The past couple of years have been particularly challenging for many companies in the transportation industry. The record numbers of bankruptcies suggest that many transport companies have had difficulty reinventing themselves.
With economic storm clouds hovering all around us as a result of the current financial crisis in the United States, this increases the requirement for companies in all industries to become more innovative. As demand contracts and current markets become more competitive, this places increasing pressure on companies to seek out new sources of revenue and profit.
As pointed out in previous blog, the Business Week Innovation Index highlights that innovative companies tend to have the highest stock returns and highest revenue growth. Those companies that are able to create a culture of innovation, that are able to energize their employees to seek out better and more innovative ways of running their businesses are likely to stay ahead of the pack. Citing Whole Foods Market, Google and W. L. Gore as examples, Messrs. Hamel and Breen in their book, The Future of Management, make the case that these companies continue to outperform the competition in their respective industries. In all three cases the companies’ employees are leading the innovation charge.
What else can companies do in the freight transportation industry do to become more innovative and profitably grow their businesses? In this blog I would like to look at another source of innovation, customers. Again, it is instructive to look at other industries.
A few years ago, Dell Computer was the undisputed leader in the personal computer market. Their innovative web based distribution model and low cost manufacturing processes allowed them to become the preeminent supplier of personal computers. Then something happened. As a result of poor customer service, combined with a certain arrogance and rigidity, the company lost its way. Customers began migrating to HP and other brands. Dell’s CEO was removed and Michael Dell took back the reins of his company. What has Dell done to reverse direction?
Dell made an investment in self-awareness. Using Web 2.0 tools, it began reaching out to customers. Through social media, it added blogs and message boards in the hope that irate customers would contact Dell rather than other public forums. It created a squad of 42 employees who spend their workdays interacting with the communities of Facebook, Twitter and other social media.
It then went beyond damage control and started building better products. The inspiration for better products came directly from customers. Dell used IdeaStorm early in the development phase to tap into customers’ suggestions. Dell engineers acted on the stated desires of customers by adding keyboards that light up in the dark, a fast connection technology called eSATA, longer battery life and a rainbow of colour choices. The good news is that consumers are noticing the change. The latest quarterly figures from the University of Michigan’s customer satisfaction Index show that Dell is back at the top of the ratings for Windows PC makers, as rivals HP and Gateway sink.
Some companies are tapping into other tools to find out what is going on inside customers’ minds. Like Dell and many transport companies, retailers are also battling the recessionary forces in the market. One such company is Macy’s which is embarking on a store-by-store strategy to cater to customers’ local tastes. To do so, Macy’s became the latest sales-challenged U.S. retailer to hire a British research shop called dunnhumby. Edwina Dunn and Clive Humby don’t help retailers find new shoppers. Rather, by crunching data from credit card transactions and customer loyalty programs, they reveal hidden and lucrative facts about their clients’ current customers. It can identify who might jump at a particular sale or who will no longer visit the store if a certain product is no longer available. Home Depot and Kroger are two other major retailers that have been benefitting from Dunnhumby’s data analysis expertise. Since employing Dunnhumby, Kroger’s same store sales have increased on average 5% for the past 12 quarters versus the industry average of 2.7%.
What are the lessons for the trucking industry? You have to stay close to your customers and find a way to get into their heads. Whether it is town hall meetings, focus groups, better analysis of CRM data or more modern web based tools such as blogs, message boards and social media, it is critical to continuously monitor customer feedback on service, rates and business practices. Good qualitative and quantitative data can reveal opportunities to add value and help shippers operate more effectively. It is no wonder that one of the growth segments of the logistics industry has been third party logistics companies. These companies are often able to “mix and match” services, to be more creative and to offer a comprehensive portfolio of logistics solutions rather than a limited set of transportation services. By creating close bonds with customers, by identifying “pain points,” by acting on this feedback to create new and better services, this should allow more innovative transport companies to pull through the current economic downturn and emerge financially stronger and more customer centric than ever before.
