The Open Kimono Business
an essay on how to
treat customers and employees like owners and reap the benefits.
In any meeting, a negotiator
can adopt a variety of strategies. Typically, they horde information,
pick apart their opponent's every move in hope of understanding
hidden meaning, and ultimately attempt to gain the upper hand through
manipulation. Sometimes you outsmart your opponent and win. Many
times, you are so busy protecting yourself that a deal never happens.
There is a less common
negotiation strategy known as the Open Kimono. Instead of hoarding
information, you give it freely. You openly explain both your needs
and what you have to offer. If the other person reciprocates with
open arms, you can work together to capture amazing opportunities.
It occurs to me that
many private companies play the game of business as a negotiation
situation where the market is an opponent that must be outsmarted.
Many deals are left on the table. What would happen if they instead
used the strategy of the Open Kimono? Imagine a company that says
to their customers with conviction and honesty, "Here is what
I have, and here is what I need. Let us work together to create
The rules of an Open
The following are simple
rules of thumb that guide the behavior of an Open Kimono (OK) company.
Rule #1: We are
all in this together
By purchasing a company's product, a customer becomes invested
in company's continued success. By working at a company, an employee
also becomes invested in company's continued success. In all areas,
both the customer and the employee are owners of the business.
#2: We share information freely
Information that is shared freely within a company should be shared
freely with the customers of a company. More is gained from sharing
than from hoarding
#3: We win through the creation of superior value
In competitive situations, err on the side of openness and honesty.
The company succeeds on the basis of offering superior value,
not trickery or manipulation.
All this is lovely sentiment, but what does it mean? The following
might vary depending on the exact company, but here is a good start.
- All financial data
is posted in an easy-to-comprehend fashion on the company web
- All major company
metrics, goals and progress towards those goals are publicly posted
and constantly updated.
- Periodic customer
research is performed and the results are also made available
to all customers and employees.
- 10% of profits are
redistributed back to existing customers. Another 10% is given
to the employees. If desired, the money can be donated to a charity
or reinvested in company stock.
- When problem areas
are identified, customers are encouraged to contribute suggestion,
time or resources to the solving of the problem.
Roots of the Open
The roots of
the Open Kimono business are quite traditional. Successful companies
have been using these techniques for years.
Public companies are required by law to divulge certain internal
information to their stock holders. It is debatable however, if
public company's slavish devotion to quarterly stockholder gain
is a positive strategy. An OK company that has the transparency
of a public company, but is measured on pertinent business metrics
instead of only short term financial data.
Open Book Management
By sharing pertinent company information with employees, companies
run by open book management empower everyone in the company to
innovate towards a common goal. An OK company uses the same technique
to leverage not only the distributed power of their employees,
but also the distributed networking power of their customers.
Companies with market orientation listen to both the needs of
their customers and the trends in the market when making strategic
and tactical decisions. An OK company's close connection with
its customers allows it to respond effectively to the latest market
Market as a community
Markets are often looked at as system in which buyers and sellers
exchange value, where value is defined in financial and material
terms. Yet strong emotional bonds form between buyers and sellers
that can bring substantial social value to both parties. People
will always seek to find meaning in their actions, yet companies
often ignore this fundamental need. An OK company provides both
customers and employees with a self-contained community that encourages,
nurtures, and thrives upon the creation of social value.
The case against the
Open Kimono business
When I bring this concept up to people, the inevitable reaction
is "What an idealistic notion. Unfortunately, the world does
not work like that." It is utterly self evident that close
management of information is essential to any financially successful
venture. In no particular order, the following are considered to
be fatal flaws in the Open Kimono philosophy.
The moment a company provides open information to the public,
competitors will use that information to gain an advantage. Copycat
tactics, preemptive product releases and attack ads that further
publicize embarrassing information are all likely.
By spending time providing reams of information, small companies
are using scarce resources ineffectively. Seeking more sales or
creating a improved product will yield better results.
Customers lack of
No benefit is gained because customers lack the skills to interpret
company information in any meaningful fashion.
Honest publication of information means that the company will
be displaying warts and all to the public. There is little opportunity
to spin bad news or manage your financial data.
If you give customers a sense of empowerment, they will complain
endlessly and publicly. This in turn leads to bad press and a
loss of sales.
No one is doing
No major profitable company operates in this fashion. They must
have already failed.
The case for an Open
The following are benefits
of an OK company.
Companies with a strong vision tend to outperform those that focus
solely on financial results. By building a culture around a philosophy
that people can wholeheartedly believe in, employees and customers
will give the extra effort necessary to ensure success.
Strong word of mouth
A company with a unique ideology stands out in the crowd. The
fact that customers benefit from this ideology yields a powerful
source of word of mouth advertising.
The customer's network
is the company's network
A customer that truly believes that they are invested in a company
feels comfortable sharing their contacts and resources. At the
extreme end, the customer is a believer that happily volunteers
for the company. A thousand customers have a larger and potentially
more powerful network than a hundred employees.
to market change
Customers that complain or offer advice provide a highly responsive
early warning system to changing needs or competitive threats.
Many eyes catch
Strategic blunders are easier to catch when you have multiple
people offering unbiased commentary.
trust and loyalty
This in turn leads to retention and improved profits. Why go elsewhere
when a company concretely demonstrates that it is deeply interested
in listening to your needs?
trust and loyalty
This also leads to retention and improved profits. Employees are
the core asset of a knowledge-based company. By keeping them,
you build an experience based sustainable competitive advantage.
The cost, both financial and psychological, of keeping multiple
books, one for the public, one for the employees, and one for
the investors is greatly reduced. The benefit is that customers
and employees can talk the same language and use the same data
to create mutually beneficial outcomes.
Let's suppose for a moment that benefits of an Open Kimono philosophy
outweigh the detriments. What are the success factors that must
be focused on to gain those benefits?. The follow are key implementation
areas that must be addressed in order to achieve success.
Any culturally driven
sustainable advantage needs to have buy-in and support at the
leadership level. Words alone are meaningless. Consistent public
actions by respected leaders help the cultural change permeate
through the entire organization
Customer and Employee
Data is useless unless the intended audience is capable of understanding
it. Putting company information in format that is comprehensible
to the customers and employees is a partial solution. Actively
educating both customers and employees on the meaning and use
of the data is equally important. If there is not an obvious connection
between the data and the benefits received by the person digesting
the data, then the system has failed.
When everyone yells their opinion, it can be hard to capture any
useful information. Rigorous data collection and analysis techniques
can turn the outpouring of information into actionable solutions.
A strongly customer and employee oriented company is more likely
to prosper than a profits oriented company. Profits are still important,
but they are one metric amongst many. By focusing on satisfying
a broad range of benefits instead of merely materialistic and financial
benefits, an OK company attracts and retains both superior quantities
of customers and superior quality employees.
In the end, running an
Open Kimono company is as much a personal choice as it is a business
decision. Openness, honesty, community and mutual respect are concepts
I can believe in. All else being equal, what type of business would
you want to devote your life to?
Send comments and critiques
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