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Perspective

The Customer-Centric
Organization
From Pushing Products
To Winning Customers
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CONTACT INFORMATION

Chicago New York


Andrew Tipping Matthew Egol Paul Hyde Frank Ribeiro
Partner Partner Partner Principal
312-578-4633 212-551-6716 212-551-6069 212-551-6677
andrew.tipping@booz.com matthew.egol@booz.com paul.hyde@booz.com frank.ribeiro@booz.com

Originally published as:


The Customer-Centric Organization: From Pushing Products to Winning Customers,
by Matthew Egol, Paul Hyde, Frank Ribeiro, and Andrew Tipping, Booz Allen Hamilton, 2004.
The Customer-Centric Organization:
From Pushing Products to Winning Customers

As the economy moves from recession to expansion, Customer-Centricity Defined


companies are shifting their focus from pruning costs What distinguishes customer-centric organizations from other
companies that proclaim their customer focus? In short,
to stimulating growth, particularly organic growth. they’ve moved beyond lip service and re-oriented their entire
Launching new products and services is one way of operating model around the customer, increasing customer
generating organic growth, but this growth is short- satisfaction and their own profitability in the process.
lived because competitors almost immediately mimic Customer-centric companies understand not only what the
customer values, but also the value the customer represents
innovations. Thus, astute companies are increasingly to their bottom line. They align their operating models behind
looking to their customers to drive growth–tailoring a carefully defined and quantified customer segmentation
offerings, indeed their whole organizations, to strategy and tailor business streams–product development,
demand generation, production and scheduling, supply chain,
customers’ unique needs. The problem many
customer care, etc.–to delivering the greatest value to the
companies face, however, is: How do you cater best customers for the least cost.
to customers without incurring debilitating costs
A recent Booz Allen study of product and service companies
in complexity? Building a truly customer-centric in North America and Europe found that businesses that
organization is the solution. successfully combine value-creating customization with cost-

Exhibit 1
From Product-Focused to Customer-Centric

Product-Focused Customer-Centric
n Discrete transaction at a point in time n Customer life-cycle orientation
n Event-oriented marketing Customer Orientation n Work with customer to solve both immediate and
n Narrow focus long-term issues
n Build customer understanding at each interaction
n Narrow definition of the customer value Solutions Mindset n Broad definition of the customer value proposition
proposition n Bundles that combine products, services,
n Off-the-shelf products and knowledge
n Top-down design n Bottom-up. Designed on the front lines
n Perceived as outsider selling in Advice Orientation n Working as an insider
n Push product n Solutions focus
n Transactional relationship n Advisory relationship
n Individual to individual n Team-based selling
n Centrally driven Customer Interface n Innovation and authority at the front line with
n Limited decisionmaking power in the field the customer
n Incentives based on product economics and n Incentives based on customer economics and
individual performance team performance
n "One size fits all" processes Businesses Processes n Tailored Business Streams
n Customization adds complexity n Balance between customization and complexity
(e.g., one-off workarounds) n Complexity isolated within the system
n Rigid organizational boundaries Organizational Linkages and Metrics n Cross-organizational teaming
n Organizational silos control resources n Joint credit
n Limited trust across organizational boundaries n High degree of organizational trust

Source: Booz Allen Hamilton


2

effective delivery outperformed industry peers two-to-one uses a customer’s past purchases and browsing behavior,
in revenue growth, and generated profit margins 5% to 10% as well as the purchases of similar customers, to tailor
above their competitors’.1 However, to deliver these results, recommendations to the customer’s distinct preferences.
organizations really have to walk the talk. They have to That’s life-cycle marketing.
make dramatic internal organization changes. Only then can
companies evolve from pushing product to delivering genuine #2: Solution Mindset
value to the customer and the company (see Exhibit 1). Becoming a customer-centric organization presupposes a
fundamental shift in mindset from selling products to solving
The Building Blocks of a Customer-Centric problems. Solutions replace products as the basic element
Organization of the customer value proposition (see Exhibit 2).
Booz Allen has studied companies across many industries to
determine what makes an organization customer-centric. The In line with this concept, companies in many industries
key is striking the right balance between customer pleasure have migrated from selling “off-the-shelf” products to
and company profit. To achieve this balance, organizations customizing solutions. The objective is to design a suite of
must demonstrate–not just advertise–the following six modular product bundles that, when coupled with an advisory
winning traits: relationship, can deliver cost-effective tailored solutions to
clients’ specific problems. The challenge is to make money
#1: Customer Life-Cycle View doing it.
While companies today tout their rich, ongoing customer
relationships, most are organized and equipped to treat Truly customer-centric companies regularly open their minds
clients as a set of discrete, unrelated transactions over (and their addressable market) to working with competitors
time–a series of “events.” Their lens is set to tele-photo; their to fulfill customer needs. GE Transportation’s Aircraft Engines
focus, narrow. As a result, these companies have little insight unit, for example, moved beyond manufacturing and selling its
into what motivated the customer to buy their product or own jet engines to repairing and maintaining all manufacturers’
service in the first place and even less information about his engines and spares. Now, instead of selling engines, the unit
or her needs and aspirations moving forward. To guess what sells thrust and reduced engine life-cycle costs to airlines, and
else a customer might want and increase penetration, they today services as many of its competitors’ engines as it does
default to more product push in the form of cross-selling, a its own.
technique that, despite billions of dollars of CRM investment, #3: Advice Bundling
has proved largely ineffective. To develop customer intuition and offer relevant advice,
Truly customer-centric companies take a different, wide- customer-centric companies engage in a continuing dialogue
angle view. Moving beyond event-oriented marketing, they with customers that starts long before a product or service is
have developed a holistic and continuous view of each purchased and continues long after the sale. The trick is to
customer’s evolving life-cycle needs as he or she moves do this cost-effectively.
through marriage, home ownership, parenthood, and other Many industries, including financial services, have historically
transforming life experiences. restricted this sort of tailored, advisory relationship to high
Some companies have used technology to tailor their net-worth individuals. Leading banks, however, are increasing
approach, Amazon.com perhaps most visibly. Amazon their penetration of the mass market banking segment by

Exhibit 2
Solutions Advance the Customer Value Proposition

Traditional Value Value-Added Customer-Centric


Industry Traditional Product = Proposition
+ Services = Value Proposition
n Financing "We can help you reduce your
Truck Manufacturing n Trucks "We sell and service trucks"
n Service life-cycle transportation costs"

"We sell high-performance n Application/Design "We can reduce your


Aerospace Components n Aerospace fasteners fasteners" support operational costs"

"We provide electricity n Energy asset "We can help you reduce your
Utilities n Electricity reliability" maintenance total energy costs"
n Usage and application
"We sell a wide range "We can increase your machine
Chemicals n Lubricants design
of lubricants" performance and up-time"
n Lubricant analysis
n Product support "We can help you better manage
Pharmaceuticals n Drugs "We sell pharmaceuticals" n Outcomes-driven your patient base"
information database

Source: Booz Allen Hamilton

1
Booz Allen Hamilton, “Smart Customization: Profitable Growth Through Tailored Business Streams,” November, 2003.
3

Exhibit 3
Pre-Sales Support Enables Companies to Migrate Up the Customer Purchase Chain

Outputs
Face-to-Face Meeting with 1. Client Financial Plan
Financial Client Analyst Debt-to-Income Ratio
Citibank uses Citipro Current Net Worth
financial planning tool to n Set up at convenience of client Cash Flow
drive product penetration n Free, with no obligation to Retirement Plan Analysis
purchase any products/services
Overview of Citibank's Marketing
n Client provides his or her financial
2. Proposed Financial Solutions
Efforts for Citipro information
Target Date Completion Date
Account Statements
Cash Management
n Targets all customers
Tax Statements Direct Deposit
n Uses statement inserts, service Citigold Account
Debt Statements -- Mortgage/Education
center calls, some outbound Overdraft Protection
efforts, and advertising on Web site Proofs of Assets -- Car/Home Citibank Automatic
Insurance Savings Program
Budget Management Income Protection
Begin Process for Insurance
Protection Qualification
n System generates customized plan and Debt
proposed Citibank products to fulfill it Debt Elimination Program
(approximately 60 minutes) Investment Management
Mutual Funds
Citicorp Brokerage
Citibank/IRA Account

Source: Booz Allen Hamilton

developing innovative “advice bundling” and technology-enabled cost-prohibitive. Instead, winning companies strive to offer
tools. Citibank’s Citipro is an example. Citipro is a no-obligation, customers an integrated, multi-channel experience in which
financial planning tool that clients complete with the help of a the retail outlet serves as the hub. Self-service channels (e.g.,
branch-based financial analyst or relationship manager. Clients Web site, telephone) efficiently handle routine servicing needs,
provide their financial information (e.g., account statements, tax while skilled sales and customer care personnel deal with more
records, insurance), and the system generates a customized complex sales and consultative transactions. Hitting the sweet
plan along with a list of proposed Citibank solutions to fulfill spot between personal service and administrative scale is one
it. The relationship manager can apply for and approve these of the secrets to a successful customer-centric strategy.
products on the spot. Clients receive an education; Citibank
gains an early advantage in securing a larger share of these #5: Fit-For-Purpose Business Processes
clients’ wallets. Citibank has now significantly increased its The #1 reason companies fail in their efforts to shift from a
average product penetration among Citipro users (see Exhibit 3). product to a customer focus is the cost of the organizational
complexity that results. Too often, companies try to customize
#4: Can-Do Customer Interface by layering one-off workarounds on top of old product-
Customer insights and intelligence invariably dwell where focused processes, which drives up costs. A successful
the customers are–on the front line--so retail distribution technique for avoiding this trap is what we at Booz Allen
channels should be armed with the skills and authority to call Tailored Business Streams. Using TBS, companies flow
tailor solutions at the point of contact. However, too frequently their most basic and stable products and services through
customer management, pricing, marketing, and innovation are the most efficient, least expensive business streams. More
dictated from the top down, relegating the sales force to the complicated and less predictable elements of offerings are
status of order takers. diverted to more customized streams. This technique isolates
complexity within the system and minimizes its costs.
Ritz Carlton has taken the opposite approach, delegating
authority and accountability for local decisions to the As client experience shows, this modular approach can ensure
customer interface in their hotels. Front line employees have cost-effective delivery of a unique experience. For instance,
great latitude in addressing and anticipating guest needs. TBS enabled the service center for a leading U.S. bank to halve
Hotel staff fully own customer complaints and have the implementation time and increase customer satisfaction by
authority–within broad corporate guidelines--to compensate 50%. Similarly, at an aircraft producer, the shift to TBS cut
guests on the spot for any problem or inconvenience. billions of dollars from the company’s cost structure. TBS also
helped double the installation rate at a telecom service provider.
Of course, not every decision and customer interaction need
happen at the physical point of contact; that would likely be
4

#6: Collective, Cross-Functional Effort management program, one that motivates participants at a
Finally, a customer-centric organization demands a new basic human level to invest in a customer-centric future.
culture of collaboration. The product-oriented sales culture
of old was, by definition, territorial with little sharing Progressing Past Platitudes
across organizational silos. Not so in the customer-centric Customer-centricity is, in the end, only an exalted form of the
organization. Tailoring solutions to customers’ ever-changing customer focus companies have touted for years in annual
needs requires a level of cooperation across functions, across reports and values statements. Treated as window-dressing,
product and service lines, and across company boundaries this focus has produced merely platitudes and hollow gestures.
that is unprecedented and not a little uncomfortable. The steps described here, however, are anything but superficial;
they are the building blocks for a full-scale transformation of a
To develop the necessary esprit de corps, companies must company’s operating model and the priorities on its executive
build linkages across their organizations. Key financial and agenda. Failing to execute this transformation will relegate many
operating metrics will change. Employees at every level in an organization to the sidelines of its respective industry, and
every division will also need to deeply understand customer many will fail. Success hinges on progressing past platitudes to
needs to make the end-to-end client experience streamlined the real, substantial work of building a truly customer-centric
and satisfying. Stimulating the right attitude and creating organization.
cross-functional teams will require a full-scale change
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