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.
1. A strong body of research has evolved around the importance of customer focus in innovation and strategic growth, and the importance of interacting with customers and delivering a unique experience to them. For recent relevant works, see R.C. Blattberg, G. Getz and J.S. Thomas, “Customer Equity: Building and Managing Relationships as Valuable Assets” (Boston: Harvard Business School Press, 2001); C.M. Christensen and M.E. Raynor, “The Innovator’s Solution: Creating and Sustaining Successful Growth” (Boston: Harvard Business School Press, 2003); F.R. Reichheld, “The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value” (Boston: Harvard Business School Press, 2001); and A.J. Slywotzky and R. Wise, “The Growth Crisis — And How To Escape It,” Harvard Business Review 80 (July 2002): 72–84. Discussions of customer interactions include G.S. Day, “Creating a Superior Customer-Relating Capability,” MIT Sloan Management Review 44 (spring 2003): 77–82; and M. Vandenbosch and N. Dawar, “Beyond Better Products: Capturing Value in Customer Interactions,” MIT Sloan Management Review 43 (summer 2002): 35–42. Major works on customer experience include B.J. Pine II and J. Gilmore, “The Experience Economy: Work Is Theatre and Every Business a Stage” (Boston: Harvard Business School Press, 1999); C.K. Prahalad and V. Ramaswamy, “The Future of Competition: Co-Creating Unique Value With Customers” (Boston: Harvard Business School Press, 2003).
2. Organizational transformation continues as a critical area of study, but to date, the literature in change management has not explicitly dealt with how to use the principles and practice to achieve a customer focus successfully. A notable work on change management is J.P. Kotter and D.S. Cohen, “The Heart of Change: Real-Life Stories of How People Change Their Organizations” (Boston: Harvard Business School Press, 2002). For related work on the public sector, see W. Chan Kim and R.A. Mauborgne, “Tipping Point Leadership,” Harvard Business Review 81 (April 2003): 66–75.
3. S. Vandermerwe, “How Increasing Value to Customers Improves Business Results,” Sloan Management Review 42 (fall 2000): 27–37.
4. For an example of recent research on the importance of energizers in evoking emotional reactions that lead to improved organizational performance, see R. Cross, W. Baker and A. Parker, “What Creates Energy in Organizations?” MIT Sloan Management Review 44 (summer 2003): 51–56.
5. A market space is defined as a desired customer outcome. It extends boundaries beyond core products and services but also frames the new competitive arena for the enterprise. See S. Vandermerwe, “New Competitive Spaces: Jointly Investing in New Customer Logic,” Columbia Journal of World Business 31 (winter 1996): 80–102; and S. Vandermerwe, “Customer Capitalism: Getting Increasing Returns in New ‘Market Spaces’” (London: Nicholas Brealey, 1999).
6. The customer-activity cycle has three phases: pre, during and post, and maps the entire experience needed to get a customer outcome. Each phase has subcycles, sub-subcycles, sub-sub-subcycles and so forth to get to the level of detail that uncovers the opportunities. See S. Vandermerwe, “Jumping Into the Customer’s Activity Cycle: A New Role for Customer Services in the 1990s,” Columbia Journal of World Business 28 (summer 1993): 46–66. For the experiences of corporations using the tool as they make the transformation from products to customers, see S. Vandermerwe, “The Eleventh Commandment: Transforming To ‘Own’ Customers” (London: John Wiley & Sons, 1996).
7. For an example of how scholars calculate the lifetime value of customers, see E. Ofek, “Customer Profitability and Lifetime Value,” Harvard Business School case no. 9-503-019 (Boston: Harvard Business School Publishing, 2002); R. Rust, V. Zeithaml and K. Lemon, “Driving Customer Equity: How Customer Lifetime Value Is Reshaping Corporate Strategy” (New York: Free Press, 2000); and R.K. Srivastava, T.A. Shervani and L. Fahey, “Market-Based Assets and Shareholder Value: A Framework for Analysis,” Journal of Marketing 62, no. 1 (1998): 2–18.