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+genius Roadmap to Customer-Centricity Peter Fisk, bestselling author of “Customer Genius: Becoming a Customer-Centric Business” describes a roadmap for implementation. 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 innovation – their groundbreaking firstname.lastname@example.org www.thegeniusworks.com +genius
+genius 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. email@example.com www.thegeniusworks.com +genius
+genius 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: 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 firstname.lastname@example.org www.thegeniusworks.com +genius
+genius 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 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. 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 email@example.com www.thegeniusworks.com +genius
+genius 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 product-centric business The customer-centric business Best product Best relationship Add value through features Add value through service Competitive obsession Customer obsession Treat customers equally Treat customers differently Wide range of products Personalise solutions Selling and delivering Collaborative and enabling Short term transactions Long term relationships Revenue and volume Profit and value % market share % best customers % new products % wallet share % satisfaction % advocacy New customers, existing products Existing customers, new products Buyer driven, pull Sales driven, push We go to customers Customers come to us Connect with end users Connect with intermediaries Personal conversations Broadcast campaigns Experiential Mass media Engagement and retention Awareness and attraction Externally focused Internally focused Relationship management Product management Market innovation Technological innovation Customer profit centres Product profit centres Agility and responsiveness Planning and consistency Right brain, Y-type people Left brain, X-type people 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. firstname.lastname@example.org www.thegeniusworks.com +genius
+genius 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 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 to becoming 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. Product-based Sales driving Functional Standardised Operational Fragmented Rigid Customer-driven Value creating Integrated Experiences Relationships Strategic Collaborative Agile There are four phases to the management of change to becoming a customer-centric business: email@example.com www.thegeniusworks.com +genius
+genius 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 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 firstname.lastname@example.org www.thegeniusworks.com +genius
+genius Customer broader view Business Business narrow narrow view view Business Customer 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 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 email@example.com www.thegeniusworks.com +genius
+genius 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 Customer Customer rewards leadership Customer Customer management portfolio Grow Segment Relationship Target Customer Customer learning research Support Retain Identify Insight Serve Brand Experience Attract Customer Customer service Proposition Strategy Customise Distribute Communicate Customer Customer cocreation priorities Customer Customer alignment programmes 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 firstname.lastname@example.org www.thegeniusworks.com +genius
+genius 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. 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 Brands define company or product S C Brands reflect customer aspirations Communicate in mass campaigns S C Personalised interactive dialogue Products standard and discrete S C Propositions that engage needs segments Distributed through defined channels S C Customer partners help create solutions Price based on competitors and costs S C Pricing based on perceived worth Relationships sought by suppliers S C Customers loyal to people like them Innovation drives product derivatives S C Innovation redefines market contexts Strategy based on current capabilities S C Strategy based on best opportunities Measured on financial- based metrics S C Measured on customer- based metrics Overall, we call the shots S C Overall, customers call the shots email@example.com www.thegeniusworks.com +genius
+genius 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 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. firstname.lastname@example.org www.thegeniusworks.com +genius
+genius Peter Fisk is a best-selling author and inspirational speaker, a strategic consultant to leading companies around the world and a business entrepreneur. Peter leads the GeniusWorks, a strategic innovation business based in London and Budapest, Istanbul and Dubai, that works with senior management to “see things differently” – to develop and implement more inspired strategies for brands, innovation and marketing. Gamechanger is a strategy accelerator for leadership teams, Innolab is a facilitated innovation process based on deep customer insights and creative thinking, and BrandVision is a platform to develop better brands and brand portfolios. His best-selling book Marketing Genius explores the left and right-brain approaches to competitive success, and has been translated into more than 35 languages. Customer Genius describes how to build a customer-centric business, Business Genius is about inspired leadership and strategy, Creative Genius is the innovation guide for border crossers and game-changers, whilst People Planet Profit explains how to grow, whilst doing good ethically, socially and for the environment. Peter grew up in the remote farming community of Northumberland, in the North East of England, and after exploring the world of nuclear physics, joined British Airways at a time when it was embarking upon becoming “the world’s favourite airline” with a cultural alignment around customers. He went on to work with many of the world’s leading companies, helping them to grow more profitably by becoming more customer-centric in their structure, operations and leadership. He also led the strategic marketing practice of PA Consulting Group, and was the CEO of the world’s largest marketing organisation, the Chartered Institute of Marketing. He works across sectors, encouraging business leaders to take a customer perspective, and learning from different types of experiences. His clients include American Express and Aeroflot, Coca Cola and Cemex, Lastminute.com and Marks & Spencer, Microsoft and O2, Orange and Red Bull, Shell and Tata Steel, Teliasonera and Turkcell, Vitra and Virgin, Vodafone and Volkswagen. . He was recently described by Business Strategy Review as “one of the best new business thinkers” and is in demand around the world as an expert advisor and energising speaker. For more information go to www.theGeniusWorks.com or email email@example.com firstname.lastname@example.org www.thegeniusworks.com +genius