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Meet the Masterminds: James Champy on Inspiring Customer and Client Loyalty

James Champy, Chairman of Perot Systems' consulting practice, is an expert on leadership and management.

He's coauthor (with Michael Hammer) of Reengineering the Corporation: A Manifesto for Business Revolution, and the author of Outsmart! How to Do What Your Competitors Can't.

Champy's latest book, Inspire! Why Customers Come Back, shows how organizations can drive new levels of customer loyalty in an ever-shifting market. We asked Champy how we can apply these innovative ideas to our clients and practices.

McLaughlin: You say there's a seismic shift taking place in the marketplace—a reversal of the buyer-seller relationship. What do you mean by that?

Champy: Today’s buyers often believe that they know more about a product or service than the person who’s trying to sell it to them. That sophistication comes from the information available on the Internet and from communities that follow particular brands and products very closely. As a result, people will go into a store like Best Buy, for example, knowing exactly what they want to buy.

In many ways, a company is no longer in control of its own image.

In many ways, a company is no longer in control of its own image. Consumers are much more likely to form their own opinions. And it’s harder for a company to influence what consumers think about the company and its products with a simple marketing campaign.

Years ago I was talking about how consumers were becoming more demanding and sophisticated. Well, it’s finally happened. I think they really are using the wealth of information out there. The formation of communities and the organization of all that information have made it easily accessible and provide a way to assess products.

McLaughlin: In general, how are most organizations handling this shift?

Champy: I haven’t done a formal study across corporate America, but I don’t think most big companies understand the shift in the market. Or, if they do understand it, they don’t know what to do about it. I think that’s because their executives, in particular, are not used to being so close to the consumer.

On the other hand, the CEO of Campbell Soup, Doug Conant, is intentionally close to the consumer and has revitalized Campbell based on that. But I think he’s an exception. Unfortunately, we don’t seem to have enough people who go into business wanting to create products and services that people really want.

For instance, like most people in this country, I’m watching what’s going on in Detroit with the auto makers. I’m struck by how little conversation there is about building cars that people love.

Unfortunately, we don’t have enough people who go into business wanting to create products and services that people really want.

A couple of years ago, I was doing a seminar in Japan and several of the participants were executives from a Japanese auto manufacturer. Their stated ambition was to build cars that people really love. That objective has been conspicuously absent in the US auto industry.

If GM and Chrysler would build vehicles that inspire the feelings people have for their BMWs, Saabs, or Volvos, they could get some real results. Otherwise, they will continue to get beaten in the market.

McLaughlin: In this economy, how do companies inspire customer loyalty?

Champy: The businesses that are inspiring their customers have a shared characteristic: underneath everything these companies do, the motivating force is a connection between the values of the company and the values of their customers.

They may have different ways of inspiring that loyalty, including everything from developing broad appeal around environmental issues, to honesty, to the passion people in the company have about their product or service.

For instance, the folks at Honest Tea value good health; and they believe in dealing honestly with their suppliers as well as with their customers in terms of labeling. They have a set of beliefs and values and they execute on those with a consistency that I call authenticity.

How does a company inspire customer loyalty? Simply put, by connecting with the values of its customers.

How does a company inspire customer loyalty? Simply put, by connecting with the values of its customers. But boy, you better be authentic in doing that and truly have those values. You won’t succeed if you’re faking it.

McLaughlin: Are you saying that the values don’t follow the product, but the product follows the values?

Champy: That’s right. The product has to be true to the company’s values. By the way, those values aren’t always about the high sense of purpose that some companies have. If you look at the Big Green Egg folks, these are people who are passionate about good cooking. And they produce a product that delivers on that.

Again, the values don’t necessarily have to be lofty ones. For instance, Puma offers cool style, which you might say is a pretty base value set. But that cool style appeals to the values of many younger people—and some older people who also want to be cool. So that too is a form of value-based selling.

McLaughlin: Don’t you think many companies start off with that kind of passion? Herb Kelleher at Southwest Airlines, for example, wanted to make travel accessible to everyone and built the company around that aim.

Champy: Yes, and I think Southwest is still true to those values, although it’s been tarnished on safety issues. That's a good example of how delicate the value-based proposition is; if you tarnish it, you’ve got problems.

McLaughlin: When the founders' flame dims, don’t some organizations drift a little bit?

Champy: They do. That’s exactly what happened at Campbell Soup. It took a new CEO to get the company back on course. Now the company has a real strategy around health, convenience, and quality.

That’s the way it often happens. A new leader has to recognize the power of the brand and be both a strong enough leader and a competent enough manager to take the company back to its position of prominence.

Smith & Wesson is another example. It was the country’s largest and best manufacturer of handguns, but lost its position in the marketplace for years. The company almost died. But a CEO came along who understood the brand and knew how to execute.

McLaughlin: What’s at stake for organizations that are not going down this path of inspiring their customers?

Champy: Eventually, their products or services will become commoditized—if that hasn’t already happened. Then, they will feel like they are always selling on price because people will not appreciate the value of what they're offering.

I don’t think anybody in their right mind wants to be a commodity in the marketplace. Unless you totally control your market, it would be foolish to lose out on the opportunity for people to buy on value.

McLaughlin: The market is tough right now for those selling professional services. What should they be thinking about as they navigate through this market?

Champy: Well, they should recognize that the market is tough not just because we’ve had a collapse of financial institutions. That exacerbated existing conditions, but isn’t the only culprit.

An underlying cause in many industries is overcapacity, which really ballooned because of loose credit. For example, I now have three Home Depot stores within 20 minutes of my home. Who needs that many Home Depots? But money was cheap to finance inventory and that was the result.

This is cyclical, of course. In the 1960s, Jay Forrester called it Industrial Dynamics, and Edward Roberts continued that work at MIT to develop techniques for predicting the sort cyclical overcapacity we are seeing now.

Second, the whole world is learning how to produce more with less—either by choice or by the force of competition. If the Detroit auto makers survive, they won’t use as many people to build vehicles as they did in the past.

We’ve been going through a long-term adjustment to efficiency. And I think within the last couple of years, it’s taken another significant leap. So I would advise consultants to push their clients to make sure that they are achieving the optimum levels of efficiency possible.

In the long run, competition will require you to be one of the low-cost producers. And then you build value on top of that. These days, you’ve got to become extremely efficient and then take the profits from that and reinvest it in your product or service to deliver even more value.

That’s the simple prescription. And if I were designing a consulting practice today, that’s what it would look like. It would be a combination of cost and value. You can’t just drive on costs. As Tom Peters said, you can’t “shrink your way to greatness.” The other end of the equation is value. You have to do both at the same time: deliver more but learn to do it with less.

McLaughlin: Thanks for your time.

Find out more about Champy at www.jimchampy.com.

You might also be interested in our previous interview with Champy on Outsmarting the Competition.