What Leaders of 21st Century Customer Centric Organisations do!

Roger Martin, in his Harvard Business Review article (Jan-Feb 2010) entitled ‘The Age of Customer Capitalism introduced a new principle called Customer Driven Capitalism. He introduces this as the third era of modern capitalism and builds an argument that society should rapidly shift towards this principle which is based upon a logic that shareholder value can be best optimised by focussing on the customer. This is radically different from the two previous eras of modern capitalism – the first, Managerial Capitalism, began in 1932, and was defined by the then radical notion that firms ought to have professional management. Business leadership moved from entrepreneurs and founders to an elite group of professional managers. The second era of modern capitalism began in 1976 and, known as Shareholder Value Capitalism – defined and built upon the premise that the purpose of every organisation should be to maximise shareholders wealth.

Roger Martin shares statistics that prove that shareholders weren’t necessarily any better off during era 1 when professional managers came in to look after their interests. Similarly, during the last quarter of the 20th century and through till the end of 2008, when the maximisation of shareholder value was the ‘calling cry’ – shareholders aren’t shown to have benefitted any more as a result of their interests being put first and foremost. In fact, during this period, the focus of many organisations and stock markets became increasingly short-term. This focus on quarterly results led many executives to ‘dilute’ their focus on longer term sustainable earnings, to the detriment of those shareholders who were longer term focussed. We’ve all seen the results and possibly felt some pain resulting from Worldcom, Enron, Madoff and the 2008 financial meltdown. This is largely due to leadership focussed on serving themselves and short-term shareholders rather than leaders who are focussed on building both short and long term sustainability and earnings.

Bill George, in his HBR article entitled ‘The New 21st Century Leaders’ highlights the fact that a new generation of leaders is re-shaping the best led global companies. Authentic, customer focussed leaders are replacing hierarchical leaders who have focussed on serving short term customers.

The late Peter Drucker probably said it best when he stated that the purpose of a business is not to create a product – it is to create a customer.

So what needs to be done to focus new age leadership on delivering sustainable superior business performance and where does leadership focus to deliver against the mandate?

Sadly, measures and bonuses are often structured in such a way that management is incentivised to do the wrong things. Silo mentalities remain embedded, functional areas operate in their own isolated universes oblivious to the customer experience, often a business focuses on optimising a functional area unaware that ‘fixing the part’ often breaks the whole –  (e.g. Optimising operational efficiencies of the call centre by measuring AHT (Average Handling Time), Time to Answer etc without realising that the Call Centre is very often the only channel that a customer will proactively use to make contact with the business and instead of encouraging  customer interaction the focus remains on getting customer off the line as quickly as possible so that operational metrics can be achieved.)  This is often at the expense of brand reputation and customer experience – real drivers of organisational value.

Bonus payouts are very often based upon Revenue, EPS, Market Share and such like. These metrics seldom correlate with building sustained value.

Furthermore, the analyst community very often ‘rate’ companies according to aggregated and generic measures that do not necessarily correlate with building organisational value. For example, ‘Net New Customers’ is often viewed as being representative of an organisations growth capability. The higher the number the better! Well, reality is sometimes different if viewed from a value perspective e.g. Net New Customers may equal 1 Million, made up of 1.27M newly acquired customers and 270K lost customers. What if the bulk of the newly acquired customers were low value customers and the bulk of the lost customers were high value? This may well represent value erosion rather than be reason for celebration.

So…..in the Age of Customer Capitalism leaders need to create organisations that have the capability to Influence Customer Behaviour – they need to demonstrate an ability to Acquire customers more effectively than their competitors through high quality, relevant product and service. Their Value Propositions need to be targeted and appropriate. They also need to create an organisation that has developed capability to Retain customers through the delivery of a service promise that aligns with the value proposition and brand. Corporate social responsibility, socio economic commitments, sponsorships, environmental awareness are all important as part of Retention capability. The organisation also needs to develop the capability to cross-sell and up-sell their customers – to develop trusting customer relationships that encourage customers to be open to additional, relevant products and services.

The ability to Influence Customer Behaviour is reliant on having a solid base of Committed Customers, not merely satisfied customers. It is this group of customers who, through consistency in terms of product quality, relevance and service, become company ambassadors.

The only way to build real commitment is through the Design and Delivery of a Unique and Distinctive Customer Experience. This is a blend of the rational and the emotional – it is a mix of the traditional product, service, communication offering and the emotions evoked when engaging with the business across various touch-points and/or channels. New age leadership needs to proactively design this experience at each and every moment-of-truth and ensure that employees are empowered to deliver according to the agreed upon standards

Lastly – to deliver the defined experience requires Engaged Employees – employees who are fully aligned around the organisations values and its purpose. These employees need to be committed to deliver upon the promises they will have made to ensure that the intended experience is brought alive

Organisations developed around these principles will indicate that the ‘Age of Customer Capitalism’ has come of Age.