As the economy moves from recession to expansion, companies are shifting their focus from pruning costs to stimulating growth, particularly organic growth. Launching new products and services is one way of generating organic growth, but this growth is short-lived because competitors almost immediately mimic innovations. Thus, astute companies are increasingly looking to their customers to drive growth — tailoring offerings, indeed their whole organizations, to customers’ unique needs. The problem many companies face, however, is: How do you cater to customers without incurring debilitating costs in complexity? Building a truly customer-centric organization is the solution.
What distinguishes customer-centric organizations from other companies that proclaim their customer focus? In short, they’ve moved beyond lip service and re-oriented their entire operating model around the customer, increasing customer satisfaction and their own profitability in the process. Customer-centric companies understand not only what the customer values, but also the value the customer represents to their bottom line. They align their operating models behind a carefully defined and quantified customer segmentation strategy and tailor business streams — product development, demand generation, production and scheduling, supply chain, customer care, etc. — to delivering the greatest value to the best customers for the least cost.
A recent Strategy& study of product and service companies in North America and Europe found that businesses that successfully combine value-creating customization with cost-effective delivery outperformed industry peers two-to-one in revenue growth, and generated profit margins 5% to 10% above their competitors’. However, to deliver these results, organizations really have to walk the talk. They have to make dramatic internal organization changes. Only then can companies evolve from pushing product to delivering genuine value to the customer and the company (see Exhibit 1).