Letter to the Board: Competive Advantage & Customer Centricity (relevant to 99% of companies)


Dear Board of Directors

Your Current Reality:

We understand that any organisation looking to work, and to win, in the 21st Century is impacted by political, economic, social and technological challenges simultaneously. Leading in this environment is a major challenge.

There are four trends reshaping the world of business – technological advances and the speed with which new technologies are created and copied, the loss of geographic advantage resulting from globalisation, the shake-up of traditionally stable industries as a result of deregulation and the rising power of the consumer and their ability to get what they want, when the want it, from whomever they want.

We understand that your primary objective is to make a profit and to maximise that profit over as long a time period as possible.

Your approach, however, to maximising profits is the same as roughly 99% of other organisations on the  planet…………..through volume and market share. Volume and market share are driven by growth and growth is derived through market expansion and through the launch of new product.

You’re a product centric company (irrespective of your grandiose statements about being customer centric or customer led). Your long term focus is to strengthen and expand your product portfolio. You reward your employees on their ability to create new products and/or create new ones. Your divisions/teams are set up around products. All your strategic advantage is set up around product and the product expertise behind those products. Your brand is perceived to have greater value than your customer.

So we challenge you……………will this approach allow you to deliver sustainable corporate earnings and create a sustainable competitive advantage? What is your unique differentiator? What are you uniquely known and recognised for? How meaningful is that to your customer base? Does your ‘uniqueness’ influence customer behaviour in your favour?

Your world is saturated with largely undifferentiated goods and services. According to Gartner Group less than 10% of brands will be able to provide meaningful differentiation for consumers through differences in core products and services, by 2020. We are of the opinion that this is the current reality in any event. Goods and services are simply no longer enough.

It’s easy to forget that customers don’t really care about your offerings. What they care about is their own needs and how best to meet those needs.

You cannot ignore 2 major realities – the 1st is that competitors cannot allow you to go unchallenged as you launch new products, drive price leadership, gain market share, and expand into new territories. The 2nd, is that you are not only competing with other businesses in the customer markets – you are also competing with them in the capital markets for the critical funds needed to build and sustain a competitive position.

Your Challenge:

The reality is that you’re on a path to mediocrity unless you radically change the way you’re working today. As a product centric business it is highly unlikely that you can build a sustainable uniqueness, unless you have a similar ‘make up’ to Apple. Yes, you heard right – Apple is primarily product centric, not customer centric as many believe.

You need to think differently. No-one ever buys a product. They always buy what they think the product will do for them. They buy the sum of the benefits that the product delivers.

Your corporate machine has remained a machine of mediocrity for customers. Your business continues to be defined by the traditional silo structure – what goes out to market is defined by your dis-connected silos/functions. Because of your structure there is no complete understanding of the customer experience. As a result your management team is unable to grasp how the company performs from an end-to-end customer experience perspective. They are therefore incapable of developing a ‘customer management strategy’ that they can clearly communicate internally and externally. Instead, all you see is a bunch of ‘tactics’ being embraced. The strategic customer issues lie in wait as the corporate machine scuttles around reactively fixing complaints that have escalated to senior management within the corporation.

Your Desired Reality

To be differentiated, increasingly relevant and able to charge a premium you have to move beyond delivering ‘goods’ and ‘services’ to staging experiences. The mind-set must be away from focussing merely on what employees do, to one of how the tasks are actually performed. The emotional component is as important as the rational elements. The ability to design and deliver a unique and distinctive customer experience is your competitive advantage.

Your business performance is directly linked to your ability to compete.

The mandate to your management team shouldn’t be to manage the business or to create and sell products. It should be to develop and sustain value driven, mutually beneficial, relationships. It is these relationships that are the core of sustainable success. Everything else they do is to support those relationships.

Organisations seeking a competitive advantage must examine every component of their internal systems. That competitive advantage results from the inter-relatedness of the functional areas which is required if a business is to deliver a consistent customer experience.

Jack Welch of GE fame said this: – ‘There are only 2 sources of competitive advantage. Firstly, the ability to learn more about your customers faster than the competition and, secondly, the ability to turn that learning into action faster than the competition.’

To do as Jack Welch says requires an ‘outside-in’ approach or a ‘customer centric’ approach.

You require a framework for Customer Centricity where Customer Centricity is defined as the business system and way of managing that enables your organisation to design and deliver a unique and distinctive customer experience in order to acquire, retain and develop targeted customers efficiently, for improved business performance.

That framework must provide your management team with a completely objective and comprehensive understanding of how well you are managing customer profitability across the 4 levers of Customer Value Management – Retention, Efficiency (understanding cost to serve), Acquisition and Penetration (cross-sell and up-sell).  Your business capability must be reflected in a single ‘leading’ indicator or metric that cascades into a number of individual capability areas to provide a detailed view of organisational maturity and understanding of where improvement in capability is most needed. This should be based upon a clear methodology and model to drive focus and consistency as well as benchmarkability to other organisations that will be setting prospect and customer expectation. Just think about having every senior stakeholder in total alignment about the direction being taken in order to drive up customer performance in enough detail to know exactly what they need to be doing differently, with a clear set of prioritised and detailed activity, underpinned by a realistic set of expectations about the financial benefits that could be delivered by getting to the desired state, and how long it is likely to take to deliver a return on investment.

Your role:

Your role, as business leaders, is to ensure that your organisation has a business model/ecosystem in place that fully supports the development of a competitively superior business. Your role extends further to ensure that the management team is capable of driving the transformation necessary to ensure that the strategic transformation programme is a success.

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3 Responses

  1. Doug,
    Excellent position on the negatives of product-centricity—one which I agree with. Organizations have taught themselves to believe that their purpose is to sell a product or service. Customers are a necessary part of that model because they create the needed revenue to sustain and grow the business.

    However, your direction about staging experiences is still based on “inside-out” thinking. It’s built on the mindset that customers are still outside the organization and we (our company) must create experiences for them. This is not in the spirit of Jack Welsh’s comment.

    The term “experience” has become the new buzzword in the customer relationship consulting industry in recent years. Almost all of this messaging is focused on transactional approaches—individual encounters (or touch-points, or other words and phrases) with customers—which is still rooted in a product-centered mentality. This is traditional, even old-fashioned thinking.

    The alternative to transactional (i.e. creating experiences) is transformational. In order to really become customer-centered, organizations need to adopt a different worldview. Since the product-centered view is one-dimensional, I refer to this new perspective and the system to achieve it as Customer 3D (www.customer3d.com) because it expands an organization into a new dimension, where perspective and performance are focused on customer success.

    As you point out in your Board letter, it is critical that the leadership of a business adopt this customer-centered thinking and that it empowers employees into making pro-active decisions that benefit customers. The competitive advantage going forward will reside in this differentiation in how effectively the culture of organizations connect with their customers.

    Thank you for your post.
    Bill

    • Hi Bill
      Thanks for your comment and input. Staging experiences is not based on ‘inside out’ thinking at all unless you’re looking at experience design from the perspective of ‘how do we deliver experiences.’ All of our Customer Journey Mapping and Experience design work is done from ‘outside in’, based upon clearly defining ‘what experience does the customer have.’ Our approach is to work with businesses to proactively design the experience across the relevant customer journeys, recognising not only the experience that the customer has at each touchpoint, but also the experience they have at ‘non-touchpoints’, i.e. what are they feeling prior to, as well as after engaging at the touchpoint of their choice (e.g. what do we feel prior to having to call a contact centre and what do we want the customer to feel (and say, and do) after the contact?) After all, one of the primary purposes of Customer Journey Mapping and experience design is to influence customer behaviour in order to support the business objectives. Happy to discuss in more detail if you’d like. Really appreciate your comments. Best wishes, Doug

  2. Very nice article, just what I was looking for.

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