Target’s new CEO Brian Cornell recently made the radical decision to—gasp—make an unannounced appearance in one of his own stores with some actual Target customers.
The move, which Fortune’s Phil Wahba described in a recent feature on Target, gave me a profound sense of déjà vu. The previous CEO, Gregg Steinhafel, allowed a Potemkin Village-like circus to surround his state visits to the stores. Everyone up and down the management chain knew the chief was coming, the customers he would meet were all carefully chosen, and as Wahba observes, “About the only thing missing was a brass band playing, ‘Hail to the Chief.’”
This is a script that has played out over and over again, and somehow companies seem doomed to continue to relive it.
Here’s the basic plot. A terrific company becomes a leader in its market. The media lionize it, case studies are written about it, and it wins awards for things like innovation and customer service.
Then, somehow, without anyone being able to pinpoint when exactly, the formula stops working. Gradually, the numbers get softer and the adulation diminishes. The executive team at first attributes the slowdown to external conditions. Then there are a series of incremental stopgaps. Product variety is slashed. Cuts are made. Heads roll. Innovators abandon ship. Strategies are tried, then ditched. Sometimes, a horrific mistake leads to the ouster of the CEO (as in Target’s case, a brand-destroying data breach). Sometimes it’s a sense of things coming to a head. But the CEO leaves, someone new takes the role, and that someone new discovers, “oh my goodness—we have lost touch with our customers!”
In the next act of our play, our newly minted CEO sets about exploring what exactly it is that these customers are looking for, often by taking the controversial step of going and meeting with them one on one. It was such meetings that led Lou Gerstner at a rapidly sinking IBM to tell journalists that “the last thing this company needs is a vision.”
Alan Mulally famously arrived as the new CEO at the executive parking garage at Ford, itself months away from potential bankruptcy, to find no Ford-branded cars parked in the company’s employee parking lot!
Anne Mulcahy, facing a near-bankrupt Xerox, spent as much time as she could on the road. As she said, “When I became CEO, I spent the first 90 days on planes traveling to various offices and listening to anyone who had a perspective on what was wrong with the company. I think if you spend as much time listening as talking, that’s time well spent.”
Even once-highflying organizations, such as the U.K.’s Tesco, face the “lost touch” conundrum, with former CEO Terry Leahy blaming his successor for the retailer’s current problems, somehow overlooking the weakening of its British business and a disastrous foray into the U.S. Market, both of which occurred under Leahy’s watch. The answer, for Tesco, was to find yet another new CEO—nicknamed “Drastic Dave,” from Unilever—who has announced massive restructuring measures.
Gap Inc., once the darling of the “gap generation,” has been struggling for some time. As a 2012 New York Times article notes, Gap had “filled its stores with stuff that people didn’t want.” Apparently, the company is still figuring out what people want because—you guessed it—a new CEO took the reins just a few weeks ago, swearing to figure out what female customers are looking for.
Sometimes, it isn’t a new CEO that renews a company’s bonds with its customers, but a returning one. Steve Jobs, of course, at Apple, and Michael Dell at Dell are well-known examples of triumphant CEO returns. Charles Schwab returned to the company that bears his name after customers began to defect and he felt the culture had changed. Howard Schultz came back to Starbucks, dismayed at some of the decisions that he thought watered down the Starbucks experience. Myron “Mike” Ullman of J.C. Penney returned to try to right the ship after a disastrous attempt at a brand makeover by former Apple executive Ron Johnson. And A. G. Lafley returned to Procter & Gamble, only to find that a lot of the mantras that had made the company the success it was during his first tenure at the company had vanished. As an acquaintance told me, “he wondered where all the ‘customer is boss’ thinking had gone.”
Now, CEOs are very busy people, and it can seem like a poor use of their time to stand around in store aisles talking to customers without a particular agenda. When times are flush, it seems reasonable to treat ourselves to beautiful corner offices, decorate them with art, and spend time with our senior management teams. It’s hard to stay objective at those high altitudes. As a new CEO friend of mine said, “Oh, it’s great. My jokes are funnier, my decisions are wiser, and I think I’m even taller since taking the role.”
So, how can a CEO rewrite this script? As entrepreneur and colleague Steve Blank tells us, “there are no answers in the building.” Executives need to go out and hear from people outside their normal orbit. I’ll never forget a team meeting with the senior leaders of the Boots part of then-AllianceBoots. The meeting was on the 5th floor of a building with no elevator. At lunch time, we all trundled down the stairs to an AllianceBoots store to get sandwiches. Alex Gourlay, then the CEO of the group, dutifully went to the Boots sandwich display to collect his lunch and while in line got an earful from a customer who was displeased because they had run out of her favorite sandwich. That sparked a discussion among the group about how feedback like that could be incorporated into the retailer’s stocking decisions.
One CEO I know has a weekly breakfast with employees of different levels, randomly chosen, to get their perspective on the business without their superiors present. Others do as Target’s Cornell did and make visiting physical plants and locations part of their routine. Some, like Jeff Bezos of Amazon, routinely dip into the flow of customer comments and complaints. Some have an active social media presence in which they can exchange comments and ideas with customers. The basic lesson is an eternal one. Businesses achieve extraordinary results when they are in touch with their customers. They stumble when they lose sight of that fact.
Rita Gunther McGrath is a professor of business strategy at Columbia Business School