Creating a true customer culture

With the digital revolution as a main driver of change, customers have become a central market power over the past years. Their new clout forces companies to perform a fundamental rethink. The CFI Method – an approach based on the Job-to-Be-Done Logic – can fuel this transformation by facilitating a new, fresh perspective from the customers’ angle.

Transformation Is Driven by Customers

There is hardly a company these days that would not claim to follow a customer-focused approach. The only question is, how consistently do they follow it, and to what extent?

Many companies seek competitive differentiation via technologies or optimized processes. Major innovative leaps or new business models are rare. Preferred ways to build and expand competitive advantages are by improving existing products, launching new products in existing markets, and eliminating process deficiencies.

This fixation on technologies and processes may have worked well in the past. It no longer does so today. Over the past two decades, end customers, consumers and users have turned into an active driving force in the market – more than ever before. They are quick to learn, and they keep changing the rules. While the internet was initially used as a tool for seeking information, then for procuring products and services, it is now leveraged to exercise influence. Rather than mere recipients of marketing messages, customers today are co-designers, evaluators, bloggers, empowered patients, opinion leaders, and much more. They confidently handle the latest devices, apps, internet platforms, and social media, switching between brands, networks, sales channels and providers in what appears to be disloyal consumer behavior.

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They accept innovations – or reject them. By doing this, they force companies to undergo major transformations in strategies, processes, or even entire business models.

Virtually Every Industry Is Affected

The CEO of a market-leading manufacturer of hearing implants realizes that the company’s latest product launches have resulted in marginal revenue growth at best. Now she is asking herself: How can we turn around product development and migrate from a physician-centered to a patient-centered approach? Non-clinical stakeholder groups such as patients, their families, and health insurances are better informed than ever, and they have gained enormous influence on the choice of device.

The Head of Marketing of a premier European B2B distributor of electronic components is aware that his company’s customers are switching from mail-order catalogs to online sources. They search the web, not just our site, he knows, and they buy from the cheapest supplier – unless we succeed in differentiating ourselves. His company has just managed to move its business online in time, now customers are already calling for mobile solutions. Where should our marketing approach be heading? he wonders. How can I get other functions to support the change?

Or take the global agrochemistry company that has been marketing its products to farmers around the world with strong ties to their local communities. Now the company faces a situation where its influence on customers via traditional channels – retailers, advertisements, local sales reps – is dwindling as farmers are beginning to optimize the tilling of their fields with the help of their cellphones and mobile apps. How, management are asking themselves, can we continue to cultivate and expand our relationships with these farmers?

As different as these situations may seem, they all have one thing in common: customers’ increasing market power. More and more decision-makers have come to recognize the need to consider customers to be the linchpin of their activities, thus creating a customer- centered culture across all business functions.

The Job-to-Be-Done Logic in Theory and Practice

The basic idea behind the Job-to-Be-Done framework originated with Ted Levitt, whose paper “Marketing Myopia“ (Levitt, 1960) introduced a trendsetting way of thinking about marketing. His statement that “people don’t want to buy a quarter-inch drill, they want a quarter-inch hole” explains the basic principle quite well. Clayton Christensen, in studying possible strategies for incumbents to cope with disruptive innovations, uses the same kind of logic to identify customers’ expectations. According to Christensen, customers “hire” a product to get a job done (Christensen 2003). A marketing school of thinking that has become very popular in the past years, the Service-Dominant Logic (Vargo/Lusch 2004, Vargo/Lusch 2008), uses a similar underlying assumption: it says that, rather than the product as such, it is the product’s use that adds value. Or in other words, what counts is the Value- in-Use, rather than the Value-in-Exchange, which places the purchasing transaction at the center.
Several practitioners have gone by this logic as well, such as in innovation management (Ulwick 2005) or in business model development (Osterwalder 2011). The User-Centered-Design movement applies the approach to observe customers’ activities and understand what goals they are pursuing.

The Customer – A Catalyst of Change

To initiate the transformation from technological dominance and business model defense to a truly customer-centered culture, we feel companies need to achieve a change of perspective. Rather than viewing customers from their own angle, they need to do the opposite: put themselves in their customers’ shoes and look at their products and services from the perspective of customers’ life realities.
This change of perspective must be unmistakable, thus causing all hierarchy levels and business functions to realize how important it is for their day-to-day work to adopt an unbiased customers’ view: How and why do customers use products or services, and what do they experience, feel, or think when they do? An efficient way to accomplish this is by having actual customer requirements and needs at hand, phrased clearly and precisely and validated by a representative customer sample. This provides the basis for creating a new customer-centered culture, which can develop into the driving and controlling force of transformation. (Note that when we speak of “customers” here, we are referring to customers in the broader sense, including users and influencers of purchasing decisions.)

To use customers as catalysts of change, we suggest a three-phase process in line with Lewin’s Change Management Model (Lewin 1947).
In the first phase (“Unfreeze”), the company’s management and teams are pulled out of their perceived reality. In-depth exploration reveals customers’ unbiased perspective; the organization‘s existing understanding of customers is supplemented by an authentic picture of customers’ actual life realities and the resulting challenges (referred to as Pain Points in the framework). By confronting the teams with another reality, this first phase of the transformation helps to mitigate biases and soften resistance to change.

The second phase of transformation (“Change”) is dedicated to strengthening the organization‘s understanding of customers’ actual reality and its strategic implications for the company. This is achieved by providing quantitative evidence of the results of the customer exploration, presenting it in effective ways, and discussing implications with the group.
In the third phase (“Anchor”) the newly established understanding of customers’ reality is firmly anchored in the organization by jointly working out decisions, priorities, strategies, and action steps in line with the new customer perspective. Full concentration on customers’ reality, working on actual, concrete assignments, allows the change of perspective to take hold and a truly customer-centered culture to evolve.

Potential Pitfalls When Changing Perspectives

For an organization to achieve a 180-degree change of perspective – that is, seeing the company from customers’ or users’ point of view rather than the other way round – three potential pitfalls must be avoided

1. Distorted perceptions in the organization

Each and every employee tends to perceive things selectively. A product developer will make decisions from an engineering point of view and pursue her technical agenda. A sales rep will have his latest customer meeting in mind, with topics typically including demands for price discounts, quality issues, and/or advantages of competitive products. Management will focus on how to defend profit margins and keep shareholders satisfied. This selective perception is further distorted by systematic flaws in people’s judgment, a phenomenon well substantiated by scientific findings (Bazerman 2013). For instance, people tend to seek confirmation of what they believe in (confirmation bias), or to overestimate their own capabilities (over-confidence bias). Decision- makers should be well aware of these “blurred spots” to ensure an unclouded view of their customers’ perspective.

2. Customers locked in their frame of experience

Customers only know what they have experienced or heard before. They are unable to imagine things that don’t exist yet. If asked directly about innovations or new technologies they will typically be lost (Ulwick 2002). Customers would never have invented the fax machine if they had been asked about possible alternatives to mail correspondence. Likewise, no customer would have ever thought of using a wrist-watch instead of a wallet for making payments. So, asking customers about their opinions on new solutions is likely to lead to marginal improvements at best, or – even worse – to an approximation of existing concepts.

3. Lack of in-depth understanding of the customer

People intuitively judge a product or service based on hundreds of expectations and criteria, which they use to determine the product’s value to them. Many companies do not know or fail to use these criteria. As a result, they get stuck at the level of concepts describing generic needs, such as the desire for flexibility, convenience, safety, or quality. At this level of abstraction, customer needs do not provide a suitable basis for a transformation.

Customers’ Role under the Job-to-Be-Done Framework

The Job-to-Be-Done framework presented here, and the CFI-Method (CFI = Customer-Focused Innovation) based on it, offer an effective way to avoid the three potential traps described above, and contribute greatly towards achieving the change of perspective most companies need.

The basic idea is quite simple: People pursue functional, emotional, or social goals in whatever they do. Under the Job-to-Be-Done logic these goals are referred to as “jobs”. To attain the respective goal, people use specific resources which may include a product or service, but also a supplier or an activity. Every resource is consciously or subconsciously judged by how effectively it helps master the job. For instance, an everyday job such as communicating long-distance is addressed using resources such as WhatsApp, a phone, a letter, a fax, or – back in the old days – a messenger. A job is solution-neutral and may therefore remain unchanged for a long period of time. Resources, by contrast, are subject to technological change (fig. 1).

A resource is used as long as it helps the user attain his or her goal. Existing solutions are only replaced by new ones when users consider this change to be “worthwhile”. This may happen very quickly (as was the case with the Sony Walkman or the smartphone), or slowly (as with on-demand TV) or not at all (as happened with the visual telephone back in the 1970s). The pace at which new solutions are adopted often depends on technology and the costs to customers.
The Job-to-Be-Done Logic avoids the pitfalls described above by a) strictly taking the customer’s perspective and thus eliminating perceptive distortions from the company’s inside-out perspective, b) rigorously disregarding possible solutions and thus transcending customers’ limited frame of experience, and c) embracing the possibility of breaking down a job into very small parts using explorative methods, and thus identifying tangible and precise expectation criteria which we refer to as Customer (or CFI) Value Metrics.

Creating a New Customer Culture

To achieve a change of perspective in practice and build a customer culture, we have integrated several approaches with the CFI Method and refined it further in over 90 projects. We will now describe the CFI Method’s three stages of transformation.

Transformation Stage 1 (Unfreeze): Identifying a New Customer Reality

The process begins by determining the stakeholder groups with the strongest influence on the purchase and use of the company’s products/services, as well as their respective context. Before entering into customer exploration, it is important that customers’ core jobs be defined as precisely as possible in an initial hypothesis. Each core job must express a purpose or goal; it has to be formulated in a solution-neutral manner and must be neither too generic nor too narrow. Usually, this discussion, and ideally a first exploration round, will already suffice to change people’s perspective, as it will demonstrate how different groups pursue very different core jobs (fig. 2).

Based on the job hypothesis, which is broken down into individual steps, each job is then explored in depth with the customer. This is one of the crucial elements of the CFI Method when it comes to uncovering customers’ reality: Through the exploration process, customers’ needs, as well as their functional, social, and emotional Value Metrics, are identified for each step of the job, using customers’ own language. The result is a total of about 300–400 Value Metrics, collected from customers that have been recruited anonymously, which are then condensed to a maximum of 100. Studying these criteria thoroughly is an important step towards developing a new, unbiased customer understanding.

The format to be used for the exploration step depends on the type of customers, the topic, and the effort companies wish to put into the monitoring the of customers. The CFI Method combines different elements from market research, user-centered design research, and ethnography. The key is to ensure that Value Metrics are phrased clearly and precisely and that they do not imply any existing or potential solution features for a product or service. They are to follow a predefined structure, which also determines their syntax (fig. 3).

  • Expected result: Jobs are carried out to achieve a certain result.
  • Metrics: Customers judge against certain criteria, which they apply consciously or subconsciously. Examples include duration, number of steps, and number of positive responses.
  • Context: Jobs are always carried out in a specific context. For instance, a diabetes patient’s context is different depending on whether he or she is on vacation or at work.

While 100 Value Metrics may seem quite a lot, in our experience it is about the number required to avoid pitfall no. 3. After all, customers’ judgment is based on quite a number of very clear-cut expectations, not on just a few general requirement concepts.

Case example: private bank
The Head of Private Banking at a Swiss bank identifies soon-to-be retirees (people about to retire within the next five years) as a potential field for growth, seeing as the Swiss pension fund system permits applicants to choose between a monthly annuity and a one-time payment at the age of 65. The bank’s strategy is based on proven elements such as a customer desk, a choice of products from the portfolio, and a dedicated market communication including advertising materials and a special website. The key message is: Enjoy your life – we will take care of your assets. Alas, results are disappointing: In as much as two years, hardly a new client could be won through these efforts.

The CFI project begins by determining customers’ perspective. Target clients are men and women facing retirement in three to five years, and with a predefined amount in retirement assets at their disposal. At the top level, the core job is determined as “planning my life after retirement.” One level below, it is “sorting out my financial situation for my life after retirement.” Customer exploration, which is based on 30 in-depth interviews with anonymously recruited target clients, focuses on these two jobs and breaks them down into 125 tangible, precisely phrased Value Metrics. This helps the project team to realize what target clients really wish to achieve and how they rate existing offerings and solutions.

Transformation Stage 2 (Change): Embracing Customers’ Reality

The numerous Value Metrics around the job customers wish to perform represent valuable pieces of a puzzle which need to be placed in a new order that the whole organization will comprehend. This is done by way of quantitative validation: In a representative number of interviews, all criteria identified are rated by target customers. Respondents are asked to rate both the importance of each criterion and the degree of its fulfillment – i.e., their satisfaction level – in their everyday lives.

The key result of this validation, the second CFI component, is a matrix with four boxes – the Customer Value Map (fig. 4). By showing the connections between all job steps and all Value Metrics, the matrix allows you to define in a later step how a company’s future product/ service strategy should be prioritized and detailed, and what kind of transformation it will involve.
All validated Value Metrics fall into one of four customer value categories:

  • Build Value (importance above median, degree of fulfillment below median): Key Value Metrics are not fully met and represent customers’ Pain Points. Solving them creates the most value from a customer perspective, and thus offers the greatest potential for competitive differentiation with respective innovations.
  • Maintain Value (importance above median, degree of fulfillment above median): From a customer perspective, these are essential requirements (“Essentials”). They are important to customers but are essentially met. Here, companies have limited possibilities to differentiate themselves – but they may have some homework to do in order to remain competitive.
  • Reduce Value (importance below median, degree of fulfillment above median): Customer expectations that are not high on customers’ priority list but are currently exceeded. These Value Metrics offer a valuable potential for cost savings (which is why they are referred to as Cost Savers in the framework) or for a Blue Ocean Strategy (see Kim 2005). Here, it is advisable to challenge one’s offering at regular intervals, as the most disruptive business models tend to originate from this quadrant.
  • Monitor Value (importance below median, degree of fulfillment above median): These Value Metrics (referred to as Sleepers) can safely be disregarded or, selectively and with low priority, used as a source of ideas.

The very first analysis usually produces valuable insight with regard to where the transformation should be headed. To sharpen this customer understanding further, the Customer Value Map can be analyzed by various criteria, such as socio-demographics, regions, needs clusters, product categories, and competition.

Case example: private bank (continued)
The project team understands that customers’ reality differs – in part considerably – from their own perception of customers’ problems. The list of over 100 tangible Value Metrics that customers apply when organizing for retirement makes quite an impression. However, as the customer exploration step is only qualitative, it remains unclear which of these Value Metrics have the greatest relevance. In the validation step, 220 target clients rate each criterion by importance and their own satisfaction. As subsequent analysis reveals, there are no less than 14 distinct Pain Points that people face when making arrangements for their upcoming retirement. Another 10 Essentials reveal which Value Metrics the bank absolutely needs to address in its future offerings. The analysis provides deep insights into an overriding, very emotional customer problem: “I worry about not mattering anymore, not being involved in decision-making, not having anything useful to do after I retire from professional life.”

Transformation Stage 3 (Anchor): Implementing and Anchoring the Customer Reality

Transformation towards true customer focus, as the linchpin of a business strategy, requires the customer culture to be entrenched in the organization far beyond the marketing function. The results of the CFI analysis are therefore shared with top management and the company’s employees. The goal, however, is not only to communicate the results of the process but to jointly develop strategies and action steps, both per business function and across functions. As soon as is feasible, priorities from a customer perspective are derived from the new insights and an action plan is set up. This is done in workshops and internal workgroups. Topics that help anchor the transformation include: sharpening the company’s value proposition for existing and new market services, realigning its innovation pipeline, generating ideas for new innovations, and developing new elements for the business model.

At this stage of the transformation, the risk of a “relapse” is particularly high, as companies tend to fall back on old decision patterns governed by, say, a technology focus. The key is therefore to define a process in which the customer, figuratively speaking, has a seat at the table.

The whole approach helps to accelerate transformation in two ways: On the one hand, the CFI Method provides a very straightforward decision framework for sharpening the value proposition and ensuring customer-focused innovation. Quite early in the process, sometimes even before major investments are granted, it becomes clear which ideas and concepts are likely to achieve market success and which ones aren’t. On the other hand, the customer insights gained add a new quality to the process of agreeing on targets and approaches in the organization. There will be no room for speculative discussions, and decisions on innovation and transformation are based on facts. This way, the go-to-market is accelerated considerably.

Case example: private bank (continued)
The Pain Points customers experience when making arrangements for their retirement, along with the Essentials and the customer insight developed, set the direction for the project team: The assets available at that point become an essential part of life. Target clients want to be able to determine what to do with them, as often and as long as possible. Now the organization mobilizes its energies to transform the approach adopted so far. New service offerings are created within a very short time; the bank’s investment strategy is divided into three components: security, withdrawal, and revenue. It can be modified any time, thanks to a maximum of flexibility. A new simulation tool for customer use is developed and a customer desk is set up, staffed with finance experts from the insurance industry as they are closer to the target group. The counseling process clearly addresses the identified Pain Points and Essentials. The advertising agency finds a fitting name to express the customer insight and sets up a campaign centered around a new key message: “You always knew what to do with your money. Keep in charge.” The change of perspective is confirmed by impressive results: Those of the bank’s existing clients who fit the target profile are enthused by the new line of services, and many new customers come on board. The resulting net new money inflow reaches nine-digit figures.

2018-05-29T10:38:42+00:00

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