We all recognize the picture of the CEO in a large organization. A sharp dressed person in a big office building on the top floor with all the power required to manage and operate the company. The person who is in charge and talks to the press and shareholders… and perhaps occasionally to his customers. But wait a minute. Are we still living in the nineties, or are we actually living in the Age of the Customer?
Brand Perception is Reality in the Age of the Customer
Today’s consumers have access to information 24/7, share their opinions online and make buying decisions or choose alternatives within a split second. All made possible by a device introduced in 2007, the smartphone. Look at the impact this had in less than 10 years’ time. It has forced companies to change the way they communicate with their customers.
In today’s digital world, complaints are published through Twitter and Facebook so if your brand does not respond fast enough, your reputation is two clicks away from being damaged. On the other hand, if you do well and provide great products and services (great Customer Experiences), these will be shared and have a positive effect, leading to new and loyal customers and building your brand.
The speed at which customers took control, has blown away traditional sales and distribution models in almost every vertical. From the Travel and Hotel industry (booking.com and Airbnb) to many others in Retail (Amazon and Alibaba) and Payment Services (Tencent’s WeChat has almost 800 million users in 2017).
Amazon is changing consumer behavior with a simple device like Alexa. Cheaply priced, it provides an order entry point at home for grocery products to be delivered at your front door. Or you can order your pizzas. In 2017, more than 20 million Alexa devices were shipped into US households. That puts the acquisition of grocery stores chain Whole Foods in August 2017 in a different perspective. Amazon already replaced the loyalty program of Whole Foods by Amazon’s Prime.
Why Companies Fail With Innovation
So why is a company like Amazon so dominantly present when it comes to the innovation of existing business models? Why are companies like Google, Spotify and even Microsoft successful with all kinds of innovative initiatives and why do many other companies fail? We believe these points below might provide an answer:
- Many companies are built for stability, reliability and predictability in everything they do because the incentives focus on short term results. These incentives do not encourage radical renewal of businesses. They focus on each quarter’s financial results and when this quarter is done, the next quarter already started. It’s all about keeping the shareholders happy.
- Stability, reliability and predictability require structure and processes inside the corporation. This keeps corporate functions separate and discourages people from sharing their ideas, looking into the outside world, talking to customers or come up with new ideas.
- Expressing ideas or creating radically new stuff, might disturb the status quo. Most employees prefer to stay away from the rejection, humiliation or even punishment. When quarterly results are not met, most companies start cutting costs and delaying investments. Or they simply reduce the number of staff. That creates a culture of fear for losing your job. The result? People sit tight and avoid taking risks.
- Some companies’ management styles might be decades old, with top-down control and rigid outdated IT systems and procedures in place, leaving no room for ideation or experimentation to changing market circumstances.
Many business- and management books have been published on these points, like The Innovators Dilemma by Professor Clayton Christensen and The Lean Start up by Eric Ries. These typically explain the turmoil businesses of today are going through, and as such are necessary reading material for many leaders. And that’s exactly the point we want to make: We believe that leadership has the responsibility to take the necessary steps into Customer Centricity. After all, The Age of the Customer is here, and maintaining the status quo is no longer the answer to running a successful business.
What Should We Expect from Leadership in The Age of the Customer?
1. Keep your existing business in perfect shape
The new CEO (Customer Experience Officer) should realize that the existing organization is there to support innovation. It must remain in a fit and competitive shape. Keep the current financial performance at expected levels and only look into smaller, incremental innovations that take the existing business to a new level, step by step. After all, radically changing your business is not easy and requires thoughtful planning. You can’t risk it all based on one simple new idea. (Read more in our whitepaper: Innovation in Your Organization: Timing is Everything.)
2. Innovation and true Customer Centricity start in a separate environment
In parallel, the new CEO focusing obsessively on Customer Experience, should separate radical innovation from the existing business. Establish a new set of metrics, rules, structures and incentives and do so in a separate innovation environment. A startup culture is a nice side effect, leading to openness, transparency, experimentation and creativity.
In that environment, radically new ideas often come from outside and are created together with customers, partners, vendors and can also involve universities and startups.
3. Start small, scale fast – Build – Implement - Learn
A transformation like this is complicated. The existing business might favor its own interests, and remind management and leadership that the biggest business impact still comes from them. In their opinion, all the new stuff is “Nice, small things, but they will never truly move the needle on the corporate level”.
As a leader, you have to keep all parties involved, share views and opinions, allow teams to soar, provide adequate support in terms of money and talent, and accept the fact that some new radical innovations might eventually fail. As a leader, you manage the discussions: do we pivot or persevere? Do we proceed or do we stop? Do we go public with a big bang or do we stick to a prototype and keep it small?
4. Innovation is a leadership challenge. Not a technology tool nor a methodology issue
If your company wishes to renew its business, the leadership requires courage and persistence. Introducing an innovation initiative –outside the existing business – and a new culture with different people, puts pressure on leadership.
Once everybody in your organization is aware of the need for these initiatives, only then the various methodologies, processes and tools will have effect. Leadership is about making clever investment decisions and people nominations to resist the strong inertia of the status quo.
5. Outside in, and not inside out – The Customer Experience is all that counts
Last but not least, we believe the most important skill for leadership today is to be Customer Centric. Not one single pivot, change or experiment should be decided upon without the voice of the customer being heard in the entire process.
Always ask yourself: what is the customer value you provide, how does your Customer Experience your product and service, when is your customer happy and how do you increase customer loyalty? That’s what it is all about.
The Road to Customer Centricity
It’s interesting to see that 40% of consumers are willing to pay more when they have a good experience (source: study by American Express, 2017).
Published in Medium.com – a US magazine, June 2017.
So when happy customers buy more and are more likely to become loyal customers, you would expect leadership to go full speed ahead and work on this, right?
And indeed, a survey published by Bloomberg Businessweek found that “delivering a great Customer Experience” has become a top strategic objective. Also, a recent Customer Management IQ survey found that 75% of management- and executives rated Customer Experience a full 5, on a scale of 1–5.
However, many companies are still failing. When Bain & Company asked management- and leadership to rate their own perceived quality of Customer Experience, 80% believe they are delivering a superior experience. Remarkable to see that only 8% of their customers believed that they are receiving a great Customer Experience. A big gap to close for any company.
The Leadership Must Lead
Despite the fact that Customer Experience is considered a top strategic objective, many organizations today are still managed by financial metrics like KPI’s, ROI, EBITDA and Net Present Value among others. In most cases, these are all about improving Operational Excellence, not about improving the Customer Experience.
In this Age of The Customer, expectations are rising faster and customers expect every interaction as the best experience they have with any company. So the question remains: how do you get your organization to create great customer experiences?
We believe it is about leadership. Leadership to motivate people who like to Get out of the Building (Steve Blank), people who understand the impact of social media and who can rely on basic understanding of digital technologies to support great Customer Experiences.
Footnote from the author:
To support these organizational changes in technology, behavior and staffing, in the beginning of such a journey, leadership relies on external partners to bring in expertise to speed up a process or implement new technology. Many specialist digital service companies can provide you with expertise, but bear in mind that once you have taken the first steps towards Customer Centricity, the necessary skills and competences required should always be available in-house. Simply because they are strategic for the existence of your company.
Outsourcing these competences and skills on a permanent basis is not an option. They should become a fundamental part of your business, the sooner the better.
Are you ready to deliver the best customer experiences to your customers? Contact us now to get started today.