Delight Your Stakeholders

Imagine you organized a dinner party for all stakeholders of your business. Shareholders, customers, suppliers, employees… everyone who is affected by your company is invited. Even the government, your local community and representatives of on-line communities are welcome. I would invite my spouse too. And the hamster.

Now imagine someone will ask the question, “what’s for dinner?”

Who will decide?

Jack Welch might say, “The shareholders get to choose what’s for dinner, because the party is financed with their money.”

Stephen Denning might say, “The customers get to choose, because the purpose of our business is to delight customers.”

Gary Hamel might say, “The employees get to choose what we’ll eat, because they are organizing the party.”

And I’m sure other people are able to come up with various reasons for suppliers, governments, and local and on-line communities to be allowed the final say over the dinner menu. I would tell you about the needs of my hamster.

Of course, you know better.

A business is a social network of stakeholders participating in freedom for mutual benefit of everyone involved. Nobody is more important than the others.

But Stephen Denning says you cannot please everyone:

The mathematics of optimization shows that only one variable can be maximized. […] It is not possible to maximize both client delight and shareholder value. You have to choose one or the other. (Radical Management, Kindle location: 1386)

Huh?

I wonder if Stephen Denning has any children. Will he always put the needs of the eldest first, because he doesn’t know how to optimize the needs of all children in his Excel spreadsheet? And will he just ask one party guest to decide what’s for dinner, because the problem of optimizing the sum of all needs across all guests is mathematically too hard for a manager?

That’s silly.

A traditional manager 1.0 might simply ignore stakeholders and follow his own personal agenda when making business decisions. A manager 2.0 might do better when trying to apply somewhat simplistic management advice, such as “optimize shareholder value” or “delight the client”. But I think a manager 3.0 will outperform all others. Because she understands a business is a complex adaptive system of stakeholders. They can all give and take, in endless iterations of collaboration, to please themselves and others.

A business is a non-zero sum game. You can and should delight everyone.

Including the hamster.

p.s. I actually like Stephen Denning’s book, Radical Management. You should read it! Just remember not to take its first principle (delight customers) too far.

(Jurgen Appelo is author of Management 3.0, a best-selling management book for Agile developers. It has a picture of a monster in it.)

(picture: Muffet)

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  • http://profile.typepad.com/martinproulx Martin Proulx

    Jurgen,
    You know I’m a big fan of your book and your thinking. I recently discovered Steve’s book through his talk at Agile 2011 (more on his presentation here: http://pyxis-tech.com/blog/2011/08/10/making-the-entire-organization-agile/) and really liked the concept of focusing on delighting customers.
    Unfortunately, this time I don’t agree with your post. I don’t believe it is “an either or” choice. In my opinion, it is a matter of priority and focus. As managers, we need to understand what has to have priority when making decisions. If is was as simple as selecting one of the 5 choices (or 7 or 10 depending on the number of stakeholders), that wouldn’t be a huge challenge.
    When it comes to making the right business decision, all stakeholders need to be taken into consideration but some will have a higher priority than others and ultimately, one of the stakeholder has the highest priority.
    After reading Steve’s book, I understand the message to be : “make the customers your top priority” instead of “making the shareholders the top priority”. He argues that focusing on delighting the customers will, in the end, benefit everyone.
    Things become possible when considering both options instead of “one over the other”.
    Cheers!

  • http://profile.typepad.com/jurgenappelo Jurgen Appelo

    Martin,
    In nearly every Management 3.0 course I am confronted with teams that are suffering under the customer-always-comes-first dogma. There’s never time for the needs of employees, or the needs of suppliers, or the needs of the community, etc. Because they have to delight the customer all the time.
    I’m simply claiming that, whenever you make priorities, make sure that sometimes one of the other stakeholders comes out on top. The customer should not be running the organization.
    The idea that focusing on the customer will, in the end, benefit everyone is IMHO a fallacy. The same fallacy as the idea that caring first about the employee will benefit everyone, or caring first about shareholders will benefit everyone (yes, all versions of the same fallacy are preached).
    Also see:
    The Purpose of a Business is NOT Customer Value
    http://noop.nl/2011/06/the-purpose-of-a-business-is-not-customer-value.html

  • http://profile.typepad.com/martinproulx1 Martin_proulx

    Jurgen,
    I guess I will have to attend a M3.0 course =)
    Seriously, I get what you are saying. It is critical to understand the interactions between all components of the system and not ignore the stakeholders that are not THE priority.
    I’m worried when I hear things such as “customer-always-comes-first dogma” or “customer running the organization”. I don’t believe customers are always right either.
    You say, “I say it is not the purpose of the business”. I think this is where there is confusion. Each business has its own purpose. For instance, ours is “to help software development companies to become places where results, quality of life, and fun coexist sustainably by being first and foremost an example of what we proposes to our clients and by coaching them”. One of our strategy to achieve our purpose is to delight our customers.
    I also like the “delighting the customers” focus because it brings a paradigm shift in the way companies do business.
    The old economy was about focusing on shareholders – just make money, whatever you are producing. In the new economy, organizations with a (real) purpose – other than just making money – will IMHO be more impactful and will appeal to more loyal (delighted?) customers. Fortunately, other stakeholders will also benefit.
    That’s it for me. I’ll let you and Steve sort it out on Twitter 😉

  • http://profile.typepad.com/stefanbilliet1 StefanBilliet

    I can definitely relate to what Jurgen is saying… Ordinarily, yes, pleasing your customers is important.
    But living by the dogma “customer is king” can leave a company open to all manners of abuse, both from within and without.
    On one hand, it can create a blame filled organization, where certain people will promise anything to the customer that the customer desires and hold a gun to the heads of the developers to make sure that promise gets fulfilled.
    On the other hand, I’ve also seen customers that have so much money on their hands, that they stop thinking of priorities. They just throw a sack of money against the problem and proclaim that they want whatever they want implemented yesterday.
    My previous employer’s company practically ground to a halt trying to accommodate that one client (who had a lot of very silly requests mind you), all because nobody would sit down with them and get their priorities straight…

  • http://blog.mikepearce.net Mike Pearce

    So, who decides what’s for dinner, and what is for dinner?
    I don’t really understand this post. Are you saying that neither the stakeholder, customer or hamster are the most important, but they’re all important? Thus, none of them are important?
    If the stakeholders want steak, the customers want ice cream and the hamster wants lettuce, how on earth do you delight everyone? Or are we talking about degrees of delight? Or linear delight?
    Maybe your analogy is too simple for your idea, I’m not sure. It sounds like, buy trying to delight everyone, you’re diluting the delight, which is OK I guess. It’s acceptable, but hardly as delightful as it could be.

  • http://profile.typepad.com/jurgenappelo Jurgen Appelo

    You never cooked dinner for multiple guests, trying to make sure that everyone was at least happy, instead of just delighting one person?
    Maybe the metaphor doesn´t work work you, that´s fine.
    Hope you still understand there will be times when you need to compromise on delighting customers, in order not to make other stakeholders very unhappy.

  • James

    Sorry have to pull you up on mathematical inaccuracies. If you optimise for 2 variables you are not guaranteed to get a maximum for each of those two variables, you will get the maximum for the two variables combined which may be considerably lower than the maximum for each variable considered separately. Once you accept this you are simply saying I’d rather get the best possible value for these two factors and I accept that if I focused more on one than the other I may be able to get a higher value for that alone. (And this is leaving out all arm waving and discussions of getting stuck in local maxima or NP intractability)

  • http://profile.typepad.com/jurgenappelo Jurgen Appelo

    Yes, that is pretty obvious and exactly what I meant. It’s the whole point of working with non-linear complex systems such as a software team. 🙂
    What part of my post is inaccurate?

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