Winning on Purpose: The Unbeatable Strategy of Loving Customers

In his latest best-selling book, Fred Reichheld introduces NPS 3.0 as a way for companies to enrich the lives of their customers and generate good profits. This approach puts treating customers the way you would want to be treated at the centre of enduring business success. Reichheld provides examples of companies with superior NPS delivering higher returns to shareholders across various industries.

However, achieving this purpose is challenging, and Reichheld presents the newest thinking and best practices for implementing NPS effectively, including the Earned Growth Rate (EGR), a reliable measure for leveraging the power of NPS. This is an indispensable guide for inspiring customer love and achieving both personal and business success through NPS.

Here is an extract from Winning on Purpose: The Unbeatable Strategy of Loving Customers by Fred Reichheld.

The End of Capitalism as We Know It

The evidence is clear that dissatisfaction is surging against traditional capitalism, which I refer to as financial capitalism. In recent years, that dissatisfaction has been voiced by not only typical antibusiness radicals but also middle-of-the-roaders. A Gallup poll in 2018 found that the number of Americans with a positive view of capitalism had declined to 56% (and 47% among Democratic voters). The majority of respondents under thirty years of age preferred socialism over capitalism. Even the capitalist glitterati attending the annual World Economic Forum in Davos, Switzerland, have expressed concern about the current system. Michael Bloomberg echoed this distress in his 2019 Class Day address at HBS.

The blue-chip CEOs who comprise the venerable Business Roundtable have clamoured for change. There seems to be a mounting demand for enlightened CEOs to hold themselves accountable for creating value for all stakeholders: customers, employees, communities, the environment, society, and so on.

Yes, these kinds of arguments are emotionally appealing, but the problem is that being accountable to everyone means you are accountable to no one. Being equally accountable to everyone is virtually impossible, just as optimising value along multiple dimensions simultaneously leads to mathematical chaos. Even the most powerful of supercomputers baulk when they’re asked to maximise multiple dimensions of a complex system such as a business organisation. They spit out some version of this error statement: indeterminate solution. Linear programming algorithms can’t cope unless all variables except one are treated as constraints for which minimum hurdles can be specified; only one single dimension can be maximised.

Of course, it’s not just computer models that stumble when multiple goals for maximisation are put forward.

Complexity trips up humans too

That’s why the best leaders work hard to simplify team objectives so they can focus their creative efforts productively. This begs the obvious question: What is the single dimension that a business should optimise in its quest for greatness? I’m willing to entertain the argument that at one time in history, perhaps up to about the early twentieth century, maximising shareholder value (famously promoted by Milton Friedman) was the correct theory and legitimate goal of the firm. But today, with oceans of capital sloshing around the globe in search of a slightly better-than-average return, capital is not a truly precious and constrained resource.

Today, targeting the maximisation of shareholder returns, especially short-term returns, leads quickly to mediocrity and decline. Why? Customers are not loyal when they don’t feel loved. But additionally, talented employees are the precious and constrained resource, and few people today embrace enriching shareholders as their life’s work. Almost every company is desperately seeking the talent required to move more processes to digital platforms and to take advantage of cloud computing — and we’ve seen ample evidence that people in this Millennial and Gen Z talent pool want to work only for companies with an inspiring purpose.

So, should we embrace employee happiness as the central objective and line up behind their favourite purpose du jour? Labour unions and many progressive politicians naturally endorse this point of view. The problem is that many of the things that make employees happy – lots of vacation time, evading those demanding customers who insist on innovative solutions, avoiding the stress of competition and taking risks, sidestepping the need for uncomfortable change and adoption of better processes are the very things that make customers unhappy, which quickly smothers their loyalty and over time eviscerates corporate growth and prosperity. And truth be told, those things make employees happy only in the short term and fail to engender the kind of loyalty that employers need.

Take a look at one of those “Great Place to Work” lists

They rarely mention delivering great customer experiences as a central criterion underpinning workplace rankings. Instead, they focus on cool fringe benefits: great cafeterias, ping-pong tables, free smoothie machines, and so on. But the sober truth lies in their collective name: these are benefits at the fringe of work life. I argue that beyond competitive salaries and benefits, what makes a company a great place to work is when it puts workers in the position to do great things for customers — again, building lives of meaning and purpose.

What will be the next stage in the evolution of capitalism? I believe we have already entered the age of “customer capitalism.” While I am certainly not the first person to use this term, I believe this book provides the first comprehensive explanation of the full system, including its guiding philosophy and underlying economics, along with the metrics and managerial processes required to win in this customer-centred world. You’ll find my Net Promoter Manifesto in chapter 9 of the book, which distils the book down to its quintessence: detailing the seven core principles that business leaders must follow to build a sustainably prosperous business in this age of customer capitalism. Once again, the exemplars of customer capitalism do not attempt to extract maximum profits from every customer and employee to boost share prices and dividend streams. Instead, they focus on the vital role of kindness, generosity, and love in dealing with their customers and employees.

Did you hang up on those three nouns? Let me underscore them: kindness, generosity, and love

So many self-help books today focus on actions you can take to make yourself happier and more successful. But by and large, they ignore the most vital question you must answer in order to earn happiness and success: What is the primary purpose of your life? If your answer is anything like mine — that is, to enrich the lives of others and to make the world a better place — then you need to think carefully about which relationships (individuals and organisations) deserve your investment of precious time and resources, your loyalty. You need to make sure they embrace and embody a concordant purpose. If they do, you can focus your energy on helping them prosper. And you can measure progress by how consistently you actually live up to the Golden Rule, which is the surest guidepost orienting you toward a life of meaning and purpose. This is one of the key lessons that I want to convey through the stories and arguments in this book: be sure to invest your loyalties wisely.

Reprinted by permission of Harvard Business Review Press. Excerpted from Winning on Purpose: The Unbeatable Strategy of Loving Customers. Copyright 2021 Fred Reichheld and Bain & Company, Inc. All rights reserved.