Customer Strategy Infographic


It goes without saying that if your organisation pledges to become more customer-centric, you need to innovate your business model through a customer-centric lens. Customer-Centricity is all about the organisations ‘way of work’ or the ‘business system’ that enables the business to design and to deliver a unique, distinctive and consistent customer experience in order to Acquire, Retain and Develop targeted customer Efficiently. An organisation seeking to develop customer-centric capabilities must be willing and able to change its organisation structure, its measures and its employee and distribution incentives to focus on long term business success.

The design of a customer-centric strategy requires an organisation to deeply understand its current customer-centric capability (its departure point on the transformational journey), the nature of customer-centricity to which it aspires, the action and implementation priorities to bridge the gap between the current and the ‘to be’ state as well as the business benefit (financial uplift) derived from this improved level of customer centric capability.

This infographic helps explain the core components of the transformational journey and the customer-strategy, and is based upon the SCHEMA Customer Management Framework which is the methodology we use to drive customer-centric transformation

Exampleco customer management strategy - REAP

Customer-Centricity! Oh, I’m Doing that Already!


Yeah right! I had a really interesting discussion with a prospective client recently. He is the MD of a multi franchise vehicle business. Successful? – no doubt. Customer-Centric? – I don’t think so. Yet he was adamant he had ‘customer-centricity’ under control. They were busy hiring someone who was going to drive this initiative. This is a classic example of a refusal to admit to the current reality. A refusal to fully understand what’s wrong with the current way they’re running the operations. A refusal to really understand what customer-centricity is all about.
Will these refusals lead to business failure? I certainly don’t believe so. But I do know that they will lead to lost opportunity. And what really agitates me is a verbal commitment made to developing themselves as an internationally recognised exemplar of customer experience. How, I ask with tears in my eyes? How are they going to enable disruptive change by doing more of what they’ve always been doing? Time will tell. I only wish that people would stop making bold statements that they’re never going to deliver upon, unless they develop a REAL understanding of their current reality, a REAL understanding of the reality to which they aspire, and REAL capacity for change.

Customer Centricity = Sustainability = Customer Centricity = Superior Business Performance


In a recently published article (MIT Sloan Management Review – How to Become a Sustainable Company)the authors point to a study that supports the view that ‘high sustainability’ companies significantly outperformed their counterparts over an 18 year period in terms of both stock market and accounting criteria, such as return on assets and return on equity. Also, stock market performance was higher and there was lower performance volatility. We can therefore conclude that sustainability makes good business sense.
The term ‘sustainable company’ is spoken about and referred to fairly frequently these days. At the core of this trend is the fact that consumers and the general public are not satisfied with businesses that focus solely on short-term profit maximisation. People want businesses to be far more considerate of broad based human needs.
In this context ‘sustainability’ refers to a business philosophy based on balancing financial, social and environmental considerations.
I am a firm believer and supporter of ‘sustainable enterprise’ – I also have this expectation that if a business can balance financial, social and environmental issues then surely they should add ‘customer experience’ to the list? After all, why waste the energy and effort to address social and environmental considerations (which ‘speak’ to us and can therefore be used to create greater levels of loyalty and advocacy) if they don’t design and deliver a differentiated customer experience.
Sadly, I’m a customer of a couple of ‘sustainable’ companies that deliver a customer experience that is mediocre at best and downright unacceptable at worst. This got me thinking from two perspectives – firstly, building organisational capability for sustainability is similar to building organisational capability to deliver differentiated experiences. Secondly, if an organisation is committed to ‘sustainability’ yet doesn’t focus on customer experience, should we be more accepting of mediocrity in delivery of those customer experiences? I say NO! NO! NO! In fact, Customer Experience and Sustainability should go hand in hand – one without the other is indicative of opposing forces.
Your thoughts?

Customer-Centric Transformation a no-brainer: Check out why!


I’m guilty! I admit that I’m a customer-centric evangelist because quite frankly, how else can you build meaningful competitive advantage? Customer-centricity is all about differentiation and it’s almost impossible to sustain differentiation around product, price and distribution footprint. But you can sustain differentiation around your customer knowledge, insights and understanding.

Here are 3 questions designed to get you thinking a little differently about the criticality of developing customer-centric capability within your organisation. These ideas are attributed to Don Peppers & Martha Rogers of Peppers & Rogers Group, whom I worked with very briefly around 11 years ago.

1)      Who is the one stakeholder, whom if you maximised the return thereof, would benefit ALL stakeholders?  So think about this – there are generally 5 major stakeholders in businesses today – society, partners, investors, customers and employees. Maximising the return for the investor is not necessarily good for the customer! Maximising the return for the employees doesn’t mean ALL other stakeholders will benefit. Maximising the return for the Customer, on the other hand, certainly does benefit all other stakeholders. This is why the principles of customer-centricity are so important. If an organisation is unable to propagate a supply-demand chain then they are unable to supports investors and all other stakeholders.

2)      Would you agree that customers create 100% of business value in almost all cases? Customers create value for businesses every quarter by purchasing products and services. They also create value in another way which is referred to as lifetime value (LTV). LTV is based upon their intention to continue doing business with, and paying money to the organisation. That LTV goes up and down in value, as does a stock/share portfolio. Any reduction, or potential reduction, in that value (brought about possibly through a poor engagement or experience) is bad news for the organisation. This level of understanding and insight of that value change is generally not available within organisations so this reduction in value is not reported to shareholders , albeit that it is akin to the company reporting lower earnings which in almost all cases results in company stock/shares losing value. My friends at Peppers & Rogers have a metric for this which they refer to as ‘Return on Customer’ and this metric is designed to capture both types of value created (actual and LTV) to balance the short term/long term impact of customer value. ROC = (Profit made on customer today + change in LTV)/Initial/beginning LTV.

3)      What do shareholders & investors really want? Most shareholders and investors want confidence that leadership is able to grow a company organically. That means that the organisation will have developed capabilities to Acquire customers, to Retain them and keep them buying from the business, to grow them and to get them to buy more from the business. They’d also want confidence that leadership is able to guide investment and understand the cost-to-serve different customer cohorts/segments to best manage financial return. If the business can demonstrate these capabilities then they are providing REAL value to customers which means they’re providing real value to shareholders/investors at the same time

Customers are a scarce asset. They are valuable and unique. They are measurable. They are the biggest limitation to growth and to understand this will impact the decisions we make.

So…………within your organisations, if customers are the most important asset in your business, who is managing them as such. What operational framework/ architecture/ business model are you using to optimise that asset? Who is tracking the value of the customer today and the value of the customer tomorrow? What does your customer dashboard look like?

Comments?

A blended set of measures are critical for customer-centric operationalization


What company doesn’t want to be customer-centric? It’s highly unlikely that any executive wakes up in the morning and makes a statement along the lines of – “Customer-Centricity is not important to us and we shouldn’t consider it!”

That said, to move beyond the lip-service that is so evident around this topic/set of capabilities requires both courage and a commitment to a transformational journey.  Surely everybody with some understanding of change management principles recognises that transformation requires an amended set of measures and/or the addition of some added measures to ensure focus and accountability? Financial metrics and the achievement of profitability targets are, of course, non negotiables.  Today, however, organisations have to balance profitability with social conscience and need to focus much more on stakeholder relationships. The most important stakeholder in almost all cases is the customer.

I’m regularly asked what metric should be used to measure customer-centric capability. The reality is ‘a measure’ is not sufficient. Trying to craft a customer strategy, develop customer-centric capabilities and operationalise those capabilities isn’t going to be supported by ‘a measure.’

The purpose of this article/discussion isn’t to wax lyrical about the strengths and weaknesses of individual metrics. It is to share a suggested ‘blend’ of measures that are needed if an organisation is serious about a customer-centric transformational journey.

These are illustrated below. Most will be familiar with Customer Satisfaction, Employee Satisfaction, Voice of the Customer and Net Promoter Score. The 2 measures that have less of an understanding are SCHEMA® and Customer Effort Score.

Customer Measures Matrix

 

 

 

 

 

 

Very briefly, SCHEMA® is a leading indicator and measures the customer-centric capability of an organisation. It measures how well a business is optimising customer profitability and compares against global benchmarks. It’s a leading metric because, from this level of understanding, an organisation is able to quantify and identify where it needs to build capability to enable it to be customer-centric – in other words what capability is needed to design and deliver a unique and distinctive customer experience in order to acquire, retain and develop targeted customers efficiently.

The Customer Effort Score is another metric that I am hugely supportive of as ‘effort to engage’ is becoming an increasingly important indicator of ‘willingness to do business with’ as well as loyalty. Quite frankly, it’s astounding how difficult it is to do business with many organisations (after all – why should we care about or be expected to adhere to processes that make absolutely no sense to us – why should we have to put up with broken, inefficient engagement capability that wastes out time and requires effort from us?)  Who has any loyalty and wants to support a business that is difficult to do business with.

I chair a senior learning forum called The Customer Council (TCC) and at the end of 2012 we invited Dr Nicola Millard from BT to address TCC. BT have become somewhat of a ‘poster child’ when it comes to Customer Effort Score in action. Have a look at this video, by Dr Nicola Millard, on the topic of Customer Effort: Help or Hype?

http://www.youtube.com/watch?v=U5iBs_Kac3U

Customer-Centricity = Blue Ocean Strategy


I’ve long been a supporter of ‘Blue Ocean Strategy’ thinking. I’m also a firm believer that the greatest opportunities for business today lie with business model innovation – i.e. finding new ways to create, deliver and capture value. This enables the creation of uncontested market space – ripe for growth.

Blue Ocean Strategy

Blue Ocean strategy, created by Professors W. Chan Kim and Renee Mauborgne, deals with the reality of companies long engaging in head-to-head competition in search of profitable growth. These companies have fought for competitive advantage, battled over market share and struggled for differentiation. This head-on competition often results in nothing but a bloody ‘read-ocean’ of rivals fighting over a shrinking profit pool and failing to build any meaningful and sustained strategy to create profitable growth in the future.

It is suggested that the business universe consists of 2 distinct kinds of space, viz red oceans and blue oceans. Red oceans represent all the industries in existence today – the known market space. In red oceans, industry boundaries are defined and accepted and the competitive rules of the game are well understood. Here, companies try to outperform their rivals in order to grab a greater share of existing demand. As the space gets more and more crowded, prospects for profit and growth are reduced. Products become commodities and increasing competition turns the water bloody.

Blue oceans, on the other hand, denote all industries not in existence today – the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. There are primarily two ways to create blue oceans. In limited instances companies can give rise to completely new industries. In most cases however, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry.

One of the most effective ways to create blue oceans – to create meaningful competitive advantage, is to develop organisational capabilities that enable the enterprise to design and to deliver unique and distinctive customer experiences, and through this capability, to create value that is distinctive in the market. This is about satisfying a real customer/client need that deals not only with an appropriate, relevant and unique product or service, but also addresses the experiential and emotional elements that the customer/client needs.

The Challenge of Growth – Value Innovation

Profitable, organic growth is a tremendous challenge facing many companies today.  As organisations get larger the organic growth challenges become bigger. Very often the value differentiator that led to the initial growth is lost or diminished as more nimble and agile competitors step in to disrupt.

Most companies share an implicit set of beliefs about ‘how we compete in our industry or in our strategic group.’ They share a conventional wisdom about who their customers are and what they value and what products and services their industry should be offering. Their strategy is dominated by the idea of staying ahead of the competition. They view business opportunities through the lens of their existing assets and capabilities – they ask, given what we have, what is the best we can do? This leads to competitive convergence – they end up competing solely on the basis of incremental improvements in cost or quality or both.

Differentiated, winning organisations with enlightened leadership pay little attention to matching or beating their rivals – instead they seek to make competitors irrelevant through a strategic logic called value innovation.

Value innovators do not accept their industry conditions as given. They do not set strategy accordingly. They do not let competitors set the parameters of their strategic thinking – they do not focus on comparing strengths and weaknesses with those of their competitors in order to build an advantage. They are not interested in competing at the margin for incremental share.

Value innovation logic starts with the ambition to dominate the market by offering a tremendous leap in value. Value innovators do not let what we can do today condition their view of what is required to ‘win’ tomorrow.

An analysis of major innovations within existing corporations in the past decade shows that precious few have been business model related and an American Management Association study a few years back determined that no more than 10% of innovation investment at global companies is focussed on developing new business models.

Shareholders today want to understand that companies are able to grow organically. Customers are a finite resource. Companies need to prove to shareholders that they are capable of acquiring more of this limited resource, need to prove they are capable of retaining those customers that they have, particularly the valuable ones, need to allocate resource efficiently and manage the cost-to-serve those customers based upon what they’re worth today and what they will be worth tomorrow and need to have a sufficiently compelling customer value proposition that ensures they can develop their current customers through appropriate and relevant up-sell and cross-sell initiatives.

This is about developing leaps in value for both the organisation and the buyers, creating all new profitable demand.

The creation of blue oceans is reliant on innovation across products, services and delivery (experience). Those companies most successful at repeating value innovation are those who take advantage of all 3 of these platforms. Sadly, too many organisations limit their strategic options by focussing on only 1 dimension of strategy.

Competing in overcrowded industries is no way to sustain high performance. Developing and operationalising a customer-centric business model will enable an organisation to stand out.

For more insight into customer-centric business model innovation, please see my book “The Customer-Centric Blueprint’ – http://amzn.to/ZILg4y

(Much of this content is attributed to various Harvard Business Review articles – Blue Ocean Strategy by W.Chan Kim and Renee Mauborgne, Value Innovation: The Strategic Logic of High Growth by W.Chan Kim and Renee Mauborgne, Creating New Market Space by W, Chan Kin and Renee Mauborgne and Insead MBA Mini Elective – Blue Ocean Strategy Simulation Course)

Customer-Centric Transformation: What Good Looks Like – Penetration – Managing High Value Customers – Part 14c of 14c


Designing and executing a customer-centric business model requires end to end organisational alignment. Customer-centric capability development cannot take place in isolation to the rest of the business. The customer-centric journey requires a clear quantified understanding of current organisational capability across all 14 capability areas of the SCHEMA® Customer Management framework in the centre of the REAP Customer-Centric Blueprint below. As important as an understanding of current customer management capability is, so too is an understanding of the capability to which the organisation aspires.

Each week I’ll address another single capability area, sharing with you the Transformation Intent to which your organisation should commit to, as well as ‘What Good Looks Like’ for those organisations that have achieved a fairly high level of maturity in the respective capability area.

The REAP Customer-Centric Organisation Blueprint®

REAP CCOB for Blog

This week  we are dealing with Penetration which is one of the four Execution capability areas represented. The Execution layer relates to the capabilities and control levers needed to optimise customer value and includes Retention, Efficiency (understanding cost to serve), Acquisition and Penetration (customer development, cross-sell and up-sell) – collectively referred to as REAP. These are capabilities and initiatives that can be optimised in the short term.

These capabilities support your ability to implement your chosen customer strategies and rely on the fundamental building blocks (Foundations) as well as the Enabling capabilities already discussed in Part 1 to 10 of this series of blog posts.

Each of the four Execution capability areas is made up of sub-components. The Penetration dimension relates to the ability to develop more value from existing customers through cross-sell and up-sell activities to improve return on customer investment. Formal management of high value customers and key accounts is a critical part of this. It also requires clarity as to how you deal with low value customers from a development perspective, if at all. The 3 sub-components of the Penetration dimension are ‘Understanding Customer Value,’  ‘Increasing Customer Value,’ and ‘Managing High Value Customers.’ Each of these areas is addressed in separate, individual blog posts.

Transformation Intent – Penetration

“Delivering sustainable and superior business performance requires the on-going development and growth in the value of your customer base. To do this you need to have an in-depth understanding of your customer value so that you can identify opportunities to increase this value. This potential uplift is then supported through relevant propositions, cross-selling, up-selling, indirect value creation and expansion of existing product usage. In treating different customers differently, high value customers should also be given special attention so that the right team equipped with the necessary budget can deliver on their specific needs.”

What Good Looks Like – Managing High Value Customers

  • Current and potentially high value customers are identified and managed as a specific category with additional resources and budget, even if there is no formal concept of key accounts, or they do not fall into the definition of key accounts.
  • Planning for customers that do classify as formal key accounts is a meaningful exercise that drives resource allocation, customer activity and relationship development rather than just setting targets and budgets. It involves a wider range of internal stakeholders for each account and is at least transparent to the customer if it does not actively involve them.
  • Key accounts are managed at a deeper and more pro-active level than other customers with regular reviews of the relationship as well as progress against the plan. Opportunities for meaningful collaboration on a shared-risk basis are actively sought.

For more insight into customer-centric business model innovation as well as more insight into this particular area of the REAP Customer-Centric Blueprint, please see my book “The Customer-Centric Blueprint’ – http://amzn.to/ZILg4y