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Organisations that embrace customer-centricity outperform their peers on revenue growth 1). However, if a customer-centric strategy is not approached in the right way, it can fail to deliver business value.
Successful customer-centric strategies and transformations require a holistic approach. While the strategy will likely differ for every organisation, there are 10 fundamentals we consider imperative to deriving business value from customer-centricity.
1. Assess and understand your level of customer-centricity
Assessing your organisation’s level of customer-centricity against international best practice standards will not only help you pinpoint what good, bad and great look like, but also identify where you can deliver business improvements.
International best practice customer-centric standards often apply a Balanced Scorecard methodology to assess an organisation’s strategic ability to deliver its value proposition to customers while also generating sustainable shareholder returns. This assessment should identify the level of continuous improvement of people, systems and business processes across the organisation.
However, simply conducting an assessment of customer-facing systems and practices is not enough. It needs to look holistically at how your entire organisational ecosystem contributes to the overall customer experience, including financial governance and HR processes, both front and back-end.
2. Assess organisational readiness
If your CEO’s agenda doesn’t include customer ‘focus’, ‘obsession’, ‘intimacy’ or similar, it’s going to be tough to embark on a customer-centric journey.
Culture is key. Even if your CEO is already driving the customer-centric mandate, it won’t be effective if it doesn’t shift the entire culture towards customer-centricity. Think about employees in non-customer facing functions, like finance or production.
Assessing your organisation’s readiness will help you understand the level of transformation required, whether an incremental or a complete transformation. A readiness assessment could be as simple as a traffic light assessment of 10 company attributes, or a more intensive and rigorous research project with scoring and benchmarking.
3. Assign ownership & accountability for customer
Ownership and accountability of the customer is often left with the marketing department in many organisations. Yet having one department own the customer mandate can often result in a silo-ed effort and one that can be disconnected from other parts of the business. This scenario most often occurs when there is no mandate from the CEO or senior leadership team to support the delivery of the customer-centric vision.
Many global organisations are now addressing this issue by assigning Chief Customer Officer (CCO) roles to oversee the delivery of their customer-centric vision. The most successful CCOs go beyond paying lip service, by driving continued alignment across all departments to put the customer at the centre of everything they do. This often includes realigning operating models, distribution, value-chain, pricing, products and promotions to meet customer needs and deliver gross profits.
4. Understand your customers & conduct diagnostics
Achieving customer intimacy is what successful customer-centric companies like Amazon and Walt Disney focus their strategic efforts on. This includes gaining an intimate understanding of the key customer groups that drive profits, their key behaviours, preferences, needs and wants. The current customer journey across your people, process and technology also needs to be thoroughly understood.
Customer research and analytics only forms part of this assessment. Practical diagnostic tools should also be used, such as Customer Journey Mapping, Service Blueprinting, Persona Development and Customer Discovery.
5. Define the metrics that matter
Developing and delivering a customer-centric strategy is irrelevant if it doesn’t link to profits and growth. For example, if the key business metric that matters is Earnings Before Interest and Tax (EBIT), you will need to demonstrate how your customer metrics drive EBIT.
Simplicity is king. Creating too many metrics makes it complicated to measure and act on the results, and challenging for your organisation to embrace. This is why some organisations choose one or two key metrics. For example, Customer Lifetime Value is often used as a key customer metric, as it can be directly linked back to profits.
Irrespective of the metrics that you choose, you must be able to assess whether your initiative is working and identify how you can make improvements. The most successful organisations often integrate these metrics into their official company financial reporting.
6. Develop & assign aligned customer-centric KPIs
Without assigning aligned KPIs across all teams, it can be challenging to deliver on integrated business objectives right across the organisation.
Take the simple scenario where Sales and Marketing have aligned KPIs around profitable customer acquisition and retention, but the Customer Service’s departments KPIs are focused solely on productivity. Customer Service Reps try to reduce time spent on the phone to deliver cost savings, greater dissatisfaction results, as customers’ problems are not resolved. This may trigger customers to leave the organisation.
Not only does this negatively impact Sales’ and Marketing’s KPIs, but also overall business results, as conflicting interests drive behaviour that goes against customer-centricity.
7. Understand, review & align your people capability
Pivoting from a product-centric to a customer-centric operating model often requires an uplift in people capability via up-skilling, outsourcing or hiring-in new capabilities. For example, gaining an intimate understanding of your customers often involves the development of research and analytics capabilities. This may mean you need to hire new staff, up-skill existing staff or outsource to perform these activities.
Changing the mindset of staff to put the customer at the front and centre of their thinking can also require considerable training.
You may also want to review how different departments operate to ensure the customer is put at the forefront of their decision-making and processes. This could be as simple as refreshing collaboration processes between departments or conducting a complete structural realignment.
8. Optimise organisational processes & technology
Customer diagnostics will enable you to pinpoint key customer friction points, such as back-office processes or customer-facing technology, that negatively impact your current customer experience. The next step is to leverage these insights to develop or adapt processes and procedures across your organisation to deliver a seamless and improved customer experience.
This can be one of the most complex steps because it spans multiple business functions, and it may challenge the status quo in terms of who owns the process, customer, technology platforms and delivery.
This is usually where organisations can benefit from an outside-in perspective to challenge in-built internal viewpoints and beliefs.
9. Create a culture of experimentation & measurement
Embedding a rigorous continuous improvement culture is crucial to ensuring transformational initiatives are implemented effectively and are sustainable. Having a test and learn environment will help you transform new ideas and initiatives into winning business decisions.
Measuring the success of your key customer initiatives will help you understand the key performance drivers required to deliver continuous improvement. Visibility of customer metrics can also help drive increased cultural adoption of customer-centricity, especially financial customer metrics.
10. Implement a change management program
A robust change management plan is crucial to delivering customer-centric success across your people, technology and processes. Employees need to buy-in to the concept, which can be challenging without a clear understanding of what is happening and why. Some simple impactful initiatives might be to get a cross-section of the business involved in developing a customer value proposition, or identifying an existing customer journey map for your organisation.
A customer-centric transformation is a cultural change as much as a change to actions, systems and processes. A holistic approach is required, often needing those responsible for change management to be dispersed across the organisation from the top-down, bottom-up and across.
To sum up
•Customer-centricity is not a one size fits all process and it will be different in each organisation.
•Incorporating the above fundamentals will help you derive value from your customer-centric strategic efforts, but only if approached in the right way.
•This requires taking a holistic approach towards customer-centricity, which is of course easier said than done.
•The overarching principle is to find the balance between mutual value for you and for your customers. Permeating this principle throughout your entire organisation is the key to delivering optimal commercial outcomes in practice.
•It doesn’t necessarily mean jumping straight into an overhaul of your current strategy and operations. Bespoke solutions are often needed and they depend on your business strategy, culture, industry, organisational readiness and executive focus.