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Perhaps the most important key is truly to believe that building great relationships will get you the best results. Too many times I see companies behave in ways that suggest they would rather not hear from their customers. Or I see stressed and busy managers focusing only on their operational responsibilities, when careful investment in the relationships they have with their staff may allow them to delegate more effectively, and perhaps reduce that stress and busy-ness that is taking over their lives.Make building relationships part of your day-to-day life. Schedule into your diary time to nurture existing relationships and start new ones.
Believe
it will be a good investment of your time and energy, and inevitably it will.

ENSURE COMPETENCE

Once you have the right mindset, competence is fundamental to striking up a quality relationship. Simply put, if you are no good at what you do, no one will want to be your friend. To understand what is required to meet basic expectations of competence, think back to chapter 2, 'Fast, Good, Cheap – Pick 3'.

DELIVER ON WHAT YOU PROMISE

Once you are comfortable with what you offer, make sure you don't overstretch on what you promise. The only thing worse than a bad job is a bad job which you thought was going to be fantastic. If you can't meet an expectation, level with the customer. Don't be like the hire-a-hubby who came to our house and gave my wife a quote to fix our stairs, then told us when he would be back to do the work but never showed up.

BUILD TRUST

In many ways, building trust in a relationship is contingent on the above three steps (having the right mindset, doing a good job and delivering on what you promise), but trust is also established independently of the above. Medical researcher Wendy Levinson found that doctors with good patient relationships were less likely to be sued,
even when they did things wrong
.8 That is because patients who trusted their doctors believed they had their best interests at heart. The way patients judged whether their doctors had their best interests at heart were very simple things like:

• did they 'sound' interested
  
• how 'long' they spent in consultation
  
• how intently they 'listene?'
  
• their 'tone' of voice.
  

I would like to make the point here that not getting sued and getting return business are different prospects altogether. I may not sue a doctor who misdiagnosed me, but there is a good chance I will never go back. So again, competence is still a huge part of this equation.

HAVE GOOD MANNERS

People might think this sounds simple. If that's the case, why is it that websites like crmlowdown.com are
filled
with examples of straight-out rude customer service? And why is it that I can issue you an air-tight, money-back guarantee that every single person reading this book can give an example of a time when they have been treated appallingly by a company? Ensuring people on your front line (and yes, this includes
you
) treat customers with respect and courtesy (and actually go the extra mile in helping them solve their problems) might seem obvious, but I will talk about it until it actually starts happening!

As one final point to hammer home the idea that relationships are key and that many businesses just don't do enough to establish and nurture them, consider the following. After buying a $900 phone from my local Vodafone store (a brand to which I have been loyal to the tune of $1500 a month for near on ten years) I was thrilled to learn that their generous warranty period covered full replacement of my new handset after failure for, wait for it . . .
two weeks
. I personally think that almost one thousand dollars should buy you slightly more confidence in the product, but apparently not.

Well,my phone did break (
three
weeks after I bought it), and given that I was about to head out on a five-city business trip to the US I really needed a functioning phone. So I took it back to the store hoping they could help me out. After an hour dealing with three different and equally unhelpful people, not only did it become clear that they could not repair the phone in the two weeks before I left for the US, but if I wanted a temporary replacement phone I was going to have to pay $100.

They certainly acted as though they didn't value my business and didn't want to help. If this is how you feel, then get out of business! Fast!

The unfortunate thing for Vodafone is that they do not own this store. It is a franchise, but it still bears their logo. This is outsourcing the relationship you have with the customer.

And to make it worse they did not make the phone either. But hey, my relationship was not with the phone manufacturer, it was with Vodafone.

Five Things To Do Now

1. Get a group of key customers in a room and ask them whether they believe your company goes out of its way to build quality relationships with their business. Do the same with a group of suppliers too.

2. Run a focus group with employees and find out whether they think you are a staff-focused organisation. Be prepared to do something with the feedback you get.

3. List three new technologies you are going to explore that could be valuable tools to help you stay in touch with existing customers and staff. Might I suggest you start with SMS, blogs and podcasts. Then, just for fun, start a personal MySpace profile and visit Second Life and start playing around in these new spaces. Who knows, you might enjoy it.

4. Start one initiative that centres around reconnecting with customers you have lost touch with.

5. Do an audit of your systems and processes and ask if they have positive, neutral or negative effects on your relationships with customers. Look at each policy individually: is it helping you or the customer?

'Generation Y is too small, Pete. No one is asking for it.'

This was what the managing director of one of Australia's leading speakers' bureaus told me when I explained my area of expertise.Coming from someone who sells expertise and speakers to clients all day every day, this wisdom should have been accurate. I didn't think it was. So I ignored it, and thereby laid the foundations of a multi-million-dollar consulting business.

'This is every organisation's number one problem!' I exclaimed. 'They just don't have a label for it yet.'

I was right, and the MD was wrong. We have a great relationship now by the way, so I know it will be okay to be this blunt. Not that it is about right and wrong. Rather it is about the fact that if you do what everyone else is doing and you draw your wisdom from the crowd, you will find yourself just another supplier of the same product, service or skill set. Go your own way. Invent a new wheel. Cirque du Soleil did. The Apple iPod did. Burton Snowboards did.

Let's go back for a minute to one of the dominant parameters in today's business world: global oversupply and global underdemand in every category of goods and services. In these circumstances, you can putter along doing what everyone else is doing and if you're more or less industry standard in your offerings and practices, you'll likely do okay. But if you want to stand out from the crowd, you have to differentiate yourself in one of two ways. You can either differentiate your approach to an existing market, or you can differentiate the market you're operating in by discovering or creating a new market. If you want to be a flipstar, you've got to zig when all your competitors zag (kill me if I use another cliché).

This is not to deny that there is a kind of wisdom in crowds. The wisdom of crowds has become a popular notion lately, as studies have shown that patterns of behaviour among large groups of people can be self-organising in an optimal way. For example, pedestrian traffic on a crowded street will naturally flow in the most efficient way possible, and the stock market picks of millions of investors determine very accurate share values over time. Likewise, large groups of people responding instinctively to various options can reveal the best product among competing alternatives and give important clues to emerging trends. This is the kind of risk-averse, largely unconscious wisdom that James Surowiecki, the 'Financial Page' columnist of the
New Yorker
magazine, celebrates in his recent book called
The Wisdom of Crowds.
I'll be talking about some of the same phenomena from my own perspective a little later in this book in chapter 6, 'To Get Control, Give It Up'.

Notice, however, that crowds do not make something new on their own. Crowds don't create innovations, they validate them. In a global marketplace, the crowd will recognise and celebrate the best innovations. But those innovations don't come from the centre of the crowd. They come from the fringe, from bold companies and individuals who are willing to risk doing something different from what competitors are doing, and to offer something different from what the crowds are currently embracing.

Let me put it another way. Crowds are where the big profits are, no question. You don't make money with unpopular goods and services. But market-changing and market-making products don't come from a crowd. They cannot be designed and developed by committee to the crowd's existing specifications. Market-changing and market-making products like the iPod, ING Direct, Progressive Car Insurance, Cirque du Soleil, Starbucks, Virgin Blue or Callaway Golf's oversized Big Bertha drivers spring from the minds of maverick companies and individuals who have the guts to gamble on attracting the crowds that will eventually validate them.

One thing crowds are definitely wise about is in telling whether something is a true innovation or a tarted-up version of the same old thing. Crowds have a nose for things that are really new and exciting. The best way to differentiate your offerings from the competition is therefore always to take the route least travelled.
Flips
are the way to locate those routes, and speed from the fringe to the mainstream. Or to adopt some language from Kim's and Mauborgne's insightful book
Blue Ocean Strategy,
flips are the course to adopt to discover entirely new markets – blue oceans – and leave behind mature, overcrowded markets – red oceans.

FROM THE FRINGE TO THE CENTRE

Say you're looking at the iPod and thinking, 'If we come up with a better Mp3 player with a better link to the home computer, the internet and the home entertainment system, we can take the iPod's place.' Even if you could do it right away you are probably still too late. With sayings like 'iPod therefore I am' being bandied about, you are likely to get slaughtered. In reality it will take any organisation a while (Samsung, Sandisk and others are trying), which may actually mean that by the time you have built a better Mp3 player the world may well have left Mp3 players behind for good in favour of a totally new way of getting, carrying and enjoying music, pictures and other things.

When Apple introduced the iPod in 2001, the Mp3 market was still a blue ocean, despite the presence of a number of Mp3 player manufacturers, because no one had yet created a total customer solution for managing digital entertainment. The market is a red ocean now – red with the blood of Apple's shark-bitten rivals, you might say – thanks to the iPod–iTunes combination. It will take an entirely new blue-ocean strategy to supplant the iPod with something else.

The market-changing power of the iPod is manifest not only in its huge sales, but in Apple's decision to change its name and start trading as Apple, Inc., rather than as Apple Computer, Inc. In January 2007 Apple extended the iPod line with the announcement of the iPhone, a combination of a wide-screen iPod with a mobile phone, a camera and a wireless touch-screen internet communicator for webbrowsing, email and SMS texting.

The last feature led a friend of mine to say, 'Hey, now might be a good time to short shares in RIM,' the makers of the BlackBerry. I didn't think so. The iPhone is unlikely to be a BlackBerry killer, so long as the only way to input text is via a clumsy virtual keyboard on the iPhone's touch screen.

But that doesn't make me any less excited about getting an iPhone. The iPhone is not a short-term threat to the BlackBerry as a business device, because that's not what the iPhone is trying to be. Instead the iPhone is the culmination to date of Apple's efforts to make the iPod the first infotainment device, a multipurpose gadget for talking to friends, listening to music, looking at video and still pictures and surfing the web, all with the characteristic ease and simplicity of the Apple interface. It marks a journey from the one-time fringe of Mp3 players to the centre of consumer culture.

The iPhone's initial price shows that Apple does not worry about hitting the centre of the mass market when it launches a product. Instead it uses what I call market gravity, which Apple has steadily acquired over its innovative history, to pull the market to its new products and their unusual mix of appealing design and seamless functionality. At US$499 or $599, for four or eight gigabytes of storage respectively, the iPhone is priced well above the mass market in mobile phones, just as the original iPod was priced well above other Mp3 players. Obviously this shows Apple's love of fat profit margins, but it also shows its confidence that launching the iPhone on the fringe of affordability, so to speak, will help fuel the product's long-term popularity. And again just as it has done with the iPod, Apple will no doubt lower the price of the iPhone in due course but still seek to maintain a price premium over competitors.

Acting on the fringe and taking a risk like this will always feel uncomfortable. In fact all of the flips will. They are counter-intuitive and can create a sense of fear (I would rather think of it as excitement). It takes guts to take action without a fully formed plan or a sense of certainty about your success. It takes guts to invest heavily in becoming fast, good and cheap. It takes even more guts to get to the heart of who you are and to yell that story from the rooftops as you build a total ownership experience. It takes even more guts to know who you are and not yell it from the rooftops, allowing people to discover you. And it takes guts to venture from the known, from the crowd. This is why it is a
flip
. But even if the iPhone does not take off, Apple will learn from the process and come again. That is why Apple is, well, Apple!

The benefits of shuttling between the fringe and the mainstream show up plainly in Apple's bottom line. In the final quarter of 2006, Apple reported a 78 per cent increase in profit to US$1 billion on sales of $7.1 billion. During those three months the company sold 21 million iPods, an increase of 50 per cent over the same period a year before. It also sold 1.6 million computers, an increase of 28 per cent over the same period a year before, showing how the iPod cast a halo of enhanced desirability over the entire Apple range. As Apple CFO Peter Oppenheimer said, 'This one was for the record books.'

Apple would never have boosted its bottom line so much without making big, bold bets. In a study of new product launches by 108 companies, 86 per cent of the 'new' products were actually line extensions and they only accounted for 39 per cent of total profits. The 14 per cent of remaining launches that involved genuinely new products accounted for 61 per cent of total profits.
¹

Toyota took the route less travelled by making an early bet on bringing a mass-production hybrid-engined vehicle to market with the Prius. Now it's leveraging the success of the Prius throughout the Toyota and Lexus product range.Making the part-electric and part–internal combustion powered Prius hatchback a viable mass-market product is one of Toyota's most notable achievements. All the major manufacturers had developed some form of hybrid technology. But General Motors and Ford, despite losing dominance to Toyota in almost all categories, sat on that technology and did nothing. Toyota, already winning the game, took action to change the game in a way that could have backfired.

Some may argue they didn't need to do this, as they were already dominating the market. I would argue that this is the very reason they were dominating. They were prepared to innovate. To try new things. To challenge the conventional paradigm that 'if it's not broken, don't fix it'. Toyota have not only positioned themselves favourably in an increasingly 'green' developed market, but sales of the Prius have been so successful that they cannot meet demand in many countries, with waiting lists up to nine months in some.

The Prius's sales are limited to some extent by the greater upfront cost to the consumer of hybrid technology. Toyota have accordingly extended hybrid technology from the volume car business to their luxury line, Lexus, whose affluent purchasers will find the additional cost less significant.Having recently test driven the G450h model, which drives like a V8 with the fuel efficiency of a four-cylinder hatchback, I believe this strategy will prove successful. The strategy depends not primarily on the performance of the car, however, but on its appeal to a segment of affluent purchasers who want to be seen as 'green'.

In March 2007, the Prius sold almost 20,000 units in the US, a 133 per cent increase from the previous year, and the competition is feeling the pinch. Toyota experienced an 8 per cent rise in demand for its hybrids last year, at the same time as GM felt an 8 per cent drop in demand for their cars. Toyota's share price in the US rose 38 per cent; the now nearly bankrupt GM's fell 20 per cent.

Many attribute Toyota's pioneering foray into hybrids to rising petrol prices and growing concern over global warming. The truth is, however, that Toyota had moved far ahead of the crowd long before these issues took the centre of the stage as they have in the last couple of years.

Perhaps the biggest hybrid-related flip on Toyota's part is that instead of trying to keep a proprietary lock on their technology, they are licensing it to all comers, creating a new income stream for technology that is already ten years old. The companies that are buying this technology will likely achieve Toyota's 2007 'best practice' only in 2010 or 2017. Current business advice is to benchmark your efforts against winning companies' best practices. But the flip is that today's best practice is tomorrow's bad practice. In ten years' time there will be much better ways to build a 'green' automobile, and Toyota's competitors should be racing them to that new benchmark, not plodding along in Toyota's footsteps.More on this in chapter 6, 'To Get Control, Give It Up'.

What is your company's or industry's version of the Prius? Are you doing enough to develop this potential new market opportunity?

Again, Toyota was the first to identify and act on the massmarket potential in the fringe custom car culture.As I discussed in chapter 3, 'Superficial is Anything But', Toyota scored an instant hit with the Scion and then demonstrated its ability to flip perspective by deciding to limit production, selling many fewer Scions over the short term than it could, in order to protect its hip, edgy brand story over the long term. Toyota knows exactly how to sell to the masses without losing the fringe characteristics that spell innovation in the marketplace.

When Toyota was developing the Scion, the other car companies' marketing research – they all spend millions of dollars a year on trend-spotting and consumer surveys – undoubtedly told them that customising small cars was a growing phenomenon among young urban customers. But only Toyota had the guts to bet that what was still a fringe activity could generate a high enough volume of sales to support an entire new range of vehicles like the Scion.

After the Scion scored a huge hit with young customers, Honda and Nissan rushed out copycat vehicles, but they had missed the chance to establish themselves as cutting-edge brands for Generation Y. The Detroit three were even farther behind the curve. Toyota performed a similar market-changing flip from the fringe into the mainstream with the Prius.

More recently, as we will explore in chapter 6, 'To Get Control, Give It Up', other car makers are trailing Toyota down the electricity–petrol hybrid path. Not BMW. The most successful of the European marques over the last decade, BMW is going against the grain of the hybrid engine technology Toyota has popularised and is instead developing hydrogen-powered cars.