Roadmap to a Customer-Centric Business by Peter Fisk

www.theGeniusWorks.com

Roadmap to a customer-centric business Extract from “Customer Genius … Becoming a Customer-Centric Business” by

bestselling author, speaker and consultant, Peter Fisk.

Doing business on customer’s terms is obvious and essential.

Peter Drucker was one of the first to suggest that the sole purpose of a company is

to create and retain customers. He reasoned that since the customer alone pays

for the product or service, the customer the most important entity within the

business. Indeed, in recent years, from the eighties bandwagon of total quality

management to the nineties obsession with customer relationship management,

organisations have sought to align themselves to customers.

However, some argue that a blind obsession with customers has a destructive

impact on competitive advantage, the focus on competitors is last as every

company seeks to meet the same needs of the same customers. This itself, they

argue, leads to falling satisfaction of customers as they are faced with an infinite

number of relevant but commoditised products and services. It also misses the

stimulus for innovation, for meeting the unarticulated needs of customers, and

finding better ways to solve their problems.

Companies have succeeded with both strategies – Courtyard by Marriott, for

example, was a business traveller hotel concept designed entirely by conjoint

analysis-based customer research, focusing on the priority needs of this target

audience. Meanwhile companies like Chrysler have succeeded through


innovation – their groundbreaking minivan, for example, defining and shaping an

entire market despite customer research saying that customers did not want it.

The reality is that a successful business does both – these approaches are not in

conflict. Having a customer orientation is not about blindly obeying the customer,

but about working with them to so that you both understand their needs and

ambitions, whether they are articulated or not. Similarly an innovation orientation

is not about product obsession, customers are increasingly partners in the

innovation process, and all innovations ultimately need customers to embrace

them.

From Amazon to Zara, P&G to Target, they realise that they need to meet the

existing and emerging needs of their customers, but also drive innovation and

differentiation. Indeed they realise that a customer orientation is not just about

bowing to the declared needs of customers, but being selective about which

customers to work with, and then collaborating to understand their real issues

and aspirations. They also realise that competitive advantage stems from having

the better insights, the better customers, and thereby driving better innovation

and growth.

Perhaps it comes down to words and meanings – early approaches to “customer

focus” were largely cultural and superficial, achievable despite being driven by

products and internal priorities.

Customer focus, customer intimate, or customer driven?

These initiatives tended to focus on attitudes and behaviours, and mainly those at

the “customer interface” - a term which itself implied that the rest of the business

is not connected to customers. They were largely about nice words, soft focus,

but when it came to the crunch, it was still business first, customer second - how

to gain and grow profits first, satisfy and retain customers second.

So what’s different?

A “customer business” starts with the customer. It works from the outside in, and

then balances this inside out. By starting from the outside in, the business is

fundamentally inverted, its priorities are different, and its performance better.

No longer can businesses see the best opportunities, engage the best customers,

compete most effectively, by standing inside and looking outwards. Products and

processes, strategies and systems, rewards and relationships must start and

revolve around the customer.

Customer-centric is probably the best adjective, if you need one.


Customer Value, Business Value

Becoming a customer business is not just about passion, it makes commercial

sense.

Customer businesses deliver more profitable growth, are more sustainable over

time, and deliver better returns to shareholders. It can also be a more efficient

business, a more flexible organisation, and a more enjoyable place to work.

At a strategic level, customers are the scarcest resource of a business.

It is easy to secure physical resources from suppliers around the world, except in

the case of oil which we all know is running out. It is relatively easy to secure

capital, from conventional investors or more recently from private and

particularly from ethically-motivated sources. It is not so easy to secure the best

talent, as knowledge and ideas become more important. Yet the most difficult to

secure, and most valuable resource is the best customers. These are the golden

nuggets of today’s business.

At a commercial level, customers are the most valuable assets of a business.

Consider the market capitalisation of a business – the collective value of all your

shares, and reflecting the price somebody might pay to buy your business. This

value reflects the future profit potential of your business, and therefore the assets

that make up that figure are those that are most important in driving future profits.

Today, 86% of the value of publicly quoted businesses is intangible (according to

Brand Finance), and the most significant intangible assets are typically brands,

relationships and ideas. Two and sometimes all three of these are driven by

customers.

At an operational level, the best customers cost less and spend more.

Research, to be considered in more detail later, describes your best customers as

those who are prepared to engage in long-term, profitable relationship. It shows

how these best customers will typically stay longer, cost less, buy more, pay

more and tell others. Their acquisition costs will be lower, falling to zero as they

want to come back of their own accord. Their operational costs will also be low,

as they do more themselves. Their perceived value is higher, and therefore they

may pay more or at least seek lesser discounts. A best of all they are great

advocates – recommending you to their friends, other people like them –

building reputation and attracting others.

Every business will quote different figures to demonstrate the importance of

customers. The numbers and chosen ratios may differ by type of business and

market. However these are some of the most typically quoted statistics, averages

and generalisations, but helping to make the business case:


20% of your customers give you 80% of your revenue

10% of your customers give you 90% of your profit

A very satisfied customer will tell 3 other people

A dissatisfied customer will tell 12 other people

A very dissatisfied customer will tell 20 other people

98% of dissatisfied customers never complain, they just leave

65% of lost customers are due to negative experiences

75% of negative experiences are not related to the product

The biggest reason people leave is because they don’t feel appreciated

It costs 3 times more to acquire than to retain a customer

It costs 12 times more to win back a dissatisfied customer

Over 5 years a typical company retains 20% of its customers

5% increase in retention would increase profits by 25 to 55%

Most companies are quick to beat their chests about delivering superior value to

shareholders, driving profitable growth, reducing risks, improving dividends,

and seeing their share prices rise. Of course they can do this in the short term by

“slash and burn” approaches to cost reduction and aggressively driven sales. But

it won’t last. The only sustainable route to long-term value creation, profitable

growth and lucrative dividends, is in creating and delivering superior value to

customers.

Creating superior value for customers – through deeper insights, more

relevant propositions, and personal solutions - is the foundation of a

successful “customer business”.

Creating superior value for shareholders – through sustainable growth,

enhanced margins, and reduced risks – is the results of a successful

“customer business”.

“Customer value” is therefore the starting point - not the financial value of the

customer to us, but the value we create for them, which is obviously a perception

that differs by customer, rather than an absolute value. But it is the notional value,

the philosophy, and approach that matter.

Building a customer-centric business

Defining a “customer business” can sound simple and obvious. It sounds like the

right thing to do. And this is perhaps why so many organisations, and particularly

their leaders, have failed to appreciate the more fundamental differences


involved. They have applied the philosophy, but not the disciplines that move

from a product to customer obsession, and to turn passion into profit

We understand now that it is about creating value for customers first, and

business second. We are ready to embrace pull rather than push approaches to

our markets, and to adopt this more holistically in our “outside in” approach to

business. We can also make a strong business case for it, based on the significant

impacts on profitability and value creation.

Customer centricity: Turning the business on its side

But what are the more practical differences? How does it affect the business

strategy, the performance metrics, and our decision-making criteria? What does

it mean for the way we recruit and manage people, for our key operational

processes and systems, and for organisation structure? To be absolutely clear,

what does it mean we must stop doing, and what must start doing?

The customer-centric business

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Customer centricity: a fundamentally different approach

Moving from a product-centric to customer-centric business is a like flipping the

organisation on its side. It is about aligning the organisation to the customer

experience, rather than product management. It is about managing your

customer portfolio rather than your product portfolio. It is about solutions rather

than products, and relationships rather than transactions. It is about measuring

profitability – with profit and loss reports, the budget allocations, the

performance rewards – by customers and segments rather than by products and

business units.

The specific differences between a product-centric to a customer-centric

business are shown below. Some of them are obvious, whilst others require more

explanation which will follow later. Some of them challenge ingrained principles

Best product Add value through features Competitive obsession Treat customers equally Wide range of products Selling and delivering Short term transactions Revenue and volume % market share % new products % satisfaction New customers, existing products

Sales driven, push Customers come to us Connect with intermediaries Broadcast campaigns Mass media Awareness and attraction Internally focused Product management Technological innovation Product profit centres Planning and consistency Left brain, X-type people

Best relationship Add value through service Customer obsession Treat customers differently Personalise solutions Collaborative and enabling Long term relationships Profit and value % best customers % wallet share % advocacy Existing customers, new products Buyer driven, pull We go to customers Connect with end users Personal conversations Experiential Engagement and retention Externally focused Relationship management Market innovation Customer profit centres Agility and responsiveness Right brain, Y-type people

The customer-centric business

The product-centric business


or philosophies of business – such as moving from a large catalogue of products,

to a capability to bring together the right solutions, or the replacement of %

market share with % share of best customers.

How do you make this happen? What matters most? And where should you start?

Of course every business is different, and every business will already have

embraced some aspects of customer-centricity. Fundamental will be the strategic

direction, targeting the right performance metrics, and giving people the tools to

act differently. However it is the business that combines these many different

factors that will be able to realise the real commercial benefits.

The Roadmap: Making the change to a customer-centric business

Becoming a customer-centric business requires fundamental change to the whole

business, not just how it interacts with customers. It therefore requires a managed

programme, typically lasting 12-36 months, that aligns with the strategic and

operational priorities, and delivers sustained value creation.

The change to a customer-centric business must be driven by business leaders,

must be managed to mitigate risks, must unlock new energy inside the

organisation and with customers, must make a difference to customers, and must

deliver results both intermediately and on completion.

There are four phases to the management of change to becoming a customer-

centric business:

Phase 1: Making the case

1. Defining a compelling vision for the future – what does it mean to be

customer centric, what will be different, why will it be better?

Customer Centric Vision Workshops

Customer Immersion

What’s possible

What’s plausible

Vision video

2. Evaluating the current business – how effective is it in attracting, serving

and retaining customers compared to best practices?

Customer-Centric Benchmarking

Benchmarking competitors and other sectors

Evaluating the “as is” state


Agreeing the “to be” state

Gap Analysis

3. Understanding how this relates strategically – how does a customer centric

focus fit with other priorities, and deliver strategy better?

Business strategy alignment

Mission, values and goals

Business priorities

Financial plan

4. Engaging stakeholders in all of this – prioritising internal and external

stakeholders, in both the imperative and opportunity of change?

Stakeholder management

Stakeholder mapping

Engagement plan

5. Agreeing what it will take to make happen – what resources will it take,

what does it mean we stop doing, and have to start doing?

Change workshop

Phase 2: Making ready

6. Mapping out a programme of change horizons – how will we move from

“as is” to “to be” states in a series of phases, phasing investment and

results?

i. Change planning

Business

narrow

view

Business

narrow

view

Customer

broader

view

Business Customer


1. Horizons

2. Budgeting

3. Resourcing

4. Aligning

7. Identifying priorities – balancing the financial imperatives, what matters

most to customers, making it coherent and logical, and finding quick wins.

i. Change governance

1. Sponsor

2. Steering group

3. Project team

8. Acquiring the needed resources and investment – making the business

case, securing the money, people, time, help, to do it?

i. Business case

1. Preparation

2. Approval

9. Preparing people for change, building commitment – building a desire and

internal energy to make change happen, and making it “designed by

customers” too.

i. Customer education

1. Immersion

2. Big Talk forums

10. Engaging customers in the change – so that it is “designed by customers”,

they are engaged in both the solution and the partnership process of

creating it.

i. Collaborative design

1. Journey mapping

2. Needs mapping


Phase 3: Making it happen

11. Challenging leadership beliefs and behaviours first – ensuring that leaders

change too, as they have moulded by the old organisation, structure and

values.

i. Leadership workshop

1. Business challenge and opportunity

2. Personal challenge and opportunity

3. Personal role in leading change

4. Personal role in changing self

12. Developing pathfinder projects – pilot the change with chosen teams,

segments, products, markets to learn from, and demonstrate the impact.

i. Pathfinder projects

1. Project selection

2. Experience design

3. Product, process and culture development

4. Test, learn, launch and adjust

13. Focusing on hearts and minds – making change in culture and process at

the same time, so that people have the tools to do what they now believe is

right.

RetainSupport

Identify

AttractServe

Relationship

Grow Segment

Target

Insight

Brand

Proposition

CommunicateDistribute

Customise

Experience

Customer

leadership

Customer

portfolio

Customer

research

Customer

Strategy

Customer

priorities

Customer

programmes

Customer

alignment

Customer

cocreation

Customer

service

Customer

learning

Customer

management

Customer

rewards


i. Internal communication

1. Regular updates

2. Symbols of change

3. Forums and feedback

14. Managing the change as a programme of projects

i. Project office

1. Milestone deliverables

2. Governance reviews

Phase 4: Making it Stick

16. Roll out the change programme throughout the business and across all

markets – change is not a point but a journey

i. Project office

1. Sustain for at least 18 months

2. Embed into business as usual

3. Leadership driven

17. Develop sustaining mechanisms to do business in a more customer-centric

way as the normal business practice

S

S

S

S

S

S

S

S

S

Communicate in mass campaigns

Products standard and discrete

Distributed through defined channels

Relationships sought by suppliers

Innovation drives product derivatives

Strategy based on current capabilities

Measured on financial- based metrics

Price based on competitors and costs

S

S

S

S

S

S

S

S

S

S

Brands define company or product

Communicate in mass campaigns

Products standard and discrete

Distributed through defined channels

Relationships sought by suppliers

Innovation drives product derivatives

Strategy based on current capabilities

Measured on financial- based metrics

Price based on competitors and costs

SOverall, we call the shots

C

C

C

C

C

C

C

C

C

C

C

C

C

C

C

C

C

C

C

C

Propositions that engage needs segments

Strategy based on best opportunities

Measured on customer- based metrics

Pricing based on perceived worth

Overall, customers call the shots

Personalised interactive dialogue

Customer partners help create solutions

Customers loyal to people like them

Innovation redefines market contexts

Strategy based on best opportunities

Pricing based on perceived worth

Brands reflect customer aspirations


i. Business model

1. Customer-driven business planning

2. Customer-driven resource allocation

3. Customer-driven organisation structure

4. Customer-driven marketing, sales, service, support

5. Customer-driven performance scorecard

6. Customer-driven investor relations

18. Introduce new performance metrics and incentive structures – so that

people are rewarded for customer-centric behaviours

i. New KPIs and Targets

1. Team and Individual targets

2. Bravo Zulu style recognition

3. Development framework

4. New training resources

19. Ensure that the change delivers business impact – improved products and

services, better customer experience

i. Deliver change for customers

1. Customised products

2. Personalised service

3. Segmented propositions

4. Customised products

5. Personalised service

6. Improved experience

20. Communicate success as an ongoing activity – continuing to adjust and

improve, and demonstrate the impact of a customer centric approach.

i. Deliver improved business results

1. Impact on shareprice

2. Impact on profitability

3. Impact on sustained growth

4. Impact on brand reputation

5. Impact on customer advocacy

6. Impact on customer satisfaction


© Peter Fisk. Extract from “Customer Genius : Becoming a Customer-Centric

Business” by Peter Fisk, published by Wiley Capstone.

Peter Fisk is an inspirational business author and speaker, consultant and entrepreneur.

He is an expert in strategy and brands, innovation and marketing, working across sectors

worldwide.

He is founder and CEO of GeniusWorks, the accelerated innovation business, that helps

business leaders to see things differently – to develop and implement more inspired

strategies and business actions. Customer-centric platforms include GameChanger

(accelerated strategy from the outside in), InnoLab (fast customer-centric innovation),

and BrandVision (customer insights, propositions and experience design).

Peter has written five best-selling book, translated into 35 languages, including, “Customer Genius” on becoming a customer-centric business, and most recently

“Creative Genius” described as the essential innovation guide for visionaries, innovators

and game-changers.

He started life as a nuclear physicist before getting into marketing and brands. He then

spent a number of years working in sales, distribution, product development and brand

management worldwide. He went on to lead the global strategic marketing consulting

team of PA Consulting Group, and was also CEO of the Chartered Institute of Marketing.

Peter works with many of the world’s leading brands including American Express and

Barclays, Aeroflot and British Airways, Coca Cola and Cooperative Bank, Lastminute and

Marks & Spencer, Microsoft and O2, Pinar and Red Bull, Virgin and Vodafone … as well

as many local and growing businesses.

He was recently described by Business Strategy Review as “one of the best new business

thinkers.”

[email protected]


+44 78344 83830

Roadmap to a Customer-Centric Business by Peter Fisk

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