“No company will tell you, ‘I don’t want to be customer centric,’ but do you know the difference between taking an inside-out versus an outside-in approach?”

-Ranjay Gulati

Most companies (small to Fortune 500 and everything in between) are not customer-centric—even if they think they might be (market-oriented or customer-focused isn’t the same, but they are a great start!). Driven by revenue generation, product and service development (i.e. profit centers) usually takes the lead and determines the hierarchy, culture and power within the organization. While products and services may be innovative, creative, and useful often the complete inward focus creates a fundamental disconnect between function and actually solving a customer’s challenges—from the customer’s perspective—and therefore companies only gain a temporary brand loyalty foothold. It’s why products and services (whether B2B or B2C) continue to face the challenge of commoditization. Even if customers force fit a product or service that alleviates short-term pain, there is still the hurdle of solving long-term challenges. If they are not focused on or solved, the next company that comes along with a solution and complete focus on achieving loyalty will win. Because companies focus on short-term gains, they lose 50% of their customers every five years or so. Ironically, it is more costly to acquire new customers than it is to make existing customers satisfied.

Breaking the Cycle

There is a reason why companies are not customer-centric. It is an operational practice, which can be  difficult, challenging and downright painful especially considering it requires a hard look at what—and who—is wrong when it comes to focusing on the customer. That doesn’t mean it’s not possible, however. There are examples of B2C and B2B companies that get it like Zappos, Southwest, Target, Best Buy, Carnival Cruise Lines, Cisco, Jones Lang LaSalle, and Lafarge.

So then, how does one break the cycle of being solely hierarchical and product-driven?

First, it is important to understand that customers have gained control of the market place and recognizing that they are not willing to settle for the status quo. It is from that perspective I will share methodologies from the leading experts in customer-centricity.

IMC Value Add – Don Schultz & Heidi Schultz

Don Schultz, the Father of IMC, has been my marketing guide for over 15 years. Everything I know about IMC I have learned from Don’s books (along with implementing, testing, etc.). IMC focuses on becoming customer-centric (putting the customer at the center of the organization) and data-driven. As found in IMC, The Next Generation : Five Steps For Delivering Value and Measuring Financial Returns¹, the “Five R’s” of IMC help companies to focus on reversing the traditional notion of value. That is, the customer determines what is valuable, not the company (not great news for fans of value prop creation).

• Relevance:  Developing products and services that meet customer  wants and needs
• Receptivity:  Reaching customers when they are most receptive, but more importantly in a manner that they want to be communicated with (This requires a company to be open to new ideas, concepts and methods of doing business)
• Response: Can customers response to a company and its offerings in an easy manner at every point of contact (This requires employees to sense, adapt and answer the needs/wants of customers)
• Recognition: Understanding important points of contact (data) that a customer has made within the organization (people, websites, 1-800s, etc.) and connecting the dots of their actions (This requires a company to stand apart from the competition from the start)
• Relationship: Comprehending that customers create the relationship, not the company and specifically not the marketers

NOTE 1: Click on this Google Books link for a graphic and more detail. Or, just buy the book. Bonus: ROI Formula!

NOTE 2: I share the 5 R’s in all of my IMC presentations, so you may have seen them there, too.

The Star Model – Jay Galbraith

I have been a long-time fan of Jay Galbraith, the driver behind organization design and customer-centric organizational strategy and management. Jay’s focus has been on helping companies understand that they: A) no longer have control over the customer;  B) need to understand each customer wants to do business in a different manner;  C) need to interact with customers and D) expand offerings to meet customer needs. Well, that and much more!  Jay is best known for The Star Model, a design framework used to determine new organizational strategies.

The Star Model has five areas:

• Strategy: Determines the new direction and includes goals, objectives, values, etc.
• Structure: Establishes the location of decision making power (including specialization, shape, distribution of power and departmentalization) and is based on the Strategy
• Processes: Channels the flow of information and decision making across the organization as an operational guide
• Reward Systems: Influences the motivation employee actions so that their goals are aligned with the overarching goal of the company
• People: Directs the hiring of employees in order to achieve the strategy and fit the structure of the organization

The Five Levers – Ranjay Gulati

Ranjay Gulati is a professor of business administration at the Harvard Business School and author of Reorganize for Resilience: Putting Customers at the Center of Your Business. Gulati hit the nail on the head when he wrote “enterprises talk the customer talk while failing consistently to walk the customer walk.”¹ To help organizations get to a point where they are customer-centric, flexible and resilient (to economic downturn), Gulati shares five key levers (I talk about them frequently in my IMC presentations):

• Coordination: connect, eradicate, or restructure silos to enable swift responses
• Cooperation: align all employees around the shared goals of customer solutions
• Clout: redistribute power to “bridge builders” and customer champions
• Capability: develop employees’ skills at tackling changing customer needs
• Connection: blend your offerings with partners to provide unique customer solutions

Choosing an Outside-In Focus

What do all of these models/methodologies focus on? Well, they certainly aren’t about giving up strategy, planning, processes (for all of you Six Sigma fans out there) or revenues—if that’s your concern. In fact, customer-centricity is about increasing value and revenues in a reciprocal manner. The first step is for companies to choose to have an outside-in focus, which is akin to admitting there might be a problem. Often an internal audit (hire professional help here) will help to determine next steps and the selection of a methodology that works best to support overall objectives while satisfying customers.

Realistically, however, I don’t see customer-centric becoming the norm. There are too many egotistical, insecure and arrogant people running around corporations for that to happen (am I wrong?). It really takes strong leadership, a willingness to be open-minded and wrong, and a drive to be the best (from a customer perspective) to flip an organization’s focus from inside-out to outside-in.

What do you think? Where is your company’s focus today? Do you think reorganizing around customers realistic?

If you are of the belief that “customers don’t know what they want” and it is a company’s role to determine what the market needs, how would you address being customer-driven?

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¹ Don Schultz, Heidi Schultz, IMC, The Next Generation : Five Steps For Delivering Value and Measuring Financial Returns (McGraw-Hill, 2003), 120-122.

² Ranjay Gulati, Reorganize for Resilience: Putting Customers at the Center of Your Business (Harvard Business Press, 2010), 4.

[Image Source: Elizabeth Thomsen]

Even More Goodness! Related Posts:

• What Integrated Marketing Is Not (Hint: It’s Not Integrated Tactics)
• Customer-Centric: An Operational Practice, Not a Marketing Buzzword
• Saturday Morning Reads: (Re)Organizing for the Customer
• Your “Industry Experience Only” Requirement Is Hurting Customers, Employees and Shareholders

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