinds of problems that their customers experience. 

Obviously a lost package is the worst thing that can happen followed by a damaged package, and then a later than promised delivery; and so on. This focuses the entire company - all the employees, on working to reduce problems to an absolute minimum to enhance customer satisfaction and the overall image of Fedex. 

This commitment to delivering outstanding service and "walking the talk" has resulted in Fedex leading its industry in customer satisfaction for the past 10 years! It has made Fedex the largest air express company in the world. They are not only moving packages, they are dealing with their customers lives and they take it very seriously. 

I guess the question is "are your employees - walking the talk"? Do you have a measurement system in place to determine if your customers are delighted with their experience with your firm? Are your employees looking forward to coming to work everyday with the thought of seeking ways to deliver excellent service? 

As I have written  in previous  columns  - you are in the customer business. Happy satisfied customers will keep coming back and they will tell others about their good experiences. Unhappy customers will just go away and tell others of their unpleasant experiences.

You need to treat your customers as appreciating assets because that is what they are. You have to deliver on your value proposition and even enhance it. Set a goal to "delight" your customers. Your job is to grow the value of your customers by delivering excellent memorable service. 

Just think of Apple's goal to make a few products exceedingly well, or Costco's ability to empower employees to be ambassadors on the floor, or Fedex's Purple Promise cultural manifesto. 

Let's establish a dialogue on how you can inject your employees with this desire to be the best in your industry, and to deliver excellent customer service - beyond customer expectations.

An entrepreneur himself, Bob has spent most of his career involved with starting, growing and selling businesses. Having held managerial positions with IBM, Pfizer and Exxon, he draws upon extensive organizational experience with large and small companies in advising CEOs of growing firms. He is available online to answer questions from Chief Executive readers, as well as offer workshops, tips, books to read and a monthly online column about common issues facing CEOs of growing firms. Bob has been featured in USA TODAY for his work with Inc 500 firms and is associated with NYU's Stern Graduate School of business in their Center for Entrepreneurial Studies where he is a Venture Mentor, Marketing Strategist and Business Plan Reviewer.


He is the author of GUIDEBOOK TO PLANNING - A Common Sense Approach to Building Business Plans for Growing Firms, which has recently been reprinted. He is a past contributor to Chief Executive and one of his articles was featured in The Best of Chief Executive.  Email Bob at: rmdonnelly@chiefexecutive.net

CEO’s Role in New Product Development

Most customers don't really know what they want next, but one thing is for sure - they have a list of problems that they are looking for a solution for. 

These problems represent opportunities for new product development for the savvy CEO and most of the time the solution is quite simple. 

How simple was the "Swiffer"? Who wants to mess around with the pail, the water and the mop? How about microwaveable soup for one? Look what Rachel Ray has accomplished with "30 minute meals". These simple solutions were answers to likewise simple problems that people have. 

Isn't this what entrepreneurship is all about? Aren't these simple solutions to problems the way that all businesses evolve? Isn't change the driving force in our lives? Maslow sure hit it on the head long ago with his simple theory of the human search for something new once all of our basic needs were satisfied. 

Since this is so obvious and we all know about the product life cycle - why aren't more CEO's the driving force for new product development? Often they have turned the responsibility for new product development over to others or have become complacent with the status quo. Frequently, early success lulls the CEO and the management team into a false sense of security and they begin to believe that they know what the customer wants next. 

Once you start to "market by assumption" and assume that you know more than the customer about their requirements you are giving your competition, and especially the entrepreneur, a window of opportunity. 

Someone once said that a "desk is a dangerous place from which to view the world". 

Business is about customers. They have the problems and you need to find the solution. As I said in an earlier column the most successful CEO's are aware of their customers changing requirements and have come up with a solution to a problem before the customer fully realized they had it. 

Look what Apple is accomplishing with their evolving line of "i" products. How about their exciting Apple stores now generating about 20 percent of their revenues up 40+ percent over last year? Yes, it is the sleek elegant styling of their products, but it's also about helping customers satisfy their problems by answering their questions. 

They have developed an electronic version of Starbuck's - a gathering place for wannabe geeks. The Apple stores are brightly lit and have music hall acoustics that create a rock concert like feeling. Over the holidays there were so many people in one of the stores I passed by in a shopping mall that I had to stand outside to talk to one of the smiling enthusiastic young nerdy salesmen who dazzled me with rapid-fire answers to my questions about "how many gigs and graphics software applications". 

Other innovative things that I noticed were a "genius bar" where i techies were fixing iPods, iPhones and iMacs, and personal trainers were giving workshops and one-to-one instructions. There were also other perpetually smiling iHeads wandering around with hand-held credit-card swiping terminals for instantaneous sales opportunities and a quick check out. An Apple store in Manhattan is even open at 2 am. 

The Apple stores are becoming known as the Nordstrom of technology. Even in an era of virtual storefronts for electronics the Apple stores are generating a growing perpetual stream of brick-and-mortar revenues. 

This wave of new products from Apple is also generating a myriad of accessories from a host of entrepreneurs. The latest is the Juice Pack, a thin battery that slides onto the back of an iPhone that generates extra power to allow up to eight hours of talk time or 24 hours of music listening time. It also acts as a hard nonslip case for the iPhone and recharges with the same cable used to charge the phone. 

Was all of this so hard to imagine? Don't you have questions about the iPhone, iPod, iMac? Don't you want to be greeted by happy enthusiastic knowledgeable sales personnel? Don't you want to buy a product and check out quickly? Don't you want accessories to make your iPhone, iPod, iMac look and perform better? Don't you want personalized one-to-one instruction? 

Remember the Ghost-Busters theme "who ya gonna call"? Well now you have the answer - the Apple store. 

What are you doing about new product development for your business? What are the natural questions your customers have?

What simple problems do they have that you can solve for them? 

If you do not have the answers for these obvious questions you better restart your business model. Who is in charge of new product development strategy at your company? YOU ! 

If you are struggling with new product development issues email me and maybe we can start a dialogue to find ways to determine what kinds of problems your customers have that you can develop simple solutions for.

An entrepreneur himself, Bob has spent most of his career involved with starting, growing and selling businesses. Having held managerial positions with IBM, Pfizer and Exxon, he draws upon extensive organizational experience with large and small companies in advising CEOs of growing firms. He is available online to answer questions from Chief Executive readers, as well as offer workshops, tips, books to read and a monthly online column about common issues facing CEOs of growing firms. Bob has been featured in USA TODAY for his work with Inc 500 firms and is associated with NYU's Stern Graduate School of business in their Center for Entrepreneurial Studies where he is a Venture Mentor, Marketing Strategist and Business Plan Reviewer.


He is the author of GUIDEBOOK TO PLANNING - A Common Sense Approach to Building Business Plans for Growing Firms, which has recently been reprinted. He is a past contributor to Chief Executive and one of his articles was featured in The Best of Chief Executive. Email Bob at: rmdonnelly@chiefexecutive.net

Converting CEO Vision into Action

Many CEOs that I have talked to have told me that one of their biggest problems is getting their team to understand and implement their vision for the future of their business. 

If you are experiencing this same problem you need a catalyst to help you clarify your vision for your team. The natural question is "who are these change agents"? 

They can take many forms all the way from strategic planners to a wide variety of HR consultants. However, there are also firms that just deal with this specific issue. These experts are aware of these patterns of disharmony that transcend industry specifics and they have developed proven templates that can be applied to any management team to get them back together and focused on the same goals. 

These companies are usually classified as leadership solutions implementers. They work with management teams to achieve clarity of vision with their CEOs. Their task is both educational as well as strategic. 

Many CEOs are so focused on growing sales, and improving operations and future profitability that they do not take the time to practice good management principles. As a result they overlook basic personality theory and treat all of the members of their management team as if they are exactly like them and totally comprehend everything that they say and believe.  

Since we are all different personalities, if the CEO doesn't take the time to explain where the company is now, where he believes it can be in the future and how he plans to get it there to each personality on his team in a way that they each can understand it they will not be able to participate in making it happen. Without this kind of personalized communications each manager's "perception" of the vision the CEO has for the business by nature will be different. 

Once this happens each manager consciously or unconsciously starts to work on their own agenda which is not aligned with the vision of the CEO. Now we have a situation where an outside expert on team building can be invaluable. 

What these leadership solutions firms do is work with the CEO and each member of his or her team initially to improve this breakdown in communications. Once this is accomplished they measure if communications have actually improved by using a variety of measurement techniques.  

Once clearer communications have been accomplished their next task is to work with the CEO to develop a menu of incentives tied to various cultural, financial performance and equity related performance goals for each member of the team. Each of there goals is tied into achieving the CEO's vision. The ultimate incentive has to be a sense of inclusion and participation for each manager in being part of a winning team. It's when an emotional bond has been established between the team and the brand/company vision.   

To insure that the plan is working they also maintain an ongoing liaison with the CEO and the team to measure business outcomes. Without their continued involvement it is very easy for the team to return to their old ways. 

In talking with James Celentano, CEO and Managing Partner of the Hudson Gain Corporation, one such leadership solutions firm, he shared the following types of successful outcomes that his firm has achieved.  

Sales Force Effectiveness - Increase Topline Growth 

The Challenge: The CEO of a consumer services firm was struggling to reach sales growth targets that his investors and Board had set. He identified high employee turnover in the sales force as the major problem. Half of the new sales hires were gone within the first 12 months. 

The Solution: Hudson Gain took the CEO and his team through what they call a "discovery process". They used behavioral interviews and an online Executive Chemistry tool to identify behavior patterns that led to sales success. Based on these findings they identified for the CEO the ideal profile of a successful salesman that was then used for recruiting replacements. The benefit for the company was a dramatic decrease in turnover and an immediate increase is sales. In combination with a training program that reinforced the most effective selling techniques for their unique service sales exceeded the previously established sales targets. 

I'm Leading - Are they following? 

The Challenge: The CEO of an educational publisher was concerned that his team was not in sync with his vision as actions by his managers were obviously not reflective of his vision. 

The Solution: Hudson Gain developed a questionnaire for each direct report to the CEO to determine their perception of the roles of CEO, President and COO in executing the corporate mission and strategy, and how each of these senior managers were communicating the vision for the future of the business to their subordinates. The result was that everyone was not on the same page. Senior management working with Hudson Gain was able to refocus on the CEO's vision and strategy, and improved communications quickly cascaded throughout the organization. 

As these few examples illustrate it is often very helpful to engage a change agent like James Celantano's group to quickly get the team refocused on the CEO's vision and improve overall communications, which is almost always at the root cause of disharmony in any group dynamics. 

Is your team in sync with your vision? If not, do you have a way to get everybody on the same page? Maybe you need to reach out to find your own catalyst. 

Let me know if we can establish a dialogue on this issue if it has become a problem for you.

 An entrepreneur himself, Bob has spent most of his career involved with starting, growing and selling businesses. Having held managerial positions with IBM, Pfizer and Exxon, he draws upon extensive organizational experience with large and small companies in advising CEOs of growing firms. He is available online to answer questions from Chief Executive readers, as well as offer workshops, tips, books to read and a monthly online column about common issues facing CEOs of growing firms. Bob has been featured in USA TODAY for his work with Inc 500 firms and is associated with NYU's Stern Graduate School of business in their Center for Entrepreneurial Studies where he is a Venture Mentor, Marketing Strategist and Business Plan Reviewer.


He is the author of GUIDEBOOK TO PLANNING - A Common Sense Approach to Building Business Plans for Growing Firms, which has recently been reprinted. He is a past contributor to Chief Executive and one of his articles was featured in The Best of Chief Executive.  Email Bob at: rmdonnelly@chiefexecutive.net

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