As an amateur Investor, I could rarely accept and appreciate why some orgs. could execute and some couldn’t. I use to think its more a pitch to impress investors and hence had a linear scale than a binary scale to like/dislike managements.
Zoom out after running a start-up and having seen some tech driven orgs. from inside out, understand that companies that last long have a sustainable internal MOAT. They implement tech/systems for customers, staff and vendors (in that order). Good orgs. are those that:
a. Can connect customer experience to internal orgs.
b. Does the above in the most transparent manner.
For our food tech startup, we had an objective function: We wanted to have a simple and transparent org that is customer-centric and responds to exceptions. We scaled up our tech to make sure we were true to our objective function. While executing, we zeroed on some ground rules:
Build an org/tech to catch bad customer feedback and exceptions than to reporting good data:
Orgs. that respond to bad feedback more proactively, are on a treadmill. We didn’t know what exceptions we will face or where we will screw up, but just wanted to catch that exception and build a tech module around it. What this paranoia did was to build a standard response to problems and secondly, minimized any human interaction and cost. What this also did was to signal to our customers that we are listening. This amplified the feedback we got from our customers. Around 60–70% of our customers gave us feedback. This helped us collect statistically significant data on each internal metric to set up KPIs for staff from top to bottom. For scaled up companies such as Flipkart/Amazon, customer experience may be solved by tightly controlling supply and delivery manpower. Asking a customer for a feedback might cause leakage in the conversion funnel at that scale, I still think that systems built to identify whether a customer is happy with a product are more fruitful than pushing for the next sale. If I have bought a ball from amazon/fk, and am looking for another ball in next 10 days, there may be issues in the last purchase. Or if I am checking the same category after the delivery of an order, there may be an issue. Customers rarely mind, bad news delivered to them proactively. Or blend the reward program with getting customer feedbacks. Trust me you will not have to discount to red or answer to investors what you stand for.
Completely map staff performance to customer KPIs:
A bit difficult to execute given HOs and distributed systems, but this helped us align 90% of the staff to good and bad times in the company. This is something we check for even as a public market investor. The trick is to keep it simple and make people believe in the power of a statistically significant sample set of feedback. How do we get a statistically significant sample set: build a culture where a customer knows we will respond to exceptions/bad ones more proactively. Even for large orgs, blend customer feedback on frequency of late deliveries to delivery staffs performance which in turn maps to the performance of the category team. Even, for roles that are distant from the customer, aligning the conversion funnel to staff’s performance helps. Show it live, show the incentives to good and bad behaviour.
Improve the frequency of visibility of staff performance data, so bad news gets known first:
Small point but helps correct staff behavior. We didn’t like surprises as employees and wanted the same for our company. This keeps noise level down. If someone is not performing, show it upfront.
Equip your staff to take decisions with customers, create buffers :
We shamelessly learnt this from Amex. The authority with which their execs execute, is remarkable. Empower your staff to take decisions that suit customer, even if it means giving them a long rope. This also helps weed out the middle service layer in mature/large orgs. Make a cost center, a loyalty/perk center for an employee, you will see savings without blinking an eyelid. Have seen this for travel, logistics, delivery cost, food cost and reporting.
Lastly, invest in dashboards. We built our own with views and access like a tree. Consolidated at each level for the data relevant. This kept the noise low and focus on the top 2–3 that we as entrepreneurs wanted to focused on. On a lighter note, I often use to ask an an amateur investor to an entrepreneur “What are the top 2-3 things you want to focus on”. After a startup and some grounds up experience this has now changed to “How do churn out your top 2–3 things and what do you do to only focus on them”?
How this helps in public investing
For pubic investing, we rarely have access to this granular a data, but what helps in on-on-one interactions and scuttlebutt on the managements running consumer facing service businesses is to get to know the following:
How does a founder capture and check the primary velocity of his product/service. We try and understand how much a promoter is on top of the signals from the consumer. Whether be new product launches or be it after sales. Does a promoter deal fairly and equally with his channel. Have seen case of a listed apparel company run by one of the most conservative and smartest founder, but he does not respect his channel. The only thing that matters is how to clear the inventory of the shelf, if it takes making their channel unhappy, so be it.
How is this velocity linked to long term metrices such as churn/repeat. A listed classified ads company often talks about how their traffic is growing, how their listed MSME base is growing, but rarely talks about whether any one is repeatedly using their app/website. Traffic is a vanity metrics.
What is the escalation and tolerance mechanism of the org. and what level of information reaches the top management.
Lastly but most important, whether a promoter likes to hear and give bad news first. This paranoia mostly translates into a mindset, that don’t know a lot, let me adapt. It also creates a responsibility to not only customers but also minority shareholders.