In this article, we look back on our #FutureReadyBrands webinar with Charlie Dawson, co-author of The Customer Copernicus and a leading global voice on customer-led business. We breakdown the key takeaways from our discussions and Charlie's years of work, through The Foundation advising, and guiding CEOs and leaders of global businesses on how to become and how to stay customer-led.
Charlie contends that a good company does 'OK' for its customers, seeing itself as a provider of cars or beer or whatever, but a great company looks beyond what they do to why they do it.
As part of the discussion, Charlie shared three key reasons why many companies' customer-centric strategies are failing to deliver the desired returns.
- Inconvenient truths
- Inside-out belief systems
- Lack of ‘burningness’
If you want to be part of a great company, not just a good one, and you know you could be doing more to put your customers first, but you aren’t sure where to focus your efforts, read on.
The first reason that many companies fail to be truly customer centric is that they don’t face up to inconvenient truths.
Inconvenient truths are things that go against the shared beliefs that the organization has, such as ‘the way things are currently done is really good and we don’t want to change it.’
Charlie gave the example of working with Volkswagen some years ago. The goal was to improve loyalty and retention. The MD wanted to create a Volkswagen magazine because “it’s easy to do, Audi has a magazine, Land Rover has a magazine” and so on.
One of the ways that we help brands start on this journey is to get stakeholders to speak to the customers themselves. We can try to tell them inconvenient truths, but when they hear it from another human being, whom they suddenly realise they are on the same level as – they aren’t better or smarter than the customer – then they believe it.
In this example, the MD spoke to only one customer, who was angry about the cost of servicing. The MD knew that when people get their car serviced independently, rather than with franchisee, they're so much less likely to renew with the same brand.
I remember saying to him afterwards, "Did you ask him about the magazine?" And of course he didn't. When you talk to a real person, you realise that's completely missing the point.
The MD realised ‘why does anybody want a magazine about Volkswagens, other than the MD of Volkswagen?’
The issue was not that people were putting their fingers in their ears and ignoring what was being said but the real problem - the cost of servicing - is a hard problem to solve.
It’s inconvenient to face this truth when creating a magazine would have been simple and satisfying in the short term, albeit ultimately ineffective.
The ‘voice of the customer’ is a great way to get inconvenient truths heard in the organisation.
Inside-out beliefs systems
The second reason why companies often fail is the belief system that exists in the organisation: what success is and how it's achieved and the unspoken assumptions about ‘how things work around here’. Charlie’s research has uncovered two types of belief system: inside-out and outside-in.
- An inside-out belief system starts with the organisation. It's self-centred, focuses on your goals and pushes to make sales happen. This system is not customer-led.
- Outside-in belief systems start with understanding what matters to people outside the company and trying to respond. This is customer-led.
As Charlie explains:
The next thing we learned was that one of them is natural and one of them is not. No prizes for guessing… the natural one is the inside-out, self-centred one. For example, you focus on sales and set high sales targets... The problem is, eventually, the number that you're trying to hit becomes so high that it can only be hit by pushing very hard... At Wells Fargo they decided that every customer having eight products was what they were going to try and achieve. People found the best way of achieving this target was to open accounts for customers that they didn't know about. Then, eventually, the wheels fall off and you end up in court.
Inside-out beliefs are natural and attractive in the short term, but unattractive in the long term. Outside-in initiatives have an equal and opposite problem which is that they are clearly good for the customer but the benefit to the business is uncertain.
For example, in the 1990s, Tesco’s outside-in belief system helped them to understand that whilst their pricing was fine for customers, the shopping experience was poor. They focused on reducing queuing by creating the ‘one in front’ promise – that they would open another checkout as soon as any queue became longer than two people - what Charlie calls a ‘moment of belief’ for the customer.
They estimated it would cost them €60 million a year (in 1994), when their profits were €500 million a year - a huge cost with no idea what the returns would be. Would customers come more often? Spend more per visit? Or would nothing change? It’s impossible to research because customers don't know what they're going to do until they experience it themselves. You can’t pilot it because the other supermarkets will steal the idea. So you need to believe in the longer term value of the initiative in order to spend the money and to take the step.
This strategy was ultimately successful for Tesco, but it had involved considerable risk.
Inside-out companies are unlikely to create these types of risky business cases and have them agreed. Again, voice of the customer research can start to dismantle existing belief systems by exposing what is really important to customers.
Lack of burningness
The final reason for failed customer-centricity strategies is a lack of a condition that Charlie calls ‘burningness’ - that is, that things are OK and there is no great incentive to make risky changes. In descending order of effectiveness, burningness includes pain, fear and ambition.
Pain is the most effective motivator because something is wrong right now and you have to change. Fear is less effective because it's not going wrong yet, but you can see it's going to go wrong in the future. So maybe you're Kodak and you invented digital photography, but you're selling loads of conventional film. Why on earth would you ruin your business now? Why not just wait a year?
We called this ‘burningness’ because, to motivate change, the combination of pain, fear and ambition in the organisation has to be held to the degree that it feels like you're on fire. You are so determined, or you so need to get to this other place, to this better place, that you can see your current way of doing things is simply inadequate
Charlie gave the example of easyJet and the pain they were in when Carolyn McCall started as CEO in 2010.
The previous management team had got into a spiral of trying to hit the numbers by continually reducing cost. However, they’d reduced costs to the point where they didn't have enough crew or pilots to run an on-time schedule. The pain hit a high when Ryanair took out advertising saying that easyJet’s punctuality was worse than Air Zimbabwe's.
The new CEO set out to make the experience better whilst still retaining the affordability – a real innovation challenge.
The first thing they tackled was allocated seating. People hated the race to get a seat. So they set about trying to get allocated seats to work, while still turning the plane round just as quickly as normal, which people in the industry said you couldn't do. It took them 18 months in the end. With hindsight, it's easy to say that but imagine you're a year into it, you haven't solved it yet and the operations guy is saying, "See? I told you." And you don't know whether it's going to take 18 months or five years, or if it actually is impossible.
So, is your customer-centricity strategy paying off? And is it truly customer centric?
Is there an appetite in your organisation to face up to inconvenient truths and take risks?
And do you have ambition, but it’s not burning, or you are not in pain, yet?
It’s tough to move companies’ belief systems from inside-out to outside-in and it can be extremely uncomfortable to speak ‘inconvenient truth to power’ in your organisation.
When contemplating risky moves, it helps to have hypotheses about each step of the way and metrics in place to understand whether movement is happening.
If you would like to know more about how you can uncover the meaningful contextual human truths that move and motivate people and how you can bring about meaningful change in your organisation, then get in touch.