Monday, December 12, 2005

The Value Chain for Customer Centric Organizations

You must have read the article on Building a Customer Centric Organization Culture. Here's some thoughts on how the Value Chain propogates a customer centric organization:

To receive the full benefits of being customer centric, companies must find ways to extend it through all the levels and parts of the company. This requires adjusting priorities in nearly everything a company does. I understand that being customer centric means moving the organization’s center of gravity outside the organization, closer to the customer. Senior management from the CEO on down must set the tone and the example. Policies that require senior executives to deal regularly with ordinary customers can be particularly valuable here, such as having every senior executive deal personally with a few customer complaints every month. Having senior executives listen in on the calls that come through, the human emotions in the live call always teach us things he couldn’t have known from a dry tabulation of the facts. Tomorrow’s managers need to learn and accept the fact that once they grow to be on a senior position, they cant assume to be out of the daily proceedings in the company. A level of involvement is still required.

The new customer focus must be reflected in the metrics and incentives for each employee. New customer-centric information must be given an explicit place in the regular work process. There has to be verification that this information is being put to use in this work process, and, there has to be a clear benefit to the employees who are putting it to use. Vouch for a policy of meritocracy. If you want to instill in your employees a passion for customer results, it helps if you acknowledge them for those results.

This adjustment of metrics and incentives is especially important when a company is first making the transition to being customer-centric. In addition to the metrics and incentives that will be part of the new customer-centric organization, employees will need special metrics and incentives to ensure they make an effort to adopt the new systems. Furthermore, these temporary metrics need to be strict, and the corresponding threats and benefits need to be large. Six Sigma makes sure that these are taken care of in due course.

A genuine customer focus usually requires employees to develop new skills. If sales people are offering solutions with several components, they need different skills than they would for selling individual products. They not only need to know how the components fit together; they also need to know how to deal with the several different levels and departments in the customer’s organization that will need to approve a complex purchase. It is also a fact that some customers want an intimate long term collaboration, and some other look for just a few services. The problem is not one of choosing to have a relationship or not, its about choosing the right kind and right level of relationship.

To extend through every part of a company, the new customer focus requires an enormous amount of boundary crossing. In my opinion, the most important boundaries to be bridged are the ones that separate the methodical, technical, operations-oriented parts of the company from the creative, human, marketing-oriented parts. People who can bridge the gap between customer needs and technical procedures are especially valuable. The project manager types, are always in short supply. In a customer-centric era, companies need to be giving thought to how such people can be identified, cultivated, promoted, and rewarded.

Tuesday, December 06, 2005

Building a Customer Centric Organization Culture

Is this the “Decade or even the century of the customer?” The answer to that question could be a plenty. If you ask me, I have mixed feelings about this. Firstly, customer focus has always been an issue for leading companies, wonder why, its human beings that we are dealing with, day in and day out. Recently, the struggling economy has put pressure on companies to focus on these questions, in particular realizing that cost management will not alone deliver sustained profitability. Leaders use market orientation and innovation in service to bring an objective advantage over competitors. An organization needs to understand the market intimately, I include not only the customer, but the competition and channels. Leadership focus is to give its clients “the good to haves” vs. “the must haves”, everyone has to deliver the “must haves” or leave the market – pretty straightforward. One needs to use those insights, bring them into the organization and use them to improve strategies.

What could be confusing leaders (I again use the word leaders, instead of managers), is how to leverage the insight gained. Data that is lying unused is as good as trash. Triggering the potential of market-drivenness is an important strategy. Work smart to understand a clients latent need, live with the client, adopt the client work culture, especially as we work in a multicultural environment to manifest the best of global business, innovate and change it to suit their and our requirement – finally gaining confidence of the client. Once we have established the faith in them, there is no turning back. Or may be I’m wrong, you won't be called Gods.

Here’s how one can proceed. Consider the key elements of a market orientation to be Culture (Quality and timeliness), Capability (superior skills for market learning, communication and adaptability), and Configuration (structure, controls, metrics). Without a strong culture one cannot support, for example if you miss a plane its no good, neither is getting on board one without landing gear. If one would like to build an organization, it may be probably easy and best to start with configuration, because cultures resist change. If capability brought the business in, configuration guides the behavior in the desired direction, culture will incorporate it. Effective market-driven organizations use what I call the “hot-house” experiment or tests while ramping up a particular venture. They first stick to a plan, once stabilized, experiment different programs on the part of the client and its own business. Create a success and roll it out through the company.

Another issue which may rather seem important is moderating the assumption that “the customer is always right”. From the customers standpoint they are right. The question is do we want to respond to that? Do they understand fully the possibilities, and is it worthwhile for us to do this? How do we compete to advantage? The opportunity is to find those customers for whom you can do an outstanding job, and then charge them appropriately. The money is on focus, a price premium is assumed, or at least we avoid excessive or any discounting, and building loyalty so one don’t have the high acquisition costs. That way we manage our P&Ls. In the meanwhile, efficient, low cost operations are becoming commonplace. This is partly because the techniques for re-engineering processes to gain greater efficiencies are becoming widespread. New entrants and smaller enterprises can present themselves as serious competitors to the bigger, longer established players. What’s more, they can begin competing on price in a remarkably short time. Companies leverage the talent pool and labor costs of an emerging economy, and combined it with advanced techniques, ownership of process, delivered cost savings, quality improvements and peak handling capacity to our clients. I guess to strike a distinctive way of creating value is categorical, and that in my opinion is top priority – differentiation.