On Business and the Science of Terminal Velocity
April 25, 2018
Something is missing as we have transitioned from a people-oriented and relationship-based business economy to one of a technology-focused economy. Can you guess what I’m talking about? Of course, it’s that personal touch. The person on the end of the phone you can talk through a problem with, someone who can provide answers or at least human contact and empathy about your situation. Personal contact has, seemingly, been killed off in the name of phone trees and automated emails. Businesses chasing the most efficient (read “cost effective;” read “cheap”) way of doing business have removed the only thing that ever separated them from their competition. The people who work for their company.
Make no two ways about it. People are the only thing that are a differentiator in any business. Not technology, not logos, not service offerings, not regionality or business area… people. When a business loses site of the people component, they have lost sight of their only competitive advantage.
A few examples. For years, McDonald’s has tried to reduce some of their largest expense—labor—in favor of technology. I’ve been in their restaurants that have touch screens where you can key in exactly what you want, pay, and then wait for your order. A complete business transaction without ever having to talk to a person, to force a fake smile or to engage at any level of interaction. Seems like a great idea? Machines are more efficient, and people know what they want so it should be easy for them to click on an image of a double cheeseburger, tap the remove pickles button, tap the add extra ketchup button and the remove mustard button. Click the complete order. Run their credit card and be done. Makes sense, right?
Now, look at Apple, indeed a technology company and not a food company, their retail stores are filled with technology, touch screens to review product details and sample devices that one can immerse themselves in – hands on. Cool. The panacea, right? Products that represent and sell themselves to the consumer without having to have representatives in the flesh. After spending time gushing over that new iPhone X, you can look up and see people. Not just other consumers, but actual Apple employees working with other people, answering questions, ringing up sales, providing support, guidance and that all-important personal touch. Therefore, the Apple stores are successful; they have embraced the human element to sell more product. Their technology sells itself, but their people sell the company. There’s always a human with a smile and a “is there anything I can help you with.” They truly understand that people are the key to a relationship.
Relationships, by definition, require another person to be there. (Note: I understand that cats, dogs, cats and more cats can fulfill, technically, the relationship hole that people need to fill, but that is for another conversation.)
My son works for Chick-fil-A. He really likes it. He is a very gregarious young man and thrives in an environment that encourages, and itself thrives on, the personal touch. Virtually every transaction I’ve had at any Chick-fil-A ends with the representative saying, “My Pleasure.” And I really believe that it is so.
Now, with all that, there are exceptions to the rule. Amazon is one of them. Just try to talk to a person. Hard to find where, and how, to do this. Theirs is a business model set up on the one click order. They’ve leveraged technology and, frankly, pricing, to minimize their need for personal relationships. I firmly believe that for Amazon to continue to be successful in the long term, due to their lack of personal interaction, they must always drive their costs and prices down.
The problem with this logic is that there is always a bottom. You can only cut your way to profitability for so long. This is, roughly, equivalent to the fundamental law of terminal velocity. Essentially, if you drop something from an airplane there is maximum speed that object will reach during free fall. This is due to the forces of drag and friction battling it out with gravity. Drop 100 bowling balls of the same weight from different heights, eventually, they will all settle on the same free-fall speed. In business, the forces that prevent an infinite drive to the bottom is the cost of labor, shipping, raw materials and time. Short of revolutionary changes in manufacturing and shipping, there’s always a bottom. How many times have you ordered something online and the cost of shipping is more than the cost of the product?
With Amazon setting up their own fleet of delivery vehicles and airplanes for this important logistical part, they can lower the cost versus using a third-party vendor, but there’s a bottom.
Once Amazon and their competition pricing becomes similar, people will gravitate to the company that provides customer service. Not via webforms and online chats, but through phone calls, in-person interactions and good old-fashioned relationship building.
Even the most introverted of us all would prefer to talk to someone about questions on a product rather than searching endlessly via FAQs on the internet.
In the end, people like ‘My Pleasure’ and knowing that there are actual people who are trained to demonstrate a product and available to interact with. No matter how hard programmers try, Alexa and Siri are no match for an actual human-to-human conversation. Heck, half the time they don’t understand when I ask what the temperature is…