Bringing Customer-Centricity to the Enterprise

Gwynne Young
Managing Editor, CustomerThink
Member

Posted 31-Aug-2004 12:59 PM
What are the main elements a business needs to expand customer-centricity to the enterprise?

Posts: 397 | Registered: 21-Jun-2004 Reply With QuoteEdit or Delete MessageReport This Post
Gwynne Young
Managing Editor, CustomerThink
Member

Posted 31-Aug-2004 01:00 PM
[For Dick Lee]

First and foremost, companies desiring to become more customer-centric need to rethink their business strategies.

Rather than starting with predetermined financial goals and product goals and then using "strategic planning" to figure out how to achieve these goals on the backs of customers, companies have to rewrite the strategic planning script, so the planning process identifies opportunities to add value to customers in ways that add value to the company—and goals are the outcome of strategic planning, not the starting point.

Then, customer-thinking companies must redesign enterprise workflow and information flow to fulfill these strategies; then reengineer work processes to support workflow; then support work process with appropriate application technology.

That's a far cry from rushing out and cutting a deal with Siebel.

Graham Hill
Guru
Member

Posted 01-Sep-2004 12:20 AM
Gwynne

Despite all the hullabaloo about customer-centricity, the hard evidence suggests that customer-centricity is often NOT the best strategy going. An overwhelming focus on customers tends to ignore other equally important factors that can easily make or break a business.

A market-orientation has been shown to be a better strategy, as it incorporates a more balanced view of the inter-related role of customers, competitors and market trends in driving business success. It follows that the business management must be based upon more than just spotting profitable opportunities to add value to customers.

Business planning should be based upon a balanced understanding of how the business creates value, what it is good at doing, what customers will buy & how, and what competitors are likely to do. The relationships between these four factors need to be understood before you can start to identify what products should be offered, to which customers and at what prices. That may mean retiring products that can't be offered profitably, or that can no longer compete in the market. It may also mean choosing not to serve particular customer segments if you can't do it profitably, or if you can't service them adequately. I think you get the picture.

Once you know what you are going to offer to which customers and how, then you can start the workflow and process reengineering that Dick describes. You can also start to think about how you are going to change the mind-set of the organisation to infuse a market-orientation across the whole enterprise. A much harder thing to do.

Graham Hill
Independent Management Consultant

Bob Thompson
Founder, CRMGuru.com
Member

Posted 01-Sep-2004 09:32 PM
Successful businesses have a lot of "moving parts." I don't think saying a company should be more customer-focused means that it should ignore competitors, stop building new or improved products, or offer non-competitive pricing.

Southwest Airlines is primarily a low-cost carrier, but its culture-driven customer orientation is one way it differentiates itself from other fly-me-cheap wannabes.

Dell offers competitive (but not leading) products, and gets good marks for customer service, but without a low-cost direct delivery business model, wouldn't be any more succesful than say HP, which is struggling to make money on PCs.

Michael Dell said it well in his book, Direct From Dell: Strategies That Revolutionized an Industry, "If you’re constantly getting feedback from your customers, and you're willing to listen, you can make the most of the opportunities implicit in those needs." Notice he didn't say blindly do whatever the customers said they wanted.

When the core product/service offers and pricing are similar (and aren't we seeing that most everwhere these days?), how the customers are treated does matter and can be a differentiator. Gerald Zaltman, professor of marketing at Harvard Business School and author of How Customers Think: Essential Insights into the Mind of the Market, found in a massive study of consumer behavior that consumers used phrases like this to describe their ideal company: "I want it to be easy, pain-free"; "they (the supplier) want to take care of their customers"; and "I like the teamwork and cooperation."

To me the point of CRM is to create more focus on customers and make it a part of a profit-generating enterprise business strategy. I think Dick Lee is right that being customer-centric is not necessarily just about improving the front office operations.

Bob Thompson
Founder, CRMGuru.com

Graham Hill
Guru
Member

Posted 02-Sep-2004 01:35 AM
Bob

As you quite rightly point out, an orientation towards customers should not prevent an orientation towards other market factors. In most companies, it clearly doesn’t, otherwise they would be rapidly out of business. But that doesn’t stop a lot of CRMers from talking about customer-orientation as though the customer is always the most important thing in business. For a lot of industry leading companies, the customer is not the most important thing. Superiority comes from other sources and a change towards a customer-orientation would most likely do untold damage to their competitiveness.

For example, for some companies products are the most important thing. The Toyota Motor Corporation produces the highest quality vehicles in the world. They are a product oriented company through and through. And this orientation has allowed them to develop the most satisfied and most loyal customer base, to have the highest brand value in their industry and to be one of the most profitable manufacturers in their industry too.

And for some companies, having the lowest costs is the most important thing. Ryanair is the European equivalent of Southwest Airlines. Their costs are so low that they can make profits on routes that no other airline possibly could. They are a cost oriented company through and through. And this orientation has allowed them to develop a loyal and satisfied customer base (in spite of them being absolutely no frills), to grow profits at the one of the fastest rates in their industry and to have a higher market valuation than any of the world’s major airlines.

Both of these companies offer perceived benefits much greater than the perceived costs. They are on the upper side of the ‘fair value’ line. Toyota offers unbeatable quality that almost guarantees no breakdowns (vehicle, or the associated emotional!) over the vehicle’s lifetime, at comparable costs to other lower quality vehicles. And Ryanair offers unbeatable prices for what is rapidly becoming a commodity product within Europe. Two industry leaders and neither are what you could call particularly customer-oriented in any way.

Rather than slavish adherence to customer-orientation, the CRM community needs to be more open to the bigger business strategy picture in all its complexity. It needs to be more able to look at what really drives business success and what doesn't. And it needs to be more willing to challenge tired old CRM nostrums that don’t always stand up to close scrutiny. That a customer-orientation is always the most important, or even an important factor in business success is just one of these nostrums.

A lot of companies lead their industries without putting the customer first, second or even third. There is much more to business success than just customers.

Graham Hill
Independent Management Consultant

Bob Thompson
Founder, CRMGuru.com
Member

Posted 02-Sep-2004 01:58 AM
I've often felt that one of the biggest problems we have in the CRM industry is saying, in effect: "CRM is the solution. Now, what is your problem?"

CRM is not the answer for all companies, but even product- and cost-focused companies can benefit from CRM techniques — to make their products better or costs lower. Listenng is one of those technicques, and it clearly works for cost-focused Dell, which also gets high marks for customer-centricity.

The point of this online community is to help people understand where CRM does fit, and how to make it work (deliver a business result). Can we share some examples of companies that lead their industries by putting customers first?

No, customer-centricity is not the end all be all for all companies in all industries, but neither is chasing product supremecy or cost leadership.

Bob Thompson
Founder, CRMGuru.com

Graham Hill
Guru
Member

Posted 03-Sep-2004 01:20 AM
Bob

You are completely right.

Without a doubt, the best example of a company that I have personal experience of that made the change towards a customer-orientation successfully WAS British Airways in the 1980s. I was an employee at the time so I saw it from the inside-out, as well as from the outside in.

At the time, British Airways was losing $750m a year, staff morale was on the floor and customers nick-named the company "Bloody Awful!". And they were right. The government of the day was desperate to turn BA around so that it could be privatised. All in a couple of years!

Lord King was brought in from an illustrious career in engineering in 1981 and Colin Marshall from a similar one turning around service companies like Avis. Both quickly realised that costs could not be cut quickly enough to turn BA around and there was no fundamental product advantage. The only way forward was to focus on the customer and that meant changing ALL aspects of the organisation to deliver a superior customer experience.

The first thing they did was look at the quality of senior management in BA. They identified a core of some 180 senior managers who just were not going to make the wrenching change from being a 'flying club for pilots' to becoming the 'World's Favourite Airline'. They knew it, the managers knew it and so did every other employee in the company. In an infamous 'night of the long knives', they were dismissed and helped to move on to other jobs outside BA that could better use their skills.

With their way forward clear and critical management obstacles removed, King & Marshall set about reinventing airline travel as we knew it.

Senior management were taken off-site to work out what they would have to do to meet King & Marshall's aggresive business targets. Effectively to reinvent their own business.

Line staff were engaged in the nitty-gritty of redesigning how their new work would be done.

All staff (45,000) went through a 'Putting People First' programme that introduced the changes that were going to be made, gave staff new personal skills that they would need to use and a 'can-do' attitude.

All staff went through a second 'Day in the Life' programme to show staff how their work was essential to support front-line staff. Board members appeared at unscripted Q&A sessions at the end of each day to take questions on the chin. They either answered them there and then on the spot, or got answers back the following day. No question was taboo. No question went unanswered. But it was also OK not to know and to find out.

The look and feel of the whole customer-facing business was redesigned and relaunched externally through Saatchi & Saatchi. At the same time, exactly the same relaunch was carried out internally, again by Saatchi & Saatchi.

A third programme called 'Brainwaves' was started to capture ideas for improvement by staff. Successfull ideas were steered by their creators through to completion and a share of any value created returned to those involved. It was not unusual for engineering staff to receive three times annual salary for their ideas, as their share.

All these activities achieved an organisational tipping point in the mid 80s. Staff were visibly proud to say they worked for British Airways. It culminated in over 24,000 staff writing to the Government to protest about the possibility of some of BA's routes being given away to British Caledonian to foster competition.

Customers voted BA to be the Best Airline in the World. That translated into climbing passenger numbers and in turn into climbing profits. BA was successfully floated on the LSE in 1987 at a price of $2 and was 11 times oversubscribed.

So what made this successful? Just a few simple factors.

1. Staff had a clear direction to go in that made sense to them and were given the personal skills to start out on the journey
2. Customers were made the indirect focus of the whole business. They were to be feted by doing airline business basics better than anyone else, not by just improving the customer-facing bits
3. Staff were involved in redesigning all aspects of their own jobs, how they related to others and how they related to customers
4. Staff did things collaboratively or in teams, directed and supported by their own management
5. Everyone in the company knew what was going on across the business, ably supported by without doubt the best change communications I have ever seen, courtesy of Saatchi & Saatchi
6. There was burning bridge. Either BA was going to make it to privatisation or it was to be aggresively downsized

British Airways today is no longer the airline it was. The overemphasis on cost cutting in the 90s at the expense of all other things first alienated staff, then customers, then markets. Wars (Gulf I, On Terror and Gulf II), a weak world economy and new no-frills airlines have contributed to its decline to the point similar to where it was at the start of the 80s.

I was proud to be an employee of British Airways in the early 80s, today I only fly with them becasue of their route network and their excellent frequent flyer programme. They are no longer my favourite airline.

Who is you ask? Singapore Airlines is. They are the World's Favourite Airline today, largely because they have continued to invest in the 'soul' of the airline througout the last 20 years.

Graham Hill
Independent Management Consultant

Posted 09-Sep-2004 10:40 PM
I just have a short comment to what you have written.

Toyota is a high quality car maker because that is what the customers wanted. Ryan air sells cheap air fares because that was what the customers wanted.

I see CRM and the art of beeing customer centric as a tool to find out what the customer crave from the company. If what one find is that they crave a higher quality from the products the company produces ,and the company therby produces higher quality products, is the compay not customer centric?

Beeing customer centric does not remove the possibilty for a company to evovle but should rateher heighten that possibilty.

Joachim