Sep 26, 2014

Courage to Build a Customer-Focused Organization

Something’s eating at the heart of old-school western business, and it isn’t just a hangover from the tough economy or recent financial sector excesses. Not that long ago, iconic brands were faltering, commoditization was rampant, margins were plummeting, planning horizons got stuck quarter-to-quarter, suppliers and distribution partners were bickering, and opportunities for growth were increasingly being sought in greener pastures overseas. But like children swept up in a messy divorce, it’s the ultimate consumer’s buying experience that got caught in the middle.
You see, now that the dust has settling on the great 21st Century economic malaise, the basic game is still be the same. Winners will still be those who delight end customers by breaking with the pack and offering them distinctly better experiences than others are. But in today’s hyper-connected world, providing better experience alternatives means making a difference in more than just your product’s features and its price.  It involves re-thinking every aspect of how your end customers learn about, find, evaluate, choose, buy, own, use, update, and share, maybe even talk about, your product, service, or solution. This is distribution.
More than ever, what customers say they crave most are better buying and ownership experiences in the distribution channels available to them, not lower prices or bigger selections. And this fundamental dynamic holds true whether your end customer is in a mature, western market or a growing emerging one. Good times or bad, customers choosing among options will always discriminate on a complex range of variables, and only a certain segment makes their decision on the single dimension of price (unless all the options are identical!). Even in tough economic times, consumers make careful trade-offs around dimensions like durability, safety, usability, personalization, returnability, installation and much more when comparing prices. This is as true in Iowa as it is in Beijing, Mumbai and Rio.
And dramatic advances in internet and mobility technology mean that new improvements to your end customers’ experiences are being pushed further and further downstream into your distribution activities and partners. The net result is that all these touch point experiences will come together to either reinforce or destroy your customer’s experience with, and therefore perceptions of, your brand. And your future.
What customers say they crave, then, are more authentic interactions at every touch point in the experience-creating channels for your offering. They  want to be treated as individuals, not abstract members of segmentation schemes. Future innovations in distribution channel experiences simply can’t be described in the arcane language of ‘customer satisfaction’ research and ‘buyer insight’ studies.
Creating competitive advantage through your distribution channels comes from looking harder and more creatively at white spaces in your industry. White spaces in distribution, once spotted, may seem hard to reach or dangerous to explore. Some members of your management team will want to turn away from such daunting prospects, calling their retreat a “return to fundamentals.” The familiar may indeed be more comfortable (i.e., “doable”), but treading on old ground will typically do little to help your company change the actual experiences your customers have downstream in your channels.
This is where Frans Johansson’s thinking becomes helpful. Johansson, author of the fascinating book The Medici Effect: What Elephants and Epidemics Can Teach Us About Innovation, synthesizes medical, mathematical, and business research into a fresh perspective on converting natural fears of white space unknowns into managerial terms. He views white space as opportunities that arise in the margins, or the unknown, where two or more industry players or marketplace activities intersect.
Using this perspective, you can start to see your supply chains and your distribution channels as simply a stapling together of one industry intersection or activity after another, all the way from components supplier to assembler to wholesaler to retailer, and with all sorts of other ancillary industries such as logistics added in at different points along the way. Often, managers in under-performing chains or channels experiencing intense cost reduction pressures, inadvertently start regarding these intersects as necessary evils - the inefficiencies and loss of control that a company must endure in order to avoid doing all the customer experience work itself. But more powerful and enduring gains in the marketplace can be made if instead you view every one of these intersects as a white space opportunity, and see that orchestrating all of them in fundamentally new ways is the biggest opportunity of all.
Classic prospect theory teaches us that, without even realizing it, managers often take bigger risks in relatively safe environments than they are willing to take in hazardous ones. It is not so much that managers cannot live with uncertainty; the real problem is that they and their organizations fear losing. In the relative comfort of one’s industry, it is easy to do badly but it is hard to lose entirely. There may be some off years, some bad quarters, and the odd product failures, but the chances of going out of business are fairly low in the medium term. The long term, as they say, is another story. And the day of reckoning may be here for many companies.
That’s why Johansson says it takes “intersectional courage” to work the white spaces between industries. Managers fear the unknown risks involved in tackling new space. Ironically, however, taking the plunge may be less risky for your company than continuing to operate in the old corporate confines of tried-and-true processes. Staying afloat in a tough competitive environment is not exactly risk-free. But for a variety of reasons, it can be hard for managers to make an accurate comparison between white space and normal business risks.
But here’s what you will likely find most frustrating on your journey: those whitespaces are more than likely hiding right out in the open. What makes such golden nuggets so hard to see is the dense fog of conventional wisdom and constraints-based thinking that the old generals in your business have long espoused, and which you are struggling to break free.  As new leaders, you must stop fighting their last war!
Of course, this is not a journey for the timid, the faint of heart, or the risk-averse. But as one senior leader recently said to me – “What’s our alternative? Follow the lemmings over the cliff?”. Maybe Woody Allen was right that ‘just showing up is half the game”. But what about the other half? And what about winning?

Richard E. Wilson is managing director of the advisory firm Chicago Strategy Associates, and a former clinical professor of marketing at the Kellogg School of Management and Director of the school’s Center for Global Marketing Practice.

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