In 2008, as part of the Supply Chain Risk Consulting practice at Marsh, I led a research project commissioned by a major client to define the term “customer centricity.” For the report (which you can download here) we interviewed a number of Fortune 100 companies with a goal answering a couple of key questions (which I have summarized below):
First, how do you define customer-centricity? Customer centricity, in the simplest terms, means putting the customer and their expectations at the center of the business model and aligning the rest of the business processes around this core constituent. While this is an intuitively simple definition, putting this into practice is much more challenging because when customer expectations change (i.e., when the center moves), the ring which represent the core business processes have to be realigned in a timely manner. Not surprisingly, the larger the business, the greater the inertia that impedes that realignment.
Second, what prevents customer-centricity? Defining customer-centricity was the easy part. We then shifted our focus to adaptation – in other words, we looked at what may prevent a company from (a) sensing changes in customer expectations, and (b) responding in a timely manner. The result was the following framework that identified the critical linkages (that represented strategic risks) that must be constantly monitored and realigned to stay relevant to the customer.
The critical linkages are explained as follows:
- Failure to sense risks/opportunities in the “expectations gap”: Customer centricity starts with knowing who is the “right” customer/segment, or in other words, your core constituency targeted by your brand promise that you intend to capture and defend against the competition. To provide that the value proposition continues to resonate with the customer, companies need to continuously monitor the gap between their brand promise and their customers’ present and future expectations.
- Failure to design/fulfill the right customer experience (for each segment): As consumers become more powerful, they are less interested in specific products or services and motivated more by experiences and outcomes. Thus, creating the right experience involves matching the right combination of products and/or services at each interaction throughout the customer lifecycle, delivered in a way that is consistent with the brand promise.
- Failure to design/deploy the right value chain structure: Last but not least, the ability to deliver the right experience to the right customer at the right cost, right time, right quantity, and right location, etc. depends on having an appropriate network structure in place. This is where generally most of the inertia exists because a structural change to the value chain isn’t something you can accomplish overnight. Depending upon the degree of change, the realignment effort can take months and even years. Too often, the response comes too late and subsequently valuable market share is lost or worse, the business fails altogether.
Managing these critical linkages can be easy so long as the size of the business is small or the product/service is simple. But for large companies with several product lines serving diverse customer segments, it is a significantly more complex challenge. This is where the concept of a platform is important because when designed appropriately it may enable the business to address the multi-dimensional challenges of operating in a globally-diverse market. (The report elaborates on the platform concept.)