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Is your business model under threat and your survival at stake?

Business Model Threat

In any large successful business today parts of the business are performing well while other parts are ailing. Multinationals like Ford Motor Company and Starbucks are performing well in some countries, but not in others. Samsung and Ikea have high market acceptance of some products, but not others. But, what’s important is to determine if your core business model is under threat. If it is, your very survival is at stake.

Consider what is happening to the traditional postal service corporations like the US Postal Service (USPS), Royal Mail (UK) and Australia Post. Virtually all national postal services originated from government owned and legislated monopolies when letters were the primary source of written communication. These organizations created thousands of bricks and mortar post offices and shops, a large transport infrastructure to deliver letters using thousands of postal staff. The digital revolution has changed all that – letter volumes are declining rapidly, with consequent ongoing and growing losses for incumbent mail services. The business models of traditional postal corporations are under attack from all sides.

Take Australia Post. Like many postal corporations it has developed a growing profitable parcel delivery service fuelled by online consumer purchasing. It is providing new services like its digital mailbox for business and consumers. But profits from these new lines of business are being eroded by losses in the traditional letter delivery business and from competition. Both Singapore Post and Japan Post have purchased courier companies to compete in the Australian parcels delivery market. Also Uber Rush is allowing people to order pickup and delivery of packages using the Uber app. Last year Volvo trialed a service called Roam Delivery that allows retailers to drop off merchandise inside your parked car. All of this adds up to intense competition for Australia Post. Much the same is happening to US Post and Royal Mail as well as other incumbent mail and postal services around the world.

How can organizations like Australia Post survive? They must develop and strengthen a customer-centric culture as the foundation of their organization and as a basis for long-term competitive advantage. This means that they must have strategic alignment with their markets and customers where an understanding of current and future customer needs and current and potential future competitors is factored into their strategies and supported by everyone in the business. This knowledge and mindset must become embedded in all of their businesses and throughout all functions in their organization to enable them to become more agile, competitive and innovative to create superior value for their customers. That in turn will help to drive ongoing growth and profitability.

The postal organizations around the world seem to be at different stages on the journey to customer centricity. New Zealand Post is probably one of the most competitive being one of the earliest to have its mail service deregulated in 1998. It is now two years into a 5-year transformation plan and is showing improvements in overall profitability. USPS lost US$5.5 billion in 2014 despite its growth in package services and has a lot of ground to make up. Australia post is profitable, but profits are declining from the impact of mail service losses and there is now a strong focus on developing a customer culture.

Is your business model under threat? You can measure where you are in terms of customer centricity and what stage of the journey you have reached by exploring the roadmap provided in the award winning book: The Customer Culture Imperative: A Leader’s Guide to Driving Superior performance.

Why should a monopoly be customer-centric?

Monopoly

If you operate a monopoly you can dictate what customers get, when they get it and what price they will pay. Legislated monopolies like water and power utilities, letter mail services and cable companies with geographic monopolies have held customers to ransom and traditionally have just paid lip service to customer service.

Why should that be any different today? Well there are some good reasons why these monopolies should start to think deeply about their customers’ needs and strive to provide more value to them – that is, to start becoming customer-centric.

First, disruptive technologies and indirect competitors are changing the way consumers behave and what they value. Both US Mail and Australia Post are experiencing substantial and growing losses in their mail services as people communicate digitally. The businesses of cable companies are feeling the inroads of satellite providers and digital entertainment services streamed directly to consumers’ smart phones and mobile devices. Water authorities are facing existing and new competitors that are adding value to the basic water supply. The bottled water market is huge around the world. New technologies to tap sea water for use in irrigation are in their infancy but will impact the traditional water authorities over time. Solar technology, power generation technologies for businesses and subsequently homes are having an impact as alternative sources of energy.

Second, monopolies are under pressure to become more efficient by regulators and government stakeholders to reduce duplication and waste and make better asset resource decisions dictated by the future needs of consumers and continuous pressures on the public purse.

Finally, unhappy customers resisting price rises and poor service are becoming vocal and this translates into lost votes for politicians.

The Water Services Association of Australia (WSAA) is the industry body that supports the Australian Urban Water Industry. Its members and associate members are monopolies that provide water and sewerage services to approximately 20 million Australians and many of Australia’s largest enterprises. Its members have defined the vision they want to achieve by 2030 as:

Customer driven, enriching life. 

Many of the individual water utilities are embarking on a customer-centric initiative to develop a customer culture within their organizations. There are strong customer-centric behaviors in parts of their organizations, but senior leaders realize that many of the traditional functions in their utilities are internally focused. The best starting point will be to benchmark all the functions in the utility to measure relative customer centricity strengths and weaknesses using a tool such as the Market Responsiveness Index. This will highlight “bright spots” in the organization and help create focus for specific initiatives to develop customer centricity.

If you are in a monopoly position, are you considering how to develop a more customer responsive organization – not just through improved customer service, but as a customer culture? You can find a roadmap to help chart your course in our award winning book: The Customer Culture Imperative

Why are Tesco, McDonald’s and Woolworths Supermarkets Losing their Leadership Positions?

businesses_losing_their_way

Tesco, the British based supermarket chain, has shocked analysts with an overstatement of profit expectations by 250 million pounds and questions have been raised about accounting irregularities. This problem reflects an underlying decline in its market position. 

McDonald’s, the dominant American fast food chain for decades, is now losing its market share, experiencing deteriorating margins, a lack of success with new products and reduced sales growth.

Woolworths, Australia’s leading supermarket chain, is being overhauled by challenger Coles as it experiences slowing sales growth and a customer perception that it is losing its price competitiveness.

Customer resistance, competitive price cuts, shrinking profit margins are just symptoms of a much deeper problem. These signs obscure the real issue – these market leaders have lost their customer focus that in turn has had a negative impact on customer perceived value and customer experience. Even more fundamental, they have not embedded a customer culture that incorporates the customer insight and foresight needed to be proactive with relevant new offers that will enhance customer retention, loyalty and growth. It is this that will sustain ongoing growth, share and profit. This issue is symptomatic of many large businesses that have focused on processes, technology, cost cutting and profit margins at the expense of building and embedding a strong customer focused culture.

There is only one way to act on this – to identify weaknesses in customer culture and take action to strengthen it. Extensive research shows that the right action to strengthen customer culture will provide any business with valuable insights that will lift customer experience, increase customer retention and grow revenue. You can find more on this relationship in our book The Customer Culture Imperative.

The starting point is measurement. Retailers like Tesco, McDonald’s and Woolworths measure just about everything – financial, sales and costs metrics. But they don’t measure customer-focus culture with the same rigor. If you don’t measure it, you can’t manage it. This will show the source of customer experience and market share problems and create a focus for all in a business to implement value adding strategies founded on clear customer insight and foresight.

More and more companies are using a validated customer culture measurement tool called the Market Responsiveness Index that benchmarks those customer, competitor and strategic alignment factors that drive future performance – customer retention, innovation, new product success, revenue and profit growth. If Tesco, McDonalds and Woolworths want to retain their leadership, they should do the same.

How to generate customer insights without another survey!

starbucks_ideas

While surveys are useful at collecting information on customers and how they feel about certain interactions, products or services there are other ways to gain meaningful insights.

First let’s define what we mean by customer insights:

Customer Insights Defined: a deep understanding of a customer’s needs and behaviors—both known needs that the customer can identify, and the latent needs that they cannot.

It also helps to begin by framing the type of customer insight you are looking to uncover. There are 4 main categories of customer insights that are useful to driving business performance.

1. Strategic Customer Insights – these are used to inform the company’s strategy by understanding what unique market segments exist in the marketplace. For example in the telecommunications industry there are a wide range of different types of customers with unique needs. Some customers now use smartphones as their primary internet device, their needs will be different from customers that still use cell phones primarily for phone calls and text messages.

A deep understanding of the needs of different market segments allows a company to determine which segments are most attractive. This customer insight also allows a company to identify where it needs to improve its own value proposition in order to attract and retain customers from each segment.

2. Program Specific Insights – these are insights specific to a component of a business strategy. For example, a manufacturer looking to roll out a training program to its retailers would need insight into the most effective methods to educate retailers. Should training be conducted in person, via a webcast or through a self service portal?

3. Product and Service Insights – these are direct inputs into how products or services could be improved. A great example of this in action is “My Starbucks Idea”, an online brainstorming tool driven by customers. Customers share ideas and other customers can vote on them so the best customer driven ideas rise to the top.

4. Insights for Marketing Communications – understanding what media and mediums customer’s use to get information informs how companies can more effectively reach and communicate with potential customers. For example if the customer group in question is predominantly focused on using social media, understanding which social media platforms they are most engaged in will help direct communication resources.

So now to the question of how to generate insights without surveys…

Customer insights can initially be generated from reviewing existing publicly available research and data as well as data internally available to the company. This often involves internal interviews with experts in markets and front line people that interact with customers on a regular basis. While this is useful it is secondary research, a review of what already exists and while it can generate new insights it is more useful for gaining alignment around what the company already knows about customers.

To gain deeper unique insights an ongoing process should be implemented that involves primary research. This doesn’t need to be complicated or only handled by marketing research profession in fact it is more impactful when people across the organization are involved.

Customer Immersion Activities

The most time and cost effective way to generate insights is to simply talk with customers. In today’s world this can include a range of mediums from one on one interviews to focus groups to online forums like the one Starbucks runs or Ideastorm, Dell’s equivalent.

Now I realize that technology products and coffee are highly engaging products with many willing participants, what if you sell toilet paper or a product that inspires less passion?

For these less inspiring categories a great source of insight can be customer complaints. Barbara Buchanan has written a great article titled “Mining Complaints and Negative Social Media May Have Positive Consequences” including some examples from the banking and manufacturing industry. The key is making it easy for customers to complain and provide feedback in real time, in the moment. For example a Hospital in California installed posters around the hospital with a QR codes. Patients can scan the QR code on their phones and immediately send a manager a message about an issue. Managers receive these in the form of text messages and commit to responding immediately and resolving issues as fast as possible. Patient satisfaction has doubled in the past several quarters as a result.

qrcodes_feedback

Going Deeper by Observing Customer Behavior

Ethnographic research can provide deep insights into people’s behaviors and unmet needs by taking a holistic view of customers in their own environment.

This is a more expensive technique but can yield unique insights. A great example comes from a day in the life analysis of  women cleaning their homes in Italy. A US company after failing to gain success with an all purpose cleaner for the home in the Italian market, undertook ethnographic research to understand why the product was failing. It discovered that Italian women spent 4 times as much time cleaning their homes than US women. They were fastidious and extremely house proud. They used specific cleaners for specific jobs as they believed an all purpose cleaner simply would not get the job done. These insights allowed the company to reposition the cleaner to focus on meeting a more specific need – benchtop cleaning. The repositioning resulted in a much more successful launch into the italian market.

Piloting New Products or Services

This involves putting new products or services in front of customers to gain direct feedback. A modern version of this can be seen on websites like Kickstarter, where entrepreneurs and intrapreneurs can essentially describe a product or service and raise funding for the idea. This is really the ultimate way to test concepts, will customers pay for it? One of the most successful products launched on Kickstarter is the Pebble Watch. It launched 18 months prior to Apple announcing their own iWatch. It is now raising funding for its second version and has raised almost $10 million to date.

Mining Social Media

The last incredible source of rich customer insight exists within a wide range of social media including Facebook, Twitter, LinkedIn, Yelp, Pinterest and other online communities. There are a range of different companies that can help mine this online data and distill sentiment and feedback in a meaningful and actionable manner. A great list of the top 50 tools is provided here by Pam Dyer.

While surveys remain a great way to elicit direct feedback on specific topics of interest to the company, there are many other ways to generate insights that should be incorporated into every company’s way of doing business.

3 reasons why customer centricity’s time has come

the_time_is_now The world of business has rapidly transformed over the past 15 years. From a world where businesses controlled supply, controlled the message and could dictate terms to customers to one where customers have a much louder and more influential voice.

While we have always been advocates of businesses that act in the best interests of their customers, it seems market forces are now compelling all businesses to behave this way.

So why do we believe 2015 is the year for Customer Centricity? 3 reasons.

1. Customer Feedback Systems are going enterprise wide.

Companies have been measuring customer satisfaction levels for many years. Often these surveys have been conducted once a year, presented and then forgotten about. This type of survey methodology is rapidly changing, becoming real time and supported by great technologies to get the right feedback to the right person at the right time. In fact technology is enabling enterprise wide feedback mechanism that were never previously viable.

While this is a great positive trend for companies that realize they must become more customer centric, it is not enough for these to remain only the domain of customer service or marketing.

Being customer centric is a way of doing business that is not only about sales, marketing and customer service. It involves every department understanding their role in creating a great customer experience. Many forward thinking CEOs recognize this fact and are working on transforming their organizations to meet this challenge.

2. Convergence of customer experience and employee experience.

Today there is a recognition that employee experience impacts customer experience. If employees are not given the opportunity and tools to change the way they work, the customer experience will suffer. Being customer centric means understanding that every interaction with customers allows them to form an impression, good, bad or indifferent. It truly requires everyone in an organization to be engaged in delivering great experiences.

The bottom line here is that you cannot create truly engaged customers without truly engaged and passionate employees.

3. Recognition that Customer Centricity is a Leadership Competency. 

Being customer centric, requires leadership that is customer centric. Leaders need to be engaged with customers first hand. Leaders need to immerse themselves in the customer’s environment and experience what customer’s experience. I wrote about Telstra’s (A $20billion telecommunications company) Executive team engaging in this practice previously here. We are seeing this become the norm in many other large businesses around the world.

There is also increasingly a realization that leaders of all disciplines need to develop their customer centric thinking and leadership competencies.

We were recently honoured that our Book, the Customer Culture Imperative  was nominated as one of the Top 20 and later short listed after a public voting period to the final 5 for the Marketing Book of the Year – 2015. Perhaps some further proof that Customer Centricity’s time has come!

Great places to work create great customer experiences

5starrating

An interesting study from my friends at Software Advice (an HR & workforce management technology research company) leveraged data from the employee reviews website, GlassDoor.com.

What caught my eye was the fact that only 37 companies from 147,071 received a 5 star ranking from their employees. While this is an extremely high bar, I expected there would be more companies achieving this top-level status.

Of the 37, almost half (16) are headquartered in our region of the US, the Silicon Valley. I believe there are a number of reasons for this:

  1. Silicon Valley is still the benchmark for innovation, new ideas and disruptive business models. That mix can be an intoxicating environment for the right type of people, people that really want to change the world. From my experience working with companies to become more customer centric, one thing that is often lacking is a compelling vision and strategic alignment around that vision. In general people are interested in being part of something bigger than themselves and certainly the powerful entrepreneurial visions in silicon valley fit the bill.
  2. A second reason is the valley has always been ahead of the curve in how work actually gets done, the tech companies were the first to introduce remote working (although some have since reversed this trend as the right levels of social bonds among workers does need to be in place for remote working to be effective “See Yahoo”). Regardless the underlying theme behind this is empowerment, flexibility where getting things done matters more than politics and busy work. People respond well to being given flexibility and the tools to get their work done.
  3. Thirdly, by there very nature start-up businesses are customer centric, they are solving a problem that either no one has solved before or doing it in a way that is 10 times better that the current options available. This creates alignment with customers and a compelling value proposition that excites and motivates people.
  4. Finally, Silicon Valley is collaborative by nature, there are diverse pools of talent with different cultural and social backgrounds coming together with a single purpose to solve difficult problems with technology

These factors combine and attract world-class entrepreneurs, which through their vision and leadership create insanely exciting companies.

These companies by their nature have to create unique and valuable customer experiences around their core product or service to stand out and be different. This drive to do this requires teamwork, personal development and hard work, some of the attributes cited by employees as reasons they like working for these firms in the chart below:

 

Top-Listed Attributes of Five-Star Companies Source: Software Advice

Top-Listed Attributes of Five-Star Companies
Source: Software Advice

The bottom line is without passionate, engaged and excited employees you cannot have passionate, engaged and excited customers.

Why smashing hierarchy and driving collaboration is essential to customer experience

Source: BRW Australia Photo: Nic Walker

Dr David Cooke, MD of Konica Minolta Australia.  
Source: BRW Australia Photo: Nic Walker

When Dr David Cooke was appointed managing director of Konica Minolta in Australia he was faced with a culture of strict hierarchy, strong silos and task oriented behavior.  He realized this was the first thing that had to change.

Why? Because the market for multifunction copiers and printers was changing. The market for these products was declining and the demand for outsourced solutions and services was emerging. The hardware was less important than it was in the past, customers just expected the devices to all work well and be built with high quality engineering. Quality products did not differentiate, customers wanted more, they wanted more sophisticated services and solutions to help them manage the costs of running their fleets and value add solutions that would streamline workflows and improve their operational effectiveness.

These new market conditions required a more flexible, agile and collaborative culture that focused on the changing customer needs if Konica Minolta was to thrive in the future. So his vision of KMA as the “company that cares” for its customers and its community was a means to differentiate KMA from its large competitors, promote a unified company view of improved service and value for customers and one that he felt his staff could buy in to.

His view was validated by a staff survey that benchmarked the level of customer-focused culture in the business by measuring market responsiveness on a 7 factor index. It showed that there was some work to do, but that staff were overwhelmingly ready for change, wanted transparency of information across the organization and expected the senior leadership to lead it and show the way.

David immediately looked for tangible initiatives that would demonstrate a unified company with increased collaboration and communication. In the first few months of his tenure he made the following changes:

  • the large corner office that was originally the haven of the previous managing directors was re-purposed as a “quiet lounge” for all staff
  • he moved into a glass fronted office next to the lunch room where he could wave or nod to his staff as they used this heavily used walk-way.
  • he replaced several of the functional heads with new leaders to strengthen the cultural change program and break down the silos
  • he increased transparency in the HR function by moving it from closed office walls to join others in the open plan office and appointed a new leader to facilitate the change program
  • he promoted an external focus by encouraging all staff to work for non-profit community organizations by enabling them to take days off to directly contribute

David’s approach to creating a less hierarchical structure, sharing of financial results and customer successes across the business is leading to more engaged staff, better customer service and growth in revenues at a time when overall market revenue is declining.

What’s the secret? Customer Focused Leadership – leaders that genuinely care about creating value for customers, the business and the communities that operate in.