Treacy and Wiersema purport there are but three ways to achieve competitive advantage.
These are by being operationally excellent, by becoming a product leader or by achieving customer intimacy. The main premise is that companies must choose—and then achieve—market leadership in one of the three disciplines, and perform to an acceptable level in the other two.
The customer intimacy strategy focuses on offering a unique range of customer services that allows for the personalisation of service and the customisation of products to meet differing customer needs. Often companies who pursue this strategy bundle services and products into a “solution” designed specifically for the individual customer.
The successful design of solutions requires organisations to possess deep customer knowledge as well as insights into their customers’ individual needs and wants.
True customer intimacy can only arrive through aligning the product development, manufacturing, administrative functions and executive focus around the needs of each customer. Amazon is a good example of an organisation that succeeds at being customer intimate, Emirates is another, and John Lewis a third. What links these organisations together is their use of customer centric data.
Without it, it is impossible to become truly customer centric – it is no wonder therefore, to find these brands coming top of customer satisfaction surveys or customer centricity reports.
But how about organisations at the other end of the spectrum – those that are operationally excellent.
A strategy of operational excellence is ideal for markets where customers value cost or convenience over choice, which is often the case for mature, commoditised markets where cost leadership provides a vehicle for continued growth.
Leaders in the area of operational excellence are strongly centralised, with strong organisational discipline and a standardised, rule-based operation. McDonalds, Direct Line and Lidl are examples of organisations that pursue this type of competitive strategy. But for such organisations is it still enough to only pay lip service to customer centricity?
With the balance of power now very firmly in the consumer court, customer centricity has got to rise up the agenda of every organisation – not just those that follow a customer intimacy strategy – which by the way, if recent research is accurate, isn’t very many at all.
A study revealed that whilst half of marketers agree that the organisation must be customer centric, only six per cent of organisations actually are.
Over a third of respondents said their organisation was product focused and almost 20 per cent said that channel dictated how marketing was carried out. Moreover, with single customer view being an instrumental part of customer intimacy on average marketers scored their organisation’s ability to do so at just 2.8 out of five.
As previously mentioned, the customer has never wielded such power over its suppliers. Not only do they have more choice than ever before, but they have regulation on their side too. The recent introduction of GDPR and upcoming ePrivacy legislation is not designed around clicks or channels, its aim is to protect the consumer and give them greater control. Consequently, organisations by law have got to become more mindful of their customer.
This is not a bad thing. In fact it should be perceived as positive. Having a greater appreciation of the customer will enable every organisation (not just customer intimate ones) to put the customer at the heart of the business and make decisions that both add value to the relationship and bolster the bottom line.
Treacy and Wiersema were right – back in 1997 – but this was before the advent of the smart technology, AI, deep learning and indeed the extraordinary penetration of the Internet.
Today all organisations must be customer centric as a base line and then be choose to compete using even greater customer centricity, product leadership or operational excellence.
Caroline Worboys is the Chief Operating Officer of Outra.
The following article was published by Customer Think, 6th December 2018.