Customers are becoming an increasingly important strategic asset for companies (1). This complicates things; because managerial theory and practice have told companies for decades to keep customers on the outside (2)(3). This has created a gap between companies and customers, so wide that it is hard to find measurable indicators demonstrating that creating customer value is beneficial for the company. Why is this important to digital?
(1). The annual IBM C-Suite survey put customers importance as a strategic assets in sixth place in 2003 and in 2nd place in 2013. http://www-935.ibm.com/services/c-suite/series-download.html
(2). Using brand, advertising and now Customer Experience to create the illusion of customer centricity – while in reality trying to create a competitive advantage through management, organizational efficiency and standardization
(3) Shoshana Zuboff on the design flaws of your organization http://youtu.be/GCPvnXUVteA
Creating customers have become the problem (marketing is the expense-department), while organizational efficiency and standardizing employees task has become the solution (20th century management principles).
This has burnt the candle at all ends:
- Employees are trained to think in terms of products, not customer value. To align their thinking inside controllable boxes (or industries as we call them): The mental concept of an industry gives the idea that companies have a defined role and scope – in line with the idea of what that industry is and what other competitors are doing (and so competing products and brands become indistinguishable). (5)(6)
- Employees are unengaged. “In Gallup’s latest 142-country survey on the State of the Global Workplace, only 13% of employees were truly engaged in their work.” (7).
- Creativity has become so detached from what the company does that it has been outsourced and spurned a whole creative industry. Creativity is not about crayons, it’s a definition of the ability to think and ad original ideas to the market in order to find new business models and revenue stream. It should be the core competence of any business in the digital economy.
(5). Richard Murray on how creativity gan give you an edge https://vimeo.com/3753780
(6). Larry Downes and Paul Nunes on the unconventional companies that disrupt industries https://hbr.org/2013/03/big-bang-disruption/
(7). Gary Hamel on the Core Incompetencies of the Organization https://hbr.org/2014/10/the-core-incompetencies-of-the-corporation/
Ignoring the customer can mean the peril of a company in the digital economy (8). Finding the formula that demonstrates how customer value creates better companies, even for shareholders wallets, is essential. Unfortunately it is also hard. Management and Economics have been woking so hard toxicating the strategic approach of customer investments that doing it has become more a leap of faith than a sound business strategy.
“…nearly half said customer experience must be a strategic priority. However, the vast majority of companies struggle to tie customer experience investments to business outcomes ” – Advancing the customer experience, Harvard Busienss Review and Disney (9)
(8) Steve Denning on the Dumbest Idea in the world. http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/
(9) HBR Analytic Services, Advancing the Customer Experience https://hbr.org/resources/pdfs/comm/disney/advancing_the_customer_experience.pdf
Luckily the future is already here, with several cases to prove it:
Steve Denning talks of the Creative Economy, an economy in which companies need to redesign their managerial approach and culture in order to combat todays challenges. In his panel on this subject at the Drucker Forum in 2014 (10) he is joined by Dan Pontefract who introduces how they changed their mindset at the Canadian Telecom company Telus. Where, he says; the company shifted its direction to Customer First and asked the question: How are we going to serve the customers better? The result is a proven success on all familiar business measurements, from shareholder return, growth and market share, to employee engagement and not least; customer value.
Steve Denning introduces two other cases:
- Apple, almost bankrupt in 1997 after years of 20th century managerial approach to management was taken over by Steve Jobs. Who was a tyrant on behalf of the customers. Spending four years cleaning up the company and throwing out employees who had no direct impact on contributing to customer value (including 4000 middle-managers and 125 User Experience Specialist…). In 2001 Jobs had changed the company and its culture and set it up for large scale rapid innovation – and the story of its success is widely known.
- Salesforce, after seven years of rapid growth (40% annual growth) took the advice of management consultants and started adding 20th century management techniques to their corporation. Layers of hierarchy, divisions, and excess control rapidly resulted in slowing Salesforce down. Leading them to throw out the approach and rethink how to regain the success they had as a company. The result was an agile approach with the customer at the centre. Starting with the customer they asked “what is the most important thing we can do for this customer”. And then they put the most important employees on the task of solving that most important problem. This was implemented across the whole organization with autonomous teams approaching different levels of problems. The result was outstanding, Salesforce for the fourth consecutive year, has been awarded the most Innovative Company by Forbes.
(10) The Drucker Forum – Day II Parallel Session 3: The Creative Economy – New Management Practices for the 21st Century http://youtu.be/XESGMOsfzAs
The summary is that 20th century management and economic theory has created a gap between customers and companies. And as companies are seeing that the traditional tools for improving company excellence (operational efficiency and standardization) isn’t churning out the results they used to, they are turning their eyes back to the customers in order to extract value. The problem is that the customer centric approach – often marketed by glorified slogans of customer experience – isn’t connected to the existing organizational culture (goals, collaboration and metrics). So companies can’t just flick the switch, and win with customer orientation – they need a fundamental shift in how they are managed and compete.
“Customer experience is about much more than providing a pleasant feeling in a call center,” says Pine. “It is a fundamental dimension of how a company competes.” (11)
“To ground customer experience in the company culture, businesses should develop precise, meaningful principles to guide everything from investments to frontline decisions.” (11)
(11). HBR Analytic Service, Advancing The Customer Experience https://hbr.org/resources/pdfs/comm/disney/advancing_the_customer_experience.pdf
Digital requires a cultural shift; to bring back the customer focus (if the customer is in charge, be sure that they really are) and to organize for it (the creative company – employees are organized to find new revenue streams, and increase customers’ life time value). If companies are to capitalize on the technologies brought forward by digital, the customer needs to be at the center of their strategic attention.
“The survey found that among the areas where these technologies [cloud, analytics, mobile and social] are having the biggest impact, five of the top six are top-line or customer-facing: improving customer service (53 percent); increasing productivity (52 percent); developing new services (50 percent), business models (42 percent), and products (41 percent); and increasing revenues (40 percent). ” (12)
(12). HBR Analytic Service, The Digital Transformation of business https://hbr.org/resources/pdfs/comm/microsoft/the_digital_transformation_of_business.pdf
As other successful companies have done before – a shift to digital means a shift to customer value contribution, where the main goal of the company is to find how to increase the customers value from their relationship with them – and be organized to extract enormous wealth from this collaboration.
Are you set up to compete in the digital economy? Ask yourself these two question:
- What should be the core competency of your business – creativity or organizational efficiency?
- Who are the most important employees when it comes to directly contributing to customer value?