Designing the Customer-Centric Organization: A Guide to Strategy, Structure, and Process
Excerpted with permission from "Designing the Customer-Centric Organization: A Guide to Strategy, Structure, and Process," authored by Jay R. Galbraith, Copyright 2005 by Jay R. Galbraith. Published by Jossey-Bass, a Wiley imprint, April 2005, ISBN 978-0-7879-7919-5. The Star Model is copyrighted by Jay R. Galbraith. To buy this book, please visit www.wiley.com or www.amazon.com.
Customer-Centricity: How Much is Enough?
In this chapter, we will determine the level of customer-centricity necessary for your company. First, we will describe the different kinds of customer relationship strategies, from which will be determined the level of customer-centricity to be implemented.
Customer Relationship Strategies
A number of authors, using slightly different language, have argued the case for becoming customer-centric (Day 1990 and 1999; Vandermerve, 1999; Wiersema, 1998; Peppers and Rogers 1997 and 2001; Selden and Colvin, 2003), and have described the details of a customer relationship strategy. They make several points that need to be underlined here.
First, many customers want relationships with key suppliers. While companies are using auctions and reverse auctions to purchase commodities, they are choosing a few long-term suppliers for their unique requirements.
Second, customers want close relationships through which they can dialogue with suppliers, for the purpose of detailing their customization desires.
Third, these dialogues create opportunities for astute suppliers to discover unmet customer needs and requirements, and can then expand their offerings to include more products and services. More importantly, however, these suppliers can create packages of products and services that create value for customers. These packages or solutions make the customer more effective, and the more effective the customer feels as a result, the more the customer will dialogue with and use the supplier. A virtuous circle can result.
Following this prescription to establish a relationship ultimately leads a corporation to offer more than stand-alone products; it leads you into offering what are now called "solutions." Let us now look at several solutions strategies that will determine the level of customer-centricity.
The different types of solutions described below will guide the choice of organization to implement that strategy. But first there must be the conscious choice of a customer relationship strategy for the company. The contrast between Nestlé and Procter and Gamble is illuminating. Both are consumer packaged goods manufacturers delivering a large number of products to the same retail customers. On our strategy locator (to be described below) they would both measure 5 on the scale and scope dimension. Yet Nestlé has chosen to remain a product-centric company and only uses informal processes to coordinate account management around the large, global retailers. P&G, on the other hand, has chosen to focus on these retailers and form global supply-chain partnerships. Some retailers, like Wal-Mart, even outsource the management of product categories and aisles to them. So a company still needs to do its strategy homework to decide whether becoming customer-centric will be an advantage for it.
In other industries, gaining customer-centricity is becoming a necessity. Both HP and Motorola saw that the digital revolution held out opportunities too good to pass by. Currently almost all product-centric consumer electronics companies, like Sony and Philips, are experiencing the digital pull to provide solutions. In the automotive industry, the tier-one suppliers to the auto OEMs are finding themselves faced with a few very large customers. For the tier ones, becoming customer-centric is less of a choice and more of a necessity.
The points being made here are that there are industry- and company-specific factors that must be weighed when choosing whether or not to implement customer relationship strategies. However, in many -- if not most -- industries these factors are leading companies to become more customer-centric and to offer solutions. The following types of solutions strategies will help to determine how customer-centric you need to become.
Read the rest of this excerpt in this PDF of Chapter 2: Customer-Centricity: How Much is Enough?
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