The Customer-Centricity Paradox

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What’s the first thing that crosses a CXO mind, when he or she hears “customer-centricity” bandied about? For many execs, it’s “increased cost.” You betcha. “Gotta have so many mignions attending to so many needy customers that we’ll never post a profit increase.” And if you think about it, makes sense to frame customer-centricity this way.

But it’s wrong. Dead wrong. Wrong because, paradoxically, giving customers more of what they want requires fewer employees, rather than more employees. And managing head count is almost always the pillar of cost control.

Hopefully, now you’re really scratching your head. “How do we get to taking better care of customers by reducing head count?” Actually, by applying a fundamental business principle championed by folks including Jack Welch, Peter Drucker and damn near every organizational consultant on the planet.

Some, including Welch, call this principle “delayering.” At High-Yield Methods, we call it “rationalizing work” (to make sure everything adds value to customers). But whatever the name, it requires reducing “supervisory” layers to a bare minimum. And perhaps the most essential element of delayering is trusting and empowering line employees to make decisions without supervisory oversight (read “interference”).

Now here’s where good organizational strategy meets customer-centricity. Aside from quality products (which includes more than a dollop of service quality), what does research show to be customers’ highest priority? Dealing with empowered employees. Voila.

In a nutshell, delayering the organizational structure, which results in substantial cost reductions, doesn’t just work for companies. It works for customers as well. We rediscover this principle from the opposite direction virtually every time we reengineer business process. When we rationalize process to eliminate activity that doesn’t add value to customers, we very quickly come down to delayering. So in this case, doesn’t matter whether you start from a customer-centrric point of view or the customer perspective. You reach the same end point. Which doesn’t happen very often. Which is also why it’s so unexpected. Which makes it a paradox.

So next time you hear “customer-centricity” and “cost-control” used in the same breath, don’t belch.

5 COMMENTS

  1. I hope some CXO are reading this blog.

    Companies that really deploy customer-centric practices benefit financially in several additional ways. One, customers become more engaged and less price focused. Two, engagement increases commitment to the relationship and more tolerance for snafus. Three, engaged and committed customers are more potent advocated who recruit other high-value customers. And, advocates often serve as a free help-desk to those they recruit.

    John I. Todor, Ph.D. is the author of Addicted Customers: How to Get Them Hooked on Your Company. (www.AddictedCustomers.com)

  2. Viewed in this way customer centricity doesn’t increase value FOR the customer, rather it increases value OF the customer to the firm which keeps the thinking ‘firm centric’…

    customer centricity is a leap of faith and while the search for proof continues, organisations that get it (and implement it) before the proof is found will prosper…

    forget the attempts of conversion to the new faith, just as going to church on a Sunday doesn’t make you religious (except in your habits), faking customer centricity to drive down costs doesn’t cut it…

    whether it drives down costs is not the point, what it does do is increase the value of your proposition / offering, which customers are prepared to ‘pay’ more for…

    although pay in this sense may not equate to increased prices at each transaction, it likely means more transactions from each customer (increased CLV) and / or increased loyalty as more than transaction price is required to shift them to competitors

    as an aside, adding value is a misnomer. it is production centric thinking. firms can’t add value, because they don’t produce value. they produce value propositions or potential value, without customers no value is created just costs; a warehouse full of products is not a warehouse full of value

  3. John, Phil

    Missing so-far in this discussion has been any semblance of offering evidence, let alone proof, for the customer-centric proposition. It is not adequate to just say that “customer centricity is a leap of faith”. If it is, then companies are well advised not to bother to make the leap and to stick to the not so customer-centric facts. Indeed, until evidence is gathered that show clearly that customer-centricity is a superior business strategy and how to make it work, a CXO implementing it would be being negligent in his duty to non-customer stakeholders.

    We MUST rise above this motherhood and apple-pie approach to customer-centricity. Until we can provide hard evidence of the efficacy of customer-centricity, we should stop peddling it as the panacea for all ills.

    Graham Hill

  4. Graham, there’s plenty of evidence that a customer-centric approach can deliver business benefits, as you’re well aware.

    It’s not the only way to make a buck, of course. Product innovation and cost leadership are still valid strategies, and can be used in combination with customer-centricity. If fact, I could argue that providing the best product or lowest cost is a form of customer-centricity, for customers that value such things.

    A “customer-centric business strategy,” in my view, is one where the enterprise delivers what the customer wants and in return receives revenue and profit. A win-win. I think part of the problem is that some may define being customer-centric as just being nice to the customer, no matter how much it hurts.

    I don’t believe customer-centric business should be a leap of faith. Perhaps we can use this thread to refine what customer-centricity really is, and when and how it can work for a business. And when it doesn’t.

    Bob Thompson, CustomerThink Corp.
    Blog: Unconventional Wisdom

  5. Dick Lee – we’re in violent agreement about all your points. But keep in mind that the perceived addititional costs of becoming customer-centric act as a giant brake that keeps many companies from “taking the leap.” The point I’m making is that we can and should spread the word that customer-centricity reduces operating costs, rather than adding to them, as an extra carrot to spur on more customer-centricity.

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