Customer Centricity in the 21st Century

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.

definition_customer centricity

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From Silos to Streams – The Changing Structure of Business

Technologists tend to use the “real-time” phrase to represent speed (of computing, response, etc.) which is different from managing in real-time – in other words, “how does one deal with the real world as it unfolds in real-time?”

Managing in real-time is a lot like watching a movie.

Unfortunately that is NOT how we manage business today. Instead, imagine a theater where the seating represents the management hierarchy:

  • First row: These are the workers on the front-lines of business watching the movie unfold in full detail in real-time. And let’s say the movie is in English and 2 hours long.
  • Second row: These are the first-line supervisors. They get to watch (see & hear) every other minute.
  • Third row: These are the departmental managers. Every 5 minutes, they get summary reports (snapshots) from the second row of what’s happened so far.
  • Fourth row: This row is middle management. Every 10 minutes, they get summary reports (snapshots) from the third row of what’s happened so far. They also have to translate the reports from English (operations) to Chinese (finance) for upper management – and vice versa, when they get instructions for the rows in front of them.
  • Fifth row: This row is senior management. Every 30 minutes, they get summary reports (snapshots) but this group is special because they get to influence the plot of the movie. They can’t really choose the outcome due to random events beyond their control. Ideally they are supposed to do their best to make sure there is a happy ending for all – but in reality, the priorities of their row and the row behind them, the shareholders, trumps everything else.
  • Sixth row: The shareholders in the last row get a summary report once a year (but they may also happen to have seats in the other rows or find out what is going on in other ways.)

This is essentially how we manage business today where (a) much of the information technology architecture is built around this hierarchical structure, (b) a lot of management is like driving by the rear-view mirror, (c) there is often a disconnect between operational metrics and financial metrics, and (d) as much as we claim to desire agility, the front row who watches critical events unfold in real-time is often the least empowered to respond immediately to it. Continue reading

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Does business have a “shape”?

If we observe living systems all around us, we see that they come in all shapes and sizes. Nature’s rich variety is classified along kingdoms (animal, plant, fungus, etc.), where each species possesses a certain structure and often unique shape that is designed to serve a particular purpose within nature as well as ensure its survival and adaptation through the evolutionary process.

If business has structure, then why not shape?

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Explaining “structural changes” in the value chain

Today, economists frequently use the phrase “structural changes” to explain major aspects of the multifaceted impact of globalization. It is an umbrella term that captures the macroeconomic view but seldom gets into the details of the structure itself, i.e., the micro view. (And in defense of economists, their focus is the “forest” as opposed to the “trees” of the inner workings of the global supply network with its extreme complexity and processes intertwined among hundreds of businesses spread across multiple economic entities.)

To understand the structure of the network and how it evolved over time, we need to view the world through the “value chain” lens, and wind the clock back to the days of Henry Ford. Continue reading