The internal customer

Treating parts of the organisation as customers in an internal market is a great idea except for one thing – it doesn’t work.

Why not? 

Before I expand it is worth defining what is meant by a customer and a supplier.  A customer is someone who has a demand for products and services and expresses this demand with money.  A customer pays.  They can exercise this choice in whatever way they want.  They can choose supplier, choose if the offer from the supplier is of value and at a whim, subject to contract of course, go elsewhere.

A supplier provides goods and services to consumers on behalf of customers for remuneration, in other words they get paid.  A supplier can choose the customers that they will deal with, the prices they are prepared to charge, the terms upon which they wish to do business etc.  They can also decide to stop dealing with a customer at a whim, subject to contract again.

So what has this to do with an internal market?  A commercial relationship must be based upon a tension between provider and payer which settles at the right quality for the price.  The tension arises as the two parties have different objectives.  An internal market however must be based upon a harmony as both parties should have the same objectives, such as to increase shareholder value or to become market leader etc.

An internal customer cannot exercise their choice through money as any revenue transaction belongs to the same organisation..  Spending time and money negotiating on a price is wasted as the overall amount of money within the organisation must remain the same.  An internal customer cannot go elsewhere otherwise the parent organisation pays twice, once for the service that they could have provided and once for the service that was purchased elsewhere.

An internal supplier in a similar vein cannot refuse an internal customer.  It cannot put them on the stop for non-payment as they would be hurting their own parent company.

By all means organisations should treat internal departments professionally and business like but both sides should have their focus on what is right for the whole company and what the real customers want.  After all they are both on the same team.