So, I've talked about these practices to manage people as being a system, right, this idea that we want to think about how they fit together. That raises another question, which is how do they fit with the rest of what the organization is doing? For example, how should we think about the way that we manage people, how it fits with the organizational strategy? Do we need to change the partnership approach for different kinds of strategies, maybe there's a partnership approach only fit certain strategies. So the answer will give to this, I guess, yes, we probably do want to think about implementing things differently depending on strategies. But no, it doesn't seem to be that kind of cost minimization, taylorist approach will work for some strategies and a partnership approach will work further. Let me explain that in a bit more details, first, a sensible question we might ask ourselves is, what do we mean by strategy? There are a lot of different ways that this can be defined, one of the ways that my strategy colleagues seem to enjoy is. Thinking about it in terms of the difference between cost to serve and customer willingness to pay. That's the idea here, is that the value that you're creating and ultimately the profits that you can derive. Really reflects the gap between those two things of the cost to serve and customer willingness to pay. I mean, think about it, you can't charge less than your minimum price and continue to make money. I mean, the number of companies that seem to do so with vast amounts of venture capital backing. But generally in the main, in the long run, your minimum price has got to be above your cost, cost to serve or you're not going to make money. On the other hand, obviously, you can't charge more than your customers are willing to pay, okay? So, the most profits you can make is really the difference between what people are willing to pay for your goods and what it costs you to actually provide those goods. So, when we think about strategy, strategy with trying to make more money, right? So, how do we make more money, there are really two ways that we can do it. So, one is to lower our cost to serve, right and we see this for a lot of retailers, right, why do you go to them? Because we think we're going to get goods cheaper, then we will elsewhere. They're able to do that because they think they can drive down their costs of providing goods. To you below what their competitors are able to do and therefore make more profit, so we can drive down cost to serve. That's one strategy, the other strategies to try and drive up willingness to pay people like coming to my store. They think they're better quality or maybe I'm really targeted at a particular niche of customers. And those people really want to come to me because I'm different, okay, so somehow the alternatives, I'm going to really drive up willingness to pay. So, I think there's been a common conception right, that if you're following this kind of willingness. To pay strategy of kind of quality of service, then the partnership approach makes a great deal of sense, right? So, think about Lululemon, I don't know if many of you have come across Lululemon, So they are an American brand of athletic apparel. Which charges what I believe to be borderline unconscionable prices for very kind of high end, yoga pants, those sorts of things. So yeah, you can imagine if you are Lululemon, you're selling the brand. You're selling an experience as much as the goods and so yes, you can't have some kind of very scripted process. You really need people to be able to engage with their customers, you can understand for them like a partner approach. Sounds like it's got to be a much better idea than really driving down costs in every way and how you're going to serve people. Okay, what about the cost of service, so you might think, okay, if my goal is to drive down cost to serve. Then there's a lot about the tailor of strategy that I like, so I can hire cheaper people, they're more interchangeable, all of these sorts of things. And yet, whenever people have looked within industries of this, do we see stronger returns. To partnership approach in those organizations which have more of a kind of increasing willingness to pay strategy, they just don't see it. You see when you're also improving cost to serve a partnership approach,, is a good idea to take Costco I've mentioned before. So Costco is a wholesale retail change, so it's one of these places you go in. Kind of like a big warehouse inside, large kind of pallets of goods stacked high, you go in because it's cheap. I think they argue some of their hoods kind of move 40% cheaper than what you get elsewhere, you buy it in bulk, you take it home. So for them, like driving down the costs, keeping those costs as low as possible is key, and yet they have a partnership model, why? Because yes, your wages and benefits for an important part of your costs. But ultimately, if you want to be low cost of serb, you need to be productive, you need to be efficient. You need your processes to really work in terms of delivering the right goods to the right people when and where they're needed. And you can't actually get that done with a cost minimization approach, and so, if you look think across industries, right? So Costco, you see again, it's kind of this low cost provider yet still providing a partnership approach. If you look at, for example, Southwest Airlines, as I mentioned before in the airline industry. The only consistently profitable airline across decades in the US again, they both had low prices. Low cost airline and yet at the same time really exploiting this partnership approach to deliver productivity. And so, do I want to manage people differently with different strategies, yes, absolutely. The kind of instructions and training, I'm going to give somebody who is selling yoga pants in a Lululemon store. They're going to be different from the way that I manage somebody in a Costco, what I want them to do day to day. Probably the kind of attributes that I'm going to hire them for as well but the fundamentals of do I really want to focus on. Making sure have high ability people in my stores that their goals are well lined with mine. And I'm really giving them opportunities to use those abilities to help the organization. Those things are constant across organizations, regardless of their strategies. And so, ultimately it is and fine tuning these details that really we see the differences. Rather than whether you want to implement a partnership strategy or whether or not you want to go with kind of more of a taylorist cost minimization approach. Okay, so what I want you to take away from this module really what this module has been focusing on. Is understanding how our human capital, the people we employ, how they manage them. Really shapes your organizational performance, done a few things, partly, I've tried to encourage you to think about your organizational capacity. So, thinking about the tasks that are performed in the organization, how those relates human capital. So, idea that's partly about your head count, it's partly about the processes that you employed to manage them. But a lot of it is about the skills and engagement of those people as well. What that means is that when we think about how we manage frontline workers. A partnership model that really emphasizes them as full partners in designing. Implementing and innovating services ultimately tends to be more effective in the long run. What does that mean in practice, it means paying careful attention to three things. How do we make sure people have the skills that we want them to be, how do we make sure they're effectively motivated? That we've really aligned their goals with the organizations and how do we make sure they also have opportunities to participate in decision making? I've talked about a lot of the evidence that we have, the partnership approach really does yield benefits. That we see these benefits across different industries and even across the different strategies the organizations implement. Okay, what I want to do in the following modules is really dig deeper into this and try. And understand when we talk about making sure that we have the right skills, what does that mean? When we talk about making sure that people are motivated, how do we do that, I hope you'll join me for those discussions.
