The customer still knows best

  • Date:01 Feb 2014
  • Type:Company Director Magazine
Business models can’t stand still. Graeme Chipp explains why boards must place the customer at the centre of all decisions and set up signals that flag risks and opportunities.

Are your board papers getting thicker? Do spreadsheets, data and numbers abound? If so, with so much information, how is it that so many boards either do not see the demise of their customer franchise coming or are too slow to respond? The supposed inability of boards to adequately read and respond to rapid shifts in the marketplace is the “elephant in the boardroom” that needs urgent debate and action.

We have all heard about the demise of Kodak and the Sony Walkman, each now a classic business school case on companies that did not see it coming. Yet both Blackberry and Nokia appear to be about to join them. In 2009, BlackBerry and Nokia collectively held 70 per cent of worldwide smartphone sales. Now both are rapidly heading towards zero.

The Australian marketplace can also provide many examples of sectors and brands where the core customer franchise has fallen drastically and significant revenue lost with it.

Witness what has happened to our major electronic and print media brands, Telstra’s Yellow and White Pages directory businesses, Australia Post’s mail business as well as most mass merchandise retailers, mortgage originators, universities and health insurers. The list goes on.

What is driving these shifts?

New technologies and new competitors are driving a new set of rules in the game.

In a contestable market, it seems, no one is immune. As your customers’ confidence, attitudes and resulting decision-making and purchase behaviour are changing, so too does their service expectations and competitive options. 

Customers want to interact with brands “anywhere, anytime, anyhow” and on their terms, on and off line. Furthermore, word-of-mouth experiences, good and bad, are quickly shared via social media with the effect spreading exponentially and rapidly.

Business models cannot stand still and companies must ensure they are continually re-modelling and updating the design and delivery of services.

Conversations with customers need to be continual, building in user ratings or proactive engagement around good or bad experiences.

Traditional feedback and monitoring systems focus too much on the past and can be slow to read changes or measure the wrong things. A new approach is needed.

So how should boards respond?

Focus on customer first

Perhaps the answer is simpler than we think.  Business can be complex. No one pretends it is easy. What boards need is an early warning system – a means of scanning their markets to bring their customers’ voice to the centre of boardroom deliberations and which creates discussions with management around the health of their core customer franchise and brand assets.

Given all businesses survive on cash which, in most parts, is generated from customers or from investments that generate cash from customers, by bringing the customer to the centre of the discussion, superior returns on investment can be delivered.

In a complex business world, the issues get simpler.

In our experience, understanding what it takes to win your customers’ loyalty can clarify what is important for you and where to focus resources, remove waste and get more bang for your buck.

Furthermore, in our experience, the biggest benefit of “customer first” is in the positive energy and sense of purpose created across the business.

A board that focuses on customer sentiment and “staying ahead of the game” inevitably supports a business culture where people are motivated to do a good job for their customers

Get comfortable with qualitative data

Do not always demand large survey sample sizes. There is too much reliance on numbers.

Traditional customer research can be slow. A variety of sources can provide early-warning customer indicators.

For example, your own online customer community can be “gold”, acting as your eyes and ears, with real-time information provided from the coalface.

Similarly, your field force can provide intelligence on competitors or customers (via rumour or fact reports). 

Social media aggregation feeds, media monitoring, your own research or observations can also fill out the picture.

Make big data technology work for you

Despite the proliferation of data and increasingly accessible big data technologies, how is your board equipped to read shifts in the marketplace?  Do you really feel you have a handle on the market? 
 
Big data tools can pull together large amounts of structured and unstructured data from within the organisation and by also tapping into external sources.
 
What is needed is a clear idea of what you want to monitor and an audit of potential data-capture sources.

Disrupt yourself

Amazon.com founder Jeff Bezos once said: “Frankly, I am more concerned about those two guys in a garage than the competitors I already know about.”

It is difficult enough managing a business day-to-day, let alone innovating new business models. The idea of creating your own competitor with a “skunk works” operation, separately managed and measured, is a response being chosen by many organisations.

Creating your own start up to compete with your core business and create new revenues can be a source of learning and defence.

What fact base should you expect management to bring to board deliberations?

An audit of available data, combined with the right tools, can enable management to provide information on current customer sentiment, competitor activity and highlight any shifts that will help management and the board focus on market risk and opportunities.

Here are some issues your board could consider:

1. The health of your customer franchise

  • What are your customers thinking and feeling about your brand? What are their frustrations? What problems are you helping them solve?
  • How are they buying? What competitive alternatives are they really considering? What are they doing? What drives them into your category and business? How are you relevant to their lives? How many are repeat buyers and why? Who is defecting and why?
  • What is the competition doing? Have you got your eye on the right competitors? Are new competitors emerging? It is the two guys in the garage you need to watch.

2. The health of your brand

  • What unprompted awareness do you own? What affinity attributes do your customers have about your brand, and versus the competition?
  • How consistent is your service and product delivery? How strong are your distribution relationships?
  • Is your R&D and innovation pipeline strong relative to competitors?

3. Investments for today and tomorrow

  • Are your dollars focused on areas of greatest risk and opportunity?
  • Are you investing in future revenue streams? Have you set up our organisation/governance structure to deliver effectively?

In a rapidly changing marketplace where customers are changing their digitally enabled behaviour and expectations, boards that understand shifts in their market and can translate implications into commercial priorities will be better prepared to respond and protect their customers.

The benefits will not only focus and simplify their board discussions, but also bring growth, a positive energy and sense of purpose to their organisation.