Today’s managers acknowledge the importance of customer focus for growing a business and competing.1 Yet the often costly customer efforts they have implemented have not led to the expected gains. The reason: a superficial understanding of what customer focus really means. Fortunately, a few organizations are going beyond thinking up new technologies, products and services and, through comprehensive organizational change, are achieving the deep customer focus that is nearly impossible to imitate.

Deep customer focus is not about buying customer-relationship-management software that tracks customers’ purchases. It is not about designing sophisticated new products like mobile phones or iPods — or even about processes that allow a car to be built with customer-requested features. It’s about an attitude that gets deep inside a company into what it is, what it does and what it prides itself on.

Many observers have suggested what needs to be done to create organizational change, but no one has spelled out how to get there, particularly how to make the changes that lead to a customer focus deep enough to become part of the lifeblood of an organization.2

Becoming Indispensable to Customers

Because companies with deep customer focus are constantly thinking about better, quicker, easier ways of doing things that customers need, they ultimately become indispensable. Whatever customers need to do (say, use information to make critical decisions differently, ensure employees’ lifetime well-being, manage energy or do on-demand computing), the company with deep customer focus excels at offering the outcomes each customer seeks. Through constant innovation, customer feedback and the use of knowledge, the enterprise becomes indispensable. And as the relationship intensifies, truly sustainable gains ensue. No product or service on its own can accomplish all that.

The company’s activities become so interwoven with its customers’ activities that clients end up spending more money with the company on a greater variety of offerings over longer periods. Thus customers reward the enterprise, giving it many opportunities for profitable growth.3

Think about being the customer. Would you rather have, say, a new health plan with new features or would you rather have a relationship with a health-insurance company that is committed to solving pretty much all your health and safety problems — an organization that not only provides insurance coverage but, for example, also helps with your health- and safety-related concerns so that problems are caught before they happen and don’t get unnecessarily serious or costly even as you get older? That’s the kind of company Denmark’s International Health Insurance (IHI), operating in 150 countries, became. But it was able to reinvent itself only after managers understood the breakthrough process and tools through which deep customer focus is achieved.

And other successful companies have learned as well. IBM Corp. might not call its approach deep customer focus, but IBM did more than turn to services when mainframes weren’t selling and PCs were commoditizing: It embedded in its culture a worker mind-set focused on outcomes for customers. That’s how it keeps developing innovations that help customers adapt to constantly changing environments.

Companies need a systematic process to activate deep customer focus that shapes priorities, behavior and systems. Commitment is critical. Limp acceptance is lethal for any change initiative, but especially for deep customer focus that embraces the entire organization. It is not solely the marketing group’s sphere.

The process can be mapped into 10 critical breakthroughs that help delineate the stages the company must go through. Research has shown these breakthroughs to be remarkably consistent across enterprises and industries. (See “About the Research,” p. 28.)

Breakthrough 1: Create Strategic Excitement

The first breakthrough occurs when a sufficient number of the correct people within an organization become uncomfortable because they realize that the company must find new ways of doing things for customers or risk either being sidelined or missing out on new wealth and opportunities.

But people have to be helped to see and feel that. That’s easy enough when the enterprise has reached a crisis point or key numbers have slackened. What’s both more difficult and more rewarding is to instill excitement about a new direction before crisis stage, so people feel inspired rather than fearful. That’s what Bill Pardue, then president and CEO of U.S. Corporate and Federal Markets, a unit of LexisNexis Group, did when customers (now able to access publications on the Web, often for free) began to reduce what they would pay for LexisNexis archives.

Previously, LexisNexis would have focused on cutting costs and finding innovative content. But Pardue instinctively felt that the old approach would neither secure market position long term nor produce wealth from new sources. Determined to make his division indispensable to customers, he came up with a hypothesis worthy of testing and got his senior team excited about it. The hypothesis was that professionals who had to make decisions carrying a high degree of risk or reward — say, law enforcement officers tracking down criminals, patent officials assessing a patent application, lawyers litigating a case or scientists developing a drug — would pay for information that helped them make better, quicker decisions. Pardue and his team implemented what was needed to help professional customers make decisions, and within three years his division had outpaced competitors, boosted customer spending and increased profits.

Breakthrough 2: Enlist “Points of Light”

Once executives have generated excitement about a new direction, they need people at all levels to lead the way. But both companies and academic literature have overemphasized gaining broad consensus first. Including too many of the wrong people means having to waste time and effort on individuals who obstinately resist anything new until they see it demonstrated in action.

Because deep customer focus requires new ways of doing things rather than just listening to customers and reacting, a company needs people who are open and prepared to break with the past and to move ahead even under the unnerving scenario of having no hard facts.

Such people are a company’s “points of light.” These leaders, in addition to being first to accept new ideas, also energize colleagues through their actions and conviction.4 Eventually, their enthusiasm permeates the organization, but initially, they are the only ones who see both how the future must be different from the past and why.

Breakthrough 3: Articulate the New Market Space

Many organizations rely heavily on market research, but market research is little help in creating a future that customers have yet to imagine. “You can’t research your way into the future” is how one executive puts it. Instead, a company must define a new market space — relying partly on research but more on intelligent hypothesis.5

Defining the market space focuses the implementation effort on the customer outcome. It enables people in discrete product silos and disciplines to visualize how they might fit into an offering that involves contributions from all departments. Employees at LexisNexis, for example, used to think of themselves as working for one particular database or unit. They had no sense of participating in a market space to enable professionals to make better decisions, quicker or in a “high-level decision-support management” market space, the term the company finally chose. Naming the space in terms of a customer outcome gives employees clarity, direction and a common purpose.

But doing market research and asking customers to define outcomes will not work because new ways of doing things often conflict with previous habits and orthodoxies. Until the country manager of Baxter Healthcare Corp. Germany got employees to start thinking of themselves as doing postoperative “home-recovery enhancement” instead of merely providing postoperative nutritional products to hospitals, the norm was to keep patients in the hospital for rehabilitation. When patients returned home, the company supplied only the basics, such as nursing care or wheelchairs. Once a market space was articulated, however, a new direction could be clearly communicated to doctors, hospitals, patients, Baxter headquarters — and partners. Ultimately, the division and some partners created an innovative, lucrative business called Home Supply and Care (HSC).

Breakthrough 4: Identify the Value Opportunities

Executives who have successfully implemented deep customer focus find that the next step, identifying the value opportunities, calls for a small team comprising only the best brains, “not just those that can be spared,” as one interviewee put it. The CEO or the head of the division, country or business unit should lead or sponsor the team and ensure that it has sufficient resources, time and people (usually two or three). Extra members may move in and out as needed, but it is essential to have a leader working the next stages, says an executive, as “a day rather than a night job.”

It is not surprising that at the stage that identifies value for the customer — and ultimately for the company — executives report feeling the most enthusiastic and energized and the concept begins to take hold.

The tool that supports the value-identifying stage is the customer-activity cycle.6 Using it, a team is able to look methodically at the activities customers go through to achieve an outcome, uncover the gaps (the activities customers could or should go through) and fill those gaps with whatever will lead to the desired customer outcome. The country manager at Baxter Healthcare Germany successfully defined a new market space, but it was only when the customer-activity cycle revealed precisely what patients needed pre, during and post surgery that Baxter could specify what services it would have to offer patients and who would provide each service.

The lucrative opportunities are in the details of the customer’s activity cycle. The commercial-transport unit of BP Plc, for example, wanted to become indispensable to hauling companies in its newly articulated market space, “integrated energy and environmental management.” The idea was to offer truckers a new way of buying and using energy to reduce costs and harmful emissions. Through the customer-activity-cycle tool, BP’s team discovered that in the during stage, when truckers were transporting goods, their drivers kept the engines running for warmth while they slept. Engine idling cost the hauling companies 5% of fuel costs and 20% of nitrogen oxide and other noxious emissions — and exacerbated vehicle wear and tear, which equaled 10% of overall fuel expenditures. Finding a new way to let drivers keep warm while sleeping saved the company expense and created a multimillion-dollar business opportunity for BP and partners.

Breakthrough 5: Build a Compelling Case

The customer-activity cycle not only identifies the value propositions that can make a company indispensable, it also lets the company build detail-rich stories to promote the offerings both internally and externally. Stories are more powerful than business plans and more beneficial to enterprises going through a deep-customer-focus change process. People often react anxiously or defensively to business plans, whereas a credible narrative can present an exciting picture and appeal on both the rational and emotional levels. Stories also show how the whole enterprise can contribute to the market space, whereas business plans typically set out discrete agendas from different parts of the organization and aggregate them. They neither offer a customer outcome or destination, nor suggest how to reach one or why employees should care.

Consider International Health Insurance (IHI), which serves expatriates as well as corporations that have significant overseas activities. In 2000, led by CEO Per Bay Jørgensen, IHI moved from producing increasingly sophisticated health policies into the “lifetime health and personal safety” market space.

Redefined as an enterprise devoted to customer wellness (health and safety), instead of merely insurance-policy sales and claims processing, IHI saw a 20% annual growth rate while most competitors foundered. The compelling story IHI presented to corporate clients showed how an investment in wellness could prevent employee health problems 70% of the time, increasing productivity and lowering costs. It included the rich details that emerged from using the customer-activity cycle.

(Reprint #:45307)

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