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Bronwyn Fryer: You've called Siebel Systems "a new-economy company with old-economy values." That sounds nice, but what does it really mean?
Tom Siebel: From its inception, Siebel Systems has adhered to core values that have ultimately prevailed in every economy—in the preindustrial, industrial, postindustrial, and now in the Internet economy.
First is our absolute commitment to 100% customer satisfaction. Instead of going off and engineering products and then trying to sell them, we talk to customers first, find out what they want, and then design the products and services that meet their needs. We are organizationally and individually committed to do whatever it takes to make sure each and every one of our customers succeeds. This is not lip service. It's not something that we put in paragraph two of the CEO letter in the annual report every year and then ignore. This is a cornerstone of our corporate culture. All the messages we send internally reinforce it. For example, in each of our facilities worldwide, the art on the walls is customer art—literally, art from customers' publications—and the conference rooms are named after customers. If you study our communications strategy—our advertising, shareholder reports, brochures, and so on—you'll see that it's all directed at employees and it all emphasizes our commitment to the customer. Most companies use these vehicles to communicate to external constituents: the media, prospects, shareholders. When I write an annual report, I'm talking directly to employees.
Second, we place value on running a cash-positive business. That's a radical idea in an industry full of cash-negative dot-com businesses. Until recently, running a profitable high-tech business was unfashionable. Investment bankers told entrepreneurs they could have unlimited access to capital markets and that it was not necessary to generate cash or make a profit. But responsible companies ask themselves, "How much revenue do we have coming in?" and they spend less than that.
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| I like to think of us as the Tiger Woods of the information technology industry | |
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| —Tom Siebel |
A third value is professionalism. I like to think of us as the Tiger Woods of the information technology industry. Tiger Woods does not play the U.S. Open in cutoffs, sneakers, and a Budweiser T-shirt. That's unimaginable. His shirt is pressed. His shoes are shined. And his level of performance—his driving average, his score—has exceeded all other competitors. So at Siebel Systems, the notion of dressing in jeans and a T-shirt to greet the CEO of a major financial institution, who just got off the plane from Munich, is not acceptable. It's not going to happen.
Striving to be the very best in the world at serving customers is humbling. We have to work hard to earn the respect of others. People here are not stuffy, but our comportment is always professional, whether we are interacting with each other or with customers, partners, suppliers, or competitors.
Q: The word "comportment" sounds strangely quaint in the mouth of a Silicon Valley executive.
A: It is critically important to me that Siebel Systems never develops yet another pathological Silicon Valley corporate culture. Too many companies here have an arrogant self-image. Their attitude is, "We are geniuses and visionaries who make insanely great technology." And there's the cult of the software CEO, where it's all about "me, me, me" and my transitory fulfillments—my parking lot filled with Ferraris, my crushing the competitors, my money, articles with pictures of me in my fighter jet or being escorted around by PR assistants. Meanwhile, everyone in the company is engaged in e-mail wars about who will get the corner office. All of us at Siebel have worked in companies with those kinds of value systems, and we don't want to work there again.
The CEO's primary job is to cultivate a corporate culture that benefits all employees and customers. I want to be absolutely certain that our values drive our behavior and not vice versa. It's unfortunate that CEOs are taught to believe that their most important job is to drive up the company's stock price or to meet Wall Street's expectations. Those are secondary effects of a more primary goal: understanding what customers need and delivering it. If you build a company and a product or service that delivers high levels of customer satisfaction, and if you spend responsibly and manage your human-capital assets well, the other external manifestations of success, like market valuation and revenue growth, will follow. You need to manage for customers and employees, not investors.
Q: Siebel Systems is committed to achieving 100% customer satisfaction on its products and services. That seems like it would be hopelessly difficult given the extreme complexity of enterprise software systems, which can cost hundreds of thousands of dollars and can take months—even years—to fully implement.
A: It is challenging, but we've nevertheless set total satisfaction as a companywide goal, and we devote whatever time, money, and resources it takes to make sure our customers are satisfied. Last year, for example, an installation at a Sun Microsystems site in Europe was not going well. We dispatched an A-team of our top engineers—including our VP of engineering—to work full time on making the system work. They worked in shifts, 24 hours a day, seven days a week, until it was fixed. As it turned out, the problem didn't have anything to do with our software, but we didn't point fingers at the other vendor and say, "The problem is with you guys." Our approach was to solve Sun's problem and get the system live. More recently, at Cisco Systems, a server running our software kept crashing. That turned out to be a problem not with our software but with an older version of the server operating system. We fixed it and got the system running smoothly. We do this kind of thing all the time.
Our strategy is completely opposite to what I like to call the "cold war" strategy of other enterprise application software companies—a philosophy of going to war with everybody. They tell the customer, "You're going to buy all your enterprise software from us in the future. You don't want to even think about buying our competitor's product, because we're going to run them out of business." That doesn't do much for the customer, so we take the opposite tack. For instance, BroadVision makes a personalization engine that e-businesses use to target products to individual customers. Their engine competes with ours, but if a corporate CIO says to me, "We're going to buy BroadVision's personalization engine and not yours," I say, "Great. BroadVision is one of our partners. Go with BroadVision. We'll support it, we'll integrate with it, and we hope it works well for you." Many enterprise application companies are inclined to create an international crisis if their customers choose someone else's software.
We go to extraordinary lengths to listen to the customer and do what the customer needs. Over time, we've developed a very sophisticated system of measuring levels of customer satisfaction with our products and services. An outside firm that specializes in these kinds of metrics, called SatMetrix Systems, conducts in-depth, on-line surveys with all our customers every six months. The questions are detailed, and they cover everything from ease of doing business with us to the nature of our contracting process; our licensing terms; quality of support; quality of documentation; the knowledge and ability of the sales organization; and the performance, utility, and functionality of the product. The surveys give us very precise insight into what customers are thinking and doing. We slice and dice the information by customer, product, market segment, geography, and so on, so we can discover the performance areas in which we excel and the ones in which we need to improve.
The survey results are at the top of the agenda at our quarterly management meetings. Whenever we see that the customer satisfaction levels have fallen out of our strict tolerance ranges in any given area, we develop a strategic plan to get them back in line. A few years ago, for example, customers told us the quality of our documentation was unacceptable. So we completely revised our documentation strategy and reorganized that area of the company. Now our customers tell us our documentation is excellent. We'll always have areas for improvement, because there are many moving parts in our business. But I don't see these as things to get embarrassed about or as opportunities to berate a manager; I see them as opportunities to constructively improve our business.
Q: How has the ability to measure customer satisfaction, and to make product improvements based on that information, affected the company's bottom line?
A: It's had a very profound effect for us, and I think it will have a similarly strong effect for all companies. Research suggests that there's a high correlation between levels of customer satisfaction and financial performance indicators like return on assets and equity. In fact, the connection between satisfaction and revenues is so close that we believe customer satisfaction will vault past customer acquisition and market share as the primary indicator of profitability. Product, price, place, and promotion no longer offer the competitive barriers or differentiation they once did.
Our work with SatMetrix reflects these changes. SatMetrix has developed a unique, real-time technology for measuring customer satisfaction, which we think is going to be important. We are working with the company to develop a Web-based measurement technology that we plan to install at all 2,100 of our customer sites. So the e-business czars at Deutsche Telekom, IBM, Chase, Hughes, Bank of America, Citicorp, or any one of our other customers will be able to measure satisfaction levels among their customers before, during, and after deployment of our e-business systems. I would suggest that a customer satisfaction increase of 5% to 20% could raise revenue levels significantly for any of these companies, all of which face fierce competition in their respective markets. Ultimately, this kind of detailed customer-satisfaction data will end up in the boardrooms of every one of these companies. CEOs will not only see what kind of return on investment they are getting on our software, they will discover very precise opportunities for making their organizations more customer-focused. And Siebel Systems will be able to see the degree to which our completed installations are succeeding.
Incidentally, we use the same scoring system to ensure that our employees deliver customer satisfaction. For example, the incentive compensation of everyone in the company—the salespeople, the service people, the engineers, the product marketing people, everyone—is based on these same satisfaction scores. So the product marketing people who work on our call-center software receive bonuses based on what our customers tell us about the utility of that product and their satisfaction with it. For salespeople, the bulk of their incentive compensation is paid only after we know the level of the customer's satisfaction—four quarters after a sales contract is signed. That's different from the way it is typically done in the software business, where salespeople are paid when the customer signs a contract. We practice a conscious form of organizational behaviorism. We structure the compensation plan to drive the kind of behavior we want. As far as I know, we're the only company in the world that does this, and we've found it produces the highest levels of customer satisfaction in the software industry.
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