Doc Searls recounts a few salient points about Flicr, and how their attitude toward the user base has been critical. The bottom line:

Here's the problem, and the opportunity: Every vendor involved in this - Flickr/Yahoo, Zoomr, Tabblo, and so on - will live and die by their relationships with their users and customers (and not just by customers alone).

He gives a brief example (by way of a link) to an example of not getting this - Home Depot:

Home Depot has delivered superb financial numbers in the past five years, with total sales growing an average of 12% per year and profits doubling. But the share price has dropped 24% during the biggest home improvement boom in history. And shoppers are getting grumpier. The University of Michigan's annual American Customer Satisfaction index shows Home Depot slipped to dead last among major U.S. retailers, 11 points behind Lowe's. Home Depot employees, who were encouraged to "make love to the customer" under co-founders Bernard Marcus and Arthur M. Blank now sometimes treat them like bad dates. "I don't want to say one bad apple spoils the bunch," says Curt D. Bridges, an electrical engineer from Decatur, Ga., who used to be a die-hard Home Depot fan. "But sometimes some [store clerks] almost blow you off."

Nardelli's strategy to expand into the contractor supply business, while cutting costs and streamlining operations in 1,816 U.S. stores, has pushed customer service down the company's priority list. Many full-time workers have been replaced with part-time employees, who now make up 40% of store staff. Meanwhile, workers' incentives for good customer service have dwindled, too. The profit-sharing pool for workers shrank to $44 million, down from $90 million the prior year, despite record sales.

An awful lot of "legacy management" thinks that it's all about the size of profit margins right now - so cutting costs is always a good thing. The trouble is, if those cost cuts make the customer experience worse - and if there's a competitor out there who recognizes the problem - then your cost cuts will end up being profit cuts as well. There are very few businesses that just don't have to care what the customer thinks (your local DMV comes to mind). There's no one willing to spend extra money like a customer who feels like he's been doted on. Forget that, and your "streamlining" may lead to unexpected problems.