N. Vijayaraghavan
Management and IT Consultant
E Mail: raghavan_v124@yahoo.co.in

Most organisations believe that creating customer loyalty is the domain of their “marketing” personnel. A negligible few though care to understand their customer but get lost in the barrage of defensive responses. They falter in working out a strategy to retain their edge. Or even if they do, they fail to align the organisation and implement the customer centric initiatives.

Many managers limit value additions in product offerings to minor changes that too as per their perception of customer needs. To be fair, a perspective is achieved after some research albeit in fits and jerks. The cutting edge in wresting customer loyalty is obtained through tools like schemes or promotional drives i.e. outcomes of perspective restricted to the marketing function.

It is important to differentiate products by giving the customer true value: substantial additional value as perceived by the customer. It can be through the product, delivery system or services bundled together. We must thoroughly understand the different types of customers and the execution should necessarily be fast. The entire organisation must be part of the process and aware of why it is being done. We are talking about relationship marketing to achieve total customer orientation with an organisational perspective. The value as perceived by the customer can be captured by placing the customer at the beginning of the chain and not at the end as Japanese have learnt to do. A strong customer relations -management approach can aid in this task.

An institutionalised culture of Innovation is the key to achieve substantial delivery of value addition to customers. For decades steel strapping has been considered just a piece of steel necessary to apply around packages to ensure that they reach the destinations safely. The distances the packages travelled and their unit weights increased but the features of the commodity called strapping remained the same. Instead it was beginning to become less effective.

A company entered this totally commoditised business with a high strength; enhanced performance strapping that was capable of taking shock. To the customer though it still was a piece of steel - an engineered and sophisticated one at that.

After some homework the company found that all customers used the strapping by length but bought it by weight- a typical characteristic of commodity buying. The new product, being stronger, needed less cross section or less weight per package. The company altered its strategy and marketed its strapping by length. Sophisticated technology ensured uniformity in gauge and the value perceived by the customer increased. It offered the strapping as a full system to ensure the higher effectiveness necessary during application. However, during implementation in large industrial units like steel plants, the execution was so poor that the customer failed to realise the true substantial savings. Instead of allowing the practices to slide back to the old, conventional, methods, the company viewed it as a business opportunity. It took up the contract for regularly applying the strapping! Customers realised the savings of which the company took a part.

More recently digital electronics has rewritten the nature of the photographic industry. One can take a photograph, edit it and send it across the globe in minutes. The old audio/ videotapes too are becoming obsolete with computer-stored music/movies. Flash memory based players are taking over from that mega hit product– Walkman. The Japanese were pioneers in promoting Walkman as a big success.
How was it possible?

Customer Insight: The first and foremost task is to bring the customer to the beginning of the chain and make him truly important. Then bring a strong company-wide approach to get involved in customer dialogue for essential insights. As customers and their profiles vary substantially, strategies should not be made for the proverbial “average” customer. The information must be gathered from different levels without filtration.

Customer complaints ought to be used constructively and not to evoke defensive responses or used as ammunition for inter-departmental conflicts. Openness while listening to them is of paramount importance. Promote knowledge sharing by encouraging managers, not from marketing alone to interact with customers. The analysis of the inputs must lead to clear segmentation based on differences in the values they seek. The customer ought to become a collaborator and not merely a means of revenue.

Culture of Innovation: Once the customer insight gathering is institutionalised, innovation must follow. The organisation should adopt a culture of innovation. Employees are the first source. They must be motivated and rewarded well for innovative ideas. Extension of the organisation to involve customers as co- innovators (with perhaps incentives) is another method. Task forces comprising young talents chosen from different disciplines is an other effective method. These teams analyse customer insights and come up with innovations yielding substantial additional value to customers.

Innovation is not just about enhancement of product features with scaled up R & D resources. It could be in services, or processes to respond quicker or some technology or technique picked up from unrelated industry. Constantly challenging existing assumptions ought to be religion.

Conversion: Delivery of innovative ideas converted into offerings has to orient the entire organisation to the customer. A company’s value stream should operate on a global optimisation as against a functional one. For instance, production systems must operate shorter cycles if quick delivery is the objective. This becomes essential in a multi-product company. Cost management must focus on eliminating wasteful activities in the value stream (muda as the Japanese call it).

The very temple of mass production viz. automobile industry has come a long way from Henry Ford’s offer of lack of choice in colour, no doubt an excellent product of its time. We see cars with varied combinations of accessories delivered in 48 hours. Out went long production runs to minimise cost as seen by the conventional methods. Dell created revolutions in the personal computers allowing an individual customer to select his combinations in a lower priced product and getting it delivered at home.

Collaborating with partners from another industry also augments innovation. Insurance agencies that collaborated with automobile workshops have made cashless and quick execution of the repairs a reality. This eases life for the owner who is already hassled due to an accident. All these needed a total change in the mindset also in addition to new delivery systems.

The paint industry has taken the innovation capability to the customers. As the number of shades and SKUs started growing, they decided to allow the customer to make his own colour using computer-based technology. This opened myriads of options to the customer, as he became part in the customisation process. Also the paint company arrested the growth in SKUs and consequent explosion of inventories.

To become a customer centric, learning and innovating organisations have to develop a strong entrepreneurial spirit across the board. While it goes gung-ho on creativity a performance oriented culture, which encourages innovation and rewards it must be balanced with a good budgeting and review system. Decisions on escalating a project arising out of a spark or cutting losses when things do not work out will all be part of the journey.

Innovation and Its Impact On Customer Centricity

The customer is ‘king’!

In his book titled ‘24/7 Innovation’, author Stephen Shapiro explains how today’s customers, who have an unprecedented number of choices and unparalleled access to product information (while making purchase decisions), are in complete control of the buying process. We all know from experience that this fact is undisputable.

In response to this trend, companies have grown to become more customer-focused in recent years. Consequently sophisticated market research and analysis techniques have become routine activities and customer satisfaction measures have become a part of the balanced scorecard of performance in many companies. Yet the gap between needs and their fulfilment still persists. This is because regardless of their claims, many companies are still focussed on products and not on the customer.

The convention in most companies is to make products first and then find and persuade customers to take them at a good price. Stephen Shapiro rightly says that very few companies have an answer to the question “ What else can we deliver to customers that goes beyond what they are getting today?” Most companies forget to ponder over why customers buy their products and how the products contribute to customers’ growth or success.

New challenges, new abilities!

Survival and growth of companies in today’s global markets requires an unprecedented ability to assimilate and analyse customer needs based on data inputs. This apart, they require an ability to change rapidly in response to customer preferences and market signals and to develop new solutions. Today, the traditional paradigm of pursuing excellence in existing business processes may lead to failure.

Thereby, the biggest challenge today for any company, leading or emerging, big or small is to innovate in response to emerging customer trends. What drives the innovation engine is the ability of a company to listen to, understand and lead in the delivery of new solutions to customers based on emerging trends.

Understanding and pleasing the customer is not a simple task. It requires a redefinition of most business processes and technology underpinnings associated with the customer. It calls for a new agility and new sensitivity towards customers and their preferences. In short, it may even require a new outlook with a set of new practices aimed at anticipating and meeting customer needs.

Understanding customer centricity…

The solution to this is simple … customer-centric innovations. Before we move on, let us first understand what exactly is customer centricity.

The basic idea goes thus. With ever-increasing technological advancements and continual ongoing shifts in customer requirements over the last decade, companies had to identify and comprehend a new set of business value drivers focussed on the customer. Moreover, they had to codify, articulate and evolve relevant strategies that also recognised the fundamental differences between customers (in terms of needs, value, expectations and behaviour). Customer centricity looks at products and services from the viewpoint of a customer right from the point of purchase, through use, and service up to disposal, not forgetting other related services and information.

A customer-centric innovation strategy enables a company to think in terms of unmet customer needs. Designing business processes with the customer at the core and involving key customers in innovations help a company to differentiate its products and services from competition. Hence Shapiro suggests that companies ‘hire’ their key customers and make them an integral part of their new product development and business redesign processes.

The champion traits!
Companies like General Electric (GE), Dell, Best Buy, Whirlpool, and Hewlett-Packard are champions of customer centric innovations. This is why they flourish in the midst of formidable competition. Here are some characteristics of such companies:

• They do not consider themselves as a group of functions or units that make products or services, but as a portfolio of customers.
  
• They understand differing needs of various customers and group them into operational customer segments and sub-segments based on common needs.
  
• They take complete responsibility and ownership of the customer experience and accountability for the financial performance of each unit. This apart, they thrill customers by delivering excellent and unmatched value propositions.
  
• They continually innovate and evolve their customer segments and sub-segments and improve value proposition with changing customer needs.
  
• Innovation is based on a customer R&D model focussed on continual experimentation at key customer touch points.
  
• They understand how much they gain or lose with every customer segment and why
  
• They are fully aware of how their customer relationships contribute to or take away value from the business. Since they manage their customer portfolio on this basis, they know where to invest to create sustainable, profitable growth.

All these cannot be achieved overnight. It requires careful planning and strong commitment to innovation and the customer. Achieving this is not simple. However, there are a few steps that can help to create true customer centricity.

Towards customer centricity!

Companies have largely tried to innovate through product and service R&D. Despite the huge spend, the returns are incredibly low. Recent trends reveal that for successful product and technology innovations, the focus should be on the customer.

Innovation, growth and customer centricity are all inter-dependent. Products and new technologies enter and exit the market at ever-increasing rates. Companies though need to build on and strengthen existing relationships with high value customers over time. This leads to truly sustainable and profitable growth.

Creating true customer centricity is a challenging task. However, the returns in terms of consistent, sustainable and profitable growth even in the face of powerful competition are worth the risk. Many champions like HP, Whirlpool, Target, Dell and the like vouch for this.

Steps to customer centricity!

Here are some steps that companies can follow to create true customer centricity:

• Organise the business into operationally significant customer segments that represent the value creation opportunities for a company
  
• Create a customer-centric learning process to drive customer innovation
  
• Develop, communicate and execute customer value propositions that are competitively dominant
  
• Measure customer profitability and understand key drivers
  
• Communicate key customer performance metrics to investors to enable them to understand value creation

To begin with, companies need to understand not only their customers, but also their current and potential profitability. When General Electric (GE) Corporation began to ponder over a roadmap to customer-centric innovation, new measurements were included. The company decided to report on the status of its customer-related initiatives to its investors.

Some of GE’s compelling customer statistics include customer longevity, the number of unprofitable customers still retained by GE and the churn rate in every business unit. These numbers are reflected within the status of customer relationships. They are the true pointers of the state of a company and its business viabilities.

Creating an innovative organisation that reinvents itself in response to ever-changing customer needs is the key to success. This requires a redefinition of the processes, people and technology employed to define and deliver service to customers. With such customer centricity at the core, success cannot be far away.

Hewlett Packard’s (HP) classic customer-centric innovation!

According to the Executive VP of HP’s Imaging and Printing Group, customer centric innovation is all about “putting customers at the centre and creating the experience around them”. He adds that technology is no longer the only vital piece. Instead, how a company makes a technology easier for customers, with choice, control and convenience is the ultimate differentiator.

HP’s Lightscribe printable Compact Discs were made with the above fact in mind. An analysis of customer feedback and inputs showed HP that most customers did not want to print separate labels or write on their CDs. Brainstorming resulted in designing a new product that used a laser to burn information to a disc and then print a label on it. Lightscribe was the result of a company’s sincere efforts to first solve a customer need. Another interesting point to note here is that it is not HP’s marketing or after sales team that meets its customers, but the engineers and designers. They attend ‘live demos’ at retail stores and speak to customers to know about product performance. HP’s mantra is “Understand customer problems and then fix them from a product and marketing perspective”.

When ‘differentiation’ becomes Target’s bull’s-eye:

Leading retail chain Target does not compete based on price or in niche markets. The company’s strategy is to lead in “uniqueness perceived by customers”. The stores are top priority for the company followed by the Internet and direct mail initiatives. Target aims at building stronger customer relationships. According to the head of Target group, the company’s website has recorded more than 400 million visits. A treasure trove of product information the website has product ratings and reviews including those from its customers. It is used to drive sales, test customer response to new products and provide accessories that need not necessarily be brought to the store. The aim to enhance unique customer experience also compelled Target to build one of the largest customer databases to track customer behaviour both online and in the stores.

Whirlpool looks far beyond products
Customer-centric innovation is a part of Whirlpool’s annual achievements. The company is striving to ensure that its employees worldwide are brand ambassadors and customer advocates. It believes that customers deserve professionalism. Hence when problems arise, a representative takes ownership of the customer experience and ensures a fair resolution process.

Another successful initiative of Whirlpool that has facilitated customer centricity is the creation of an updated database of customer information. Information from this database is frequently drawn into the company’s strategic plans.

Yet another crucial driver of customer centricity for Whirlpool is its social responsibility activities. The company realised that customers prefer to have a strong emotional bond with the brands they purchase. They like to feel good about their relationship with the brand of their choice. Apart from being a major partner with the Habitat for Humanity in the USA, Whirlpool played a major role in providing relief efforts after Hurricane Katrina. The impact was obvious only when a study early this October revealed a 10 percent increase in loyalty behaviours.

P & G’s Impressive Achievements Through Innovation

P&G’s CEO attributes their success solely to continuous innovation across various business areas! While some innovations are centred on the company’s product base, several others are aimed much beyond. P&G rethought its position in global markets, its marketing strategies and its ways of understanding and responding to consumers!

We shall beginning with the case of Pampers. This brand of diapers, which was the largest selling in the US markets in early 2000s, gradually began to lose out to brands of the more innovative Kimberly-Clark.

So P&G readdressed the entire process of understanding consumer needs and where it had failed. Until then, P&G’s strategy and reasoning for its Pampers brand was to provide consumers with the most absorbent and driest diapers. In short, a diaper that lasted as long as possible without causing discomfort to babies, be it in terms of wetness or rashes.

The Chief of P&G’s baby care division, Deb Henretta decided to open a diaper-testing centre near her office. She could thus watch mothers and their babies and think of ideas to improve Pampers. And she did stumble upon a new idea that resulted in a diametrically new product! Henretta found that with longer lasting diapers, babies were taking longer time to get toilet-trained much to the annoyance of parents. Henretta and team then developed a new diaper that would not stay dry for too long. Parents were thus compelled to coax their babies to use the toilet for greater comfort. This was a success. In this case, P&G introduced a disruptive logic to an otherwise sustaining innovation.

The Search for Growth Through Innovation
Innovation, growth, and customer centricity are interdependent. One cannot flourish
without the others.
http://www.destinationcrm.com/articles/default.asp?ArticleID=5169

How taking advantage of innovations in customer relationship management can help achieve high performance.
Innovation has always played an important role in the success of all types of organisations. Today, however, with intense competition and demanding customers, innovation has become absolutely critical to a company’s ability to generate consistently superior levels of operational and financial performance.
http://www.crmproject.com/documents.asp?d_ID=2932

Invest in Customers!
Customers today are more knowledgeable, demanding, and price sensitive than ever before. They want everything on their terms. If managers fail to understand these individual needs and wants and unwilling to manage their expectations better than before, it's simple: their competitors will.
http://www.etqm.ae/q_hub/fea_art/150805.asp

1. Fast Innovation: Achieving Superior Differentiation, Speed To Market, And Increased Profitability (Hardcover)
by Michael L. George, James Works, Kimberly Watson-Hemphill, Clayton M. Christensen
Book Description
Innovation is a critical driver of organic growth in today's rapidly expanding markets. That's why the number one issue on most CEOs' minds is "How can we speed up our innovation process and get successful new products and services to the market more quickly?" In Fast Innovation, business expert Michael George explains why it usually takes so long for innovations to reach the market, and why they often fail.

More important, he coaches CEOs and senior managers in proven strategies for using innovation to drive growth in shareholder value.

The Circle of Innovation
by Tom Peters
Book Description
Business guru Tom Peters has been recognised for his originality and perception since coauthoring one of the most influential management books of all time: 1982's In Search of Excellence. Now, in his seventh work, The Circle of Innovation: You Can't Shrink Your Way to Greatness, he presents a provocative new vision for prospering in the "permanent state of flux" ruling today's business world. By juxtaposing short text passages and bold graphic images, Peters simply but passionately offers his prescription--perpetual innovation--in a nontraditional manner intended to foster individual interpretation. --Howard Rothman--This text refers to the Hardcover edition.

Designing the Customer-Centric Organization: A Guide to Strategy, Structure, and Process (Hardcover)
by Jay R. Galbraith
Book Description
Designing the Customer-Centric Organisation offers today business leaders a comprehensive customer-centric organisational model that clearly shows how to put in place an infrastructure that is organised around the demands of the customer. Written by Jay Galbraith (the foremost expert in the field of organisational design), this important book includes a tool that will help determine how customer-centric an organisation is - light level, medium-level, complete-level, or high-level- and it shows how to ascertain the appropriate level for a particular institution. Once the groundwork has been established, the author offers guidance for the process of implementing a customer-centric system throughout an organisation. Designing the Customer-Centric Organisation includes vital information about structure, management processes, reward and management systems, and people practices.

Customer Empathy