Thursday, May 29, 2014

‘Activation’: The Next Step in Customer-Centricity

By David Brousell
Global Vice President, Research, and Editorial Director
Manufacturing Leadership Community| Frost & Sullivan

Putting the customer at the center of your business model may sound like an obvious thing to do. After all, what sort of business would you have without customers? But the idea of customer-centricity goes way beyond being responsive to customer demand, achieving higher customer satisfaction ratings, getting a product delivered on time, or focus-group testing a new product.

To hear C-suite executives describe the challenge of becoming truly customer-centric, the full embrace of the idea is nothing short of a revolution in how executives and their organizations think, behave, and act. And it is a revolution in which they must take up arms, so to speak, if they are to avoid being overwhelmed by the disruptions of advanced technologies and the dramatically changing balance of power with customers.

A new study of attitudes in the C suite by IBM underscores both the opportunities and challenges facing organizations in their adoption of customer-centric business models. The study, called the “Customer-activated Enterprise”, encompassed face-to-face interviews with more than 4,000 C-suite executives across 20 industries in 70 countries. The basic conclusion: Conventional structures have broken down, power has shifted to the individual consumer, and organizations that don’t fundamentally re-think their business models risk being left behind.

“In two-thirds of the organizations that outperform their peers, leaders are not just managing customer experiences; they are reorienting their organizations, strategies, and investments to cultivate contemporary relationships across all manner of customer interactions,” said Virginia M. Rometty, IBM chairman, president, and chief executive officer, in a statement in the report. “In brief, leaders’ priorities are shifting from intra-enterprise efficiency and productivity to a new agenda led by the front office and focused on extra-enterprise engagement, transparency, collaboration and dialogue with audiences and all the individuals within them.”

[A report by the Manufacturing Leadership Council, issued in the fall of last year, called Leadership: The New Struggle for Customer-Centricity, came to many of the same conclusions about the changing shape of customer-centricity.]

Over the next three to five years, CXO participants in the study said they anticipate major shifts in how innovation is conducted, in how organizations value and interact with customers, and in how their own organizations are structured and run. Sixty-eight percent of the participants, for example, said they expect that customer interaction will be digitally or socially based, compared with face-to-face interaction. Fifty-four percent said they expect a focus on customers as individuals, as opposed to treating customers as a category or a market segment. And 52% said they expected their companies to exhibit “organizational openness” rather than being primarily focused on operational control.

In its analysis of attitudes about customer-centricity, IBM said that three major themes emerged:
  • opening up to customer influences
  • pioneering digital-physical innovation, and
  • crafting engaging customer experiences.
Under customer influence, IBM said the study revealed that a growing number of CEOs believe that customer influence should not be confined to traditional activities such as new products or services. Now, customers should be involved in helping develop business strategy, IBM said, but the challenges in doing so are considerable.

“Accepting customers as stakeholders in determining an enterprise’s future has huge cultural and organizational implications,” the report said. “These businesses can’t just be customer-centric. They must be customer-activated. That requires creating fully reciprocal relationships with customers. It means being ready —and willing — to change course to pursue those paths that create mutual value. And it requires finding ways to include customers in key decisions.”

The real action in innovation, the report said, is at the intersection of the digital and physical worlds. A strong majority of CXO participants in the study, 60%, said they are looking to partners to help create business value, with almost half saying they are sourcing innovation from outside the company. But here, too, are formidable challenges.

“Two-thirds of enterprises have a weak digital-physical strategy — or none at all,” the report states. “Some organizations are reconfiguring their offerings to capitalize on social networks and mobile connectivity. Others are reshaping their operating models to inject customer input into every aspect of the buying and selling chain. But they’re often not doing both at once.”

Nearly seven in 10 CEOs, the study went on to say, recognize the “imperative” to embrace the social/digital intersection. And over half of the CEOs said they must understand and engage customers not as categories or market segments, but as distinct individuals.

“The members of the C-suite collectively need to step outside their comfort zone to create new and engaging customer experiences,” the report said. “Their real challenge: can they collaborate to make this happen?”

That, of course, requires C-suite executives to change their behavior, which is no easy task. But the fact of the matter is that behaviors of all sorts are changing as we speak. Some will be progressive and some will be regressive, as we are currently witnessing in Eastern Europe. But the old rule will still apply: The strongest today will not necessarily survive tomorrow. The most adaptable will capture the field.

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