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)

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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

Customer-Centric Transformation: What Good Looks Like – Penetration – Increasing Customer Value – Part 14b 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 – Increasing Customer Value

  • Value development is managed as a business discipline (like acquisition or retention) with: clear ownership / responsibility; detailed planning; specific propositions; checks that it is generating incremental value.
  • Active stimulation mechanisms are in place to increase usage / value / frequency of purchasing the organisations’ core products.
  • Opportunities to sell ‘up’ to a higher level of value are sought and supported by appropriate offers, especially at point of sale.
  • Cross-selling is driven through both outbound and inbound channels, based on clear rules-of-engagement and prompts to ensure appropriate offers are made from the organisation’s whole portfolio.
  • Low value customers are identified against clear definitions and specifically dealt with so as to drive up their value or at least prevent it being made worse.
  • The valuation of customers and stimulation of this value extends beyond pure transaction value, into areas such as advocacy and referral.

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

Customer-Centric Transformation: What Good Looks Like – Penetration – Understanding Customer Value – Part 14a 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 – Understanding Customer Value

  • Definitions of how customer value is calculated have been agreed and implemented for the current, to-date & future/lifetime value levels. Proxies have been developed where real data is not available.
  • Analysis has been carried out of value distribution across the customer base and there is clarity about what each of the main value drivers are (e.g. acquisition rate, attrition rate, product holding, market cost etc.).
  • The development of value (upwards and downwards) over time at the absolute level and at the share-of-spend level is understood for different types of customers.
  • Opportunities to develop customer value are identified based on analysis of current purchase patterns, predictive modelling and any other identifiable indicators.
  • Staff are clear on how much value varies between customers and the critical importance of taking special care of the most valuable.

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

Customer-Centric Transformation: What Good Looks Like – Retention – Pro-Active Retention Activity – Part 11c of 14


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 Retention 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 include 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. In developing Retention capabilities it is important to understand the drivers that create and maintain loyalty as well as the factors that destroy it, important to consider how to retain through business as usual, important to consider pro-active retention activity and how to best manage dissatisfaction. Each of these areas is addressed in separate, individual blog posts.

Transformation Intent – Retention

“Retention is all about understanding your customer base and the drivers that create and maintain loyalty as well as the factors that destroy it. Coupled with this is the need to consistently deliver on your promise while ensuring that over-delivery is balanced against the overriding goal of doing just enough to ensure repurchase. A retention strategy also demands that you are pro-active with your customers, monitoring them for signs of defection and implementing constructive plans to generate customer commitment to repurchase. Should customers become dissatisfied, the right flows of communication alert you so that the issues can be addressed promptly and consistently, whilst solving the problem at a root cause level.”

What Good Looks Like – Pro-active Retention Activity

  • Customer involvement at both the ‘content contribution’ and at deeper levels (both on-line and off-line) is enabled and actively encouraged.
  • Explicit retention messages are fed into on-going communication activity as well as forming the basis of specific retention activity where it is known to be most needed.
  • The way that customers want their loyalty recognised has been researched and reward schemes developed that consider experiential as well as product rewards. Alternatively, a clear, strategic decision has been made not to reward loyalty.
  • Customers are scored for their likelihood to leave and are constantly monitored for signs that they may do so. Mechanisms are in place to pre-empt and prevent an exit decision. Where this fails an effective ‘Save’ process is in place with the highest quality staff and realistic incentives in place to prevent loss.
  • The management of customers voluntarily leaving actively minimizes any collateral risks and looks to increase the chances of future return or winback.

 

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

Customer-Centric Transformation: What Good Looks Like – Agility and Workflow – Part 9 of 14


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 Agility & Workflow which is one of the six Enabling capability areas represented. The Enablers explore the components needed to energise your transformation and will invariably involve changes that can be planned for within the current business cycle, for implementation in the next budgetary or operating period. These components support your capability to implement your chosen customer strategies and rely on the fundamental building blocks (Foundations) already discussed in Part 1 to 4 of this series of blog posts.
Transformation Intent – Agility and Workflow
“The ability to deliver a customer-centric experience is dependent on the speed at which your organisation can mobilise itself so that you can meet the changing needs of your customers and act on new opportunities as soon as they arise. In order to do this you need an agile decision-making infrastructure that is supported by efficient and technology-enabled processes that integrate teams and deliver on the opportunities for real-time responses.”

What Good Looks Like – Agility and Workflow
• The organisation is set up to take customer insight and feedback through to new or amended processes / propositions quickly and is checking that customers perceive this agility.

• Processes are actively managed to ensure the right people receive the right prompts and information at the right time and are able to action it within defined timelines.

• The opportunities and customer need for real-time working are understood and the relevant data is available to enable clear movement towards this in the most important areas.

• Collaboration between customer-impacting colleagues is encouraged and enabled by relevant technology on an overall basis as well as being targeted at specific areas of need.

• Centres of Excellence are used to formerly incubate and develop good practices in one part of the organisation in a way that is specifically designed to support ‘packaged’ transfer of learning across the enterprise.

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

Customer-Centric Transformation: What Good Looks Like – Experience Management – Part 8 of 14


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 Experience Management which is one of the six Enabling capability areas represented. The Enablers explore the components needed to energise your transformation and will invariably involve changes that can be planned for within the current business cycle, for implementation in the next budgetary or operating period. These components support your capability to implement your chosen customer strategies and rely on the fundamental building blocks (Foundations) already discussed in Part 1 to 4 of this series of blog posts.

Transformation Intent – Experience Management

“Achieving excellence in customer experience is about finding ways to create products, services and experiences that positively and profitably influence what people think, feel and do. This calls for the ability to design and deliver innovative, differentiated, economic and relevant customer experiences across every channel and touch point ensuring that both physical and emotional elements are addressed. ”

What Good Looks Like – Experience Management

• Appropriate (i.e. not too much) quantitative and qualitative research is carried out into customer satisfaction in a format that aims to be predictive of future loyalty and to take customer expectation levels into account.

• On-line and off-line mechanisms are in place to ensure that a wide range of staff (junior to senior) listen to customers as well as those whose job it is to do so. Processes ensure that the organisation reacts to what is being said without over-reacting to potential ‘noise’.

• Based on these insights the customer experience is designed, engineered, documented and adjusted by expert resources with a focus on the customers’ emotional needs as well as functional requirements.

• Clearly different experiences can be delivered to different values of customer without causing undue dissatisfaction of lower value customers.

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