Why You Should Never Utter “Internal Customer”

When customers collide

It has long been recognized that businesses survive when they create and deliver solutions at a profit that customers desire and will pay for by means of voluntary exchange. Business success is ultimately in the hands of consumers. In this sense, the customer is king. The choices made by customers decide which businesses will succeed and which will fail, and so much more in terms of the efficient allocation of resources in a free-market society.

Peter Drucker famously identified this notion as a broader business philosophy he referred to as The Marketing Concept.

Then along came the TQM gurus. To improve quality, they taught that not only must employees be doing work that ultimately serves customers, but that they can improve the quality of their work by treating each other as customers – internal customers.

At the time, the Japanese and Pacific Rim companies were out-competing North American companies by combining high quality with low prices. By comparison, most NA producers were providing low quality at high prices. In an effort to fight back, NA companies went to school on quality, and to win against Japan the Asian Tigers, managers began to discover Deming, Juran, and Crosby, taking crash courses on how to build quality into production instead of inspecting defects out, and learning that “quality is free.”

Along with a shift in mindset about improving quality and reducing costs to compete with offshore manufacturers, came the adoption of TQM thinking via ISO standards training, the promotion of awards like the Baldridge Award, and more recently, Six Sigma and Lean training and accreditation. All of this, to the extent it was and remained focused on customers, was a good and necessary thing. Unfortunately, some good things contain the seeds of their own destructions, and along with TQM as an important method to stay focused on creating value for customers, came the expansion of the radical idea that if you are an entrepreneur, executive, or manager, employees are your most important customers.

In businesses and organizations where there is talk of both internal and external customers, there is also often an underlying premise that employees should replace and surpass the customer as king. Often the Marketing Concept and the proper orientation towards consumer sovereignty becomes inverted and the business leaders purposefully or by default adopt and promote the value-destructive idea that employee sovereignty should rule.

When this is allowed to happen, TQM kills the Marketing Concept, almost assuredly making it more difficult for such businesses to succeed.

My article, When Customers Collide, was just approved for publication in the Ivey Business Journal. In the article I take a serious look at this important and neglected issue of internal and external customers through a critical lens.

The Ivey Business Journal is a publication of Ivey Business School, Western University, located in London, Ontario, and is the leading business journal in Canada, with a mandate of “delivering practitioner versions of academic articles, productivity-enhancing management advice or transformative ideas with practical applications based on significant C-suite experience or original research.”

I hope you read the article and feel free to leave a comment below about whether you agree or disagree with my viewpoint.

Barry Linetsky is a Partner with The Strategic Planning Group, and author of The Business of Walt Disney and the Nine Principles of His Success (Theme Park Press, 2017). The book is available in print and Kindle editions from amazon. Visit BarryLinetsky.com to follow his blog and read his many articles.

© 2017, Barry L. Linetsky. All Rights Reserved.