For those of us who have worked in and around corporate environments, it's not uncommon to hear shareholder centric comments like "the shareholders aren't happy" or "what will our shareholders think?" Those investors who support your business are important to keep in mind, but, ironically, they aren't always the best judge of what your customers want.
If there is too much emphasis on the stockholder and not enough emphasis on customers, it is inevitably a losing strategy.
Men's Wearhouse and Shareholder Centric Strategy
George Zimmer was a scrappy entrepreneur who took one store in Houston in 1973 and built it into a multibillion dollar empire. It was successful for many years, but in recent years it suffered from many symptoms of a shifting customer landscape. Casual Fridays in offices gave way to wear-what-you-want dress codes everyday. Weddings, an important part of their tuxedo renting business, have been decreasing in both frequency and cost due to the lagging economy. And let's face it, many people are unemployed and don't need more suits!
When Zimmer was removed from his very public executive position earlier this year, the board members who made the decision weren't talking. Zimmer himself implied it was over conflict about strategy of where the company was heading, but it's impossible to know the real story. And now, Men's Wearhouse seems to continue to be a downward spiral, reporting a 28 percent drop in profit at the end of the last quarter.
Here's what I noticed.
In all the talk about what the shareholders wanted, there was little mention of customers. It's easy to discuss "market trends" and other factors without ever really thinking about what customers really want. There is a distance allowed between numbers and people which makes it easier to dismiss what customers really want. Saying "our earnings went down" to your employees is very different than saying "we missed the mark with our customers." (Click to Tweet!) Yes, we need to absolutely understand the market and pay attention to the real business results of earnings and shareholder value, but not without connecting those dots to customers and the real way they interact with our brands.
There seems to be a glimmer of hope when reviewing their social media channels, which are shifting away from the yelling about sales and promotions constantly and moving into a more customer-centric focus with content and conversation. It's a sign they may realize customers are the only true path to profit.
Customers have a voice like never before.
And they aren't afraid to use it. Movie studios got away with producing terrible movies for a long time. As long as they made a splash on opening weekend, then shareholders were happy and they could move on to the next project. Now, thanks to Twitter and Rotten Tomatoes, movies are hastily recognized as the dogs they are before making it to the Saturday matinee. Snakes On A Plane, the Samuel L. Jackson movie from 2006, generated possibly more buzz online than any movie before it. The campy title inspired parody fan videos and had investors predicting major success.
But the movie itself wasn't that good. So right away, customers reported their "meh" responses and discouraged others from going to see it. Industry analysts had predicted an opening weekend to earn between $20 million and $30 million, but that weekend only earned a little more than $15 million. Thanks to our peers, we have early warning signals as customers.
It's time we understand who the real "bosses" are and appreciate the input customers try to provide. Shareholders would be wise to pay attention.
Image Credits: qwekiop147, AndreasPoike and speakupglobal via Creative Commons