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Customer Calibration 63 ductivity at the customer interface—the places where knowledge flows between our customers and our business. Current Capabilities Moving out from touchpoints, we find Armstrong’s current capabilities. For the purpose of the Customer Dialer, capabilities are defined as the skills, tools, and value-creation opportunities that the organization offers to its customers and partners, such as application support, after-sales support, Armstrong University, and our extranet. Most of these capabilities are what you might consider as adding intangible value—things not expected by our customers. They are tools that support learning, collaboration, and strategy making that in turn increase our capabilities to build partnering relationships and spark innovation. We believe by investing in these types of tools we increase our customer capital and distinguish ourselves in the marketplace.    Armstrong University is a forum, offered several times a year, in which the organization gathers different groups together from our customer community. During these sessions we explore customers’ requirements and co-create solutions that address these needs. The format includes workshops and technical learning programs. Armstrong Catalogue Expert, or ACE, is proprietary software that gives customers direct access to full technical specifications. ACE was a first in the industry, created specifically to meet customer needs. Specification selection is based on personalized criteria, embedded application knowledge, and analyses of system design, energy efficiency, submittals, drawings, quotations, and on-line ordering. Armlink is a collaborative environment that allows the cocreation and sharing of crucial information surrounding the project and solution requirements in an online, interactive format. 64 The Conductive Organization The identified capabilities and touchpoint rings of the Dialer aren’t static. They’re in a constant state of change based on the changing needs of the customer. Evolving Capabilities The outer circle of the Customer Dialer represents upcoming or evolving capabilities. It serves to remind us that, to remain an industry leader, we must create new capabilities in real time and on an ongoing basis. The Customer Dialer and Internal Dialoguing We’ve found the Customer Dialer to be a useful tool for facilitating customer-focused conversations between our employees. We use it to enhance conductivity throughout our organization. Employees from all functions and disciplines can see, discuss, and bring their own perspective to the customers’ needs, capabilities, and touchpoints. The Customer Dialer is useful in showing how the work of all employees relates to the customer and in galvanizing their thinking about generating the capabilities we need to constantly improve customer service. Every Armstrong employee participates in a learning session on the Customer Dialer. We’ve also started to use the Customer Dialer with our own suppliers, working to make explicit the capabilities of, and find complementarities within, our value-creation networks. Value-Creation Networks and ValueNet WorksTM Given the complex requirements of some solution development, a single organization may not be able to fully meet the customer’s requirements. It needs to partner with other organizations, each bringing to the relationship a particular set of unique capabilities— capabilities that represent a special expertise. One approach is to develop a multiple-participant network that creates value for the customer based on each organization’s contri- Customer Calibration 65 bution of a specific capability domain in which it has a clear advantage. These networks can be successful because each organization participating in the network:     Understands the value of the network strategy Knows their customers’ needs Has the capabilities to partner Can leverage technology to realize their strategy. The value-creation network provides a collective way of knowing— the result of sharing knowledge across the network. It also forms a new way of creating value, leveraging intangible as well as tangible value. ValueNet WorksTM, a tool developed with Verna Allee, who is a thought leader on effectively using knowledge in the new economy, allows organizations, their customers, and their partners to identify complementary or value-adding capabilities by mapping both tangible and intangible exchanges among members of a value-creation network. (4) The ValueNet WorksTM system defines tangibles as products or services that are paid for and therefore expected within the relationship. Intangibles are the extras, or the value-adding services, typically concerning knowledge exchange among members of the network, that are not paid for or possibly not even well articulated. To illustrate the ValueNet WorksTM analytic process, review a value network map for one of Armstrong’s customer clusters (see Figure 4.4). The participants are all involved in a conventional building project that includes creating specifications, bidding on the project, and then building the product. The key members of the value-creation network are the designated nodes—the manufacturer (in this case Armstrong), a consulting engineer, and a building owner. A solid black line represents the tangible exchanges (e.g., an order from contractor to manufacturer and a product from manufacturer to contractor). The intangible exchange is represented by the dotted line (e.g., the technology The Conductive Organization er 19 6. D raw 8. G is k eR .P Pr o je 5. D o je ct O ct O p p o rt u n p p o rt u iti e s n iti e s Figure 4.4 u ct od or 15 e sig n S p e cs . Armstrong C a n ned S o ft w a r e High Reliab y that Builds Trust ili t Pr 10 Pr ym . Pa en tF 16 t R a is e C o m p ete n cy g e b y A s s o c i a ti o n ( A S H R A E ) 14 uc P r e s ti l o g y S e m in ar Minim i ze R Tec h no s is st D e si g k Qua lit y R n S p Min e s p ec im o ns s (Pro ize Risk e mise to) Quick Pr 12. oduct Ord 11 er .P ric eB ay re a k me nt F Re or P qu ro d u ct e st Mi n i m C o n c e s sio n iz is k ill dw Fee sig n e oo er v ic G .S r De es ig v ic n e D 18 pp al 2. D 3. A 1. ov ig n ons a ti Building Owner es pleted Fee Com 17. Co 21. leted Project p mple Com t ed General 9. Payme 20. Ins l nt P a v rod o Contractor tal uc ppr l s t& c A l pe a S S n d i n a .F o s s G ing d To aw n s hip Dr le Relatio oo d fortab an r H old b a c k o Com F s s r te ng ame wi Par Contractor ra D 7. Oppor t u ni ty L M i ni m Consulting ea iz e 4. Req d R ue Engineer 13. 66 .P ro d Broker Tangible Exchanges Intangible Exchanges Mapping Tangible and Intangible Assets seminars and design assistance from manufacturer to consulting engineer). The point of this mapping exercise is to help the organization view the added-value proposition it makes to customers. It shows the benefits that Armstrong derives from its partners and identifies the additional added-value exchanges that can be initiated. It also gives a bird’s eye view of the many relationships created among all nodes of the value-creation network. Value is created from both types of exchanges—tangible and intangible. However, without taking the time to identify the exchanges, the value that results from the intangible exchanges in particular may never be fully realized. For example, the high degree of reliability that results from the exchange between the consulting engineer and the manufacturer (see solid black line 5) during the Customer Calibration 67 development of design specifications increases the level of trust. More intangibles that create value flow from this interaction, including: goodwill, a high-quality relationship, minimalized risk, and improved speed and quality of response. Because Armstrong is working with its customers to fashion new solutions, it is cognizant of the tangible and intangible requirements of each node and can factor these requirements into the solution being created. For example, Armstrong thinks not only of the engineer creating the building design, but also the contractor who will have to install it, the building owner who will have to pay for it, the building operator who will have to run equipment, and the corporate or private residents of the building who will be the end-users. All those needs, along with Armstrong’s technical requirements, are among the considerations for creating a viable solution in partnership with all members of the value-creation network, including the customers. Intangibles as a Competitive Differentiator The benefit of mapping intangibles is that they represent an organization’s competitive differentiators. Competitors may be able to replicate tangible products or service dimensions, but they’ll find it extremely difficult to replicate the intangibles, the value-adding dimensions that help deepen the relationship with customers. Customers will readily recognize that they cannot easily get these extras from another company, so a competitive advantage is created for the conductive organization. These intangibles are a significant contributor to raising the organization’s relationships to the partnering level discussed earlier and into the domain of generalized reciprocity— once again, key dimensions of a highly conductive organization. Leveraging the Distribution Network In discussing the customer value-creation network, one factor we should spend time considering is the distribution network. Distrib- 68 The Conductive Organization utors have a massive impact at the customer interface, so we must consider them a key factor in enhancing the transmission rate and quality of knowledge flow. An organization may understand its markets and may be developing new products based on good customer understanding, but the products may hit the distribution channel and fail because of a lack of trust and partnership between distributors and customers or distributors and the organization. For many organizations, the distribution channel is the ultimate bottleneck in the flow of knowledge between the organization and the customer. However, distribution should be a critical part of the organization’s ability to create value. In fact, the relationship between the host organization and its distribution agents constitutes a significant part of their respective structural capital. The economic value of both organization and distributor depends to a large extent on how effective they are at partnering with each other and at presenting a unified face to the customer. Interdependence Achieving an effective win-win partnership requires an interdependent relationship between the organization and its distributors. Too often the organization-distributor relationship becomes counterdependent, and those who should be partners question everything the other does. From a business perspective, this means that one party actively denies the value that the other party brings to the relationship. One party is always second-guessing the other’s motive because it believes it’s being taken advantage of—a dynamic state that works both ways. For example, in the petroleum industry, independent dealers may sell gasoline and get a percentage of the margin. But when oil companies are constantly squeezing the margins, the relationship becomes counterdependent. With interdependence, however, both parties realize that their relationship will produce the most value through close collaboration and trust. Customer Calibration 69 Clarica Example—Independent Agents Clarica had a distribution network of about 3,000 self-employed agents who, on a daily basis, interacted with the customer at a personal, face-to-face level. For all intents and purposes, these agents were Clarica in the eyes of the customer. Therefore, it was the agents who had to deliver Clarica’s brand promise of clarity through dialogue. Recognizing the absolute importance of its agents, Clarica invested substantial time and energy in ensuring that the agents felt they were a critical part of the Clarica experience. Although independent business owners, the agents participated in the same values-based surveys and analyses as Clarica employees to ensure that the core values expressed by agents were congruent with those of the organization and its employees. Clarica also helped support a community of practice for agents so that they could benefit from knowledge exchange. And to enhance conductivity, Clarica established a dedicated agent’s web portal. Clarica understood that, by creating the right culture and infrastructure, they made it possible for their agents to show commitment to and a sense of ownership of the relationship with the customer. Aligning agents would go a long way to mitigating any risk of strategic failure—the central role of agents in the execution of Clarica’s strategies was explicitly recognized. Building trust, therefore, became critical to the relationship. Trust and the Distribution Network As with customer-supplier relationships the distributororganization relationship can only develop in a high-trust environment. The prerequisites to working interdependently and collaboratively are high-quality sharing, listening, and mutual trust. Such an environment is conducive to co-experiencing one another’s dilemmas, difficulties, and issues. The organization hears the customer’s perspective through the distributor. The distributor hears the organization’s perspective directly from the organization. And 70 The Conductive Organization the distributor can then translate that perspective to the customer so that the customer perceives value in the organization’s offerings. Conversations with Distributors For the host organization-distributor relationship to work fully, the leaders of the host organization must listen closely to what their distributors tell them. After all, the distributors are generally closest to the customer and can pick up on changing customer aspirations and requirements. We’ve found it makes sense that these conversations center on generating customer capital and deepening the organization’s knowledge of the customer, without either party’s being defensive about who owns the customer. When both the host organization and the distributor focus on the interests of the customer, they discover their true common interests and can identify a common perspective. In a sense, when counterdependence is evident, it is because such an exchange is seen as a zero-sum game where the competing interest of the two partners becomes the focus. In this case, the parties need to consider how they can collaborate to create more value together in a value network than any single competitor could create on its own. Values Congruence It’s important to select distributors whose values and customer perspective are congruent with the host organization’s values and perspective. A common perspective forms the foundation on which the relationship can be soundly established and grow over time. A misalignment of values, vision, and strategies between the host organization and distributor will typically undermine the organization’s customer capital. Successful partnerships are based on interdependent relationships in which all parties have the confidence and the sense of responsibility to take self-initiated action to solve problems and face chal- Customer Calibration 71 lenges as they emerge. They’re also relationships in which the respective partners’ contributions are recognized and rewarded. Being refocused on the customer can revitalize a distribution network that is old and established in its ways. The host organization should talk with the distributors about the customer and the value being created for the customer. All too often, the discussion between the host organization and distributor is about the arrangements between the two of them. Conversations that don’t include the customer are barriers to conductivity. They impede the knowledge flow and reduce the opportunity to increase customer capital. Internal and External Message Congruence Finally, when we talk about customer calibration there must be a congruence of internal and external messages. You cannot have an internal message focused solely on selling to the customer at the highest possible price and an external message that puts the customer first and promises high-quality service. These messages are not consistent. And where incongruence exists, trust is not created and customer learning is not possible. This brings us to the importance of branding and the alignment of internal and external brand promises in the next chapter. Conclusion Calibrating the organization to its customers’ needs is central to being a highly conductive organization. The approach we outline in this chapter covers the many components needed to move an organization in synch with its customers. Tools developed to help organizations analyze customer needs, such as Armstrong’s Customer Dialer or ValueNet WorksTM, are examples of ways that a conductive organization can calibrate its strategy, culture, structure, and systems to its customers. The ability to so closely calibrate relies on establishing highquality relationships, partnering mindsets, and communication 72 The Conductive Organization skills. The need to practice internally what you apply externally helps hone capabilities and improve approaches as these experiences result in further growth. But the single most important element is engendering trust. The ability to establish trust in all aspects of your relationships—both internally and externally—is the foundation for enabling the knowledge flow on which you base your customer calibration. Emerging Principles  A traditional organization focuses on customer retention, a leading organization focuses on customer satisfaction, and an innovative or conductive organization focuses on customer success.  The closer the supplier is to the customer, the greater propensity for value-creating innovation.  Gapless co-experiencing with the customer will come from suspending one’s mindsets as a supplier in order to truly listen to the customer.  The relationship between the organization and its distributor networks is a significant part of each organization’s structural capital.  The ability of an organization to partner will depend in large part on its culture and the leadership that drives it.  Customer calibration is a constant process that informs all of the organization’s thinking, actions, and relationships, enabled by the quality and speed of its knowledge flows.  Innovation results from sharing information and creating knowledge to constantly find news ways to deliver relevant, high-quality solutions to customers.