Becoming a Customer-Focused Leader

Do you have what it takes?

By Don Peppers & Martha Rogers, Ph.D.

Increasingly, customer-centricity is seen as a path to differentiation and competitive advantage. Yet, many executives fall short of being effective customer-focused leaders.

They would do well to heed management guru Peter Drucker's words: "Leadership is doing the right things." So we ask, what are "the right things" an executive must do in order to lead a customer-centric organization?
 
Balance short- and long-term goals
First, the customer-centric leader balances short- and long-term goals by seeking new ways to serve existing customers while attracting new ones. Just a few years ago, Xerox was facing significant price competition in the office equipment market and struggling to find new growth areas. Under the leadership of CEO Anne Mulcahy, Xerox maintained its competitive position in its core business, while at the same time pushing ahead with new technologies such as custom communications to serve the needs of current as well as new customers.

To her credit, Mulcahy resisted slashing investment in R&D that was critical for Xerox's long-term growth. However, R&D needed to work smarter. And so the legendary research division, Xerox PARC, was spun off as an independent subsidiary that would license technology and conduct sponsored research. This approach allowed Xerox to retain its much-vaunted research arm and deliver a range of new products. Today, two-thirds of the company's revenues come from products and services that have been introduced in the past 24 months.

Use customer insight as a strategic asset
Many companies have become adept at collecting customer information. But a true leader will find ways to share insights derived from customer data across an organization to drive profitable growth. Bob Godfroid, a Product Design Manager at P&G, recently took one of the company's most innovative new product lines, Swiffer, into a new area. By studying how customers were actually cleaning their homes, and by enlisting various departments within P&G to collect and use this knowledge, Godfroid led the charge to create the portable CarpetFlick cleaning system. From idea to store delivery, the entire process took 20 months – lightning-quick in the consumer products industry.

CRM technologies have been widely used in contact centers as well as in e-mail and interactive online marketing for some time. But it is only recently that the intelligence gained from these disparate efforts has been shared across silos within organizations to create or improve customer strategies. Aberdeen Group's recent report on business intelligence found that 74 percent of best-in-class firms are focusing on automated marketing and its resulting data as a strategic initiative. And according to a recently released BusinessWeek Research/Knightsbridge Solutions report, more than half of large and midsized organizations surveyed are using business intelligence and analytics to support at least six business functions ranging from customer service and sales to financial forecasting and budgeting.

With smart use of business intelligence and analytics, firms gain a deeper understanding of the drivers of customer behavior. As a result, each customer visit to a Web site could trigger a series of automated responses, such as follow-up e-mails or even a customized home page for the next visit.

Spend time on the front lines
Spending time with customers is a major priority of the customer-focused leader. It's well-known that JetBlue Airways' CEO David Neeleman regularly works a range of jobs on some flights, from baggage handling to serving snacks. Starbucks CEO Howard Schultz has said on several occasions that he visits more than 25 non-Starbucks retail stores every week. At Pitney Bowes, CMO Arun Sinha oversees the Onsite/Insight program, which requires senior managers to spend time at the headquarters of its largest customers with all levels of employees. Being able to see things from a customer perspective can affect not just the way a firm communicates with customers but how products are designed and delivered.

As a matter of fact, customer-centric executives regard customers as major partners in innovation. The IBM Global CEO Study 2006 found that the majority of the 765 CEOs surveyed identified customers as a top source of innovation. Soren Lund, Director of LEGO's Mindstorms Division, took this approach to a new level when he enlisted 100 top Mindstorms users to collaborate on the design of Mindstorms NXT, the next version of its popular line of robot toolkits.

Institutionalize trust among customers and employees
To the customer-focused leader, building trust among employees and customers is the foundation for all other activities. One of the most trusted companies in the world is E-Loan. It has won accolades from Forrester Research, TRUSTe and the Ponemon Institute. You won't hear much about these awards from CMO Catherine Muriel. You will hear a lot about customer advocacy and how the company's compensation structure fosters customer trust. Loan agents are not rewarded for the revenue they generate from interest rates; they are compensated based on the total amount of the loan.

Leaders who want to make trust part of their employee culture understand the importance of treating employees like customers. A good example of such a leader is Wegmans CEO Danny Wegman. Before opening two new stores last year, the 69-store Wegmans supermarket chain chartered jets to fly all new full-timers to Rochester, New York, to be welcomed by the CEO himself. With 31,000 employees, Wegmans has just 8 percent turnover, while the industry norm runs as high as 84 percent, according to the Food Marketing Institute. The trusting relationship that results from treating employees like customers is definitely paying off for Wegmans.

Bio: Don Peppers and Martha Rogers, Ph.D., are co-founders of Peppers & Rogers Group, a management consulting firm recognized as the leading authority on customer-based business strategy. www.1to1.com.