How customer-centricity unlocks profitable growth
Toward best-in-class customer focus
All organizations want increased customer profitability. Despite a myriad of internal and external challenges, organizations need to improve revenue by creating compelling offers for customers while maintaining a manageable cost to deliver. Organizations need to ensure that they are designing offers that a set of customers love so much that they are willing to tell others. This means that they need to keep a pulse on what customers are thinking, saying, and doing to continuously refine and improve offerings.
As the pace of societal change accelerates, organizations are faced with increasingly complex decisions to pursue profitable growth. Elevated customer expectations, shifting market forces, competitive changes, and the impact of technology disruption across industries and functions create pressure for organizations to deliver relevant, quality offerings in a timely fashion. While delivering these options, organizations must be responsive to changing employee expectations, shifting regulatory and societal requirements, and increased mobility of labor and business partners.
Leaders must quickly sift between what is relevant versus what is noise. Short-term needs can drown out medium- and long-term priorities. So how do leaders know what decisions will result in the greatest impact on their organization? Clarity of purpose is obtained by simplifying decisions aligned to the organizational mission and by relentlessly focusing on delivering customer-centric experiences.
Common challenges for organizationsThe dynamic nature of the business landscape has forced organizations to rapidly adjust to customer needs, respond to market disruption and mitigate competitive threats. Meanwhile, the required talent and methods that drive profitability often shift concurrently with external forces. Some of the relevant challenges that organizations face in driving customer profitability include how to:
- Measure and understand the performance of demand generation and retention activities
- Achieve greater outcomes with the same amount or fewer resources
- Identify the appropriate mix of investments and reallocate funding in a timely fashion
- Reduce reliance on third parties and eliminate non-value-added activities
- Improve the cost of revenue by managing how the organization creates value
Core characteristics of customer-centric organizationIn order to increase customer profitability, organizations need to create a customer culture that is incentivized to service the customer. While most organizations contain some customer-centric functions that understand how to create customer value, high-performing organizations create complementary incentives for revenue- and cost-centered functions to align behaviors with customer needs. Customer centricity, therefore, requires leadership alignment on how all functions integrate to create customer value, balanced against ownership expectations, compliance/risk, and broader stakeholder considerations. Key characteristics of a customer-centric organization include:
- Being results-oriented – reliably measure and understand the performance of demand generation and customer engagement activities
- Having fewer layers between the organization and the customer – stay close to the customer by reducing reliance on third parties and eliminating non-value-added activities
- Creating agility in a variety of economic environments – rapidly shift between planning and operating within an economic boom, contraction, and the transition periods between the two
- Ensuring effective investment optimization – identify the appropriate mix of investments and optimize the existing portfolio, including which investments are underperforming and which areas require greater investment
- Maintaining persistent focus on customer profitability – improve the cost of revenue by transforming marketing and sales functions, strengthening organizational capabilities, and amplifying customer success activities
We’ve seen this in practice when partnered with a global manufacturing client to facilitate their customer-centric transformation. The organization sought to strengthen its market leadership position by delivering excellent digital customer experiences and sought assistance to bring the future state vision to life through technology. In partnership with leadership, we prioritized the key customer scenarios based on the largest upside potential and defined the organizational capabilities required to unlock these scenarios. This created the blueprint needed to define the technology stack to light up the customer scenarios as well as the sequence of technology investments. Ultimately this resulted in a multi-year technology roadmap to realize customer-centric transformation ambitions and the business cases needed to justify technology investments.
Priorities of best-in-class customer organizations. Given the natural tension between customer-centric responsiveness and resource constraints, leaders face ongoing challenges among bolstering existing strengths, remediating necessary practices, and cutting what does not add value. Ideally, the investment mix strikes the appropriate balance between near-term profitability and longer-term competitive advantage. Regardless of where an organization resides on the customer-centricity maturity spectrum, best-in-class organizations have the following core competencies:
- Derive actionable customer insights – capture customer signals through qualitative and quantitative methods and use these to derive actionable insights that are infused throughout the organization
- Articulate how the technology stack creates customer value – map the front-end technology stack, convey impact in conjunction with the back-end technology stack, and develop a multi-year technology roadmap based upon business priorities
- Define customer segment profitability – assess the profitability of customer segments and optimize organizational activities and investments to prioritize segments
- Measure performance and mandate accountability – establish how each function and corresponding activities create measurable value, and optimize the organization in alignment with desired customer-centric outcomes
- Drive a culture of personalization and testing – incentivize organizational behaviors to increase personalization in a scalable manner, and structure go-to-market motions to encourage rapid test, learning and optimization activities
Embracing the challenge of building a customer-centric organization is not easy, but with the right focus, the right investment, and commitment from the top down, it is the key to driving more profitable growth.
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