Every "system" is made up of parts which are connected and have relations with each other. In order for the parts and the system as a whole to gain benefit from these relationships, the system needs for there to be feedback mechanisms from one component to another. Your body's hip is aware when your foot makes contact with a football, through signals passing through your brain and without the proper functioning of the routing of these signals you would blindly miss the ball and keel over instead. Organizations of people are no different. And a business is just a component in a system whose other constituents include the customers (and also include constituents like shareholders and employees or executive staff). Without effective feedback looping from customer to business owner and back, businesses will lose their initial momentum and then flounder and eventually fail. Imagine a bicycle rider who is pushed into motion by a friend but who then has to take over control of direction, speed, and angle. Without quick and accurate communication from your pedaling feet to your equilibrium sensors in your ears to the visual processing through your eyeballs - if any of these sensory data flows is cut, the rider will eventually tumble over. Keeping a business upright and moving forward is like keeping a bicycle upright and moving forward. When this process is failing, even though customers lose when and while this is happening, given a market of choices (another effective ecosystem component), the customer moves on away from the lost, confused, or stunted business.

For a concrete example, let's imagine a typical journey to a restaurant in Vietnam. Food is a typical small enterprise here, given the low barriers to entry compared to other types of business, giving foreigners an impression of how entrepreneurial Vietnamese are. But among the myriad of food & beverage businesses which start up in Vietnam, the vast majority close prematurely for what I think are preventable reasons knowable ahead of time. At least some of these reasons relate to restricted flows of feedback.

1. You are walking down a local street and enter a local restaurant. You know nothing about it except that it's near you right now.

Did someone notice you entering? No, not this time. The arrival of a potential real customer was not acknowledged. There is a lack of situational awareness among the staff. [I have sometimes sat down at a restaurant and then left after a few minutes without anybody offering to accept my money in exchange for a meal. When an entrepreneur is paying for those potential customers to walk in the door without buying anything, they are losing money on each non-customer.]

I don't blame only the staff for being ignorant. That behavior is enabled by a society that doesn't expect more.

2. You end up ordering some dishes. A starter, a main, a drink. Your first choices are all unavailable. You try again, but your second choices are also not for sale today (or any day). Whoever created this menu was dreaming big. But a million customers could try ordering an unavailable dish without the store owner ever knowing about this demand. Why? Because the staff will never relay those failed requests up to someone who can take action, the low level staff themselves being completely powerless in this typical hierarchy.

Anyways, you end up ordering less than you would have if the menu was accurate and up to date. The alternative: knowing what your customers desire and giving it to them.

3. Your order arrives. Hopefully, there wasn't a mistake due to miscommunication and lack of confirming your order carefully. If there was a misunderstanding, who pays for the mistake? The staff will argue with the customer to make the customer pay. If not, the employee pays. For that meal, the business owner didn't lose money. But would you ever come back? No, but you leave the owner wondering why not.

Realize, though, this waitress's role here in the business is not to provide good customer service, at least the incentive system isn't there. In the American tipping system, the carrot/stick of nice/no tips is supposed to translate into attentive service from your wait staff. In Vietnam, wait staff are treated like dogs, paid little, and rarely receive tips. There's often little trust between employee and boss. Often, employees are stealing from their employers who don't know the real number of transactions taking place.

Tomorrow, you end up getting food poisoning from this meal. This case will not bubble up back to the wait staff who was picking her nose, or to the kitchen staff who wasn't properly washing anything, or to the owner who never wanted this to happen but who will regardless not be getting repeat business due to the lack of quality control. Without effective feedback, the problem of poor sanitation continues, as will any unexamined pathology. But who wants to be the receiver of bad feedback? On a personal leve, who wants to hear that they are doing a poor job?

Rules for incentives also effectively serve as feedback. Shareholders benefit directly when a business is successful and employees should too. Shareholders aren't at the point of transaction as it's happening and can't influence the transaction. Responsibility is left to the wait staff to assess customer feedback and use it before it's too late to benefit from the transaction.

4. Finally, you are ready to leave. You haven't paid yet. Is someone willing to take your money? No, again a lack of situational awareness. Not paying attention to customers. You will have to yell to get someone's attention. Subtler cues from customers are lost to the ether. These unobserved flows of information are an opportunity for capturing a competitive advantage, but remain only the potential for such. Business owners are already fighting the known unknowns. In the meantime, they can be taken down by the "unknown unknowns".

You, as a customer, will not trust the ability of your waitress to accurately calculate your bill. So you will scrutinize it for inevitable mistakes of overcharging. These mistakes are completely accepted without any mechanism which would discourage them in the form of punishment. Instead, the carrot of receiving money for unsold goods subtly encourages the practice to continue.

At this point, your waitress takes away your unused wet disposable towelettes in case you now decide to use them without paying for them. These are the final impressions the customer takes away from their dining experience.

5. Finally, you leave. How was your meal? Who knows. Was there anything else you would have wanted to order today? Data left uncollected. Will you come back again? Time may tell, but by then the restaurant or cafe or shop or whatever business it is which isn't openly collecting and responding to feedback from customers is already closed - after only being open for a few months.

The above scenario doesn't play out every time you eat in Vietnam. But outsiders who have been eating out in Vietnam for a few weeks should be familiar with all of these typical situations. Food business is something that foreigners have the most time interfacing with in Vietnam, unless they move deeper into the society. It is hubris for a restaurateur to believe they know how their customers feel without asking them. But the same problem of ignoring constituent feedback exists throughout the culture of all organizations. First, organizations need to have an awareness of what's going on. Then, they need to implement mechanisms for collecting feedback data (many points of it). And let the customer know their feedback is being acknowledged. Finally, this data needs to feed back into business operations. The end goal is to see the cycle repeat and to see customer feedback improve over time.