Nothing like a New Year to write a blog post on building long-term sustainable value. I was reminded of this strategic view of preserving long-term value by avoiding ill-advised short-term gains with a recent issue we had with a relatively new company. It was rather surprising that any company would handle itself in such a manner that it was worth bringing up and hopefully you and I can learn from its mistakes.
We ran into a situation with AdcloudMedia where we were invoiced for an amount significantly more than we had agreed to. I generally do not have a problem with this as many companies can and have made rather innocent mistakes. I had instructed our accounts payable person to not pay the invoice until we had it corrected – unfortunately for us, the check did go out. I incorrectly assumed that when a company receives a check that is obviously in error (and notified several times about it) that it would either return the check so we can re-issue a new, correct check or they would refund us the difference. This company felt that they deserved the check and mentioned on the one phone call I could get through that “finance had closed their books” and they would not be able to refund the money. This is no different than you or I finding $8,000 in a wallet with ID and keeping it – sure we can keep it, but is it right? My argument is that not only is this wrong, but so short-sighted that it borders on incompetence.
Are you chasing short-term gains at the expense of long-term homeruns? I admit that it’s easier to take the short-term gains and it’s hard to pass on immediate gratification for the opportunity of bigger gains down the road. This company took $8,000 but lost the opportunity to grow a business where we would spend significantly more than that amount over the lifetime of our relationship. I was really surprised that they worked so hard for our business, responding to phone calls and emails and then as soon as we complained about overpaying they never responded. It’s like a hit and run, the 8-grand was the homerun and they were willing to burn the bridge. My advice to them would be to – don’t take the easy money and walk away from the opportunity to build a long-term relationship. I can think of countless companies that do this right. Nordstrom’s – they’ll take a loss on a return, but by treating you right, you’ll come back and spend more and tell your friends. We all know about Zappos, they take care of their customers and their customers are extremely loyal. Customers want to be delighted and surprised by great stories. Yet, at the same time, they won’t hesitate to share their displeasure with bad service or experiences. This company has lost a long-term customer.
We all know the power of word-of-mouth. It’s powerful, but often underestimated. It’s pretty easy to calculate what the win was for the company, about $8,000. It’s a little harder to calculate what they lost – potentially $100,000 this year in new business from us. However, word of mouth losses could exceed significantly more this year. It takes both the positive and negative form. We won’t recommend the firm to companies we’re friendly with which reduces referral business they would have received from us. Obviously, we’ll be sharing stories with other business owners about our experience with them which may cost them new business moving forward. The cost of doing business this way is significant.
Another area of fallout include employee dissatisfaction. If you can’t take care of your customers, will your employees work extra hard for you? Will you even be able to keep your employees?
So, what can we do in 2011 to focus on building long-term value for our companies, I’ve been thinking about some ideas and here are some:
1) Invest in relationships that have no immediate payoff. Be thoughtful about how you can help another company reach their goals in 2011 even if there is no quid pro quo. Make it a weekly rhythm of helping one acquaintence by making an introduction or taking a meeting. Building long-term relationships absolutely results in positive outcomes even if it is just feeling good about helping another person or company out. Deals are generally done because of relationships, make a concerted investment in them.
2) I had a unique opportunity to visit Robben Island last year and hear from one of the prisoners who lived with Nelson Mandela as well as listen to a political activist, Denis Goldberg, who was imprisoned for 22 years for his opposition to Apartheid. Their personal stories as well as their stories about Nelson Mandela were incredible – even in the midst of living in extremely inhumane conditions at the prison, they showed fortitude and lived with integrity until their release. They had a vision for South Africa and what it could be and followed through with dramatic human spirit to change a nation. As entrepreneurs we often don’t think big enough and don’t have enough fortitude to drive through the hard times – staying consistent to who we are. Invest in who you want to become and have a real vision to follow through. My hope in 2011 is to be intentional, and not to be swayed by all the short-term opportunities that might seem attractive.
3) Overdeliver. How do we delight our customers, our employees, and our investors? It used to be that getting an ok product with great marketing could drive a successful company. Now, with social media, word of mouth, and instant feedback – great products, great service get recognized quickly. Restaurants that used to be local favorites are now frequented by foodies around the world. In 2011, I want our company to overdeliver – to really delight our users and surprise them. Make it feel like magic! Let your customers market to your userbase. Focus on the product, focus on your employees, and your investors will be delighted. Overdeliver.
What are some things you are working on in 2011 that will create long-term value? Have you struggled with short-term gains that distract from the longer-term goal? Share some of your thoughts below.
Lastly, I don’t know these AdcloudMedia folks personally, and for all I know they are probably great guys and would be fun to hang out with. I don’t care to really pursue things further with these guys because we’ve all done things that are shortsighted and probably hurt the businesses we run long-term. Who knows? Maybe they’ll surprise us by doing the right thing. I think the lessons we can learn from the way they conduct business proves to be a good reminder of what to strive for – surprise our customers with more than they expect and focus on driving long-term value.