Improving performance by moving from a product centric to a customer centric approach

A combination of increased price competition, shorter technology life-cycles and rising customer expectations is making it harder for companies to maintain profits from just selling products. Future growth and profitability lies in providing products as part of a broader package of services tailored to specific customer needs.

Becoming customer centric offers companies a highly effective route to sustainable, higher-margin performance and competitive advantage.

Companies in a range of sectors are moving to becoming more customer centric – focusing on customer needs rather than product features, and designing and managing their operations accordingly. For example, telecoms providers have moved beyond selling connectivity to corporate customers, and now offer full network and security solutions. Medical device companies are offering new solutions, including data and alerting services along with their products. In engineering, Rolls Royce offers services based on delivering ‘up time’ rather than simply selling engines.

These new solutions offer routes to higher performance, but delivering them successfully is not easy. It involves making core changes to the operating model of the business – its skills, its processes, its culture and the way it manages performance. 

Customer centric companies understand their customers’ individual needs

To become customer centric, companies must first become expert in their target markets, understanding the specific needs of different customers and being clear about how to combine core products with new services to add value to their customers. This means recognising that customers want individual solutions, not generic responses. As one investment bank told a market leading technology supplier, “Your products and people were great – but your competitor knew more about applying them in an investment banking environment.”

Customer centric companies design operations around customer needs

The second requirement for companies moving to become customer centric is to restructure to respond to customer needs. In traditional companies, resource deployment, management controls, core processes and profitability measures are all aligned to products. By contrast, customer centric businesses align all these elements to adding value to customers, and measure how this converts into profit for the business. For one pan-European business, for example, this meant organising teams around customer sectors rather than geographic boundaries.

Customer centric companies develop a different culture

The third requirement recognises that customer centric businesses need a very different culture to product centric businesses. Selling and delivering new solutions often means recruiting new people with different mindsets – who think less ‘plan and build’ and more ‘sense and respond’ to react to customer needs. Customer centric companies must reward people for creating value for customers rather than simply following agreed plans.

Delivering customer centric solutions profitably carries different commercial risks and requires greater collaboration between those involved in development, sales, and delivery. For example, a telecoms business found many contracts were sold at a loss because sales teams misunderstood the true cost of service delivery. Fixing this was the biggest single thing they could do to drive up performance.

All this presents real challenges to companies looking to move away from product centricity. However, becoming customer centric can offer a highly effective route to growth and sustainable profitability.

To find out how PA Consulting Group can help your company improve performance by becoming customer centric,contact us now.