The truth about today’s market is that many companies fall short of thinking through the experience that they want to deliver at key times so they do not actively design that experience. The edict in the average business to a large extent is to focus on cost-cutting and sales including all other value-adding activities.
The reality is that in today’s world at a point in time it is essential to provide a greater focus on the customer and invest more heavily in understanding them and designing unique experiences. The Kodak story has lessons we can draw from. They dominated the film market for over a century but filed for bankruptcy in 2012. Many believe that Kodak failed because it missed digital technology. This is untrue, Kodak failed because it had a myopic view that it was in the film business instead of the storytelling business.
According to experts’ businesses grow not only because of technical R & D but also by questioning the type and scope of the value they create. Therefore, organizations must avoid the danger of strategy myopia, this is failing to see the broader landscape of their business and how they continue to create meaningful value. To succeed they must set their sights on customer needs and work backward to their strategy. This is the reverse of the thinking frame which seeks to push products and services through traditional sales channels.
A New Perspective
The context of business has changed over the last decade. Power has changed hands from the supplier to the consumer. They have access to a plethora of information ranging from prices, products, and alternative providers around the world through various platforms (social media) and countless many other avenues, you name them.
Understanding Value from the customer’s perspective reverses strategic intent
Renowned business leaders Ram Charan in his book ‘What the Customer Wants You To Know’ illustrates a flow of value insight opposite to traditional approaches.
A Harvard business professor Theodore Levitt, wrote the following as far back as 1960, regarding marketing myopia, ‘An industry begins with the customer and his needs, not with a patent, a raw material, or selling skill. Given the customer’s needs, the industry develops backward, first concerning itself with the physical delivery of customer satisfaction. Then it moves back further to creating the things by which these satisfactions are in part achieved.’ He uses the railway as an analogy to explain his point, that, railways beyond providing an end-to-end journey focus also on the larger strategic question such as whether they should become providers of travel information, or integrate with retailers and e-commerce partners.
By expanding your strategic field of vision you will develop a new mindset, one that focuses on the customer’s needs. There are four key aspects involved in this process: Reframing competition, creating shared value, reimagining value delivery, and organizing to innovate.
The traditional way of categorizing customers is by demographic or psychographic attributes (age, income, race, marital status, etc) or they look at purchasing behaviour or company size. Unfortunately, in doing so managers create categories that don’t match the actual customer’s needs and motivations. The one-size-fits-all approach inevitably fails, thus managers are forced to revisit their demographic categories. The job, not the category determines the competition from the user’s perspective. Invariably you do not compete against products and services in your category, you compete against anything that gets the job done from the user’s point of view. Scott Cook, the founder of tax software giant intuit, is quoted to have once said ‘the greatest competitor (in tax software) . . . was not in the industry. It was the pencil. The pencil is a tough and resilient substitute. Yet the entire industry had overlooked it.’
Cook realized not only did he need to outperform other software packages, by making his software mimic the pencil he simplified the tax computation process as many found it convenient to use the pencil when working through their taxes. Categorization must therefore be driven more by what outcomes customers particularly seek (“jobs to be done”) and the alternative ways those outcomes can be met. Using diagrams of experiences helps to challenge you to make assumptions of who your competition really is. It reflects the need of the individuals and illustrates the broader experience in which they are relevant. Ultimately it enables you to see the market from the customer’s perspective, not by segmentation and traditional industry categorization.
Create shared value
The old ways of focusing on reducing cost, maximizing financial returns, particularly for shareholders, which was a priority in the past, the widely held view that the more the company earned the better off we all are no longer holds. Businesses are now increasingly blamed for many social, environmental, and economic problems in general. For example, a report by the BBC recently referred to a court ruling against Shell Nigeria ordering them to pay compensation to Nigerian farmers while the subsidiary and Anglo-Dutch parent company were told to install equipment to prevent future damage. This was the outcome of a case launched by a group of farmers years ago, alleging widespread pollution. The Shell story in Nigeria is a long-standing issue which at some point led to the tragic execution of one of the local advocates.
The good news is that the balance is shifting from shareholder value to shared value. Strategy expert Michael Porter, opines that companies can no longer operate at the expense of the markets they serve. His advice to businesses is for them to shift their focus from the narrow view of short-term financial performance and instead turn their attention to the most important customer needs to determine their longer-term success. Three ways of thinking about shared value strategically are: reconceive your offering, innovate how products and services are produced, and collaborate with partners in new ways.
Skype reconceived their offering by launching a programme called “Skype in the Classroom.” With this teachers can collaborate with other instructors globally and design different learning experiences for their students. In other words Skype is not only offering video conferencing business, they provide educational collaboration opportunities for customers. Intercontinental Hotels Group (IHG) introduced its innovative GreenEngage programme in 2009 to address its environmental footprint. To date, they are reported to have achieved energy savings of 25%, and this is how they differentiate themselves from customers. They are not just a provider of hotel rooms, they are in the business of creating environmentally conscious communities. Nestle for example works collaboratively with dairy farmers in India, investing in technology to build competitive milk supply systems. These simultaneously generated social benefits through improved health care. In other words, they don’t just produce food products, they are in the nutrition business.
Reimagining Value Delivery
The mantra here is to become obsessed with your customer’s needs, become customer-centric. Using the concept of the Internet of Things (IoT), the Belkin Crock-Pot slow cooker has been designed as a regular kitchen appliance that connects with the internet. With an accompanying app, cooks can now control the device remotely. However, researchers believe that when everything from computers to cookware has a digital component, the design of the overall experience becomes more challenging. Success is determined by how well their services fit with each other and, more importantly how well they fit into people’s lives.
RightNow’s Customer Experience Impact Survey in 2011 found 86% of buyers will pay more for a better customer experience, and 89% of consumers surveyed have stopped doing business with a company after experiencing poor customer service. On the flipside, McKinsey reports that, on average, brands that improve Customer Experience increase revenue 10-15%. What this means is that businesses that make decisions about how to develop, market, and deliver their products based on internal initiatives face imminent disruption.
The social nature of brand development has disrupted traditional approaches to product and service delivery, forcing companies to deliver what customers want rather than tell them what they should buy, and where and how to buy it. Customer experience is literally everything, remove friction from it, else you lose. Note that today’s customer is self-centred, they don’t care what your business initiatives are, nor care about the operational challenges you face behind the scenes. Their focus is on how easy, or difficult it is to interact with your brand and the products or services you offer.
Organize for innovation
Charles O’Reilly and Michael Tushman in their article The Ambidextrous Organization, published in the Harvard Business Review emphasize the superiority of organizations adopting this model. Just as the use of both the left hand and right hand equally describe an ambidextrous person, an ambidextrous organization uses exploration and exploitation techniques to be successful. It is an organization that can be efficient in its management of today’s business and also is adaptable to cope with tomorrow’s changing demands. Experts refer to this as the exploration of new possibilities and the exploitation of old certainties. Exploitation includes such things as choice, refinement, production, selection, execution efficiency, and implementation. While exploration encompasses knowledge creation and analysis of future opportunities.
Beyond becoming ambidextrous, you also need to organize around customer experience. An organization that helps people find the products they offered, regardless of channel or medium thus making life easier for the customer is organized for innovation. Such an organization mirrors the customer’s journey, ignoring functional lines or technology types.
According to the author Kalbach, a strategy is typically created behind closed doors at the top levels of the organization. Leaders then reveal the strategy to the rest of the organization, usually as a PowerPoint presentation. Employees are expected to “get it” and somehow be able to magically align their work to the strategy. When things go wrong the same leaders blame failure on poor execution. Poor communication is only part of the problem. How strategy gets created also matters. Strategy creation must be viewed as an inclusive endeavour. The traditional tools of strategy only confound the situation. Using diagrams is the antidote to opening strategy development for broader involvement across the organization as well as for increased comprehension leading to broad buy-in.
|The Writer is the Managing Consultant at Capability Trust Limited a People and Learning Organisation serving the market with Talent Acquisition and Management, Leadership Development, HR Outsourcing, and General HR Advisory, Training, and consulting services. He can be reached on 059 175 7205,|