Customers are undeniably hot today in business. It would appear that, in order to drive an innovative and agile organization in today’s fast-changing and competitive business environment, what is required is a singular focus on delighting customers. Although this customer infatuation is understandable, it doesn’t represent the entire strategic picture however. In fact, there is a risk it distracts so much that it can send companies down a road to nowhere.
No more 5-forces—it is just the customer now
The last couple of decades have seen a massive shift of power toward customers. Technology-fuelled transparency amongst other advances has put customers squarely in control and made them expect anything they want—anytime, anywhere, and for less than they’re used to paying. And the resulting competitive frenzy is going a long way in delivering them just that.
It is no wonder, therefore, that customers have taken center stage and that truly delighting customers has become a pervasive core business objective. User-driven innovation, customer centricity, customer loyalty, net promotor scores, and the like now rule.
Consider this, though: Research for an upcoming book I’ve co-authored, “The Future of Strategy,” revealed many indications that business strategies are suffering as a result, and a more balanced strategic perspective is urgently required that takes cue from more than delighting customers.
Disruption affects the entire value chain
Technology and other disruptors such as globalisation did not just give customers more power. These phenomena also made many markets much more competitive by proliferating and disrupting the ways in which customer value can be “delivered.” Think, for example, how networked value chains and entire ecosystems of companies now create customer value with lower and lower barriers to entry and growing opportunities for substitution.
Substitution has also been a major source of growing customer power. Dealing with it however, is not in the realm of delighting customers: It raises the bar considerably for devising new ways to deliver customer-delighting products and services in an advantaged way.
And this brings us back to the fact that delighting customers is incomplete as a business strategy.
The need to capture value
Business strategy will have to do much more than delighting customers. It also needs to specify how the company can deliver this delight in a truly advantaged way and how it can capture at least some of the value it creates in the process. If any of these three elements is missing—delighted customers willing to part with money, a truly advantaged delivery, and the ability to capture value—the strategy won’t really be a strategy.
Strategic balance
It is important, therefore, to not get carried away in shifting the focus solely toward delighting customers. Our value chains and business models deserve at least as much attention, even if they don’t demand it as forcefully and visibly as customers. In fact, it can be argued that disruptively innovating our value chains and business models is every bit as critical, challenging, and promising as finding ways to delight customers.
This makes that strategic inspiration must come equally from the search for, and discovery of, ways to delight customers, as well as new ways to create delivery advantage, or business model superiority.
Although it would be convenient if we could start from the customer and simply work our way back from there, but the growing scarcity of truly advantaged ways of delivery and value capture deems that we can’t afford not to make all aspects of strategy a primary focus of innovative attention.
