The world of management is prone to fads. These fads come in waves, with keywords that serve as identifying labels. Thus, management magazines, the salmon supplements of newspapers, and the presentations of consultants (a tribe to which I belong) have been filled in recent years with "agile", “digitalisation”, "customer experience", "lean", “sustainability”, “networked organisations”, and so many others.
In fairness, many of these expressions refer to ideas that, in their origin, are powerful and full of substance. What almost always happens to them is that they are used with little rigour and end up being, as I said above, labels for organisations to "certify" that they are up to date, regardless of whether the ideas behind them have only been superficially applied.
One such idea that has become fashionable is that of designing and building customer-centric companies. These companies would have defined their marketing, sales, service, logistics, and innovation processes, as well as their organisations, "around the customer", i.e. first knowing their customers as well as possible and then applying this knowledge in their definition and operation.
Customer-centricity has become one of the fashions I was referring to. Almost all large companies declare that their aim to become customer-centric is one of their strategic priorities for the coming years. And they have good reason to do so. Recent research suggests that companies with advanced maturity in their customer-centric transformation see 2.5 times more revenue growth than those with low maturity (Jonathan Hughes, 2021). A 2016 Forrester article states that the average annual growth rate of customer experience leaders is more than five times that of customer experience laggards. Our own experience tells us that a customer-centric operation can increase revenue by 2-4% in a year.
However, beyond the rhetoric, the truth is that the degree of real progress on the customer-centricity journey for many companies is rather modest. Recent research cited above indicates that only 9% of companies have reached a high level of maturity, with digital companies at the forefront (19% high maturity) and industrial companies lagging behind (5% high maturity). Another piece of evidence is provided by Russell Reynolds Associates, which in a 2019 survey of 3,000 global CEOs found that, despite the best efforts of many of their executives, the transformation to customer-centricity was taking much longer than expected.
The experience of our projects at Oliver Wyman for some of the leading companies in developed and emerging markets, across a wide range of industries, is consistent with the findings of these studies. Strategic intentions to move towards customer centricity encounter a number of difficulties, as we have seen first-hand. Sometimes these difficulties are organisational in origin. Companies in sectors such as banking or telecommunications have well-established and powerful product or distribution channel organisations, which are not always open to the change that customer-centricity entails.
On other occasions, these difficulties are rooted in the depth and nature of the information that companies have about their customers. This information is often insufficient or poorly structured. Companies in sectors such as insurance or banking itself have structured information around products, but do not have a "single customer" view of the data.
In our customer-centricity transformation projects, we apply three principles:
- Deep personalisation of all interactions with customers, from what you offer them to how they are served or serviced. We do this by implementing a Next Best Action system in sales, service and communication, which fully personalises offers and service messages to customers. In a recent project for a telecommunications operator, we generated 50 million fully personalised offers every month.
- Omni-channel by design. We ensure that the customer experience is consistent across all channels: every customer should receive the same offers, messages and promotions across all channels; exceptions should be very few and highly motivated.
- Harnessing the power of data and artificial intelligence. It is about putting advanced analytics "in production" so that every business, service or communication interaction is informed by it.
When this philosophy is successfully implemented in subscription sectors (telecommunications, pay TV, insurance) and in sectors that have a wealth of information about their customers thanks to loyalty programmes (hospitality, airlines, retail), it generates a real impact on revenue and margins, and turns customer centricity from a myth into a reality.