Customer Understanding Versus Customer Centricity: Which Is The More Effective Enterprise Strategy?

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Recently, a consulting company which specializes in software and research for voice of the prospect, customer, and employee issued a blog which hypothesized that customer understanding is more important than, and needs to come before, customer centricity.

Their rationale for this position was clients had been asking them to conduct transactional surveys before having an in-depth understanding of customer needs and behaviors. They offered three reasons why this is important:

– Understanding customers can help segment the customer base and prioritize each segment for action and resource allocation, enabling targeting and focus of key experience elements

– Understanding customers can help design experiences that go beyond the functional, and focus on the emotional

– Understanding customers can help direct an experience strategy that provides a competitive advantage

From our perspective, this hypothesis, and the reasoning behind it, isn’t wrong – – but it is fairly shortsighted. Every company interested in becoming more customer-centric is at some stage in that evolution of the enterprise, from naïve to natural, beginning with tactical awareness and passive relationships and moving toward strategic, organization-wide customer obsession that is part of the enterprise DNA.

In the naïve, or general awareness stage, customers are known, but only in the aggregate. At this stage, the organization believes it understands customer needs, measurement of stakeholder behavior is rudimentary or transactional, if it exists at all. Further, management is hierarchical, with chimneyed and siloed communication, and little evidence of teaming.

As companies move toward customer obsession, they develop more sensitivity with regard to stakeholders. There is more focus on service (such as problem/complaint management). Customer measurement techniques, however, are largely attitudinal and functional, with little emphasis on emotional and/or relationship drivers. Culturally and structurally, management still operates from a traditional hierarchy.

With increased focus, customers become both known and valued, down to the individual level. At this stage, customers are recognized as having varied needs; and service and other experience elements are enterprise priorities, with more proactive communication and collaboration. And, management is moving to a more horizontal, perhaps even matrixed, structure.

At the highest level of customer-centricity, stakeholder needs, wants and expectations are well understood throughout the enterprise. Everyone’s job includes providing value to customers, or providing support for someone who provides value. Loyalty behavior is paramount, and optimal customer relationships are a key priority. Management structure is extremely horizontal, with emphasis on customer inclusion and teaming.

All of this is by way of saying that any organization seeking to become fully customer-centric need not delay its progress by first having a full understanding of the customers, and the nuances of their decision-making behavior, in order to reach this ever-evolving goal. How? Stephen Covey advised us to become more effective by ‘”sharpening the saw.” My personal preferences, however, come from the philosophically deep Broadway show, Spamalot: “Set your mind on what to find, and there’s nothing you can’t do” (The Lady Of The Lake) and “Trim your sail. You won’t fail. Find your grail. Find your grail”. (Kind Arthur).

Isn’t customer centricity, not just customer understanding, the grail every enterprise should be seeking?

5 COMMENTS

  1. Michael, your blog raises another fascinating issue: Is customer-centricity always the best goal? And, around which customer should an enterprise be centered? Let me offer an example where the issue can be complex and potentially obtuse.

    I consulted for several years with a very large air defense company. When building a new fighter jet the company’s product development approval came from DOD, their funding came from the U.S. congress, their ultimate customer was the citizenry of the U.S. and its allies they were commissioned to protect, and the user of their product was a fighter flyer (pilot). We had to begin our work with a clear understanding of the real customer (or constituencies) just to figure out the appropriate tie breakers when decisions to be made had conflicting interests.

    Do you build a fighter jet that pilots love to fly, or the one generals want to manage, or the one that John Q. Public thinks will deliver the biggest payload in combat, or the one allies can effectively maintain, or the one the U.S. Defense Department believes best fits the future requirements of air defense, or the one congress is willing to fund? While I think customer-centricity might be the ultimate strategy best suited for most, I can value circumstances where solid customer intelligence might be the right starting point.

  2. Chip –

    Thanks for your comment. I agree that solid customer intelligence, distilled to yield customer insight, is often an appropriate starting point. But, the piece to which I was referring identified customer intelligence, extended into understanding, as the end point. Without an architecture, culture and processes built around customer-centricity, there would be a slippery slope for the insights to be either incorrectly applied or, worse case, not applied at all.

    Michael

  3. Michael, why should companies have to choose customer insight vs. customer-centricity? Isn’t the first part of the second?

    Chip, one of the problems with customer-centricity is the term itself. Taken literally, it can mean “put customers at the center” and ignore everyone else. In practice, companies are balancing needs of a number of different stakeholders. In some cases, as you point out, multiple types of customers.

    At CustomerThink, for example, we align our strategy around what business leaders need — they are our primary “customers.” But without authors we have no content to serve those readers, and without sponsors we have no funds to keep the community going. Everyone needs to get value.

    At Intuit, the have a customer-centric culture, but also talk about creating wins for customers, employees and shareholders — at the same time.

  4. Bob –

    Let me clarify. I’m not advocating an either/or strategic approach. What I was doing in the post is comparing the operating logic of a customer-understanding-as-an-end-goal thesis, that I’d seen in another company’s blog, to customer-centricity. I’d count myself in the same camp as Intuit, i.e. having the enterprise function from a customer-centric culture and strategy, while working to provide optimum stakeholder value.

    Michael

  5. Like you and the other customer experts who have commented, I find this fascinating. Ultimately, if an organisation puts the customer at the heart of everything they do, then they will ultimately be in a position where understanding the customer is central to the way they work. In my opinion you cannot be customer centric unless you do understand the customer – it is that simple. Too often organisations over complicate their approach to Customer Experience – this seems to be another example of it!

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