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Roadmap to making the change to becoming a customer-centric business. Extracts from "Customer Genius" by Peter Fisk
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Roadmap to a customer-centric business Extract from “Customer Genius … Becoming a Customer-Centric Business” by
bestselling author, speaker and consultant, Peter Fisk.
Doing business on customer’s terms is obvious and essential.
Peter Drucker was one of the first to suggest that the sole purpose of a company is
to create and retain customers. He reasoned that since the customer alone pays
for the product or service, the customer the most important entity within the
business. Indeed, in recent years, from the eighties bandwagon of total quality
management to the nineties obsession with customer relationship management,
organisations have sought to align themselves to customers.
However, some argue that a blind obsession with customers has a destructive
impact on competitive advantage, the focus on competitors is last as every
company seeks to meet the same needs of the same customers. This itself, they
argue, leads to falling satisfaction of customers as they are faced with an infinite
number of relevant but commoditised products and services. It also misses the
stimulus for innovation, for meeting the unarticulated needs of customers, and
finding better ways to solve their problems.
Companies have succeeded with both strategies – Courtyard by Marriott, for
example, was a business traveller hotel concept designed entirely by conjoint
analysis-based customer research, focusing on the priority needs of this target
audience. Meanwhile companies like Chrysler have succeeded through
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innovation – their groundbreaking minivan, for example, defining and shaping an
entire market despite customer research saying that customers did not want it.
The reality is that a successful business does both – these approaches are not in
conflict. Having a customer orientation is not about blindly obeying the customer,
but about working with them to so that you both understand their needs and
ambitions, whether they are articulated or not. Similarly an innovation orientation
is not about product obsession, customers are increasingly partners in the
innovation process, and all innovations ultimately need customers to embrace
them.
From Amazon to Zara, P&G to Target, they realise that they need to meet the
existing and emerging needs of their customers, but also drive innovation and
differentiation. Indeed they realise that a customer orientation is not just about
bowing to the declared needs of customers, but being selective about which
customers to work with, and then collaborating to understand their real issues
and aspirations. They also realise that competitive advantage stems from having
the better insights, the better customers, and thereby driving better innovation
and growth.
Perhaps it comes down to words and meanings – early approaches to “customer
focus” were largely cultural and superficial, achievable despite being driven by
products and internal priorities.
Customer focus, customer intimate, or customer driven?
These initiatives tended to focus on attitudes and behaviours, and mainly those at
the “customer interface” - a term which itself implied that the rest of the business
is not connected to customers. They were largely about nice words, soft focus,
but when it came to the crunch, it was still business first, customer second - how
to gain and grow profits first, satisfy and retain customers second.
So what’s different?
A “customer business” starts with the customer. It works from the outside in, and
then balances this inside out. By starting from the outside in, the business is
fundamentally inverted, its priorities are different, and its performance better.
No longer can businesses see the best opportunities, engage the best customers,
compete most effectively, by standing inside and looking outwards. Products and
processes, strategies and systems, rewards and relationships must start and
revolve around the customer.
Customer-centric is probably the best adjective, if you need one.
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Customer Value, Business Value
Becoming a customer business is not just about passion, it makes commercial
sense.
Customer businesses deliver more profitable growth, are more sustainable over
time, and deliver better returns to shareholders. It can also be a more efficient
business, a more flexible organisation, and a more enjoyable place to work.
At a strategic level, customers are the scarcest resource of a business.
It is easy to secure physical resources from suppliers around the world, except in
the case of oil which we all know is running out. It is relatively easy to secure
capital, from conventional investors or more recently from private and
particularly from ethically-motivated sources. It is not so easy to secure the best
talent, as knowledge and ideas become more important. Yet the most difficult to
secure, and most valuable resource is the best customers. These are the golden
nuggets of today’s business.
At a commercial level, customers are the most valuable assets of a business.
Consider the market capitalisation of a business – the collective value of all your
shares, and reflecting the price somebody might pay to buy your business. This
value reflects the future profit potential of your business, and therefore the assets
that make up that figure are those that are most important in driving future profits.
Today, 86% of the value of publicly quoted businesses is intangible (according to
Brand Finance), and the most significant intangible assets are typically brands,
relationships and ideas. Two and sometimes all three of these are driven by
customers.
At an operational level, the best customers cost less and spend more.
Research, to be considered in more detail later, describes your best customers as
those who are prepared to engage in long-term, profitable relationship. It shows
how these best customers will typically stay longer, cost less, buy more, pay
more and tell others. Their acquisition costs will be lower, falling to zero as they
want to come back of their own accord. Their operational costs will also be low,
as they do more themselves. Their perceived value is higher, and therefore they
may pay more or at least seek lesser discounts. A best of all they are great
advocates – recommending you to their friends, other people like them –
building reputation and attracting others.
Every business will quote different figures to demonstrate the importance of
customers. The numbers and chosen ratios may differ by type of business and
market. However these are some of the most typically quoted statistics, averages
and generalisations, but helping to make the business case:
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20% of your customers give you 80% of your revenue
10% of your customers give you 90% of your profit
A very satisfied customer will tell 3 other people
A dissatisfied customer will tell 12 other people
A very dissatisfied customer will tell 20 other people
98% of dissatisfied customers never complain, they just leave
65% of lost customers are due to negative experiences
75% of negative experiences are not related to the product
The biggest reason people leave is because they don’t feel appreciated
It costs 3 times more to acquire than to retain a customer
It costs 12 times more to win back a dissatisfied customer
Over 5 years a typical company retains 20% of its customers
5% increase in retention would increase profits by 25 to 55%
Most companies are quick to beat their chests about delivering superior value to
shareholders, driving profitable growth, reducing risks, improving dividends,
and seeing their share prices rise. Of course they can do this in the short term by
“slash and burn” approaches to cost reduction and aggressively driven sales. But
it won’t last. The only sustainable route to long-term value creation, profitable
growth and lucrative dividends, is in creating and delivering superior value to
customers.
Creating superior value for customers – through deeper insights, more
relevant propositions, and personal solutions - is the foundation of a
successful “customer business”.
Creating superior value for shareholders – through sustainable growth,
enhanced margins, and reduced risks – is the results of a successful
“customer business”.
“Customer value” is therefore the starting point - not the financial value of the
customer to us, but the value we create for them, which is obviously a perception
that differs by customer, rather than an absolute value. But it is the notional value,
the philosophy, and approach that matter.
Building a customer-centric business
Defining a “customer business” can sound simple and obvious. It sounds like the
right thing to do. And this is perhaps why so many organisations, and particularly
their leaders, have failed to appreciate the more fundamental differences
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involved. They have applied the philosophy, but not the disciplines that move
from a product to customer obsession, and to turn passion into profit
We understand now that it is about creating value for customers first, and
business second. We are ready to embrace pull rather than push approaches to
our markets, and to adopt this more holistically in our “outside in” approach to
business. We can also make a strong business case for it, based on the significant
impacts on profitability and value creation.
Customer centricity: Turning the business on its side
But what are the more practical differences? How does it affect the business
strategy, the performance metrics, and our decision-making criteria? What does
it mean for the way we recruit and manage people, for our key operational
processes and systems, and for organisation structure? To be absolutely clear,
what does it mean we must stop doing, and what must start doing?
The customer-centric business
The
pro
du
ct-
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ntr
ic b
usin
ess
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Customer centricity: a fundamentally different approach
Moving from a product-centric to customer-centric business is a like flipping the
organisation on its side. It is about aligning the organisation to the customer
experience, rather than product management. It is about managing your
customer portfolio rather than your product portfolio. It is about solutions rather
than products, and relationships rather than transactions. It is about measuring
profitability – with profit and loss reports, the budget allocations, the
performance rewards – by customers and segments rather than by products and
business units.
The specific differences between a product-centric to a customer-centric
business are shown below. Some of them are obvious, whilst others require more
explanation which will follow later. Some of them challenge ingrained principles
Best product Add value through features Competitive obsession Treat customers equally Wide range of products Selling and delivering Short term transactions Revenue and volume % market share % new products % satisfaction New customers, existing products
Sales driven, push Customers come to us Connect with intermediaries Broadcast campaigns Mass media Awareness and attraction Internally focused Product management Technological innovation Product profit centres Planning and consistency Left brain, X-type people
Best relationship Add value through service Customer obsession Treat customers differently Personalise solutions Collaborative and enabling Long term relationships Profit and value % best customers % wallet share % advocacy Existing customers, new products Buyer driven, pull We go to customers Connect with end users Personal conversations Experiential Engagement and retention Externally focused Relationship management Market innovation Customer profit centres Agility and responsiveness Right brain, Y-type people
The customer-centric business
The product-centric business
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or philosophies of business – such as moving from a large catalogue of products,
to a capability to bring together the right solutions, or the replacement of %
market share with % share of best customers.
How do you make this happen? What matters most? And where should you start?
Of course every business is different, and every business will already have
embraced some aspects of customer-centricity. Fundamental will be the strategic
direction, targeting the right performance metrics, and giving people the tools to
act differently. However it is the business that combines these many different
factors that will be able to realise the real commercial benefits.
The Roadmap: Making the change to a customer-centric business
Becoming a customer-centric business requires fundamental change to the whole
business, not just how it interacts with customers. It therefore requires a managed
programme, typically lasting 12-36 months, that aligns with the strategic and
operational priorities, and delivers sustained value creation.
The change to a customer-centric business must be driven by business leaders,
must be managed to mitigate risks, must unlock new energy inside the
organisation and with customers, must make a difference to customers, and must
deliver results both intermediately and on completion.
There are four phases to the management of change to becoming a customer-
centric business:
Phase 1: Making the case
1. Defining a compelling vision for the future – what does it mean to be
customer centric, what will be different, why will it be better?
Customer Centric Vision Workshops
Customer Immersion
What’s possible
What’s plausible
Vision video
2. Evaluating the current business – how effective is it in attracting, serving
and retaining customers compared to best practices?
Customer-Centric Benchmarking
Benchmarking competitors and other sectors
Evaluating the “as is” state
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Agreeing the “to be” state
Gap Analysis
3. Understanding how this relates strategically – how does a customer centric
focus fit with other priorities, and deliver strategy better?
Business strategy alignment
Mission, values and goals
Business priorities
Financial plan
4. Engaging stakeholders in all of this – prioritising internal and external
stakeholders, in both the imperative and opportunity of change?
Stakeholder management
Stakeholder mapping
Engagement plan
5. Agreeing what it will take to make happen – what resources will it take,
what does it mean we stop doing, and have to start doing?
Change workshop
Phase 2: Making ready
6. Mapping out a programme of change horizons – how will we move from
“as is” to “to be” states in a series of phases, phasing investment and
results?
i. Change planning
Business
narrow
view
Business
narrow
view
Customer
broader
view
Business Customer
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1. Horizons
2. Budgeting
3. Resourcing
4. Aligning
7. Identifying priorities – balancing the financial imperatives, what matters
most to customers, making it coherent and logical, and finding quick wins.
i. Change governance
1. Sponsor
2. Steering group
3. Project team
8. Acquiring the needed resources and investment – making the business
case, securing the money, people, time, help, to do it?
i. Business case
1. Preparation
2. Approval
9. Preparing people for change, building commitment – building a desire and
internal energy to make change happen, and making it “designed by
customers” too.
i. Customer education
1. Immersion
2. Big Talk forums
10. Engaging customers in the change – so that it is “designed by customers”,
they are engaged in both the solution and the partnership process of
creating it.
i. Collaborative design
1. Journey mapping
2. Needs mapping
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Phase 3: Making it happen
11. Challenging leadership beliefs and behaviours first – ensuring that leaders
change too, as they have moulded by the old organisation, structure and
values.
i. Leadership workshop
1. Business challenge and opportunity
2. Personal challenge and opportunity
3. Personal role in leading change
4. Personal role in changing self
12. Developing pathfinder projects – pilot the change with chosen teams,
segments, products, markets to learn from, and demonstrate the impact.
i. Pathfinder projects
1. Project selection
2. Experience design
3. Product, process and culture development
4. Test, learn, launch and adjust
13. Focusing on hearts and minds – making change in culture and process at
the same time, so that people have the tools to do what they now believe is
right.
RetainSupport
Identify
AttractServe
Relationship
Grow Segment
Target
Insight
Brand
Proposition
CommunicateDistribute
Customise
Experience
Customer
leadership
Customer
portfolio
Customer
research
Customer
Strategy
Customer
priorities
Customer
programmes
Customer
alignment
Customer
cocreation
Customer
service
Customer
learning
Customer
management
Customer
rewards
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i. Internal communication
1. Regular updates
2. Symbols of change
3. Forums and feedback
14. Managing the change as a programme of projects
i. Project office
1. Milestone deliverables
2. Governance reviews
Phase 4: Making it Stick
16. Roll out the change programme throughout the business and across all
markets – change is not a point but a journey
i. Project office
1. Sustain for at least 18 months
2. Embed into business as usual
3. Leadership driven
17. Develop sustaining mechanisms to do business in a more customer-centric
way as the normal business practice
S
S
S
S
S
S
S
S
S
Communicate in mass campaigns
Products standard and discrete
Distributed through defined channels
Relationships sought by suppliers
Innovation drives product derivatives
Strategy based on current capabilities
Measured on financial- based metrics
Price based on competitors and costs
S
S
S
S
S
S
S
S
S
S
Brands define company or product
Communicate in mass campaigns
Products standard and discrete
Distributed through defined channels
Relationships sought by suppliers
Innovation drives product derivatives
Strategy based on current capabilities
Measured on financial- based metrics
Price based on competitors and costs
SOverall, we call the shots
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
Propositions that engage needs segments
Strategy based on best opportunities
Measured on customer- based metrics
Pricing based on perceived worth
Overall, customers call the shots
Personalised interactive dialogue
Customer partners help create solutions
Customers loyal to people like them
Innovation redefines market contexts
Strategy based on best opportunities
Pricing based on perceived worth
Brands reflect customer aspirations
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i. Business model
1. Customer-driven business planning
2. Customer-driven resource allocation
3. Customer-driven organisation structure
4. Customer-driven marketing, sales, service, support
5. Customer-driven performance scorecard
6. Customer-driven investor relations
18. Introduce new performance metrics and incentive structures – so that
people are rewarded for customer-centric behaviours
i. New KPIs and Targets
1. Team and Individual targets
2. Bravo Zulu style recognition
3. Development framework
4. New training resources
19. Ensure that the change delivers business impact – improved products and
services, better customer experience
i. Deliver change for customers
1. Customised products
2. Personalised service
3. Segmented propositions
4. Customised products
5. Personalised service
6. Improved experience
20. Communicate success as an ongoing activity – continuing to adjust and
improve, and demonstrate the impact of a customer centric approach.
i. Deliver improved business results
1. Impact on shareprice
2. Impact on profitability
3. Impact on sustained growth
4. Impact on brand reputation
5. Impact on customer advocacy
6. Impact on customer satisfaction
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© Peter Fisk. Extract from “Customer Genius : Becoming a Customer-Centric
Business” by Peter Fisk, published by Wiley Capstone.
Peter Fisk is an inspirational business author and speaker, consultant and entrepreneur.
He is an expert in strategy and brands, innovation and marketing, working across sectors
worldwide.
He is founder and CEO of GeniusWorks, the accelerated innovation business, that helps
business leaders to see things differently – to develop and implement more inspired
strategies and business actions. Customer-centric platforms include GameChanger
(accelerated strategy from the outside in), InnoLab (fast customer-centric innovation),
and BrandVision (customer insights, propositions and experience design).
Peter has written five best-selling book, translated into 35 languages, including, “Customer Genius” on becoming a customer-centric business, and most recently
“Creative Genius” described as the essential innovation guide for visionaries, innovators
and game-changers.
He started life as a nuclear physicist before getting into marketing and brands. He then
spent a number of years working in sales, distribution, product development and brand
management worldwide. He went on to lead the global strategic marketing consulting
team of PA Consulting Group, and was also CEO of the Chartered Institute of Marketing.
Peter works with many of the world’s leading brands including American Express and
Barclays, Aeroflot and British Airways, Coca Cola and Cooperative Bank, Lastminute and
Marks & Spencer, Microsoft and O2, Pinar and Red Bull, Virgin and Vodafone … as well
as many local and growing businesses.
He was recently described by Business Strategy Review as “one of the best new business
thinkers.”
www.theGeniusWorks.com
+44 78344 83830