Infusing the organisation with customer knowledge

Scand. J. Mgmt. 15 (1999) 17—41

Infusing the organisation with customer knowledge Bj+rn W. Hennestad Norwegian School of Management, P.O. Box 580, N 1301 Sandvika, Norway First received 1 March 1995; accepted 1 July 1997

Abstract The article explores the experiences of a company that learned to become more customer oriented. How did the company succeed in generating learning opportunities and learning, which could have a sustainable impact on its operations? The company’s use of a customer study appeared to create a situation of ‘‘unfreeze’’. It also provided directive information that was used constructively in a participative search. Inductive and dialectical qualities appeared to have been created, and these helped to develop practical knowledge. The process of joint construction, together with feedback which showed the new ideas to be working, were important factors in putting the knowledge to use. Further development of the feedback systems was integrated into normal operations, which served to stabilise the reorientation. The nature of the continuous learning process which the company’s accomplishment represents is also examined.  1998 Elsevier Science Ltd. All rights reserved. Keywords: Customer orientation; Organisational change; Organisational learning; Knowledge management

1. Introduction The problem addressed in this article concerns organisational learning, with particular attention to customer orientation. The empirical base is a company that endeavoured to become more customer oriented. The background is the increasing interest in organisational learning and change, which is reinforced by a growing focus on customer orientation. Serious attention to this interest often challenges the organisational paradigm, and this is the situation that faced the company in question. Attempts to increase customer orientation had been going on for several years. Management felt they had failed in their endeavour, but knew they had to succeed in order to survive and enjoy positive results in the long term. The focus of the article is the process of learning to increase and sustain customer orientation. This study explores whether the company succeeded in the renewed endeavour to become customer oriented and what can be learned from their experiences. 0956-5221/98/$ — see front matter  1998 Elsevier Science Ltd. All rights reserved. PII: S 09 5 6-5 2 21 ( 9 7) 0 0 05 0 - X

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The concerns of this company are reflected in the literature. For some time the need for organisations to stretch beyond mere adaptation has been focused (Heberg, 1981). In order to cope with changing environments, organisations must learn to create new knowledge and use it offensively. However, an extensive review, has suggested that the literature has been concerned with the acquisition, accumulation and utilisation of existing knowledge rather than the creation of new knowledge (Nonaka and Takeuchi, 1995). And this may to some extent hold true. Several authors, however, have brought the problem on to the research agenda by regarding organisational learning as the ‘‘generation and generalisation of knowledge with impact’’ (e.g. Ulrich et al., 1993), or by seeing the learning organisation as one skilled in creating knowledge (e.g. Garvin, 1993; Strata, 1989). The present article considers the way a company can mobilise or create appropriate knowledge for coping better with the challenge of customer orientation, and how it can put this knowledge to use in the organisation. Business organisations are dependent for their very existence on a market for their goods, and the company—customer relationship constitutes an essential pillar of market orientation (e.g. Narver and Slater, 1990; Slater and Narver, 1994). In this complex relationship, retaining customers is seen as an important (and cost effective) factor (e.g. Whitley, 1991). The customers should consequently be seen as next in line in the value chain (Selnes and Reve, 1994; Dimancescy, 1992), and the organisational emphasis should be on creating value and quality for them (e.g. Band, 1991). The quality management literature demonstrates that quality is a complex and complicated issue. It is argued, however, that customers rely on their subjectively interpreted experiences in (re)buy decisions. It is quality, if they think it is quality. It is consequently argued that weight should be given to perceived quality (Fornell and Roos, 1991). The general problem of strategic fit (e.g. Miles and Snow, 1994) in this context becomes to a large extent one of creating alignment with the customer’s definition of the situation. Developing this alignment implies long-term customer relationships and calls for an ability to learn from the customer—company interface and to create new solutions to improve it (e.g. Gummesson, 1987, 1991). In line with Argyris and Schon (1996) it could be fruitful in this context to look upon organisational learning (also) as organisational members inquiring into organisational problems on behalf of their organisations. The literature on customer quality and customer orientation demonstrates that the customer focus has not been developed as a research question, but has instead been dominated by fairly ungrounded prescriptions (e.g. Band, 1991; Schonberger, 1990; Whitley, 1991), very often of ‘‘the solution is the problem’’ type described for example by Mintzberg (1996). The general literature on organisational learning makes quite a few suggestions as to what the learning organisation could look like (e.g. Pedler et al., 1988; Senge, 1991; Swieringa and Wierdsma, 1992). It is also rich in conceptualising approaches, problems, etc. (e.g. Huber, 1991; Levitt and March, 1988). However, it has also been clearly stated that the literature is rather weak when it comes to helping us understand how to realise the learning organisation (Argyris and Schon, 1996; Garvin, 1993), nor has it produced research-based guidelines about how to increase the effectiveness of organisational learning (Huber, 1991).

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It was therefore a welcome opportunity to be invited to study the endeavours of a company that had seriously tried to develop its learning capabilities. In its desire to learn, the company was particularly concerned about customer orientation. Obviously, customer orientation, quality management, etc., are demanding research agendas in their own right. The primary focus of present article is on the dynamics of learning and change. Customer orientation is considered more as the subject of these processes, and in this context it is accepted here that the company’s ambition is defined as customer orientation. As we shall see, however, it ties in quite well with the view outlined above. The problem addressed is consequently to assess whether the company learned to become more customer oriented, and, if it did, to analyse the experiences and to identify the critical reasons for its success. How did the company generate learning opportunities and learning that could make a sustainable impact on its operations? In order to answer this question, the article begins by presenting the empirical setting and the way the problem was approached. It will continue by telling the story of what the company did in order to realise its ambition, and presenting factual information as well as indications of what it in fact achieved. The story is followed by a conceptual analysis and an interpretation of what happened.

2. Context, perspective and method ‘‘Nils, we are offering you the job as quality director, especially because what you said during the interviews was an eye-opener to us. We think you are right to claim that a ‘bureaucratic expert approach’ to become ISO-certified could actually be counter-productive in our efforts to become more customer oriented’’. Company X had been looking for a quality director to become a member of the top management group. The business of this company of 200 employees was the sale and servicing of copying machines and related office equipment through local subsidiaries and independent dealers. The quality director position had been created in response to a felt pressure to become certified by ISO (the International Organisation for Standardisation, which lays down standards for quality in procedures, products, etc.). Top management had also seen the process of certification as an opportunity for promoting their ambition to become more customer oriented. The ambition had been on the agenda for years, but without producing any significant changes. Nils, however, had argued that the common bureaucratic ‘‘expert approach’’ could represent Taylorism in disguise. It relied on rules and procedures developed by people other than those who would be practising them (e.g. Brooke, 1993). The realisation of customer orientation and customer quality, he had argued, would depend on the employees understanding what these implied and whether they were ready to assume responsibility for it (e.g. Deming, 1986; Lessem, 1991; Wilkinson et al., 1992). ‘‘Shelve the ISO issue for the moment and concentrate on improving customer relations with the help of the employees; after that the ISO task can be solved in a more meaningful way’’, he had argued. His point was that the resulting revised work practices could be formalised and could then form the basis for an ISO application. He had pointed out that unlike the Tayloristic approach, the revised procedures

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would then have been developed ‘‘from within’’, ensuring understanding and making commitment likely (e.g. Coch and French, 1948; Kanter, 1983). He wanted to carry out a customer study to establish a focus for the process. However, the company had a customer satisfaction index which some consultants had made a few years earlier. The managers argued as follows; ‘‘Nils, we know what other problems there are, what we need is to do something about them’’. ‘‘We have all the information we need2we know where we make mistakes in relation to our customers’’. ‘‘What we need to do is to get our act together and begin working on how to improve what we do for the customers’’. ‘‘We don’t have any more time for analysing, let’s get our acts together and do something’’. Nils argued that they had to be sure that their priorities were relevant and that they must therefore (at least) check out the basis for the customer satisfaction index. The kind of information it had produced did not seem to have made much difference. It was probably because he secured the support of the most influential member of the management group that the rest gave in. Whatever the reasons for their consent, the customer study provided a leverage that changed the premises for further learning efforts. 2.1. Perspective This article looks at the events at Company X from a knowledge-oriented cultural perspective. It is easy to see that management was concentrating on changing ‘‘the way we do things around here’’, to use Watson’s definition of organisational culture at IBM, subsequently made famous by Peters and Waterman (1982). It was pointed out in the internal discussions, however, that customer quality demanded renewed collective understanding. This corresponds to the conception of organisations and organisational cultures as interpreting systems (Daft and Weick, 1981), which is also implied by the many related conceptualisations of organisations as taken-for-granted (Bate, 1984), as systems of meaning (Smircich, 1983), as paradigms (Brown, 1978), as organisational schemata (Bartunek and Moch, 1987), as shared frameworks of reference (Snyder, 1988), or as frameworks (Hennestad, 1986), etc. The duality of culture is well captured by two of the most influential writers within the organisational culture perspective: Geertz (1973), who says that the ‘‘meaning resides in the act’’, and Silverman (1981), who says that ‘‘action arises out of meaning’’. In other words, the company’s old ways are channelled by a collective system of understanding. Even if the structural and ideational systems represent a duality, they are not mere reflections of each other (cf. Geertz, 1973; Allaire and Firsirotu, 1984). Changes in organisational behaviour, for example, are observed without associated changes in collective cognition, which makes them unsustainable (Fiol and Lyles, 1985). New systems and formal procedures for customer orientation could thus create new ways of ‘‘doing things’’ without representing reliable learning. Such systems will

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only (re)enforce sustainable customer orientation if underpinned by a shared understanding of customer orientation. Organisational understanding is closely related to organisational knowledge, however (e.g. Nonaka and Takeuchi, 1995). Schutz (1972), for example, conceived culture as the sediment of knowledge, whereas Selznick (1957) held effective leadership to be the kind that created distinctive competencies by infusing organisations with meaning. Note that his concept has become central in the current knowledge perspective in strategy as ‘‘core competencies’’ (Prahalad and Hamlin, 1990; Eccles and Nohria, 1992), and that his work also represents one of the main roots of the cultural perspective of organisations. In reorientation situations, therefore, organisations face a cultural mismatch and a scarcity of knowledge involving a knowledge gap (Haerem et al., 1996). The organisational knowledge does not fit the situation that the organisation is facing, or the strategic issues this contains (Schneider, 1994). The gap can be seen as distance between discursive and practical consciousness (Giddens, 1979). When so many change programmes fail or are characterised as underachieving (e.g. Alexander, 1985; Brookes and Bate, 1994; Kotter, 1995; Pascale, 1990), a fair assumption is that they have not managed to develop any practical awareness of ‘‘how’’ to do it (Bate, 1994). The Company X management, and to some extent its other employees, had (at best) a discursive understanding of the need to become more customer oriented. They had not yet developed the practical awareness and understanding needed for the sales consultants, service technicians, warehouse workers, area managers, etc., to know how and what to do differently. 2.2. Data and methods I was given the chance to study Company X’s attempt at bridging the knowledge gap at the invitation of the new quality director. His interest was to learn from the attempt, and to have an opportunity for dialogue in order to clarify his own understanding. In spite of my analytical research purpose, our relationship could thus also be characterised as what Berg and Smith (1985) call clinical. In practical terms this gave me free access to the quality director and we met regularly, on average every two weeks, for interviews and discussions. He also collected the documentary data needed for follow-up and checking. Due to his management responsibilities, his role was more as an ‘‘observing participant’’ than a participant observer associated with the research task. He was not a researcher but a trained consultant, and he acted as a ‘‘human instrument’’ (Guba and Lincoln, 1981) with the capacity to follow up queries from a holistic perspective by watching and listening and asking questions ‘‘again’’, all in a flexible way. The situation did not permit any other systematic data collection. However, I had quite a few opportunities to follow up and check things by holding sporadic informal interviews with managers at most levels. The strength of this situation was the opportunity to follow the learning endeavour at close range by meaningful real time data (cf. Pettigrew, 1990). The absence of any a priori theory meant I could adopt an inductive investigation logic (e.g. Hammersley and Atkinson, 1987) as appeared suitable for the context of discovery (Starrin et al., 1984). Some might find ‘‘abductive’’ logic a more appropriate term since conceptual knowledge played a more important part in the interpretation process than is

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generally presupposed for inductive approaches (cf. Alvesson and Skj+ldberg, 1994). The quality director could introduce the emerging conceptual knowledge into the management group and/or in various ways try it out through his own actions. In this way, he could check the grounding of the concept by seeing if it fits the ‘‘situation being researched and worked when being put to use’’ (Glaser and Stauss, 1967, p. 3; see also Blumer, 1954). Concepts and combinations of concepts — to which we shall return — which were brought into the process, such as ‘‘revealing’’ and ‘‘directive’’ (the customer study), ‘‘participation’’, ‘‘inductive learning’’ and ‘‘self-generative systems’’, not only seemed to work in the sense of creating common understanding but also appeared to influence and create momentum in the learning endeavour. The formative element, together with the open inductive-oriented approach, suggest some similarities with naturalistic inquiry (Lincoln and Guba, 1985). The absence of ethnographically oriented thick descriptions (Geertz, 1973) created a sort ‘‘black box’’ for the interpretation of what happened (Mehan, 1979). This challenge was met by the same means as in coping with the possible biases created by the fact that the quality director was the main source of data. Triangulation and social tests are regarded as the best way of tackling ‘‘threats to validity’’ in qualitative research (Denzin, 1978; Arbnor and Bjerke, 1977; Enderud, 1983). Changes in the outcomes of organisational processes were therefore checked against the available sources of objectified data such as the customer study, the pattern of customer complaints, the frequency of service visits, etc. The likelihood of various forms of learning having occurred was checked by analysing similar data — documentation of what was on the agenda in meetings, etc., speeches by employees at internal and external meetings, the focus at customer meetings, informal interviews, etc. And, as indicated above, the quality director often went back and checked again. The story reflects fruitful insight into the problem of organisational learning, and as regards the amount of deeper data which I could not obtain, it is tempting to quote Boulding: ‘‘Knowledge is always gained at the cost of truth’’ (1972, p. 112). In the cause of truth, however, the reader needs to follow the author’s learning process (e.g. Normann, 1976, p. 66), and the events surrounding the customer study were important in that context.

3. A revealing mismatch In order to discover what particular issues were relevant and important to the customers, the quality director was influenced by a method he had come across called PDS (problem detection study). His interpretation of the method was as follows: (1) To detect issues that had (subjective) relevance for the customers, panels of 8—10 customers were established in each business area. Their meetings were chaired by the quality director. Managers were present but were instructed not to talk. The point was to encourage people to describe their experiences with the company as frankly as possible, and to say what they felt needed improving. In this setting people seemed to be inspired by listening to each other to remember incidents and examples. Customers who had ‘‘left’’ the company were also interviewed in depth.

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(2) To find out how important the various issues were to the customers, all the issues that had surfaced were compiled into a questionnaire consisting of 90 assertions about the customer—company relationship, and this was sent to customers with A and B priority (according to business importance), which meant about half the whole customer base. (3) More or less by accident, but probably because so many people had said they knew what the problems were, the quality director asked that all employees should fill in the form, showing how they thought the customers would answer. (4) The issues were ranked according to their average importance. It turned out that the employees had been completely off the mark in the sense that they had an entirely different image of the customer than the one reflected in the customers’ own answers. A knowledge gap was revealed. To take one example, in the internal ranking — what employees thought customers would complain about most, the first four items were as follows: (1) There is a long waiting period before requests for a service technician are answered. (2) Deliveries (of machines) are incomplete. (3) The customer has to call again and again before the machine is delivered. (4) Delivery periods for necessary parts are too long. The average customer, however, had ranked these as numbers 20, 78, 44 and 75 respectively! Things which the customers found important were consequently low on the internal list. The top four complaints on the customer list were for example: (1) The same error occurrs again and again in a machine (after being repaired). (2) The customer is not informed when a service technician is delayed. (3) The customer is not told clearly when to expect the service technician. (4) In case of machine breakdowns the company does not take the initiative in finding alternative solutions. The average internal ranking of these issues were 39, 38, 18 and 45, respectively. The customers were also very critical on such questions as the counselling given when the customer invests in new equipment, the failure of the (sales) consultants to follow up delivery properly, and the inadequate system for preventive service. It appeared that the customers were reasonably tolerant in accepting that both technical and human errors can occur, but they found it particularly irritating when their planning was messed up, for example because the company gave no new time when a service technician was delayed. Company employees, on the other hand, seemed to believe that what irritated the customers were the same things they found irritating. Their irritation, however, seemed to spring from a production rather than a customer point of view. Confronted with the discrepancy between their own and the customers’ maps, the general reaction seemed to be one of confusion and shock. Corridors, meeting rooms and telephone lines hummed with variations on such comments as: ‘‘How on earth could we be so wrong’’? ‘‘This is serious, we are really off the track’’! ‘‘We must do something definite about this’’! ‘‘How is this going to end if we don’t find other ways of doing things’’?

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In contrast to the reaction to earlier customer criticism, almost no attempt was made to explain away the anomalies: ‘‘We must comply better with the customers’ needs, this is vital’’. ‘‘It is really serious if we are so wrong about what our customers want.’’ (5) Driven by the quality director, management now demanded a broad participative search for solutions to the problems revealed. The quality director had been hired partly because he had argued against a specialist approach to quality. And partly as a result of the discussions about his employment, it seemed easy to find support for the view that those who had to please customers had better find the remedies themselves, or as many people put it: ‘‘The one wearing the shoe knows best where it pinches’’. All units were expected to analyse the customer study in groups. No particular method was used, except that managers were trained in creative problem solving in order to help the process. Two phases followed. The first was a search for customer quality goals. The second was a search for new solutions to meet these goals. The quality director was to act as co-ordinator and go-between on local and central levels. Over a period of two months the organisation was busy with workshops, extended department and group meetings as well as a separate task force. From taking part in local meetings, informal conversations, etc., the quality director got the impression that the participative search was transforming frustration into commitment and creativity. This view was shared by the unit managers. The customer study enabled the employees to see themselves the way their customers saw them. This was not only revealing, but also directive. It showed what had to be achieved at a concrete level. One of the employees said: ‘‘It was really surprising and frustrating to see how far off we were, but once we started looking into the results of the customer study, it made us understand a much better what we had to achieve, at least when we started discussing and looking at it all depth’’. 3.1. Bridging the gap? (1) Three strategic areas for improving customer quality were now decided. These were based on the image of the customer that emerged from the answers, combined with ideas about possible ways of aligning with it. The following were decided by top management, albeit based partly on local discussions and suggestions, as points of leverage for other quality improvements: (a) ‘‘Precision in service delivery’’, referring to the amount of time in which service is delivered. (b) ‘‘Delivery precision’’, referring to the completeness of delivery of machines and parts.

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(c) ‘‘Precision in service work’’, referring to the quality of the actual service work. Precision in service delivery for example was defined in goals like terms: — The customer should always be informed when the service technician is arriving, and — If the technician is delayed the customer is to be given a new definite time. (2) It was now expected by management that the local units should use participative search in order to find better ways of achieving the goals. A great many local initiatives were defined and implemented. For example, in one area people started to make appointments with customers for preventive maintenance. In addition to strengthening their own focus on this kind of service, it was felt this would make a positive impression on the customers, who were hardly aware of this kind of activity at all. Another area started to arrange regular status meetings between important customers and the area manager accompanied by sales and service personnel. However, the local discussions had revealed general problems in the way the function was organised. The customers had been angry that they were not informed about delays in service work, that they had to ring up and check on what was happening themselves, and so on. There had been a service co-ordinator in each area, but in order to be customer-friendly anybody could answer phone calls. Instead of improving the customer service, this seemed to cause ambiguity and confusion. It was decided that as a rule each customer should have one point of contact. The co-ordinator was upgraded to manage the time schedule of the service technicians. Among other things, supporting software was developed to support them in this task. (3) In the same way a general change was instituted to improve the efficiency of deliveries. Previously, the sales people had given order information to the sales secretaries, who handled contacts with the warehouse people, who in turn handled the relations with the purchasing side. The result seemed to be ambiguity and muddle, and the sales people wasted an incredible amount of time and energy checking on the status of the order in order to keep the customer informed. A centre for logistics was created to handle orders through to the final delivery, routines were improved, and the salesperson was given one single contact person. This was done in order to reduce the energy used and the distraction caused by keeping the customer informed. Two further organisational adjustments were made in order to improve people’s understanding of the company—customer relationship and the ability to cope with the customers’ needs. (4) Introducing a team element. A ‘‘team’’ comprising one salesperson and one technician responsible for 8—10 customers was assigned to important customers. The team members were jointly responsible for customer satisfaction. Common targets and evaluation criteria were developed. It was expected, for example, that the team would have regular meetings for information exchange with the customers. The same system was applied centrally. Teams organised around product lines were jointly responsible for marketing, service and technical tasks. (5) Cutting down on hierarchy. The above changes meant that several managers in the marketing and technical areas were made redundant, and their functions were

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removed from the organisational chart. Others, for example the foreman after coordinators had been upgraded, were left with fewer responsibilities and were consequently drawn into non-managerial activities. (6) It was also decided to install feedback systems in order to keep the agenda ‘‘hot’’ and to provide opportunities for adjusting the measures taken: (a) In order to improve the third strategic area, ‘‘precision in service work’’, several criteria were derived from the local discussions, in order to focus the improvement endeavours. The ambition was that things should be ‘‘right the first time’’. The general idea was to increase the amount of preventive service work and reduce the number of revisits. This was measured in terms of the number of copies made between regularscheduled service visits, which increased by 26% in one year; the number of preventive maintenance visits, which increased by 46%; and the number of service calls per day per service technician, which rose by 6%. Generally, a larger volume of copying was achieved with fewer service technicians and better response times. (b) A customer satisfaction measurement based on about twenty of the questions from the customer study was seen a crucial follow-up. ¹he result after one year was an overall increase in customer satisfaction of 10%. The number of customers who declared a wish to repurchase from the company also increased. (c) Delivery precision was improved by establishing such goals as ‘‘All orders received before 1400 hours to be dispatched the same day’’, ‘‘All urgent orders received before 16.30 to be dispatched the same day’’, and by checking against actual performance. To start with there were failures on eight days a month; by the end of the first year there were hardly any failures. Top management was pleased with these achievements after one year, and enthusiasm was also reported from local levels and in the various areas. They feared, however, that the changes might just be a passing burst of awareness and energy, a kind of Hawthorne effect or temporary excitement at something new. The quality director realised that behavioural changes were not always accompanied by changes in the patterns of cognitive associations (Fiol and Lyles, 1985), and that it was the combination of the two that would lead to reorientation (cf. Ulrich et al., 1993). From his local visits, however, he received the impression that a new, and more customeroriented definition of the situation seemed to be emerging among the employees. Most of them also said they felt the organisational agenda was gradually changing. For example, there seemed to be more interest in customers’ problems and a more positive attitude towards fixing them. Employees also seemed far more inclined to engage in co-operation across departmental borders in order to tackle these problems. In fact there seemed to be a feeling of surprise that things were working differently: ‘‘We used to feel the lack of support’’, said one of the sales consultants, ‘‘but the work done by the logistics people and the order-processing office are both perceived by the sales force as clearly better than year ago. Efficiency and reliability have both improved dramatically, making us more confident when confronted by customer problems’’. ‘‘Co-operation, contact, as well as mutual understanding between the service people and ourselves have been considerably strengthened, and that makes us tackle customers and customers’ needs more efficiently’’, said another sales consultant.

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The general impression was that they were now serving the customers better, and also more efficiently: ‘‘One year ago, the number of telephone calls made to the service co-ordinators was the same as it is today. At that time, they seemed hassled. Today they say they are in complete control and have lots of time. They are now in a position to take over work from other regions’’, said one regional manager. ‘‘It is unusually quiet, bearing in mind the season. I suppose it must be due to the fact that we have deliberately pursued a policy of preventive maintenance’’, reflected a service worker on this issue, whereas another pointed out: ‘‘When we not only reduce our resource utilisation by 2.5 man years but also process the same quantities as before, we have to conclude that this is made possible by the combined effects of the quality enhancement process we’ve been through in the last year’’.

4. Getting beyond the threshold All in all, it seemed that ‘‘something was happening’’ to bridge the customer knowledge gap. What next? Top management wanted to ‘‘move on’’. The assistant managing director said, for example: ‘‘What do we do now? We’ve made progress. We’ve started the process. But now the problem at hand is, what should we do to see that our efforts don’t wither away or get swamped by our many other priorities. What new programmes can we get going, to continue the process of becoming customer oriented’’? The quality director, however, was afraid that the learning lacked secure roots. He was afraid that their endeavours had driven the company into a sort of betwixt and between situation where ‘‘myths and wishful thinking reign’’ and the result is still undecided (cf. Feldman, 1988; Turner, 1980). He also knew that when deep structural changes are needed, people often fail or underachieve in their endeavours (e.g. Bate, 1993; Pascale, 1988; Strebell, 1995). Given the management response, he was particularly worried that the whole thing would end up as a case of BOHICA management (Bend-over-here-it-comes-again). He coined the phrase ‘‘self generative systems’’ to promote the view that what was needed now was to make the reorientation process less dependent on management pressure. Systems and procedures were needed to reinforce the learning agenda. He therefore advocated that, rather than defining new projects, they should concentrate on: — developing quality feedback systems allowing for corrections, and keeping the agenda ‘‘hot’’, — establishing reward systems to sustain the interest in the new direction, — integrating the follow-up into the planning, general management and meeting systems of the company in order to secure a clear focus and avoid mixed messages. When management decided to follow this course of action rather than launching new projects, it was probably due to the lack of viable alternatives combined with a need to go on so as to become ISO-certified.

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They strongly advocated prolonging the feedback systems and developing them further: (1) continuing customer satisfaction measurements on a yearly basis, (2) measuring customer satisfaction after the delivery of new equipment and after service visits, A short questionnaire linked to the established goals was then sent to the customer shortly after a delivery or a service visit. For example, the customer was to say whether or not the following statements were correct: ‘‘You were given the right time for delivery shortly after having placed your order’’. ‘‘You were given clear and correct information about when the service technician would arrive’’. When a negative incident was reported, it was included in the agenda for the department meeting and questions were asked: what could be done to make the customer happy, why had this happened and was a change in procedures called for in order to avoid a reoccurrence? Statistics from every department and unit were available to the whole organisation. (3) Complaints were dealt with in a similar way, and unsolved complaints were published on lists every second week. (This was later to be made an element in the pay-and-bonus system.) (4) The company continued to measure quality and efficiency in technical services believed to be associated with customer satisfaction, for example the number of copies they were able to make between each service visit, percentage of service visits of a preventive nature, revisits (reoccurring machine failures), response time and delays, number of service visits per service technician per day, etc. (5) All measurement results were made available to all employees. (6) The use of feedback information was integrated into operations. Analyses of the customer study were geared towards the planning and budgeting procedures. Analyses of accumulative reports on other measurements were made at monthly and quarterly meetings. Single cases were treated in the regular groups and department meetings. The question was what could be done to rectify the mistakes being made, how could the thinking and procedures behind the actions that led to bad results be improved, and could procedures be found to improve procedures in general? (7) Management continued to stress the need for employee participation in this search. They kept this item on the agenda at meetings about the customer quality issue. They also tried to show that participation was needed by publicising the collective achievements in the company newspaper and so on. There was clearly a huge variation in the degree of individual participation. Nonetheless, a lot of local activity was reported, new ideas were produced in great numbers, and the company made progress in the areas measured. People were also enthusiastic about the amount of creativity and competence they could now see and the results they achieved. One of the area managers said: ‘‘Nils, I thought your quality work and customer studies were very positive, but I honestly did not know what we could do differently, nor did I see how a

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questionnaire could help. However, the customer study was an enormous help. Our discussions and dialogues released energy, and produced new ways of looking at things and new solutions’’. (8) After the first customer study it was important to see what kind of new solutions appeared necessary at the company level. The main point of the feedback systems now was to sustain the emerging change of the organisational agenda, and every unit was expected to improve its efforts. Many of these efforts of course had consequences across departmental borders. For example, the sales personnel in one unit wanted to improve ‘‘delivery precision’’ by having the logistics people send the order confirmation direct to the customer with a copy to themselves, instead of the other way round. Another example was that the logistics people identified sales people who were associated with more delivery problems than others and would work specially with them. Naturally, local statistics were also kept. For example, it was discovered that delivery precision was down for the first three months of the year in most areas. This led to a change in the inventory mix and in the purchasing routines. A further example was that the statistics helped to destroy the myth that most complaints were due to machine errors. Only 15% of the complaints were of that nature, most were due to mistakes on the invoice and incomplete deliveries. (9) One company-wide solution that emerged from the central-local communications was that a new reward system was developed for the customer teams, in order to generate consistent management signals. The idea was that the service technician and the sales consultant were jointly responsible for customer quality and customer satisfaction. Both could now earn substantial bonuses. The size of the bonus was related to a series of parameters of which general customer satisfaction was relevant for both service technicians and sales consultants. For the service technician the bonus was also linked to the customers’ satisfaction with the service work as well as the quality of the technical services. For the sales consultant it was also linked to the volume of sales and the customer’s satisfaction with the delivery of new equipment. Customer complaints that remained untreated for a long time, the sale of the wrong equipment and loss of customers, all affected the bonus negatively. (10) The customer quality feedback systems showed a steady and positive development:

Customer satisfaction index Quality in delivery Quality in service Complaints Technical quality

Year 1 Year 2 #9% #5% #8% #11% #10% #5% !8% !9% Increasing on most factors

Year 3 #10% #9% #10% !28%

It is also estimated that the fourth year will improve in all factors. Furthermore, the company was awarded its ISO certificate (for what it is worth) after two and a half years. The procedures that had been developed in the course of the customer quality process, simply had to be put into the appropriate ISO format. The company is now

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also extending the feedback system by introducing a special ‘‘no-excuse guarantee system’’. If a customer buys a machine that does not fit their needs, if machines or equipment are not delivered and installed by the date promised, or if they fail to work properly throughout the guarantee period, or if service work is not carried out as promised, the customer will get a refund in accordance with explicit rules and procedures. If such a system had been suggested four years ago, people would quite probably regarded it as a ridiculous idea.

5. Customer learning — issues and stages The question is whether the organisation did learn and, if so, how did it do it? There are fairly clear indications that a reorientation process has started. The organisation does deliver customer quality, to judge by what the customers say as well as by the company’s own criteria. After the first year, changes could be observed that were consistent with the intentions, and the company seemed to be more customer oriented in its thinking and its actions. The positive development over the two following years suggests that the measures adopted have had a sustainable effect, reinforcing the ideas that produced them. It was also widely held among managers and employees that the customers now appear more forcefully, as it were, on the organisational agenda. It seems unlikely that this development could have happened by chance. Note also that customer satisfaction had been going down before this. What were the crucial variables in the creation, dissemination and implementation of the new customeroriented knowledge? The learning process appeared to go through a first period of breaking away from the old ways, of creating new knowledge and of starting to put it to use, followed by a period in which the focus switched more on stabilising and refining the new emerging ways. In what way did these changes happen? 5.1. Breaking out of established frames ‘‘How on earth could we be so wrong’’? How could they? The sales and service people both had extensive contact with their customers. And yet, the customer study revealed that they still misinterpreted the situation. This is probably a question of the perspective from which the customer situation is viewed. The employees of the company did not themselves experience their customers’ problems when things were not working properly. It can be assumed that they framed the problems reported by their customers from their own perspective. As Kuhn has pointed out, organisations form their own paradigms or frameworks of understanding: We propose that formal organisations be considered paradigms in operation, different in degree and content, but not in essence, from scientific paradigms in use2. Like scientific disciplines, formal organisations have histories, undergo internal and external changes, and experience strains (Kuhn, 1962, p. 374).

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Schein (1985) argues that it is the solutions that have proved successful to a group in coping with its problems, that they survive. As Malinowski has put it, such solutions constitute the living history of the group concerned. Successful ways of doing things becomes idealised and embedded in values and the symbolic field in a process of selfreinforcement (Gagliardi, 1986). This embeddedness means that the organisational ‘‘way of doing things’’ becomes taken for granted (Bate, 1984). On the one hand this promotes organisational cohesion and focuses attention and energy. On the other hand it means that people in organisations tend to go on framing problems and doing things in the same old way, even if the context of the problems changes. When problems are perceived, people tend to do ‘‘more of the same’’ (plus ia change, plus cest la meˆme chose, cf. Watzlawick et al. (1974)) rather than recognising that things around them are changing and can be seen from different perspectives. The company had tried for years to become more customer focused, but with no success. This is understandable, given that their efforts and their understanding of the problems were formed by the kind of perceptions reflected in their answers in the customer study. Kuhn pointed out, however, that confronted with anomaly and crisis people take up a different attitude towards existing paradigms: To sum up, it is when the existing tools cannot help us to solve our problems and execute our tasks any more, that we are receptive to new perspectives on our tasks and relations (Kuhn, 1962, p. 88). The idea that crisis or unfreezing is needed to break an established orientation finds support in the literature of organisational change (e.g. Lewin, 1951; Lundberg, 1984; Strebell, 1995) and is indicated in longitudinal studies (e.g. Tushman and Romanelli, 1985; Miller and Friesen, 1980). It seems that the revealing experience of the employees, when they were confronted with their wrong conceptions of customer preferences, created an ‘‘unfreeze’’, or a collective perception of anomaly. This created conditions for trying to look at the situation in a different way. 5.2. Collective creation The group was faced with a knowledge gap. The search for scarce knowledge can often be neglected altogether, or only a limited search is carried out, when in fact an extensive search is needed (Haerem et al., 1996). An extensive search was needed, starting from a discursive consciousness of customer quality and moving on to practical consciousness and a knowledge of what this meant (cf. Giddens, 1977), from the ‘‘know what’’ to the ‘‘know how’’ (Bate, 1994). The unfreeze situation motivated search, and the customer study gave it a direction. Management demanded and pressed for an extensive participative search. The need for participation was a central idea in the search for new solutions which succeeded the customer study. This was not for humanistic reasons, but simply

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because this approach was expected to produce better solutions. On this point, Kanter says: The real merit of participation is that it generates concrete ideas, makes it possible for these ideas to be taken advantage of, connects people to situations and solutions of critical problems, increases the likelihood that people’s relevant capacities will be utilised, and increases the probability of effective performance (Kanter, 1983, p. 214). One reason for this, as Haerem et al. (1996) among others have pointed out, is that it is crucial for knowledge creation that employees learn about each other’s knowledge. It is likely in our present case that such sharing took place within and between groups and departments. It can also be expected that an unfreeze situation makes people less defensive and more inclined to listen to one another’s ideas. This in turn can create favourable conditions for the kind of perspective-crossing that constitutes authentic dialogue, i.e. dialogue that nourishes the creation of meaning. In analysing the works of Mead (1934) and Schutz (1972), Bras ten points out the central role of dialogue in expanding the horizon of meaning, and suggests that: Meaning is seen to arise in the dialogue of perspectives in and between individuals within the reality which they create and in which they exist. That is, there is a primary dialogical circle that makes even the individual act of creation an event within the meaning horizon of the life-world in which the individual exists with other individuals and in virtue of which there is communication between them (Bras ten, 1987). One of the regional managers seemed to be voicing a fairly widespread view when he pointed out that dialogue appeared to have taken place and to have had constructive effects: ‘‘We had open, lively and intensive discussions about the results of the customer study, which released our energy and produced new ways of looking at things’’. I also claim that an environment that nourishes dialogue makes it easier for people to make use of experiences which they would otherwise have kept (or would have had to keep) to themselves. ‘‘We know more than we can tell’’, as Polyani (1966, p. 4) put it. During the search for solutions to the problems reported by the customer study, it became easier for employees to bring many work-related experiences to the surface, which until then had been to some extent take for granted. These might concern the cause of delays, obstacles to their being informed or their informing others, ways of making dissatisfied customers happier, how to make copying machines work longer between breakdowns, etc. It is in this social interaction between explicit and tacit knowledge that knowledge can be created and increased (cf. Nonaka and Takeuchi, 1995, p. 61). 5.3. Putting new knowledge to use Tentative solutions were produced at the general organisational level, and there were a multitude of less general but often small, even minute, changes at the local level.

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To judge from the results, new ways of doing things did emerge, and it seemed to be the general view that this was so. It was a joint learning and change process. First, it seems to have been an essential factor that the ambition to change had been operationalized in the customer study and the subsequent customer quality measurements. The employees had been able to concentrate on small concrete improvements. The implicit logic is somewhat similar to Schaffer and Thompson’s idea that successful programmes begin with and are driven by results, i.e., there is a focus on short-term measurable improvement goals (Schaffer and Thompson, 1992). Activity-oriented change programmes geared to the achievement of large-scale change tend to be too vague to generate a meaningful focus or results. This view is supported by Weick’s Psychology of Small Wins (Weick, 1984). Weick suggests that grand problems should be redefined to ‘‘controllable opportunities of modest size that produce visible results’’. People then become more capable of coping with the problem, because the redefinition helps them overcome cognitive and affective limitations and thereby also increases the amount of learning involved. By reducing importance and demands and raising perceived skill levels, small wins help overcome stress problems and develop the capability to resist stress by developing a sense of commitment, control and challenge. This is an approach that also deals concretely with the need to create practical awareness and knowledge of what the ‘‘new’’ is about. Second, the division between the creation and user processes is usually seen as a problem to be overcome. As Kanter, for example, put it: Throughout, I have marshalled evidence to show the importance of integration to the innovation process, close structural connections between potential innovator and users, between functions and departments, between the innovation project and use (Kanter, 1988, p. 205). In this case the potential users were largely the innovators, as it was to a great extent a joint process of knowledge creation and dissemination. Naturally this reduced the need for introducing the employees to knowledge created by somebody else. In the literature on knowledge utilisation it is emphasised that the probability of new knowledge being put to use will be greater if the subjective, complex and social nature of the knowledge in question is implicitly recognised (Dunn and Holzner, 1988). The collective nature of participative search makes it likely that such implicit recognition occurs. Third, the combination of the unfreeze and the direction indicated by the study may well have played a constructive role in creating a favourable environment for putting new solutions to work. Authors in the field of knowledge utilisation stress that factors like awareness and conviction are critical, in the context of exploiting new knowledge (e.g. Backer, 1986, 1992). Awareness was created by the study and sustained by a strong management focus on, and demand for, new solutions. Comments in management speeches, at meetings, in documents and actions all seem to have convinced the employees that such change was genuinely intended. The perception of (management) intention, as Nonaka and Takeuchi (1995) have pointed out, is a critical enabling factor in realising the creation of knowledge in organisations.

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Finally the element of inductive learning seems to have been important role in promoting the use of the new knowledge (e.g. Hennestad and Verde, 1991; Nonaka and Takeuchi, 1995). It could be argued that knowledge resulting from inductive learning is more easily put to use than knowledge that is learned deductively. The employees actually learned about the idea of customer orientation and about the tentative solutions by trying to sort out the practical consequences of the customer study. The logic behind this has been nicely put by Bateson and Weick: An explorer can never know what he is exploring until it has been explored (Bateson, 1972, p. xvi). Furthermore, the explorer is guided by preconceptions of some kind even though they may be generic preconceptions such as ‘‘this will have made sense once I explore it’’ although right now it seems senseless. (Wick, 1988, pp. 305, 306). 2(Still) an individual cannot know what he is facing until he is facing it, then looks back over the episode to sort out what happened. (Weick, 1988, pp. 305—306). Thus the process of creating new solutions through interactive participation is also a process of creating understanding. It is a case of sharing emerging learning as both process and outcome (cf. Pye, 1995). The new solutions, or suggestions for solutions, represent understanding and interpretation and have consequently become part of the participants’ repertoire. Those who did not take a major part in their creation, learned the ideas behind the new arrangements by having to act in accordance with them together with colleagues who had a share in their creation. It was also more likely that the ideas would be taken into use since they had developed interactively, in the manner cultural models, and had thus become shared (Bate, 1994). It is still doubtful whether the solutions would have been put to use had there not been a demand on the part of management. The company could still have experienced a return to old habits had the new ones not been sustained in some meaningful way — a process we shall examine more closely in the next section.

6. Making it stick — refinement and infusion 6.1. ‘‘It worked’’ — taking root through success During the first year the company was busy finding new ways of pleasing its customers. Improvements gradually appeared in delivery and services as a result of the measurement systems. After one year there was a 10% increase in the customer satisfaction index. The general feeling was now that they were doing the right thing: ‘‘It’s worked’’. It is generally known that organisations tend to learn from what works rather than from what does not (Schein, 1986). They also tend to learn more easily if the new models do not contradict fundamental values reflected in existing models (Gagliardi, 1986). The new ways in this case constituted a reorientation which did bend the existing frame, but it is doubtful that they challenged any basic organisational values in the company’s fairly sales-oriented culture with its espoused idea of

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serving its customers. Wilkins and Dyer (1988) address the issue in greater detail and suggest that cultural change comes about more easily the greater the availability of alternative frames, the greater the fluidity of the frames, and the weaker the commitment to the existing frame. In the present case, we can see that the creation of solutions in fact produced alternatives, that the frame(s) became fluid at least when confronted with the customers’ views (the unfreeze), and that this last probably also undermined the commitment to the existing frame. A process of reorientation could therefore be expected to make a tentative start when there was a collective experience that ‘‘It’s worked’’. Gagliardi (1956) discusses the question of continued successful development, and his description resembles what we have apparently witnessed here. He describes ‘‘idealisation’’ (‘‘We are doing the right thing(s)’’ followed by (symbolically) supportive arrangements, leading to greater efficiency in the new models, and so on. It was by no means self-evident that this continuation would occur; as mentioned above, attempted change often fails because people fall back on old programmes or the new ones function inadequately. 6.2. A change of focus and level It is therefore interesting to note that the focus and effects did slowly alter. The first period represented an emerging reorientation: a strategic and (management) anticipatory type of organisational change (Nadler and Tushman, 1989). Customer premises began to govern organisational premises to a much greater extent. Although secondorder change has proved problematic to operationalise, we could say that there was a basic shift in operating premises and consequently a second-order change (Bartunek and Moch, 1988; Watzlawick et al., 1974). And in terms of learning there was now a double loop orientation (Argyris et al., 1978, 1996). The main usefulness of the firstor second-order concept and the many similar polar classifications of change, is perhaps as a heuristic device (e.g. Colville et al., 1993). As such it throws light on the shift in the nature of the development. There seems to have been a gradual shift from a second- to a first-order focus on adaptation and fine-tuning. The emerging new focus seemed to serve the double purpose of stabilising the new orientation as well as fine-tuning it and working it out in more detail. This is a crucial point, because learning and change are complex matters. Even if it is stated that a new orientation has been established, there is the risk of a return to the old ways or to some other unplanned condition. Kanter points out that one of the dominant reasons for change programs failing is that organisations ‘‘insufficiently develop vehicles to institutionalise the programs’’. The challenge is to get the new ways to become the way of doing things: Programs need to be institutionalised in the sense that they become a part of common work practice, supported and rewarded throughout the organisation (Kanter, 1984, p. 213). It is worth recalling at this stage that there was a certain amount of bewilderment, and many managers wanted to move on to new programmes. Thanks to the quality

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director it was decided to continue to develop the feedback and assessment systems. This decision seems to have secured the emerging second-order, as well as starting a process of first-order change and learning; it secured the bridge across the knowledge gap by refining it. Two points connected with the way this double function was secured are important to note. First, the participatory search for new solutions after the customer study was to some extent extra. Even, to some extent, it was taking place in special arenas and meetings. After the first round, which led to the company-wide changes, the assessing of feedback material for improvements was integrated into normal operations and the normal meeting structure. It gradually became an ordinary rather than an extraordinary way of running operations. The focus was primarily a local one to improve the tasks and relationships for which people were responsible. The collected data were made available to central management however, so it could be decided whether or not organisation-wide adjustments or changes were called for. Second, the pay systems for both the sales and service personnel were linked to the criteria believed to be of importance for a customer-orientation. Previously, the service staff had been on fixed salaries, while the sales staff had a bonus system geared exclusively to volume of sales. The only difference relative to the previous situation was that the various measurements associated with customer satisfaction were now noted by management and colleagues. There were social rewards (words) when things went well, and the reverse if they did not. Action was now also being taken to link the managers’ pay system to customer satisfaction, while preparations were also being made to develop a system of ‘‘negative rewarding’’. The no-excuse guarantee system was to compensate the customer if the company failed to comply with the declared customer quality goals (this in the process of being implemented as the time of writing). The sort of learning situation now entered upon for the rest of the study can up to a point be likened to a learning circle. This idea was proposed by Kolb et al. (1971), but has been modified and adapted many times since (e.g. Handy, 1990; Honey and Mumford, 1986; Salaman, 1995). Although originating as a model of individual (experimental) cognitive learning it has been fairly freely used as a metaphor and as a basis for modelling a learning organisation (e.g. Swieringa and Wierdsma, 1992). The image then is that Company X is infused with customer knowledge, and the various forms of feedback systems are acted upon in a way that strengthens the new customer agenda. However, it is important to be aware of the limitations and potential danger of this. The customer-driven learning is now taking place within a (new) set of premises. The basis for customer reactions lies in the existing course of action, in the existing activities and chosen criteria, and there are few if any features in this system that challenge the organisational paradigm.

7. Concluding comments Back to the problem. It has been argued here that the company has learned and become more customer oriented in what seems to be a sustainable way. What

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happened was in line with the definitions of Ulrich et al. (1993), for example, that knowledge was generated, it was taken into use and it did have an impact. New knowledge has been reflected in learning in the cognitive as well as the behavioural dimension (cf. Fiol and Lyles, 1985). Nonaka and Takeuchi (1995, p. 49) assert that organisations can transform themselves, but they also call for more research on how organisational knowledge is created. The present case indicates that organisations can transform themselves with help from their customers. More research would be welcome on how the unfreezing and directing functions can be related to the way a customer study is performed, under what circumstances these functions cannot be expected, whether there are other ways of accomplishing the same thing, etc. In my view, the participative search was a crucial factor in creating new customeroriented knowledge and putting it to use. It generated qualities of induction and dialogue which nourished the creation of practical knowledge and its first tentative implementation. The directive unfreeze and the participative search coupled with the feedback systems that gradually came into operation appear to have been what created a constructive learning environment. There is no particular novelty in the discovery of these elements as critical factors, but it is the comprehensiveness of their application that appears to have created the reorientation. Further exploration of their interrelationships and timing would be fruitful. The focus of this article has been on the creation of learning and change dynamics. Little attention has consequently been paid to the quality of the various methods and techniques applied. A more thorough examination of the customer study could be helpful in assessing the quality of the ‘‘directive’’ advice which produced it. The phrase ‘‘infused with customer knowledge’’ indicates that the company has entered upon a stage of continuous learning. The infusion, however, is created and sustained according to the premises generated by the first customer study, and it is considered crucial to the process of stabilising and institutionalising the emerging customer orientation. However, it is important to note that the learning process gradually changed in character from a second-order type of reorientation to a firstorder elaboration. The organisation appears at present to be in the process of moving from an unfreeze to a new refreeze. This experience offers some insight into the way a reorientation can be brought about, but such a development might possibly lead a company towards a new cultural mismatch as its environment changes. The challenge of creating a continuous learning process that would also be able to cope with this problem, a capacity for deutro learning (Bateson, 1978), can be regarded as a separate issue. However, it might be worth exploring whether it would be fruitful to build on these experiences. Could a revision of the basis for the customer index, for example, and hence the premises for the feedback systems, counteract too solid a refreeze? Can knowledge about meta trends be integrated into discourse about customer knowledge and transformed into organisational preparedness? The research on market orientation and strategy from a knowledge perspective could probably make a useful contribution on this point (cf. von Krogh et al., 1994). The conceptual insights that have emerged in this article are induced from one case only. Little has been said about their transferability (Lincoln and Guba, 1985). How general or special is this kind of context and these types of process? Should the

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suggestions be restricted, for example, to business-to-business customer relations, i.e. those dealing with a product and its servicing? The main contribution of this article has been to offer some conceptual suggestions and to show how these are grounded. They appear interesting because they are rooted in a successful learning experience. It would therefore be interesting, primarily in the field of organisational learning but also in the field of customer orientation, which happened to be the sujbect of the learning here, to explore the usefulness of these suggestions in greater detail in other contexts both in further research and in practice. Both in the context of further research and in considering what managers can learn from such experiences, we have to bear in mind that in the present case an implicit ‘‘model of learning’’ emerged as events proceeded. The customer study, for example, was not planned to be such an effective trigger as it proved to be. The more or less spontaneous idea of asking the employees what they thought the customers would answer, proved a critical choice. Can an approach that emerged, and was inductively conceptualised, be deductively applied? When Weick, for example, advocates a small wins approach to change, he also points out that one cannot start with a blueprint for a series of small wins (Weick, 1984). The social territory is just too complex and dynamic. The approach to change that emerged here was ‘‘tailor-made’’ due to its pragmatic nature. Some would say that models for organisational learning and change are in a sense a contradiction in terms. In the present case we have been operating at the level of concepts critical to the task of managing organisational learning. What is critical in applying them, is that they do not reflect a blueprint application. Rather, they reflect a situation in which a pre-understanding of organisational complexity and strategic intent was paired with pragmatic diagnosis.

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