Grand unifying theory

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• Commercial imperative: to have clients coming back. Above all else.
• Commitment: How to ensure clients stay with you? You indicate commitment to them.
• Indications of commitment:

• expense of communication: the thick card, embossed envelope — Rory Sutherland (this isn’t far from reciprocity: you make an overt investment that the client can see that you wouldn’t have made if they weren’t important to you)
• intellectual, social commitment to clients — Robert Cialdini
• build personalised, not cyclo-styled, interpersonal relationships with them.

• Don’t commoditise: These things are undermined by standardisation and commoditisation:

• guarantees margins tend to zero (if you have solved the risk therefore depleted the premium — if you havve automated it than anyone can automate it: your market advantage is gone)
• Of course because of non-linear effects, in most cases you haven’t solved the risk; it is just that the market prices itself as if it has, because everyone labouring under the same modernist delusion that “we have comprehensively syndicated risk/banished boom and bust/reached the sunlit uplands”. Yet, black swan. and no, you cannot crunch more data and thereby anticipate black swans.
• Indicates absence of commitment
• Allows a lack of client commitment: products and offerings are fungible: you can rebadge the same old crap and send to someone else.
• The risk/reward of greater effort to attract customers isn’t there. Hence the headlong rush to lean production management.
• Targets your offering at the mean — yet commitment is to be found at the edges — Rory Sutherland

• Embrace the non-standard: Target the bespoke, the tail events, the risk scenarios, off-piste; here be dragons:

• This is where the best opportunities are. This is where innovation will come from. This is where developments will emerge. Here the stakes are higher.
• Here you can’t manage by algorithm. You need experience; you need diversity; you need expertise. You need people comfortable with doubt and without certainty. Standard tropes and management bullshit will get found out. Ruthlessly.
• Here redundancy is an advantage — an imperative, not at all a competitive disadvantage.

• Here the bureaucratic layer can make itself useful in another way — instead of being the main player, the bureaucrats become the janitors, keeping the channels clean for the subject matter experts:

• Bureaucrats work on culling those clients who are not generating sufficient fees, despite the commitment and relationship capital thrown at them. This incentives salespeople, using their expertise, to either double down with clients, perhaps creating a scarcity dynamic in the client’s perception which is in itself persuasive (see Cialdini) and likely to improve yield, or to let the clients go. If each sales person is allotted only five clients, and told to treat them like royalty, then suddenly sales is incentivised to drop the non-performers, and seek the bureaucrats’s help to make that happen.
• Note also that the scale problems of managing a large portfolio of clients kick in precisely when you have too many tail clients and the cost ratio of providing top end service to all of them is out of all proportion, and some clot goes “why don’t we just send everyone a Silverpop”. The answer is to not have so many-low yielding tail clients that you can’t properly look after all of them. Also bear in mind the total cost of onboarding new clients is monstrous, and you are bringing in a class of clients that QED have a much shallower relationship than the ones who are exiting. The job is not to make the onboarding more efficient to deprecate the cost of churn, but to slow down or stop the churn.

Random thoughts

The high-modernist disposition has reorganised, not banished redundancy cost and slack but rerouted it from productive units into the administration layer. The generals/troops mix has inverted, with the atomisation of functions, each with its own colossal bureaucratic machine. It has converted functional redundancy — which in a complex environment, is a competitive advantage and only a drawback in a simple environment, as it maximises reactivity, creativity, agility and adaptability, but minimises central controllability — into administrative redundancy, which is a competitive advantage in a simple environment, as it prioritises control and mechanisation over a basically unnecessary (and dangerous) creativity and diversity. In a simple system control, discipline and execution is all there is: your perfect ratio is all administration and only machines executing