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Customer Centricity: Designing Your Business Around Your Best Customers | Peter Fader
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- [00:04]
A
Customer centricity can mean lots of different things to lots of different people. There's too many companies that will say we are centered on every single customer. We can't sleep at night until the least happy customer is satisfied. No focus on the right customers for strategic advantage. Not all customers are created equal. Our customers are just inherently different from each other. It's our responsibility, it's our challenge. It's our opportunity to rely on those differences, to find paths to growth that are sustainable, defendable, and more profitable than just focusing on the average customer or focusing on the product or the brand.
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B
Welcome to the Work for Humans podcast. This is Dart Lindsley. What does it really mean to say that your company is customer centric? At Work for Humans, we start from the assumption that employees are customers. So customer centricity is an idea that we should be very clear about. I found that I personally was a bit vague, so I tracked down the world's leading expert on the concept. My guest today is Peter Feder, professor of marketing at the Wharton School and a leading thinker on customer centricity. Pete argues that customer centricity does not mean treating all customers equally. Instead, it means focusing on the ones who matter most, the customers who are truly driving value for your company. He's the author of Customer Centricity and the Customer Base Audit, and his work is reshaping how businesses think about growth, loyalty, and strategy. In this episode, Pete and I talk about why not all customers are created equal, how to measure true customer value, why brand loyalty may be overrated. We also explore what it means to design your business around your best customer and why doing that may be the most human move a company can make. All right, if you enjoy the show, follow or subscribe wherever you listen to podcasts. And now here's my conversation with Peter Federation. Peter Feder, welcome to Work for Humans.
- [02:18]
A
Great to talk with you.
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B
So on this show, we talk about work as a product and employees as customers, and I realized I was unclear on the concept of customer centricity, and I think we use that term all the time. Everybody says, oh, we're a customer centric company, and I don't think most people say that without really knowing what it is. And so you wrote the book on it called Naturally Customer Centricity, and I wanted to learn from you what it really means and how it transforms companies and the misconceptions and what it looks like when it's done.
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A
Great.
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B
So that's what we're going to talk about today.
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A
I love it. It's Great. To bring clarity and then to extend it to other domains as you like. So I'm really excited about the conversation. Let's go.
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B
Right. And once we lay out customer centricity, we'll see how it applies to employees as customers. So just fundamentally, what is customer centricity and how does it relate to the history of being product centric instead of customer centric?
- [03:27]
A
Okay, well, let's start at the beginning. So the problem is customer centricity. The words really are kind of meaningless. Or worse yet, they can mean lots of different things to lots of different people. And as you said, people will use them in different ways and often in the way that I think is the polar opposite of what it means. There's too many companies that will say, we are centered on every single customer. We can't sleep at night until the least happy customer is satisfied. No. The right definition of it might be actually the subtitle of my book, Focus on the Right Customers for Strategic Advantage. The idea that not all customers are created equal. We shouldn't treat them equally. Nor should we expect that the less valuable ones will turn from ugly ducklings into beautiful swans. That our customers are just inherently different from each other. It's our responsibility, it's our challenge, it's our opportunity to rely on those differences, to find paths to growth that are sustainable, defendable, and more profitable than just focusing on the average customer or going full circle here, focusing on the product or the brand.
- [04:42]
B
You say customers are different. What's the difference that matters ultimately?
- [04:47]
A
Hate to be crass about it, it's dollars and cents. But there's going to be lots of other differences that will either be early indicators of dollars and cents or other differences that might spill over through the customer base and the way we run our business. Beyond dollars and cents, that's where I start. Most of my work as an academic and a lot of the commercial work that I've done is on the idea of customer lifetime value. That we really can very accurately and in a granular manner project the future profitability of each and every customer. We can say, how often are we going to have this relationship? How often are you going to buy? How much are you going to spend? How much money are we going to make? Again, I recognize that it's in many cases more than just profitability. In fact, in some cases, we don't even want to talk about dollars and cents at all. But as a first pass, that's how we're going to define who the right customers are. Not the ones who have been the most profitable, the ones who we project to be the most profitable.
- [05:48]
B
Moving ahead, let's take two examples. Let's take an example of a product centric approach and a company that epitomizes product centricity. And I think one of the things you've said is that there are some companies where it's more appropriate to be product centric. Maybe not entirely, but it may be more product centric. And then there are some companies where they're in a situation where customer centricity is absolutely vital and that should be their main way of approaching their markets. So what are two examples that we can compare and contrast?
- [06:21]
A
Sure. And first, I agree completely that as we go down the rabbit hole of customer centricity, it is not the right direction for every company. In fact, for most companies doing the product type thing, whether we're the best, best, best, you want the best, you're coming to us and we're just focusing all of our efforts on fine tuning the product and making sure that people are aware of, of all of its features and functions and benefits and capabilities. Or a different type of product oriented company, which would be one that focuses more on efficiency, that the stuff we sell, it's as good as anybody else. It's just the way we do it cheaply, quickly, is the way we can develop new versions of it. So let's first talk about those two. And that lets us set the stage for the customer centric. So when we say who's the best, best. Best. The obvious example, and every time we give a talk, we start with this. I just put it out there. It doesn't matter what the audience is, domestic or international, old or young, the answer is Apple. Apple, Apple, Apple. You want the best, that's who you're going to. And let's give them credit for that, that they develop great products, they surround them with great service, and they either are the best at what they do or they create the perception of it. And that's another important point, that the beauty is in the eye of the beholder. And so you can think about a company like BMW, at the end of every ad they say, the ultimate driving machine. Now we might argue whether it really is the ultimate driving machine or not, but they are clearly sticking out that kind of position. And then the second product dimension would be where you see McDonald's, Walmart, Amazon, Toyota, that with the stuff we sell is as good as anybody else. There's this incredible efficiency that we bring to everything that we do. So there's a lot to be said for being product centric, that we're just really good at innovating or we're really good at scaling. And for many, many companies, that's terrific. That's what put them ahead of the pack. That's what's going to keep them ahead of the pack. But not for everyone. And for certain companies that can't necessarily compete with the big boys, they might not have the deep pockets to do all that R and D. They might not have the availability to scale their business quite as well. It's going to be more about, all right, let's figure who the best customers are, let's do more with them, let's do more for them, and let's find more like them. That is customer centricity. One of the first examples of it would be the Harrah's casino chain is a great example. Because they couldn't compete with the big boys on Las Vegas Boulevard. They couldn't bring in the great chefs or the great entertainers or they didn't have real estate holdings that were quite as good as Sands or Wynn or Caesar's palace or mgm. And so almost out of desperation, they turned inward. They looked at their customer base. They found out who were the best customers. The whales, as we like to say in the gambling parlance. And let's double down on them. Let's develop a loyalty program to make it easier to track them, to make it easier to reward them, to understand what makes them different. To then change everything we do, to be pivoting around those best customers. That's customer centricity. And then grow from there. And they did. And they ended up buying their arch rival Caesar's Entertainment and going to the top. Problem is sometimes it's not very defendable because everybody else says, hey, that's a good idea, we'll do that too. So it really is more of a chess game than a one shot decision. It gets really nuanced.
- [09:55]
B
There's a lot in there. First of all, Harris is an interesting example. There are a lot of companies like this. They can only handle so many customers. So there's a cap on how many people can stay at Harrah's. They only have so many rooms, they only have so many seats. And so for them, focusing on those customers who are the most profitable, there is no tail for them. Right. There's not like this 20% of our customers bring us 80% of our revenue. And then there's this long tail of customers bringing us. Oh, there most certainly is for them too.
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A
Oh, yeah.
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B
I mean, that exists out in the world, but they can't serve the whole bell curve. They don't have enough space to serve the whole bell curve, which is the.
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A
Whole point of focusing on the right customers. Because actually most of the people who come in, it's either their first visit or they're not going to come back for another five years. And they're there just to walk around and they're not doing a lot of gambling or spending money on the restaurants or the entertainment venues. So most customers, even when you have that kind of capacity constraint are eh, that's just reality. And we need to, it's not so much fight against it, but we need to acknowledge it and figure out, well, where are the different ones? Where are the ones who love us and will stay with us many, many times and will spend through every channel possible and what can we do to enhance their value and find more like them? So it's very, very true and it's interesting to talk about a place like, let's say a hotel chain or something where they'll always have an open room. And if you were to walk up there with no disrespect, say hey, I'd like a room, they'd say, sorry, we're full. But if a high roller walked up, they'd say, we have the suite waiting for you. And so that is customer centricity is foregoing some revenue with the hopes that there'll be even a better customer down the road. And you want to not only get that more revenue, but you don't want to disappoint those very loyal customers. You want to make sure you can accommodate them, even if it means you're running less than full capacity.
- [11:52]
B
I can see a lot of businesses or organizations that have that limited capacity. Universities are an example of that. Wharton, your institution can only hold so many faculty. And so they're constantly trying to bring in the faculty that are going to provide the most value and can only hold so many students. And so that's another example of a limited capacity. And so let's focus on the absolute highest value. I can see that even a product company that could potentially sell to every human on earth might want to take a blended approach. Like let's take Apple. I think Apple did something very smart early on. It sold its stuff at a premium and it made it white so that you could put these white earbuds in your ears and everybody would know that you had some money. And so Apple became an adornment. And from the very beginning it was a product that it could sell at a premium to people who wanted to flash some money. Another example might be something like the New York Times or Harvard Business Review. What they want to do is they want to attract a readership that their advertisers find attractive. And so they're attracting a special customer who can buy the things that their advertisers want to sell. And so I can see that you can bake it into the product. Even if you're product centric, or especially if you don't have a product that you're selling, you're selling a service, for instance, you get much more centrally customer centric.
- [13:35]
A
Actually, there's a couple of very interesting examples there which points out one of the challenges of customer centricity, which is, who is the customer? So in the university, who is the customer? Is it the faculty? Is it the student? Is it the alumni? Is it the community? So we're going to see this all the time back to the New York Times or another publisher. Is it the reader? Is it the advertiser? So sometimes when there's confusion about who the customer is and it's hard to get the company aligned on the answer to that question, it really makes it hard to execute this pharmaceuticals. Is it the patient? Is it the physician? Is it the insurance company? Is it the person who buys for the hospital network? If you can't get alignment, then it's really hard to be customer centric.
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B
Well, and this is something that is central to my work. There can be more than one.
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A
Sure.
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B
And multi sided businesses have more than one customer. And what's interesting is when we talked about faculty, for instance, faculties are employees. So we'll get to that. But a part of what changed that made your approach to customer centricity possible was data.
- [14:47]
A
Yes.
- [14:48]
B
And customer lifetime value is something that is meant to be predictive. Customer lifetime value is the present value of the future net cash flows associated with a particular customer. Okay, so net is a really important word because it bakes in cost of acquisition, the cost of churn, but it's the present value of the future net cash flows associated with a particular customer. It's not meant to be precise because it's the future. And so you're not going to know for sure. But you can generally know once you've decided who your customer or customers are, what that is. What kind of data does a company ingest to make those kinds of predictions? And I'm particularly interested in how much of it comes from the behavior of the customer in relation to the company itself, and how much is acquired externally.
- [15:45]
A
Love it. And that's the story of my life. In fact, I'll put you in the Wayback machine and take you back 40 something years. When I was a young math major at MIT thinking I'd go to Wall street or consulting or something like that. And this marketing professor came up to me and said, you ought to become a marketing professor. And I said, you ought to get your head checked. I'm a data guy, I'm a numbers guy. And she sat me down and she said, we are building the electron microscope of the customer. Pretty soon we're going to be able to tag and track and predict and all that kind of mathy model Y stuff you like to do. You're going to have this entirely new domain to do it in. You're going to be able to develop new methods. You're going to have far more impact than you'd have if you went to some well established domain. And she was right. And a big challenge there is figuring out exactly to your point which bits of data are the most important and which bits are just nice to know. And it's shocking. Here we are 40 years later and a lot of companies still don't quite have the right answer to that. So I really welcome the opportunity to separate wheat from chaff or pick your farmer.
- [16:53]
B
Metaphor, good metaphor.
- [16:55]
A
So first and foremost, we're going to look at behavioral data. We're going to look at who did what when. And as we drill down there, we like it to be, first of all transaction oriented. Yes, it's nice to know which web pages you hit. And it's nice to know who you spoke to and which ads you read. That's all part of behavior. And sometimes we'll weave that in. But first and foremost it's going to be who bought what when and for how much. And by the way, what did it cost us to produce those products and distribute them? So it's going to start with transactions. The next layer would be things associated with the transactions, product features, what campaigns did we acquire you through information about the channel? The next level might be attitudes. Are you buying this out of genuine need or desire? And then we'd start moving out to things like demographics and socioeconomics and so on. In the old days, that's where we'd start because the only thing we could measure was what do you look like, where do you live? We had no ability to track what you're doing. So we're turning that whole data funnel around. But it's a slow process for a lot of companies and they just don't want to let go of kinds of data and processes that they found sacred years ago.
- [18:10]
B
I'd like a couple of examples of that. I have two companies. One treats me great and the other one really treats me like crap. And it's because of the data they have on me. I think United Airlines, my wife and I joke that we could probably fly cheaper if we'd let them kick us as we walked through the airport. American Airlines has decided we're whales. I'm a whale. And by association, my wife, American Airlines treats us incredible. You know, lounges and upgrades and all this different stuff. It's because American Airlines has a different data set, I assume, and they got it because of my behavior with them. But first of all, side note, by the way, this idea that what we care about is people's wallets, I think we also care about top talkers because here I am, I'm telling 35,000 people right now that I think United Airlines treats me like crap. And they're probably right. I'm probably not going to give them a ton of money. But I did just tell a bunch of people that I think United Airlines is a problem. But that aside, can companies look beyond their own data sets and what can they learn what's available?
- [19:25]
A
Absolutely. It's important for companies to be able to look beyond their own data. The first, you want to start with your own data. You want to walk before you run. You want to figure out who's buying what, who's talking to whom, who's responding to different kinds of campaigns. There's just so much value insight and forward looking economic indicators from people's behavior. So before we go out there and start doing surveys or buying data from other sources or just guessing what our customers want, we really have to look at the data we have and do it in a smart way. Don't just make things up. Know specifically what you're looking for, have specific hypotheses in mind and I'm happy to drill down deep into that, please. I'll give you a very specific example. I did not invent customer lifetime value. People give me a lot of credit for it and I've certainly done a lot to promote it, raise the bar and make it more accessible to a wider variety of companies. Yay. But when I first learned about was through an old direct marketing company called the Franklin Mint. And old timers might remember them, they'd produce collectible cars and gold plated monopoly sets and so on, located just outside Philadelphia. And I'm not saying they invented it either, but I learned about it from them. They were involved with this years earlier than I was. Well, in fact, let me tell you a story because I think it's all very relevant. We want to find out which indicators, which aspects of people are indicative that they will become high value customers. So let's say we have 10 years of data, let's break it up into two five year periods, let's hold out the second five years, look at their profitability in that second five years. Then we want to say in the first five years what are things we can look at that are highly associated with and therefore presumably predictive of their future value. So let's do this in a very systematic, very scientific way and let's find those early indicators and use those to drive our business. This is stuff they were doing starting in the late 70s, early 80s. And they would do this very, very, very rigorously and they'd find the holy rubric of R F M. They would find time and time again that the three things that would be indicative of high future profitability were recency, frequency and monetary value. You tell me the last time that someone bought from me, how many times they bought over the last, say two years and how much did they spend on average? And I could bring those three together to come up with a very accurate prediction of what this customer will be worth in the future. And I'll admit I didn't fully believe it. I thought they were just making stuff up. But here I am decades later, just singing their praises. Not just the Franklin Mint, but other old school direct marketers, all of whom came to agree on the centrality of R, F M. That's not to say that the story ends there. As we've pointed out numerous times, there's other aspects to value beyond just dollars and cents. But it's a great starting point. And there's many, many, many companies, whether it is the hotel chain, whether it is the company that sells devices, whether it is a media company that could do very well by having a really tight focus on rfm.
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B
It's interesting. RFM is a throughput measure.
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A
Exactly. That's right.
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B
I mean, if you looked at it, it would be money spent on us over time, per period. That's right, per the most recent period, by the way. It's not just ever, it's recently.
- [23:09]
A
Correct. And the recency part really matters. That's why we call it rfm. It's not fmr. Mrf. Recency matters most. What have you done for me lately? Ends up carrying a tremendous amount of weight.
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B
Okay, so one of the things you've said is that companies that have a contractual relationship with their customer, that customer centricity is more important to them. And what's interesting, when you say contractual, the way I see that is subscription.
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A
Absolutely.
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B
That essentially subscription models are the models that care most about this.
- [23:42]
A
It's the most obvious in a classic subscription setting. And I don't even care what it is. So it could be your Spotify subscription, it could be your New York Times subscription, beer of the month club, your insurance policy, your telecommunications provider. Cases where you're paying on a very regular basis, you're paying pretty much the same amount of money every time. And most importantly, we have observable attrition. We know when the customer goes away, or we know when the customer at least presses pause, they kind of raise their hand and they tell us, don't send me anymore, I'm not going to be paying you. So yeah, whether you call that contractual, whether you call that subscription, or whether you just call it observable attrition, which isn't as sexy, but that's really what I'm getting at there. Cases like that where you know if the customer's alive or not and you know the differences among those who are alive. It's just so obvious these customer centricity things are just in your face, there's no denying them. So it's not necessarily the case that customer centricity is more valuable there. It's just harder to avoid it. Because you see the key aspects of customer behavior much more clearly than you do in a non contractual or discretionary purchasing setting where again, customer centricity matters. But it's a much vaguer, much cloudier view of the customer.
- [25:11]
B
Yes. How big a difference have you seen this make for some companies? Like what's an example of really made a big difference?
- [25:20]
A
One of my favorite examples would be Electronic Arts, the gaming company. You might know them through FIFA World cup or SimCity or Battlefield 4. If you look at them 15, 20 years ago, they were selling shrink wrapped discs to GameStop and Walmart. And then people would buy those discs and put them in their machines and play games. But there was very little ability to tag and track, very little ability to know who was playing what, very little ability to know customer lifetime value, very little ability for the people internally, the R and D people, the distribution people, the talent managers to know what kinds of customers to be going after, what kinds of messages to use, what kinds of games to develop. And then everything changed. And I'm not sure how much of it was desperation to try to keep ahead of the pack or opportunity like, whoa, we can really track what these folks are doing. But for a variety of reasons, they embraced the data. They embraced both the ability to track and project what each individual player was worth and to use that to drive pretty much every decision that they would make. And I give so much credit to the gentleman who was their chief data and analytics officer at the time, Zachary Anderson. I learned so much from him through this story, both about how they would leverage the data, as well as how internally he would get his colleagues on board with the idea that not all customers are created equal. We need to be developing games for those kinds of people over there because they're really valuable. And we need to pay special attention to these customers over here because if we lose them, we're in trouble. Whereas these other customers, like you and United Airlines, if we lose it, look, we don't want to chase any customers away, but they're not that valuable. We're not going to roll out that red carpet. And if they complain enough and then leave, it's not the end of the world. So having the ability to see things that way and to act on it is really what set EA apart in a similar way, as I mentioned before with the Harris casino chain and there's just so many others. These are the very early examples. These were examples of companies almost inventing it out of thin air today, I guess, thanks to me, in part, we've written the playbook to say, okay, other companies, here's how you can follow suit and do that kind of thing.
- [27:48]
B
What's interesting about EA and that story is that unlike Harrah's, they could potentially sell to everybody. And there's very little incremental cost to them to sell the next copy of the game to somebody. And yet they still got value out of pursuing the most lucrative customers. And it's weird because they produce games that are totally uninteresting to me. If it's not a first person shooter or a puzzle game, I'm probably not interested. But when I walk into people's living rooms, what are they playing? They're playing FIFA, they're playing soccer, or they're playing all of the football games, the sport games. So they've absolutely found a market. And what I think is really interesting, something you mentioned before the call, is that they found a market that was not intuitive to their own developers.
- [28:40]
A
That's such a big, important point because too often we think we are the experts. Not only do we know our products, but we know our customers, we know our market. In fact, there's one of those famous or apocryphal Steve Jobs quotes. I know what the customer wants before the customer knows, so I'm going to give them what they want and then they will figure out that's what they wanted. Something along those lines. And while we'll give a lot of credit to Jobs and he was able to actually execute on it to his and Apple's great credit, other companies still feel that same way. And they're often wrong. They look at which products are the best sellers and they say, that's the stuff we're best at, that's the stuff that makes us different. But too often those best selling products are selling to the one and done customers. And there's a few products way down the list that we don't sell a lot of. And that's the bait, that's the glue that lets us bring in the best customers and hold onto them. So this takes us from this pivot from product centricity to customer centricity. It's not hard to do, but it's a very different way of doing things. It just requires a kind of discipline, a kind of organizational alignment, even a kind of corporate culture. That just isn't what we generally teach in the business school. And that's where I'm coming from.
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B
Yeah, I mean, I think products are so sexy to make that it's possible. This is what you expect from a good product manager. However, you expect a good product manager to know the structure of the customer opportunity and to design toward it. We had Marty Kagan on the show who writes about product management, and one of the things he said was that product managers understand the market and they understand the customer base and they understand the business model and they are able to build their products toward that.
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A
And I largely disagree with that.
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B
Oh, okay, okay, good.
- [30:38]
A
Yeah. Because I think that they certainly know the product and they might know the market in a big aggregate sense about, you know, what aspects of the product are most appealing to the market. But again, that's not the celebration of heterogeneity that I want. I want to know what aspects of the product are differentially appealing to this customer versus that customer. And I want to look at that appealingness in conjunction with the projected profitability of each customer. So I'll give you a very specific example. So I've commercialized a lot of this work on customer lifetime value. Used to run a company called Zodiac, Sold that company to Nike, which was a wonderful outcome. I mean, there's a company that's traditionally very, very, very product centric, said, you know what, we need to balance it out. We need to become more customer centric. And I'm not saying they've made the complete pivot, nor should they, but I remember very well a conversation about you go up to the flagship store in New York and for a time there they had the make your own Nikes lab and oh, mommy, mommy, I want to make my own Nikes. It's going to be fun. I'm going to make green high tops with pink shoelaces and sparkles. Yay. Now a good product manager would look at that kind of experiential activity and say, hmm, I wonder which product features the customers are going for the most. And we should take that into account when we come up with the next version of the product. But I want to go a step further than that. Like I said, I want to match each customer up with their projected profitability because we might find that there are some features and so on that are not appealing to everybody but are disproportionately appealing to those very, very, very, very valuable customers. So a lot of companies wouldn't recognize, oh, this is the good stuff here it is. This is the bait that's going to help us catch the good customers and the glue to keep them. They might just say, eh, this is stuff that's not broadly appealing, so let's not do it. That's right there, the difference between product and customer centric. And it's really important, it's not hard to do, it just doesn't come naturally.
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B
It strikes me that there's a tension between short term profit and long term profitability of a customer. I was thinking about it in relation to again, universities, which is I could bring in people who that are going to pay high tuitions because they're out of state or something, or I could bring in people whose families have a tradition of, of donating as alumni to our institution. Right. These are two completely different timescales. And I suspect that it's tempting to grab for the fast money in some cases as opposed to the lifetime value.
- [33:24]
A
So many companies that they want to build for the long run, you know, they'll have this off site meeting with the CEO and she'll say, we built this together and we've built it to last. I'm in it for the long run. I hope you are too. Then she goes to meet with the folks on Wall street and said, don't worry, I'm going to hit those quarterly numbers. So tension, big time tension and I'm trying to address that and it's hard, really hard, but we're getting there. If we can come up with short term metrics that are indicative of long term value. In the old days I used to say let's put some indication of lifetime value on our balance sheet or in our external facing statements. That's a bad idea. But we could put other indicators, things that we know are associated with lifetime value that are descriptive, not predictive, but can be interpreted in a predictive manner as well. Of all the customers who bought from us last period, how many came back and bought from us again this period? Some kind of repeat purchase rate that's innocuous enough. There's no fancy math involved, but it's pretty clear that that indicates whether there's some lifetime value there. So trying to get companies to focus on metrics and Wall street analysts and investors to focus on metrics that would be more long run oriented, not to ignore the short run, but to better balance it. And we've had some reasonable success with that. But that is indeed a very long run kind of approach to take.
- [34:55]
B
What are examples of companies getting customer centricity wrong, but a particular kind of wrong? Because there's people who just don't understand what it is and they think it's being friendly, they think it's being nice. But then there are companies that really understand it but still make mistakes. What are some examples or common mistakes that you've seen?
- [35:21]
A
Well, sometimes it's betting on the wrong horse. They think they know their customers, they don't need all this fancy pants academic math. They know who the icp, the ideal customer profile is. So sometimes it's just a bit of hubris. You're not letting the data speak. Next step would be sometimes you take a static view that, yeah, we ran the lifetime value thing last year, we still know who the best customers are. But things change, change. And it might not only be changes in the customer base, it might be changes in the competitive environment. So for instance, you go back to the Harrods example. They rose to the top of the industry by taking this customer centric view and developing a loyalty program and figuring out who the best ones were to pivot their business around them. All the stuff we've been talking about, great, great, great story. But their competitors didn't stand still. Their competitors said, thank you very much Harris slash Caesars for doing our homework for us. We will now take that recipe and do it even better than you because we have deeper pockets. So it really is a dynamic process in so many ways. And very often as companies reach the pinnacle of customer centricity, they either get lazy, they get arrogant, or they just don't have their eyes open for what's coming around the corner. So it's, you have to be on the ball all the time. You can never rest up for a minute because there could be either competitive threats or your best customers are fading away, or even better customers who aren't on your radar yet. So there are plenty of challenges. It's not as black and white as I might make it out to be.
- [36:58]
B
There are two other thinkers who I could weave through the conversation, but the more I understand your work, the less relevant I think they are. So one of them is Joe Pine and mass customization and the experience economy. And it's not that I think it's irrelevant, I just think it's orthogonal to this, which is that I thought originally when you were talking about how different customers are from each other, that that would lead to a mass customization conversation, but their differences in their future profitability, not necessarily what they want.
- [37:32]
A
Foreign.
- [37:36]
B
Work for humans. We've been exploring the principles of multi sided management, which is the belief that work is a product that every company designs, builds and delivers to employees. Along the way, people started asking how they could put these ideas into practice. So I founded the work design firm Elevenfold to help your company create the kind of work that makes teams feel alive and engaged in instead of dead and dull. So you can reduce turnover and build commitment. We're doing something revolutionary here. Learn more@elevenfold.com that's 11f o l d.com.
- [38:16]
A
Correct. They should be related, but you're exactly right.
- [38:21]
B
However, it is true that as you go out Joe Pine's progression of economic value, it starts from goods. So at the bottom of the progression of economic values, it's commodities, it's goods. And that's one of the areas where you said, you know, this is where you focus on cost. And then you go out and you get to product. And a product centric company still should be thinking about this. But as you get toward experience and you get toward these more transformation, these more ephemeral kinds of products, you find yourself in a I can't bake my customer centricity into the product even if I wanted to. I have to think about the experience. And I think that as you go out that direction, you end up more with contractual businesses, more with subscription type businesses. I'M making this up as I'm going. So I actually don't know if this is right. But I think Disney, for instance, if you're very experience centric, you might have less of a product to hang your hat on anyway.
- [39:25]
A
And I say it's not a function of the product, it's a function of the customer. So there are some customers, regardless of the nature of the product, who really have a bona fide relationship with that product or with that service. Even if there is no formal contractual element in their mind. There is, there really is a relationship there. And of course we all aspire to that. We want to nurture everyone to love us and we use a lot of dating and marriage metaphors. And when you can achieve it, it's fabulous. And in cases like that, if you can offer some kind of premium members only kind of experience above and beyond the just buying things on a discretionary basis. The President's Gold Medal Blue Ribbon Red Carpet Club paid for premium service. Terrific, great. But those customers are few and far between. They're incredibly valuable. They are the growth engine for you. But you have to recognize, and maybe it's even almost a good thing that for most customers it's purely transactional. I give you money, you give me a thing. It's a fair deal. Leave me alone. And nothing that we say, nothing that we can do can turn them into wanting to have that relationship with us. So a lot of companies are trying to force the marriage metaphor or force the membership thing on customers and that ends up being a waste of money for those customers. And sometimes they're leaving money on the table with the awesome customers who want even more. So you just can't paint all the customers with one brush. This is the concern that I have with a lot of the mass customization work. I kind of like it as a tool to use with the eh, customers. Yeah, great. But for those high end customers you do not want them subject to mass customization. You want white glove service for them. And if you fail to provide it then you're not going to create or extract as much value you can out of them or find more customers like them. So you're really running two businesses at once.
- [41:28]
B
It made me think a little bit about Apple when I was thinking through mass customization which is that they produced a platform where the end user can essentially adapt it to their need because it's a platform for apps. It's kind of baked in there. And you've touched upon the second thinker I was thinking of bringing forward, which is Fred Reichelt and customer loyalty. That does seem relevant in the sense that what you really do want from the customer segments that are likely to provide the most value to your company is their return business. And so loyalty seems like a useful concept even though like you said, huge majority are just going to be transactional for those ones we care about. We'd like to drive to that.
- [42:14]
A
And I have to say a lot of Fred Reichelt's work was absolutely formative for me. Everyone thinks about him as the net Promoter Score guy and we'll talk about that. But I go back a few years before he Even put those three letters NPS together, a book that he wrote back in 1996 called the Loyalty Effect, which if you were to go back and read that book, it lines up beautifully with everything that I'm saying. And that's not a coincidence. The idea that not all customers are created equal. If we can find those customers who will go through the gates of hell to stay with us and want to get our logo tattooed on their body parts and tell everyone about us, we want to build our business around them. We want to figure out what makes them different and develop products and services that are appealing to folks like them. That's everything I've been saying. Now Reichld went off in a particular direction saying we want to come up with a metric that's going to help us identify how many of those kinds of customers a company has versus the eh, transactional one and done types. That was the origin of Net Promoter Score. So he was looking for something that would say how well are companies doing the loyalty effect thing? And he kind of oversimplified it with the idea of the promoters and the detractors. But back late 1990s didn't have the kind of data that we have today, didn't have the computational power. It was an amazing first step and I'm a huge fan of what he's done. A lot of the subsequent work with Rob Markey also at Bain, it really has been game changing. It's the first customer heterogeneity metric that's made it into the C suite. How many promoters versus detractors do we have? So for me that's the foot in the door. Let's now just bring in customer lifetime value as another metric that reflects similar kinds of behaviors. In fact, let's see how they interplay with each other because they don't always align perfectly sometimes. The attitudinal question would you recommend us? Reveals things that the transactional data RFM don't offer and vice versa. So I love NPS and just a lot of the path breaking work of Reichld and Markey.
- [44:20]
B
Let's pivot to employees. So as we've been talking, I've been relating this to the idea of employees as customers. As you know, the premise of this show is that employees or customers works and offering. I'm not even going to say product this time because we're being very specific. It's an offering and that therefore all companies are multi sided, which is to say that they have more than one customer. I'm going to be more specific. They have more than one customer, both of whom need to be satisfied in order to satisfy the other. So there's a dependency between the happiness of the customers. And so this show frames starts from that premise. Now what does that spark for you? I'm just going to start off with a general idea and then we'll figure out how to dig into it.
- [45:06]
A
So I've always been aware of this issue and again, part of it would be a lot of the work from our friends at Bain recognizing that we should be using NPS not only with the customers that we sell to, but the customers internally who we're working with and others as well who have said that if you want to do the customer centricity thing, you've got to start with the employees. Another thought leader along these lines is Michael Lowenstein. I've always known that and I acknowledge it, but I always shied away from it because I felt wrongly. But it's how I felt that we couldn't measure the differences across employees as accurately and predictively as we can do with our customers. And I'll admit I just go where the cool data are and I'm just going to set my tent up there and go fishing. And if there was only a way that we could measure our employees in a way that was as rigorous and trustworthy and standardized as the customer measurements, man, that would be cool. But until recently I hadn't really found that. But I'm singing a very different tune now that I've found a way to do just that.
- [46:19]
B
Could you explain?
- [46:20]
A
It's a crazy story, but I love to talk about it. And it actually starts not so much with customers or employees. Well, I guess one could say they are, but our students. And in my job as a professor, and you all know this from your own experience, what is it about the courses you take or about the professors you've had that you think they hate the most? And that's grading. We're terrible at grading, and we dumb down our assignments in order to just make it easier on ourselves. And that's terrible. That's terrible. I want to take grading very seriously. Not only to give people the right grades, but. But have them learn as much as possible from the grading experience. Not just the writing of the paper, but the evaluations of the papers. Ten years ago, it's a whole long, crazy story. Came up with a grading algorithm here at the Wharton School that we call wupi, the Wharton Online Ordinal Peer Performance Evaluation Engine. And in brief, it goes like this. You write your paper, okay? And then you evaluate a bunch of papers by your classmates. Well, that's not new. Peer grading is old as the earth. But here's the difference. Under the presumption that if you know your stuff, if you write a really good paper, you should be better suited to judge, to evaluate other people's papers. So we're going to put differential weight on the students grading the papers based on how well they did. So. So if you know your stuff, you should carry a lot of weight. And if you're doing well as a grader and a gradeee, that should be reflected in your overall grade. So how well you grade the papers is part of your own grade. We look for a correlation between how well you do in terms of evaluating and how well you do in terms of being evaluated. And it turns out it's super strong, which makes sense. So we've been using this grading thing for a long time. And then a few years ago, a CEO that I was working with on the lifetime value thing, a guy by the name of Gary Morrison, CEO of a company called Hostelworld. Great company. These are real people. So I'm happy to name names here. He said we want to use that for our employees because we recognize the importance of measuring our employees, but we don't really trust the metrics. And if we can make it incentive compatible, if we can put a little bit of skin in the game, so how well you assess your peers is going to be reflected in the score that you get. That's game changing. And now we've been doing this with lots and lots of other companies and starting to build that bridge between employees and customers that you dart and other people have been thinking about for so long. I think we now have the data, the measurement technology, and I'd like to believe the organizational capabilities to manage all of this at once.
- [49:14]
B
There's something baked into that which is really important, which is you can't be customer centric if you can't differentiate between your customers. So, first of all, no customer segmentation. Is that the right word? Data? No customer centricity. Because customer centricity is about differentiated offerings.
- [49:31]
A
Correct.
- [49:32]
B
What I would say is that in many cases, the difference between an employee base and your typical customer is that they are connected together. So like a bunch of loose customers. Let's say it's a soccer team. And I'm going to segment the soccer team into. There are people who sell the most tickets. And you know who that is. That's the strikers at the very front. And so I'm going to create a special experience for them. And you know what? The goalies. I don't care. Well, the thing is that a team functions together. And sure, the strikers matter a lot, but the people who are providing the assists to the strikers are really important, too. And if you just didn't care about them at all, there's a connectedness to an employee base that if you applied that differentiation that you were just talking about too simply, it would come out with the wrong outcome.
- [50:33]
A
Absolutely right. Yeah. And that's why you have to be careful about it. In the same way, on the customer side, if you either choose the wrong horse or if you put too many eggs in one basket, pick your bad metaphor, it can be damaging, even more so on the employee side. And so what happens is, and I'm not the expert, you are. Companies shy away from the segmenting and the differentiation. They say we better not do any kind of slicing, dicing, because if we get it wrong. Whoa. But you kind of have an obligation to do that. You know that not all employees are created equal. And if we could only come up with a way to properly measure them that would allow us to do that, then we could start to do our job more effectively. And that's just been really, really hard to do.
- [51:18]
B
It seems to me that a company might be like Harrah's in the sense that it's not so much that you treat people differently while they're at Harrah's, although you might. This example may not play out, but there's this enormous addressable market for people who you could sell your jobs to, your work to. And once you have brought somebody into the company, that's the differentiation that the differentiation happens between who you decide to bring into the company and everybody else. And that once in the company, you might not need that differentiation. That's a hypothesis.
- [52:01]
A
Yeah. And there is the legitimate difference between the two, where, as we said with your customers, a lot of them really are just one and done. They're just passing through. There is no relationship there now with your employees. Granted, some are more committed than others, but you're not going to have a tremendous number of one and dones or work for a day and then leave, basically. Granted, there are some flighty people like that, but there's going to be a bit more, a lot more stickiness with employees than there is with customers, which to me makes these measurement issues all the more important. Because if you're going to be bringing them in and they're going to be with you for some time, you want to make sure you're getting it right. You want to make sure you're getting the most out of them and make sure that you're creating the right role, the right environment for them to be as effective and happy as possible. So I think a lot of the principles do apply, maybe even more strongly despite or because of the differences.
- [53:00]
B
But also the question is whether the measures of past performance are predictive of future performance. I can accept that. I can accept that this could be a employee lifetime value predictor. I think there's other sources of data on that, which is, for example, if a resume shows a history of job hopping every year, my experiences, that's predictive of duration of employment. But there's something else here. There's a couple of different things in here that I think are big questions. So the first one was it's very, very hard actually to understand the value that employees bring into your company independently, in other words, because unlike customers who come and buy a pair of shoes, everybody's interconnected. And the truth is that the performance of a person and the performance of a team is an emergent property of that team that is not necessarily tied to who's on the team. Right. It's something that together they do something different. And so one of the things I think that you'd have to watch out for is that you're anchoring on individual performance that does not tie to actual team or company performance.
- [54:23]
A
That's a great point.
- [54:24]
B
One risk. The second thing is I have a working hypothesis that neglect can be harmful in certain situations and that neglect in the hands of the powerful can actually be harmful. And so when you imagine a bunch of people inside a company and we decide that we're going to neglect the needs of a portion of the company, it can pass a threshold where it's harm. And you know, with customer centricity and selling shoes, so what, we're going to neglect the needs of people who can't buy our shoes, we don't care. But when it's employment or if I'm a hospital, for instance, if I'm a hospital, I might decide to focus on the needs of the whales, the people who want the big surgeries, and I might decide to neglect. It's not that I'm going to go out to harm the people who aren't bringing my hospital money, it's that I'm just going to neglect it. But neglect in the hands of the powerful can be harm.
- [55:33]
A
Absolutely. All right, so two really great points there. Let's take them in backwards order. This point about neglect, it really is right on target. And even in the customer centricity world, the hospital example is terrific. Then in some domains, not selling shoes, but when there's different kinds of whether it's a fiduciary obligation or even just a moral obligation. So it could be whether it involves health, whether it involves, say, finances, for instance, it's more than just squeezing as much money as we can. So even on the customer centricity side, we'd be saying, you know, are you doing the right things? Are you taking your pills, are you exercising, are you eating better? The lifetime value is how long are you going to live? Not just how much money are you going to spend with us and then we're done with you. So it does make the equation harder to do because it requires more data, some of which is hard to collect. But that's the obligation that we have is when we look at profitability, it's more than just dollars and cents. So we want to make sure that. And of course, it's obviously true on the employee side as well. It's more than just how much output are you producing, how many accounts are you signing, and so on. It has to be your ongoing are you feeling valued as a member of the team, are you enjoying your time here? And so on. So measuring engagement, not just direct bottom line contributions, is really important. And again, it's going to be true in both domains. And then there's that other point you raised, the idea that when it comes to employees, it really is more of a team sport than when it comes to just customers buying things. And the idea that the value that we get spills over from one person to another and we can't look at each customer or employee as just an island. That's great. These are two key terrific points that you raised, Dart. And this is one of the reasons why I have not declared victory on the ELTV front when it comes to customer lifetime value. Done. Got it. Here's the formula, go use it. But on the employee side, we're still years and years away. And I think that anyone who claims that there is an employee analog of what we've done with the customers I think is fooling themselves or others because the data is not rich enough. We haven't done the math. We're not even aware of the full set of factors that we must take into account. You just identify two of them, but there's more as well. So there's a lot more science that needs to be done before we can put the employee lifetime value the same level as customer lifetime value.
- [58:16]
B
This way of thinking, it's a modification to CLV potentially that this point of view brings. And that is that in a model where employees are customers and work as a product that companies are delivering to that customer, where does the work come from? The supply chain of work comes from the other customer. So what happens in that is that employees care in some cases who the customer is. The traditional customer is. One of the ways I wrote this down was how do employees feel about working for a company that says you only have to be nice to the rich ones? That's sort of the quippy way to say it. But the real thing is that a lot of people come to work to help somebody. They come to work for a lot of reasons, but who the customer is and the kind of work that they provide as a part of the supply chain of work to the employees is a kind of value that may not be currently captured in clv.
- [59:16]
A
So true. Yes, and we want that to be the case. So for instance, I've worked with a number of companies on the sales force. So in a sense this is an employee lifetime value. And we want to value each salesperson, each person involved in the distribution process, not just based on how many orders they booked, but by the future looking value of the relationships that they've nurtured. So we can take some of our clients out to play golf. Let's not just take the ones that we have the most good times with, let's take the ones who we can actually have the most needle moving potential on their lifetime value. And when that happens, we should fully value it. We should be able to calculate how much more valuable is that client now, even if they haven't booked any orders yet. So things that are just enhancing relationships should be taken into account, not just the dollars and cents of orders. So that's where we've actually come pretty close on the customer and the employee side. And it's been actually fairly impactful.
- [60:18]
B
That makes a lot of sense. And salespeople are good. In fact, anybody who's actually touching the customer, like face to face like that, like account reps, salespeople, baristas, the people who are customer service or right there. It's a very direct exchange of value.
- [60:37]
A
But we need to draw the line. And here's the problem. I look at a company like Zappos, the company that sells shoes online, and I'm just appalled by them. Not too long ago, their CEO Scott Schaefer put out a LinkedIn post boasting about the longest customer service call they've ever had. 11 hours. And I'm thinking, first of all, 11 hour customer service call for an online shoe company. I mean, really, really. And second of all, you're proud of this. And I wrote a comment in there and this is all out there. You can all find it on the LinkedIn saying, this is actually irresponsible. This goes against what a company should be all about. What's up with that? And everyone else chiming in afterwards, calling me heartless and horrible. You have to realize the customers are people and they have needs. And I'm thinking, you know what, you actually do have a fiduciary responsibility to your stakeholders not to have 11 hour customer service calls. So there is a line to be drawn there. We need data in order to say, when is it too much? How much lifetime value did we elevate for that customer? And couldn't we have done it in 45 minutes instead? So it's not a matter of just being everybody's best friend, because that's not necessarily the right thing to do either. It's quantifying, it's finding that balance. It's running experiments and it's making hard decisions of saying yes to some and no to others, which has become easier to do on the customer side. Even there, it's tough, but it's still very, very hard to do on the employee side.
- [62:11]
B
There's a subtle question that applies across all of this, which is both for employee customer centricity and regular customer centricity. It goes something like this. If I'm a customer, and let's say I'm one of the good ones, I don't want to feel, I assume that the good that the company does for me is entirely mercenary. I actually want to feel that they care about me beyond my wallet.
- [62:41]
A
Absolutely.
- [62:41]
B
Maybe that's not true. Maybe you actually find in the data that no people are perfectly fine mercenary relationship. But that's the kind of company that I think I'm going to go back. And so my assumption is that there's a part of the company that is customer centric and is thinking about which kinds of customers are producing the most value. But then once that's identified, there's a part of the company that is just about creating great experiences and is not mercenary about it. And so I'm wondering if there's a hierarchy to this approach where, sure, the top of the house can know why that customer is most important, but the part of the house that is actually facing that customer is just rewarded for service or something like that.
- [63:35]
A
Right. First of all, remember, there's heterogeneity. And even among our most valuable customers, there are some who just want to walk into the store, buy the thing they don't want, people fawning over them and offering them cups of tea and all that. And there are those who do. We want to figure out among those valuable customers who wants the white glove treatment and who wants it to be just an efficient shopping experience. We can't paint them all with the same brush. But among those who do want to be fawned upon, that's okay. If their lifetime value justifies it, then absolutely. Companies should be doing more with the idea of some kind of key account manager, a strategic advisor kind of thing and figure out, do you benefit from this or not? How much incremental value is it providing to you? Is it paying for itself? I'm all for it. I love the idea of having that higher tier where you can get that personal shopper or back to the airlines, that person who will drive you on the tarmac from one plane to the other so they you can make your flight. Some people want it, some people don't. And we should know from the data and from the finances who wants it and for whom does it make sense to offer it?
- [64:53]
B
I like that a lot. That makes a lot of sense to me. There's one other thing that is, I think, a mistake that companies make, or at least a potential mistake, which is that we sometimes do differentiate our services and we often differentiate our services. Let's take HR services or any of the other. It could be facilities, it could be finance. We differentiate our services and provide red carpet for executives. A part of the argument for that is, well, their time is really valuable because we pay a lot for their time and we don't want to waste their time. I think a deeper incentive is, you know, those people decide whether or not we get budget or not. And so we're going to do that internally because we are a little company and those are the whales for us in terms of budget acquisition. And they don't just give us budget, they give us power. And so we're going to make sure that we treat them really well. First of all, that organization is completely right, but it may not be the best thing for the company. But second of all, the cost of somebody's paying is based upon market forces, not the value that they necessarily provide to the company. So just because we pay somebody more, it doesn't necessarily mean that their lifetime value. In fact, especially not just their lifetime value, but their lifetime value as a net valuation because they're so expensive, their cost is not their value is what I'm saying.
- [66:27]
A
I couldn't agree more. Again, you do such a good job of finding the parallels and the differences between the employee side and the customer side. That's a big one. That's a big one. And it would be really wrong to assume, as you said, the market driven forces are indicative of the actual value that this employee will bring to us. Very different. Much easier in the customer world when we don't have a market for customers. Well, in some cases you do actually.
- [66:55]
B
Well, it's a mistake you'd never make with a normal customer. You'd never say, oh, we're going to pick the ones who have the highest cost of acquisition.
- [67:01]
A
Right.
- [67:02]
B
And we're going to serve them. No, that's exactly what you don't do. You do the highest net value.
- [67:06]
A
So obvious. And that's why I love it. That's why I think a conversation like this is so valuable and important because we all aspire to get to the employee lifetime value. And now that I'm starting to dip my toes in the waters through this new company, I have encompass. But we still know our limitations and we know that we're not there yet. But we're learning a lot about all the issues that you're raising. And not just we, this one company, but I think just in general, the way we've been just collectively raising the bar on HR analytics and our ability to run it in a more, let's say, productized or customer centric manner. Still a long ways from being able to declare victory in the way that we've done so on the customer side. But tremendous progress just over in the last few years alone.
- [67:54]
B
I have a few closing questions that I ask everybody, and the first one is, what do you, Peter, hire your job to do for you? Wharton hires you to do something for it. What do you hire it to do for you?
- [68:09]
A
Oh, easy. It goes back to that. I mentioned that Nutty Professor Lee McAllister, the person who talked me into this in the first place. She made me go to Wharton, and she said, because Wharton's going to be the only place that's going to provide all the resources and the tolerance and the podium and the audience for you. So I want a place where I can just dream things up, whether it's this crazy grading thing that I mentioned or a lot of the other things I'll do in the classroom or with my research or with the student groups and so on. And for the school to say, yeah, we can help you with that. It's wonderful to be in a place where the default answer tends to be yes. And it just makes me not only want to do those things more, but to make sure that it's being done in a way where the institution is seeing the value from it. It's just great. It's just a real privilege just to dream things up and know that they can happen and not only entertain myself, but benefit others in the process. Thank you, Wharton.
- [69:11]
B
I call that sometimes a company that gives me room to swing the bat.
- [69:16]
A
For sure.
- [69:17]
B
Sometimes even in the same company, there will be a reorg, and all of a sudden I'm in a hallway. There's no way to make a difference because I don't have the room.
- [69:27]
A
Yeah, they're not giving me the room. They're building the whole frigging stadium. And they're giving me the batting coaches and the tunnels and the pitching machine. Go so far with the metaphor, but something they've done for me are things that other schools wouldn't have done. Every school will give you the room to swing the bat, but providing with the ability to hit the ball as effectively as possible, that's what really makes them different.
- [69:50]
B
Do they not just set you free, but show that they admire your work? I've never asked that question before, but there are places where you can work, where you can do your thing, but nobody cares.
- [70:06]
A
Right.
- [70:07]
B
And it's not valued. Or you can do your thing. And actually they're like, yeah, that is cool.
- [70:11]
A
Oh, being a professor at a top school is a total ego trip. And the school does so many things to feed our egos, which sometimes becomes a problem because you end up having a lot of prima donnas. Because not only do they have the freedom to do what they want, but they have all these people calling attention to your work. And, hey, these billionaire donors want to meet with you. And talk about what you've. And here's a bunch of students, and they're really interested in taking your classes. So let's face it, it makes sense for this school, for the university, to kind of put us on the shelf as trophies. Look at these great professors that we have here. And so it's mutually beneficial. I still pinch myself when it happens, saying, wait me what? But others, it goes to their head and they, okay, when's the next praise coming? So it's hard to find a way to have us benefit from a lot of that praise. But also don't take it for granted.
- [71:05]
B
What does your work cost you?
- [71:07]
A
It's the ultimate deal with the devil. I have no boss. I can do whatever I want. I wake up in the morning, literally today. Do I want to go into the office or not? It's up to me. It's totally up to me. But the publish or perish life, and in general, the life as a full professor, where there's just so many other things that you're expected to do or that you're tempted to do, it requires, first of all, a lot more discipline. It often becomes a 247 thing. I love what I do so much that I just do it round the clock, even on weekends. So you can be a little neglectful of just life and making sure that you just stop and just do normal things. Sometimes that can be a challenge for a lot of us.
- [71:50]
B
Earlier this week, I interviewed Ashley Willins, and she is somebody who studies the design of time at work. And in particular, she has coined the term of time affluence and time poverty. And you're kind of touching on this idea, which is that how interesting the work is can actually push you into time poverty in other parts of your life. And that there's an opportunity cost to buying such a great product of work Wharton sells to you.
- [72:23]
A
That's a great, great point, and it is so true. And some people do get all consumed by it. Perhaps I'm one of them. It's important to be mindful about that and important for the institution to occasionally kick us out of our offices and say, go play. Which happens from time to time.
- [72:40]
B
Yeah, well, in fact, that's one of the things that she was arguing on behalf of, which is that some enforced leisure that companies can set that as a policy. I think one of the most magical things about working for a university is sabbaticals. Absolutely magical. And I don't know if Wharton offers them.
- [72:59]
A
Okay, so here's a great example of it. So, like A lot of schools will get a full year off at full pay every 12 years. I am in year 38 now, which means I could have taken three full years off just to go sit on top of a mountain and think great thoughts. And I never took a sabbatical until this year. So that was a perfect example of it where I'm having too much fun, why should I do that?
- [73:23]
B
That's a perfect customer differentiation. They gave you the choice and you chose. You wanted to keep that thing. My father was a professor and so we got sabbaticals every seven years. He was also a butterfly collector. And so what that meant was that we went to places with great science and great butterflies every seven years.
- [73:42]
A
That's great. Yeah. Some departments will be more heavy handed about it, saying, you will take it, you will take it, just stop, go. And here we let people do what they want and I didn't take it. Now, on one hand I regret it because who knows what I could have done with all that time. On the other hand, I have no regrets about what I did. So life marches on.
- [74:08]
B
Plus, those sabbaticals that you're talking about are unstructured. I mean, my father's sabbaticals were you went and worked for another university. It wasn't do anything and it was six months at full pay or one year at half pay. And then you'd get grants to fill in the rest. It was a little more structured. Well, this is an absolutely just. I can't even tell you reading the book. I can't believe that I haven't known about this before. It's like one of those things. How many times have I said customer centric in my life and not known what the hell I was talking about? It's really been enlightening and I really appreciate you coming on the show.
- [74:46]
A
And dart, I have to say, both from this conversation and our prior ones, I've learned so much from you about. Again, where the employee and the customer things come together and where they still diverge. And I look forward to years more of conversations as we get these roads to really align with each other.
- [75:05]
B
I'm all in. That'd be great. Well, thank you very much. Again, where can people learn more about you?
- [75:11]
A
Just Google my name. I don't hide very well. I'm delighted to talk to people about whether it's the customer side, the employee side or where it all comes together.
- [75:22]
B
Yeah, that does work actually. And in fact, how I found you and how I found a lot of my guests, I say there's something I don't understand. I go to an AI and I say who's the world's leading expert? So you're definitely out in the data out there. And so Peter Fader, for anybody who's googling F A D E R thank you.
- [75:42]
A
Good talking to you.
- [75:44]
B
Thanks for joining me for another episode of Work for Humans. If you enjoyed this episode, please give us a five star rating. Wherever you listen to podcasts and share the show with one person you think would get value from it, believe it or not, this really helps us grow the show and reach more people who want to build the kind of work that people really want. As always, thank you to my producer Jason Ames at 9th Path Audio for his insights into content and his high standard for quality. Final note, the opinions shared here are my own and not the views of Google or Cisco Systems. Thanks again for listening. See you next time.