Keys to success in today's business environment.

To ensure growth and survival in today's business environment, companies are developing new and unique approaches to attract and retain customers. These approaches are required of firms that intend to keep pace in an environment that includes increasing numbers of customers, competitors, new technologies, and distribution methods. Today, customers are more sophisticated and have higher expectations than those in past decades; thus, they demand better products and services. This intense, competitive environment forces companies to operate more efficiently. Investments in technology often play a vital role in retaining and expanding the market shares of growing businesses. Marketing and distribution techniques also determine the degree of companies' success. To identify keys to business success, surveys were conducted of more than 100 business people in myriad fields that included cosmetics firms, beauty salons, restaurants, auto dealers, banks, hospitals, hotels, gas stations, credit card firms, grocery stores, and paper manufacturers. The results showed that often the secret to success is successful implementation of sound business principles. The techniques utilized by successful firms fell into several categories which are outlined in this article. Enhance Management Practices Some of the surveyed firms attributed their success to employing enhanced methods of managing such as developing strategic plans to direct business operations, utilizing project management and control to complete projects on time and within the allocated budget, and developing standards for measuring performance and achievement with specific attention paid to the impact of the actions on customers. Other methods included tracking customer responsiveness by category and reporting the results to employees, improving communication to all employees about goals and objectives and progress toward meeting them, and adhering strictly to carefully-established hiring criteria to find the "right" employees. Much of the growth that occurs in successful companies is generated by long-term planning. The process involves identifying and pursuing core competencies and technologies and acknowledging that not all of these plans and strategies will stimulate growth. Successful managers know when to abandon unsuccessful strategies.[1] This effort is especially critical for small companies that have limited resources. Because of limited cash flow and credit lines, management must clearly understand the firm's objectives and create a clear plan of action to achieve its objectives.[2] Provide Superior Service To provide superior service, the telephone and utility companies that were surveyed said they were focusing on the 5 percent of customers who comprise 95 percent of their business. Twenty percent reported offering toll-free telephone numbers for assistance, complaints, and inquiries; 50 percent were empowering their employees to meet customers' needs and were taking action on other fronts to reduce customers' waiting times. For firms that provide services, offering commissions to increase productivity might be disastrous. The best example of this folly is an incident that involved the Sears Automotive Division. After Sears implemented a commission structure that required its mechanics to meet quotas of at least $147 per hour, the California Department of Consumer Affairs accused Sears of seriously overcharging customers and undertaking unnecessary repairs.[3] Sears paid $8 million to settle the charges. In contrast, Richard's Accurate Import Auto Service encourages its workers to "treat each car like their own." To improve the quality of service it provides, the company installed Macintosh computers with software designed for auto repair shops (Turbo Mac). In addition to generating work orders and invoices, the program tracks the full repair history of each car and generates follow-up files to remind the owner and employees to call customers who have not visited the shop recently. By focusing on providing superior service at reasonable prices, Richard's Accurate Import Auto Service has built a base of 7,200 satisfied repeat customers. 4 The highly successful Longo Toyota of El Monte, California follows a similar procedure. Target Specific Groups To increase business, 41 percent of the surveyed firms said they offer special services that appeal to specific groups such as business people, mothers, overweight people, nonsmokers, and the wealthy. About 10 percent target immigrants of various nationalities, communicate with them in their native language, and are familiar with their customs. Five percent offer custom product labeling. Provide Unique Services Some of the unique services include laundromats that house fitness centers so customers can exercise while doing their laundry and supermarkets whose employees not only package the customers' groceries but take them to their cars as well. Some even provide transportation home for customers who walked to their store. Other examples include automobile repair shops that wash customers' cars after servicing them; bed-and-breakfast establishments that serve afternoon refreshments plus fresh cookies and beverages at bedtime and offer an upscale, yet comfortable, ambiance. Hospitals sometimes designate primary nurses who provide patients (and their spouses) with their personal telephone or pager number and oversee and coordinate the patients' care during the entire length of their stay. Some hospitals maintain VIP suites (and floors) that are elegantly furnished with couches and easy chairs, and "hotel" floors for patients' family members and out-of-town visitors. Implement Customer Care Programs To build good will and improve customer relations, 30 percent of the surveyed companies said they develop "customer care" programs. Some send hand-written thank-you notes and birthday cards and keep customers informed about the status of back-ordered items. Other stores keep track of the types of merchandise customers purchase and advise them when a related new line or series arrives. Some pharmacies keep detailed records of the medications their customers order which helps them provide better service. Two department stores reported that they provide lunch or beverages for preferred customers while they shop; employ a concierge to assist out-of-town customers with bus schedules and hotel and restaurant information; offer coffee, tea, and other amenities for men who accompany female customers (in a women's store); and repair buttons and belts for their customers. Others said that they provide personal shoppers for their customers. Use Advertising and Marketing Techniques Effective advertising and marketing techniques promote growth and success among 64 percent of the surveyed business firms. Some companies advertise their products by having them used on television programs and in films; others promote their products in training and educational programs. Dentists, doctors, pharmacists, and a broad range of companies said they use newsletters to keep in touch with their customers. Some restaurants offer complimentary beverages to customers who were waiting for a take-out order or a table, or provide discounts or free food when the wait for food or service is long. Four firms survey customers to find out what they like and dislike about the restaurant; some offer a discount to those who are pleased and a free meal to those who are not - to regain their patronage. They also offer special promotions to increase their clientele - and gain new customers in the process. ATMs at gas station pumps save customers time and provide a cash alternative while reducing the amount of cash on hand at the station. Markets attract customers by featuring a broad range of merchandise; by operating as low cost leaders; or by offering specialty products such as broad varieties of international foods. Many businesses design advertisements that target their business to specific nationalities and employ individuals from a variety of cultures to make their customers feel comfortable. Food, clothing, and auto stores offer discounts to customers who made large purchases. Companies, such as IBM, that focus on the global market work diligently to create products that can be sold around the world with only minor modifications. Kasper Cassani, head of IBM's international activities, says that what is important "is that the concept of adaptability is built into the product." Other unique "sell" methods include salons that offer "style development" to help clients develop a complimentary hair style and cosmetics manufacturers that operate academies that stock only their own products for student training. The students become "sold" on the products, buy the products, and often expand the market internationally. Employ Public Relations Techniques Management use of public relations and other community involvement efforts also are effective ways to gain visibility and attract both new and old customers as indicated by 14 percent of the surveyed firms. Hospitals offer special services in times of crises such as earthquakes and riots. One restaurant manager visits each table to ensure that customers are satisfied and made to feel "special." Many businesses and hospitals provide educational materials to schools, and their executives are available to speak at special functions. Reduce Costs In this survey, 14 percent of the firms employ the "low-cost leader" strategy to attract customers. For example, California-based 20th Century Insurance keeps its rates low by limiting its coverage to low-risk individuals. As electric and gas service monopolies have been broken up recently, utility companies have reduced their overhead by contracting work out at lower costs. Utility companies also have diversified their energy sources by increasing production in areas where it is less expensive to generate power. Many companies indicated that they have turned to imports to lower their costs, while others have tried to increase volume. Increase Investments Other firms in this study increase their investments (and ultimately their costs) so they can provide a wide variety of improved products and services. Several auto dealers have increased their stock on hand to provide a broader range of vehicles. Supply companies have increased their stock to ensure that they can meet any customer's demands. By doing this, they believe that they retain present customers and attract new ones by having desired supplies readily available. Invest in R&D According to the survey, 30 percent of the firms invest in the latest technologies or equipment to retain market share because technological leaders tend to experience increased business. Scanning devices, artificial intelligence, leading-edge computer applications, and other technologies have an impact on many businesses' competitive advantage and increase the accuracy and quality of service as well. Redesigning, automating, and simplifying products sometimes is undertaken to increase productivity or, in severe cases, to prevent plant closures. Research findings demonstrated competitive directions. To gain a competitive advantage, many firms quickly produce items that are targeted at competitors' markets and release them ahead of the competition. An alternative to being first with a new product is to develop a competitive advantage over the competitor's product. This has been accomplished by introducing new desirable features into the products, or improving their performance to make them more desirable than the competitor's. Research and development will play a critical role in the growth of industries in the 21st century. Management should eagerly pursue new sources of ideas, products, and technologies; find ways to reduce time to market and methods to simplify products to minimize their final costs.[5] New methods could include acquiring 'non-core' product lines from other manufacturers and focusing on their 'core' products.[6] Furthermore, as businesses are pressured to improve efficiency, quality, and flexibility, innovation will be a major factor in the level of success they will achieve. Using horizontal lines of communication and crossfunctional teams can hasten a product's time to market.[7] Make Internal Improvements Improved productivity, better-quality products, and successful implementation of companywide continuous improvement programs have all been used by the Japanese to gain market share. As a result, U.S. firms have realized the necessity of addressing each of these issues to remain competitive. Although these concepts often may be associated with manufacturing companies, they are vital to the continued success of service companies as well. Improve Productivity Supermarkets and department stores that were surveyed have invested in optical scanners to increase throughput, track, and reorder inventory and reduce customer checkout time. To better regulate the flow of customers, delicatessens reported offering a discount for orders placed one day in advance, salons offer a discount to customers who make appointments, and fast-food restaurants have devised ways to speed up the ordering process. One such system involves imprinting check-off menus on bags that the customers pick up when they enter. Customers mark their order on the bag, take it to the counter, and wait while the order is being filled. This method eliminates standing in line and expedites order preparation. Enhance Quality In addition to increasing production capabilities, the firms that were surveyed utilize automation and computerization to improve the quality of the services that they provide. There is increasing pressure on suppliers to meet customer standards and specifications. Suppliers who cannot accommodate customers are being replaced. Supplier improvement programs are used to bring suppliers who are willing, but need outside assistance to make the necessary internal modifications, to comply with higher performance standards. Building strategic alliances with suppliers can also lead to improved products. As ties between organizations are strengthened, improved communication often follows. Better communication allows businesses to reduce product development time cycles and stimulates technological and managerial innovations.[8] Increasingly, the financial performance of a company is linked to the quality of its goods and services. Higher quality businesses tend to have higher market shares, higher returns on investment, and a greater turnover of assets. The most effective way to offset perceptions of poor quality is to provide superior customer service. The best way to improve quality is to listen to customers and use their suggestions to make improvements. Implement Continuous Improvement and Benchmarking A key aspect of continuous improvement for 40 percent of the surveyed businesses involves tracking complaints, reasons for returns, etc., to ensure that improvements are actually being made and to identify root causes to which corrective actions can be applied. Surveying customers to benchmark superior service becomes a vital aspect of continuous improvement and retention of customers. Some hospitals require their managers to interview three patients per month to obtain feedback and make improvements. Many companies send postcards to followup with their customers and receive feedback related to the customers' perceptions and satisfaction levels. They make improvements by acting on customer complaints and suggestions. Benchmarking and surveying customers may also unearth changing customer needs. As new requirements are identified, management must evaluate the desirability of new product development to meet their customers' changing demands? Train Employees To provide superior service, 41 percent of the companies surveyed invest in specialized education for their employees. Utility companies train employees to be project managers. Airlines provide intensive training to ensure superior service. Many stores train their employees to accentuate the stores' key competencies or benefits [especially to combat large store chains). Hotels train their staff about the customs, cultures, and languages of the customers they target. Automobile shops increase the training of service technicians to ensure that they provide the highest quality service. According to Terry Finerty, a partner of Arthur Andersen's Operational Consulting Group in London, there are three main aspects of organizational learning. First, one has to define what it is that the firm wants to achieve. Then, an action plan must be developed. This phase involves teamwork and open communication. These aspects are important because they help people see the world from different perspectives, and reveal practices that prevent or allow them from attaining their objectives. The last step involves stepping back and assessing the large picture or environment in which the company operates. This prevents short-term reactions and leads to healthier growth? Motivate Employees In addition to training employees, 45 percent of the companies reported finding better ways to motivate their employees. One hospital awards a $3,500 bonus to one employee each year for outstanding contributions. Another company uses 100 programs to recognize and reward employees who treat customers especially well. Many companies offer rewards for good ideas and publish the ideas in the company newsletter. One hotel posts the quarterly goals for occupancy, room rates, and profits. This hotel pays bonuses (at the end of the month) to all employees when all of the posted monthly goals are met. Other companies use empowerment to motivate their employees and enable them to provide superior service. Elaine Locksley, who founded Locksley Group and is a specialist in market research on customer service issues, suggests that the best way to improve productivity in the service industry is to make employees believe that their jobs are important. "Tell your employees, 'You are the most important thing in my business because the customers see you; they don't always see me.'"(11) According to EXEL Communications, "You can't inflect success; the employees have to bring it about for you." They do this by tapping employees' brain power in a team environment and empowering the self-directed teams.(12) To have self-directed teams, the company must make a long-term commitment of time and resources for training. Teams need to be trained in communicative, goal-setting, and team-building skills. Existing teams are no exception to the training rule. They often require more training than new teams, according to Super Sack Manufacturing Corporation. "When employees knew what they were doing, why they were doing it, and were empowered to change and improve it, they were excited about coming to work."(13) To place greater emphasis on teamwork, many of the best manufacturing plants provide financial rewards for team-based performance and results.(14) Many executives believe that the best way to motivate their employees to provide superior service is to ensure that each employee has job satisfaction. To meet employees needs, ten percent of the surveyed companies provide such services as fitness centers and preventive medical check-ups. With an increase in the number of women in the workplace, child care has become a key benefit. By treating their employees well, firms bring about longer tenure and improved attitudes. Happy employees provide better service than dissatisfied employees. Improve Collections and Cash Flow Other keys to success are found in the area of financial controls. Cash flow can be improved by reducing the amount of outstanding credit in relation to sales - the accounts receivable level. A number of cleaning establishments offer a discount to customers who pay cash in advance. This immediately increases the firm's cash flow and reduces the possibility of a bad debt. Other companies use high pressure collection techniques such as implying that the customers will be taken to court, turned over to a collection agency, or reported to a credit-reporting agency such as TRW. Others apply pressure by sending out collection letters signed by an attorney. Companies often settle for 75 percent of the total amount due if the creditor seems unlikely to ever pay the full amount. Their thinking is that some income is better than none. Some entrepreneurs have introduced computerized billing in connection with toll-free 800 telephone numbers since the telephone companies stopped supporting 976 billing. In one case, a computerized answering machine asks for credit card information and runs a credit check while customers make their next selection. This ensures that their credit is good before service or a product is offered. Tighten Controls Hospitals and other companies with a high inventory of supply-type items reduce losses by installing security cameras. A broad range of companies have cut losses by installing call accounting systems to control phone usage. To be successful in manufacturing products all around the world, including countries with fluctuating exchange rates, one company uses a computerized linear programming model. The program weighs everything from currency and tax rates to transportation and local production costs to identify the cheapest maker of each product. Generate Other Income or Financing Twenty-seven percent of the businesses reported that they take actions to generate other sources of income. Some generate additional income by selling off old equipment. Trash services provide separate containers for paper, metal, and other disposable items and then recycle as much of them as possible. A number of hospitals offer "hotel" services on a designated floor to generate extra income. Some colleges generate additional revenue by renting out their parking lots for weekend swap meets and other activities. Risky businesses such as video stores have found ways to secure funding by developing partnerships. Biotechnology firms obtain funding by hiring employees with evidence of good credibility, honesty, and reliability. Watch the Horizon Many of these keys to success are quite practical and involve no more than common sense. However, many companies fail to take advantage of them. They become so involved in the daily conduct of business that they fail to plan for the future, track their competition, and invest in their future through new technologies, research, and development. It is vital that companies judge their level of success against that of their competitors; examine their key competencies and competitive advantages, and plot future strategic directions. Then, they must communicate those plans to their employees (to create a shared vision), educate and empower the employees to execute the plans, and work with their employees to enable them to provide superior service. It is important to motivate employees to take the initiative and continue to make valuable contributions. Making continuous improvements and recognizing employees who contribute significantly to the success of their companies will likely separate successful companies from those that stagnate or fail. 1 Dyer, Gerald B., "To Win the R and D Bicycle Race, Focus on Strategy," Research-Technology Management, January-February 1994, 37(1), 8. 2 Bahls, Jean Easter, "Working Lean and Mean," Public Relations Journal, December 1992, 48{12), 24. 3 Applegate, Jane, "An Auto Shop With a Customer Focus," Los Angeles Times, August 21, 1992, D3. 4 Ibid. 5 "Managing for Growth," Research-Technology Management, March-April 1994, 34(2). 6 Mandell, Mel, "Small Company Benefits from Corporate Castoffs," D&B Reports, September-October 1993, 42(5), 50. 7 "Managing for Growth," loc. cit. 8 Bonaccorsi, Andrea, and Andrea Lipparini, "Strategic Partnerships in New Product Development," Journal of Product Innovation Management, March 1994, 11(2), 134. 9 Ettore, Barbara, "A Little Well-Managed R and D Goes a Long Way," Management Review, May 1995, 84(5, 6). 10 Levaux, Janet Purdy, "How Your Firm Can Build a Learning Organization," Investor's Business Daily, November 22, 1994. 11 Applegate, Jane, loc. cit. 12 Sheridan, John H., "Lessons From the Best," Industry Week, February 19, 1996, 13-18. 13 Ibid. 14 Ibid. MOHAMMAD ALA, Ph.D., is a professor of management in the School of Business and Economics at California State University, Los Angeles. He is the founder and director of the school's Productivity Center and is a frequent consultant to businesses on management and production techniques. He was a recipient of the University's Outstanding Professor Award for 1994-95. Dr. Ala has written many articles that have been published in prestigious journals and books and has made more than 50 professional presentations about management issues in a variety of fields that include health care, computer applications, the use of robots, and international information systems.