What is this beast called “customer focussed strategy”?

I came across this post by Becky Carroll and it got me thinking and I’d like to share that thinking with you.  This post is rather long, technical in parts (though I have made an effort to keep it simple and short) and will only be interesting to strategist or those of you who have an interest in strategy.  If you don’t then I suggest you go read something else.  If you have the interest and/or open to making the effort to learn something new then please read on.

Is ‘customer focussed strategy’ the same beast as ‘customer strategy’?

If you read Becky’s post you will note that she does not define  ‘customer focussed strategy  She actually defines  ‘customer strategy’.  And this is her definition: “Put simply, a customer strategy is a proactive plan for how we want to acquire, retain, and grow our customers! “

When I examine this topic, from my viewpoint,  then the following occurs to me:

• ‘customer focussed strategy’ and ‘customer strategy‘ are two different beasts – they are not the same beast;
• a strategy is a strategy and a plan is a plan – they are not the same beast.

Exploring the creature ‘strategy’

There is no shared agreement on the creature ‘strategy’.  Different authors and speakers describe it differently.  Some people (me included) consider this to be word that the speaker uses when he wants his topic to be given respect and consideration from those that wield power, influence and patronage. So let’s go back to the roots of strategy – the military.

Picture the following situation.  The place is ancient china and the period is the Warring States Period.  China is split into Qin, Chu, Han, Wei, Qi, Yan and Zhao – seven warring states.  Lets further assume you are the key advisor to the ruler of Yan a relatively weak state.  And your lord wants you to come up with a strategy that gives him enough time to build up his military forces against possible invasion by the states of Zhao or Qi.   So the political objective is to buy time.  And you have to develop a strategy to do just that.

Lesson 1 : strategy is a cognitive (thinking based) response to an important (usually political) objective. 

Lets continue with the analogy.  As the strategist you ‘strategise’ – you discuss, you observe, you study, you play mind games – and come up with some options.  Option 1: you can cement an alliance with the state of Zhao or Qi – thus making yourself stronger and less likely to be attacked.  Option 2: you can get Qin to start a war against Zhao and Chu against Qi – this will keep Zhao and Qi busy and buy you that time.  Option 3: you can ‘buy’ the key advisors to the states of Zhao and Qi and get them to convince their lords to wage war on each other.  Option 4: you can buy key people in Zhao and Qi and get them to sow discord within Zhao and Qi so that you instigate civil war and so forth.  The options are limited only by your ‘intelligence’ (your understanding of the ‘terrain’ in its many facets) and your mental agility to come up with creative and workable options.

After discussion and consideration you may choose Option 1 or 2 or 3 or …If  you did that then, in my books, you are a novice strategist.  If on the other hand you are a seasoned strategist your strategy will be some kind of clever combination of these options.  Why?  To take into account both the fact that all information is incomplete; the facts on the ground can change quickly;  the principle of synergy; and its a good idea to have a back-up plan.  Notice that at this stage you have not developed a plan of how you are going to implement your strategy.

Lesson 2: a good strategist makes use of creative thinking, analytical thinking and synergestic thinking; he also uses his intuition based on his experience of men, armies, maneuvers, battles etc.

Lesson 3 : strategy requires an in depth understanding of self, of other and the facts on the ground.  If you have a sufficiently inaccurate map of the ‘territory’ then are likely to come up with a strategy this is inappropriate, is easily seen through or simply isn’t implemented. 

Lets switch from the military to business and explore this domain

In general the business objective is some combination of growth, profits and profitability.   Business strategy is the cognitive process for mapping/exploring the terrain; thinking up, exploring and evaluating options; and placing your bets on certain options as opposed to others.  What might these options look like in the business world?  Let highlight a few:

• Expanding into new geographical markets;
• Buying up competitors thus reducing competition and driving up prices;
• Buying up promising start-ups (e.g. Cisco)
• Expanding into adjacent  existing markets (e.g. from computers to computer, printers and networking devices);
• Expanding into non-adjacent but profitable markets (e.g. GE with financial services);
• Creating new markets entirely by seeing the world differently and/or using emerging technologies  (e.g. Apple ipod/itunes, Amazon);
• Ramping up the marketing and advertising spend;
• Selling unpromising or unprofitable businesses;
• Ramping up new product development so as to refresh the product quicker and more often (e.g. car industry);
• Getting a bigger share of your customers wallet (e.g. Tesco, Amazon, Ebay);
• Attracting new customers by building a reputation for doing a great job of looking after your existing customers (e.g. Zappos);
• New business model (e.g. Virgin, Skype, IBM) ……

Once you have made your choice of these options then you have your business strategy.  Now we are in a position to take a look at the creature ‘customer focussed strategy’.

‘Customer focussed strategy’: a business strategy focussed on building mutually profitable relationships with customers? 

Is it possible ‘customer focussed strategy’ is a business strategy.  Specifically, a business strategy that seeks to deliver the prime business objective by focussing on cultivating mutually profitable relationships with customers?

In my thinking and my work I have made it mean that ‘customer focussed strategy’ is a cognitive response to a long term growth-profit-profitability objective that involves the creation, investigation, selection and combination of business options to cultivate mutually profitable relationships with the customers that you have chosen to do business with in  .  Let’s unpack that a little bit more:

First, a ‘customer focussed strategy’ focusses in on fit and as such involves choosing which customers you will focus upon because they hold the most promise for a mutually profitable relationship.  This implies that you may take action to ‘harvest’ some customers and ‘divest’ other customers.

Second, it involves selecting options that build strong relationships with your customers over the longer term.  It also means letting go of options that you have been holding onto tightly and which cause relationships to fray and stain your reputation.  As I mentioned in one of my earlier posts Zappos CEO pulled the plug on the 25% of the business - the part of the business that was cashflow rich when Zappos was fast running out of cash.  Why?  Because this part of the business was also the business that was generating dissatisfied customers through poor service.  To paraphrase Michael Porter strategy is as much about the options that you give up and forgo as it is about which options you select and focus upon.

Third, it requires the selection of options that build mutually profitable relationships. Which means options that create value for your chosen customers and which (in combination) give you a big enough share of the value that you create.

Fourth, your focus is on attaining the longer term growth-profit-profitability objective.  In military terms you are selecting the options  that hold the best promise of winning the war and reaping the benefits of peace.  Options that require short term sacrifices including losing/giving up valuable resources and losing various battles if you are to win the war.  The classic military example is Mao Zedong’s retreat when some 90% of his fighting force died during the long march.  The great business example that comes to mind is Zappos – which I mentioned above under point 2 (above).

Fifth, it is as much about the the thinking process that you go through as it is about any words on a paper document or tasks in a project plan.  Put differently what makes a ‘strategy’ strategic is the process and quality of the thinking (creative, analytical, synergistic).  In my view most business strategies are weak because they are mostly predictable.

Question for you

That is enough from me.  What do you think?