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

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What leads to un-economic Customer Experience investments?


It’s extraordinarily easy to make uneconomic investments in customer experience – much of the time and money ‘invested’ is wasted because organisations fail to understand the criticality of systems thinking and the need for ‘silo-busting.’ They also focus on how they ‘deliver’ experiences rather than understanding how people ‘have’ experiences. It is how people ‘have’ an experience that influences the choices they make in the pursuit of what they really want. The culprits that lead to uneconomic investments in customer experience include the following:-

o Reliance on customer satisfaction measures – customer experience investments only pay off when behaviour changes – satisfaction is not an emotional state that drives behaviour
o Voice of the Customer – Henry Ford said “If I had asked customers what they wanted, all we’d have is faster horses’
o Touchpoint Mapping – The highest impact insights and opportunities exist at non-touchpoints – companies ‘deliver’ an experience at touchpoints e.g. dropping car off for service at service desk, getting lift to work, getting a call indicating status of service……………….etc etc etc. People have experiences at non-touchpoints………e.g. frame of mind based upon past service experience BEFORE car is dropped off for service, having to wait for a driver to deliver them to work, having to arrange their day without access to mobility because car is in for service, having to arrange collection of vehicle…………etc etc etc. It’s important to consider and recognise behavioural pathways – what do these events make customers think, feel and what does this influence them to do?
o Service Level Improvement – Incremental improvements in service quality generally do not get customers’ attention or influence behaviour
o ‘Fixing’ the front line – The experience customers have is a product of deeply entrenched organisational behaviour. Training and motivating front line employees does not address this

Source: Frank Capek – Customer Innovations

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?

The Challenges of Implementing Customer-Centric Strategy – What creates the problem?


Let’s face it. There is very little new about the concept of customer-centricity. There is however, plenty of room for improvement in both strategy and execution.

What creates the problem?

  • The traditional functional and product silo design of organisations creates serious problems. In these instances it’s almost impossible to operationalise around ‘the customer.’ Each silo invariably has its own operational structure, own processes, sometimes its own technology, its own distribution model and very often its own ‘sales’ team. Joining up these silos to deliver a unique and distinctive experience is often a ‘step too far.’
  • ‘Slash & Burn’ cost-cutting is not a solution. Customers are not all created equal and shouldn’t all be treated in exactly the same way. Customers are a finite resource and their value lies in their business and value today, as well as their business and value tomorrow – referred to as Life Time Value. (LTV). It’s not in any organisations interest to engage in activity/behaviour that results in the reduction of LTV.
  • Developing and implementing organisational capabilities that enable a customer-centric business model creates structural and integration challenges. Many leaders do not have the guts to commit to the required transformation. Furthermore, personal incentives are often in conflict with the effort and investment needed to develop customer-centric capability.
  • Many organisations are unable to evolve from the mental model of ‘having’ customers to ‘being’ a customer.  As such they’re unable to recognise that they need to provide value that addresses the ‘customer need’ – rather than ‘selling them’ what they have. They are unable to emphasize ‘customer well-being’ in ALL decision making
  • Customers are a finite resource and the source of all revenue and profit, today and tomorrow. They are therefore the most valuable asset of any organisation. In most cases there is no-one with the responsibility of managing that asset. There is no one responsible for knowing and understanding the value of the customer today and tomorrow. There is no one who is able to provide a comprehensive and authoritative view of the customer. There is no one who is responsible for creating customer strategy at the highest level of the organisation in order to maximise the drivers of customer value management viz  REAP – Retention, Efficiency (cost-to-serve understanding), Acquisition and Penetration (customer development, cross-sell & up-sell)
  • ‘Customer Management Illusion.’ Living in a fool’s paradise. Research regularly proves the chasm that exists between what senior executives believe customers think of them and their companies versus what customers actually think. An Accenture study highlighted that 75% of CEOS’ believed that their organisations were customer-centric yet 59% of customers said customer service was somewhat to extremely dissatisfying. (NB: Customer Service is not customer management or customer experience – it is only 1 attribute of a customer-centric business). In a study by the CMO Council 50% of CEOS believed their organisations were extremely customer-centric. Less than one tenth of customers agreed.

Operationalising a customer-centric business model is complex and time consuming. Developing a deep understanding of customer needs, breaking down silos and developing the capability to enhance the customer experience is a good place to start.

Please add your inputs & comments

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)