Steve Bell talks to the popular management guru...

...his newfound popularity and glowing testaments - "sobering, intoxicating, stout, eye-opening" - from a recent CEO summit. ...vendors are clamouring for McKean to speak at their events, and the man himself turns out to be a strong advocate of technology, which he insists has a vital role, but only in an organisation that gets the balance of its "information competency determinants" right.

 There's a new kid on the management guru block... and propounding his own theories with a zeal and energy which seems to come naturally only to American religious fundamentalists. In the past few months, John McKean has flown in and out of over 20 countries, giving keynote speeches for some of the world's leading technology vendors, speaking at dinners, doing deals with business schools, and generally haranguing the corporate elite. His popularity is such that he was even called on to give a speech to the US government's technology chiefs.

But why all the fuss? Well, McKean might say that he is a prophet on a "mission impossible" from the god of corporate things, to enlighten a business community still spilling the entrails of its employees and customers on a sacrificial slab. Sceptics would say that he just got lucky. However, McKean attributes his popularity to a Latin dictum vergillo et simplex (truth is simple): "I am selling reality, people are sick and tired of the hype. People pay me to tell them truth. My market is truth."

The truth according to McKean is spelt out in his recently published "gospel", Information Masters - Secrets of the Customer Race, and is encapsulated in what he calls "information competency". This is a company's ability to have all its customer information resources moving in harmony towards the same goal, improving value for customers and shareholders.

Information myopia
Most companies are involved in "a never-ending parade of marketing, service and loyalty approaches, with all the enabling technologies, yet find themselves only marginally closer to their customers," he argues. This is because the largest part of their investment goes into technology, instead of equally crucial areas governing its application.

He identifies six customer information competency determinants alongside technology - people, processes, organisation, culture, leadership and information - and argues that investments in these areas have historically been neglected. For example, investments in people he calculates historically as at two per cent, while technology is at 82 per cent. McKean argues that this is wrong - technology should only rank ten per cent investment and people should rank 20 per cent. This has resulted in an information myopia, with firms viewing information as an operational necessity, rather than as a primary tool for creating value for customers and shareholders.

He argues that based on his research findings - and this man has been collecting information since his postgraduate days - in reality, the majority of business drivers are non-technological, and resources that could be invested in these areas are consumed by misdirected business processes.

He reels off examples of what happens when "information competency" is lacking, such as cutting support services because of poor sales resulting from poor targeting, or increasing advertising to compensate for a poor product or service (see box, right). The most brilliant marketing, sales or customer service strategies are doomed to "anaemic" success if the competency determinants do not have a balanced investment. He is aghast at the 90 per cent failure rates of direct marketing campaigns, and spits on loyalty schemes which he views as bribes, with customers bound to switch when a better "bribe" is offered. And he views call centres as the "barbaric beginning" of an attempt to start communication with customers on a different level and more cost-effectively.

Ironically, McKean's own career is rooted in the IT industry. Before he began his mission in the early Nineties by setting up the Center for Information Based Competition - to advance thinking on how firms in customer-intensive industries achieve competitive advantage - he was a "floating guru" at a computer services giant. His experience there compelled him to take the "lonely" road.

"I spent so much time on some of the leading customer-intensive firms in the world, and saw them spending millions of dollars. All these firms were spending so much time and energy on implementing and still not getting value. I saw incredible failures happening because they were too focused on the technology, and there was not enough focus on the non-technological aspects of using IT effectively, which boils down to the people who use it to interface with the customers."

Getting the balance right
On the surface, this would appear to be bad news for the technology vendors, especially given his newfound popularity and glowing testaments - "sobering, intoxicating, stout, eye-opening" - from a recent CEO summit. But not so - vendors are clamouring for McKean to speak at their events, and the man himself turns out to be a strong advocate of technology, which he insists has a vital role, but only in an organisation that gets the balance of its "information competency determinants" right.

"Technology gives companies the potential for greatness, but it is very difficult to change leadership, to change structure, to offer staff better incentives. Getting the structure of the organisation right is the biggest part of the battle," he says.

McKean is full of examples of companies that fail (see box) and in each case he shows how massive investments are made in one area, without the balance of emphasis on another. There are, of course, also a small number of companies that are succeeding, and McKean's rooting around has unearthed some interesting differences from those who struggle. These "information masters" do not view marketing and sales operations as separate business units, or customer service as a "desired" function, or loyalty/retention schemes as initiatives. Instead, marketing and sales are considered strategies to achieve information competency, and customer service is "required", with customer loyalty an outcome rather than an initiative.

Taking a more balanced approach to investing in the competency determinants will produce radical changes, but is made difficult by the cultural legacy within companies. He cites the example of greater investment in people as an area which can produce radical changes but is often overlooked. "People are being paid for short-term wins rather than radical fundamental changes, but it is so simple to change. Changing the incentives is not a magical answer, but it is culturally difficult because there is so much corporate legacy in how people are rewarded and incentivised. Employees aren't there because they are altruistic, or they like the company, but because they need to earn a living."

Those companies which have begun to develop a greater information competency have discovered they can also react far quicker to a competitor's market moves. A major US investment bank, for example, had developed the sophistication to pre-model all the likely scenarios its competitors might employ. When these scenarios actually happened, an accurate and sound response was put together in two days.

At the same time he admits he is positing the impossible, given that entrenched corporate philosophies have been solidifying over decades. He suggests sales and marketing chiefs should pick a project that is symbolic and highly valued, and which they can have control over and enough budget to implement in a realistic timeframe. And they should be allowed some failures. "The most profound learning comes from failure," he quips.

McKean's manner of speaking about the identification of problems and their solutions owes more to schools of psychology than to methodologies from Harvard University. He talks about ugliness and a human being's instinctive aversion to it, whatever form it may take, as one of the reasons why many firms are chasing their tails. They do not want to look at the "ugly reality" of how they are operating. Nor do they want to change, because human nature resists change. Firms have forgotten that people are human beings and to build a successful operation it's vital to incentivise people.

But perhaps his most withering remarks are directed at business "gurus". He gives voice to his feelings by using his favourite analogy - the "simple store owner of 100 years ago". "Present any guru's book to that store owner and watch them laugh - 'somebody is actually selling this?'". He dismisses his peers as sellers of fool's gold, which glitters and attracts attention but has little value. But people are attracted, because to discover the real gold they need to uncover a lot of dirt, and the dazzle of the fake has more immediate lure than digging through the dirt.

But perhaps one of the reasons for his recent surge in popularity is not down to the publication of his book...but that his audience recognises some fundamental and simple truths about their business.

Investment mistakes lead to:
* lowering prices to compensate for weaknesses in product competitiveness, rather than lower prices created by operational efficiencies;
* raising customer incentives to compensate for poor customer understanding;
* raising sales commissions because of poor marketing segmentation;
* increasing advertising to compensate for a weak value proposition;
* increasing the size of marketing campaigns to compensate for poor analysis;
* cutting support services because of poor sales resulting from poor targeting

Sheep and goats - McKean's studies
A large US mail-order firm had invested huge amounts in technology to understand its customer transactions. Every time it ran a national ad campaign with an 0800 freephone number, its competitors' sales would climb significantly - because it had not sufficiently differentiated its own products from its competitors. McKean points out this embarrassment came about because, unlike its competitor, the company had not invested in a "cross-origination link" to measure advertising effectiveness.

Or there is the case of a US telecoms giant, which invested a mound of money into improving its customer database without investing in the internal communications between departments. The result? Marketing campaigns that were replicated across the departments, leading to the loss of millions of dollars. No less than a form of corporate madness, sighs McKean.

But what about the success stories? McKean gives the example of two UK firms, one established and the other a start-up. The start-up was plundering 1,500 customers a month from the established firm, which did not even know what types of customers it was losing, whether they were profitable or long-term. However, the start-up knew exactly: it was taking only the most profitable customers because of a sophisticated customer attribute matrix it had modelled.