Customer-Centricity and Insight as Key Enablers of Digital Transformation

Digital transformation is the cultural, organizational and operational change of a company across all levels and functions through the integration of new and disruptive digital technologies, processes and competencies to improve or enable business models changing the way value is delivered to customers.

New business models through ecosystems, online service channels, enhanced data analytics and smart manufacturing are all examples of new digital technologies that enable companies to become more customer centric. These technologies help to better understand the needs and motivations of their clients and improve customer satisfaction and experience.

However, instead of focusing solely on technologies, platforms, devices and channels to drive organizational changes; customer needs, behaviors and expectations should be the real driver of digital transformation. Customers nowadays require their experiences to be rapid, interactive and responsive while being easy to access and available anywhere.

What is a customer-centric company

Traditionally companies have defined themselves primarily by the products or services that they provide and less by the problems they solve for their potential buyers. A product-centric firm is principally focused on new business volume and market share without segmenting users nor taking ownership of the customer within the organization. Often, these enterprises are confronted with legacy systems that have limit ability to meet customer requirements and client data that is trapped in organizational silos.

A customer-centric company by contrast puts the customer and their needs at the center of their organization and this approach is integrated in their business model,?processes, people and culture. They have systems and processes implemented that support the interpretation and understanding of customer data, behaviors and feedback so that they can continuously improve their products as well as their business models or enable new ones. Furthermore, they offer tailored products based on differentiated customer segments and employees company-wide take clear ownership for customer problems.

A good example of a customer-centric company is Amazon. In every product development project, the customer end state is taken a as the starting point. From there, product managers start ¨working backwards¨. The process initiates with an internal press release that describes the user, the problem, how current products are failing, and the solution that will solve that problem. Big data and data analytics support this process providing customer insight on behavior, needs and preferences resulting in a superior customer experience.

¨Customer-centric companies have direct competitive advantage over product-centric companies: improvement of customer satisfaction and customer experience lead to increased revenue and higher customer loyalty.¨

Another quality of customer-centric companies is that they understand the value that the customer represents to their offering during the lifetime of the customer. The customer lifetime value is a prediction of the monetary value generated by a customer in the future across the entire customer life cycle. Data analytics is used to segment customers by profitability and business operating models are aligned to deliver the highest value to the most lucrative customers at the lowest cost.

How to build a customer-centric operating model

Businesses must adapt their operating model in order to incorporate a customer-centric approach. An operating model describes how an enterprise will deliver value to their customers in accordance with the business strategy. It determines how technology, processes and people are used within the organization.

The operating model for customer-centric companies consists of four essential components:

1.????Business processes are designed to attend different segments

Because customers have different characteristics, needs and preferences, companies must define target segments based on a thorough understanding of the customer lifetime value. Groups of customers belong to different segments when value propositions, customer channels, relationship types or profit earnings are distinctive. Once a company decides which customer segments are being served, business processes must be designed around them.

Companies may implement an omni-channel approach based on customer behaviors and buying preferences assuring a consistent and unified customer experience. They must provide a seamless shift between online and offline sales channels. Display advertising, search engines, social media, referral websites, email and mobile marketing are all considered independent channels, as each can promote one-way or two-way communication.

A tendency in the next years is the implementation of mass customization which is the ability to design and produce customized products at mass production on a profitable scale. Sports shoe manufacturer Nike as an example gives customers the opportunity to personalize and design their own shoes regarding colors, materials and engravings.?Mass customization is supported by new technologies such as smart manufacturing, online product configuration and 3D printing.

2.????An outstanding experience is delivered at every touch point

Customer centric companies must deliver a positive and seamless customer experience at every touch point across the customer life cycle. Customer experience is defined as the result of all interactions between a company and a customer over the time of their relationship. These interactions are a result of the customer journey, the brand touchpoints, and the customer interfaces including digital. A customer journey describes the path of sequential steps and interactions that a customer goes through with a company.

Personas is another strategic tool for improving customer experience and a better understanding of who you customers are and what they need. When developing a new product or service it is fundamental to understand the user problem. It requires to know very well the final user as well as their needs. Knowing the target audience helps building the right specifications, features and design elements, making the product more useful.

A user persona clarifies who is in your target audience and are used to build empathy with the final user. They are fictional characters created on the basis of research that represent the different user types that uses the products of the company in a similar way. They contribute to a deeper understanding of the motivations, behaviors and attitudes of the user. Well-defined user personas help to efficiently identify and communicate the user needs.

3.????An active dialogue with customers is maintained

To obtain a better understanding of customer needs and motivations, customer-focused companies engage in a continuing dialogue with their customers. This dialogue starts before the purchase of a product or service and continues during the customer lifetime. There is a big difference between prospects who are in the point of making a purchase and those who are only orienting and gathering information. The organization must act upon the feedback of their customers by improving their products, services or business processes.

It is important that interactions with customers are facilitated across the whole organization including front office areas as well as back office areas so they can better understand the customer and their successes and challenges, and how their activities and actions impact the customer experience. Examples of how interactions can be facilitated are sales and support calls, product trials, focus groups, customer visits, participation in customer events such as business conferences, and co-creation labs.

Co-creation refers to the interaction, collaboration and knowledge sharing with customers in the processes of ideation and product development. Input from customers play a central role in these processes to gain insight leading to reduced times to market, cost savings and an improved connection between customer and brand. Technologies can support the process of co-creation in many ways, for example by web surveys, online voting polls and open platforms to gather and assess new product or service ideas and concepts.

4.????The company culture places the client in the center of decision-making

In customer-centric companies all business areas are oriented towards the customer. They foster a culture that embraces a fundamental shift in mindset from selling products to solving problems. Within this culture customer empathy is operationalized, new hires are involved in the company strategy from the beginning during their onboarding, employees have access to customer insights, direct interaction with customers is facilitated and customer metrics make outcomes of the customer-focused culture transparent.

At software company Adobe Systems, the Human Resources department plays a central role in motivating their employees to always think about the customer first. They want their employees to understand what the metrics are of how customer experience and satisfaction are measured, what are the objectives of the company to improve them, and the contribution and?impact of each employee towards them.

To achieve this involvement, frequent sessions are held with employees to remind them of the mission, vision and values of the company and to motivate them to achieve their goals. Other activities are the sharing of client success stories with employees and the “experience-a-thon” program that enables employees to provide feedback on company products. All these initiatives contribute to a culture that makes the employees feel connected to the company and its mission.

The road to a mature customer-centric company

Becoming a customer-centric company takes time. It requires leadership, a change of the business culture, the adoption of new technologies, the use of strategic tools for a better understanding of the user. It also requires changes to the operating model, implementation of processes to facilitate the customer dialogue, and the organization and use of critical customer data so that the company is capable of creating new value and new experiences for their customers.

Can your operating model tailor to each customer's needs? How rapidly is customer feedback integrated? Can customers co-create products?

The road starts with leaders developing a better understanding of what customer-centricity means, of what the benefits it can bring and of what their company needs in that moment. Once leaders are on board, companies typically start investing in programs, create a dedicated customer experience team, start to build customer journey maps and user personas, and solve first and more simple customer pain points.

Having a designated cross-functional team, customer data is being better organized and exploited to gain customer insights. Companies take advantage of new digital technologies and begin to redesign their operating model based upon these new insights. They actively use metrics for customer satisfaction and experience to measure their progress against customer revenue and loyalty. The culture is changing from product-centric to a customer-centric focus.

From there, customer-centricity becomes part of the strategy of the company and is embedded in Human Resources processes like hiring, performance management and incentives to reinforce the culture and desired behaviors of the employees. In a mature customer-centric company, all decisions are made up around the customer. The company has clearly communicated their goals and purposes to customers and employees and are able to deliver a great user experience fulfilling their brand promises.

Figure 1: Product-centric versus customer-centric businesses

About the Author

Guido N. is Senior Project Manager (PMP, SMC) with 10+ years of experience in leading strategic business and technology projects within the financial sector in Mexico. You can follow him on LinkedIn .