Customer centricity 2013 english


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Leading the entire organization according to priorities of customers. What it is and what it isn’t –
and why it works successfully.

Customer proximity, customer orientation, customer relations management (CRM), each enterprise aligns itself with at least one of these programs. Therefore, many believe that Customer Centricity [CC] is just another word for these. In fact, CC goes far beyond what was mentioned above - a radically different corporate focus on the individual customer. Only in this way the enterprise, by individual customer control according to real customer needs and verifiable customer priorities, reaches a significantly better competitive position and sustainable growth in revenue, profits and (stock market) value.

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Customer centricity 2013 english

  1. 1. Malte W. Wilkes & Klaus Stange Leading the entire organization according to priorities of customers What it is and what it isn’t – and why it works successfully Copyright © 2013, 3nd Edition. English translation by N.K.Möller E-bookof20shortcuts
  2. 2. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 2Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE Table of Contents 1. Customer Centricity – management abstract 3 2. Traditionally the product is in the focus of attention 5 3. Vanguard enterprises are focussing on Customer Centricity 7 4. Enterprises need a permanent strategic focus-point 9 5. The good vision / mission does not focus on profit, but on customer’s purpose 11 6. Corporate- and management-strategy are newly adjusted 13 7. Market domination has no particular significance 15 8. Only the individual customer is important 17 9. What really comprises a customer 19 10. Customer centricity defines customers very broadly 21 11. Priorities in customer care still need to be set 23 12. The newly adjusted management system in Customer Centricity 25 13. Brand name is not a replacement for Customer Centricity 27 14. What innovation management should really deal with 29 15. What the customer actually demands and buys 31 16. What an enterprise must factually deliver today 33 17. Individual customer focus even works without single production 35 18. Successfully making the change to Customer Centricity 37 19. Success Chain Management - the pioneering expert 39 20. In a word 41
  3. 3. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 3 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE ustomer proximity, customer orientation, customer relations management (CRM), each enterprise aligns itself with at least one of these programs. Therefore, many believe that Customer Centricity [CC] is just another word for these. In fact, CC goes far beyond what was mentioned above - a radically different corporate focus on the individual customer. Only in this way the enterprise, by individual customer control according to real customer needs and verifiable customer priorities, reaches a signifi- cantly better competitive position and sustainable growth in revenue, profits and (stock market) value. Target objectives Growth: The growth of a company is based on (a) customers who pay for a market service, are recommending it, etc. and (b) a strategy that responds better to the particular needs of customers, with individual market services, than the competitor does. That is Customer Centricity. Results in growth: The results from this strategy have to be recognizable in four statistics no later than medium term: revenue, profits, value of the enterprise and resilient individual customer relationships. This applies to medium-sized companies just as to stock-exchange listed enterprises. Strategy guidelines 1. Selection of strategy: To achieve the growth-results, several standard strategies are at hand. However, most of them are only partially applicable [innovation-, process- or competitive strategy, etc.] or are based on the business purpose of product centricity. 2. Transformation of markets: Society is changing towards participation generally in Germany, but also worldwide. In most markets - whether BtoB or BtoC - the customer takes over the market regimentation. Therefore, the widespread product centricity is no longer the core element of success in these markets. Enterprises responded to that for instance by Customer Intimacy or by Customer Relations - but in the long run that was not sufficient for the necessary results in growth. 3. Customer Centricity: CC is the only consistent and integrational corporate strategy, which is aligned to the individual customer and his individual needs. CC is both an entrepreneurial, organizational, strategic and operational foundation of a business model adapted to transformation, as well as a fundamentally new management- and leadership- as well as strategy- and implementation approach. Core characteristics 1. Customer Centricity means to put every single customer and his individual concerns at the starting point of philosophy, vision, leadership, strategy and implementation of the entire (!) enterprise. 2. Customer Centricity therefore demands that the (entrepreneurial) activitiy be aligned to each customer individually - whether to 100 or to 40,000 customers. 3. Customer Centricity therefore brings about a complete alignment of positioning, strategy, structure, organization, processes, behavior, etc., towards the individual customer. 4. In this, Customer Centricity makes no distinction between direct and indirect customers. 1. Customer Centricity – management abstract C
  4. 4. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 4 5. Customer Centricity develops market commodities as naturally according to the wishes and needs of the customers [market commodities = products, services, financings, delivery accuracy, as well as communication such as consulting- and advertising services, etc.]. Concept architecture 1. Top Down: Customer Centricity is the mental orientation of the entire enterprise and commences in the holding corporation, the enterprise or the area. Vision, mission and positioning are the foundations. 2. Bottom up: Customer Centricity has to be implemented from the bottom on up. The "melding" of the enterprise with each single customer is only possible by individual people both in the company of oneself and in the client company. 3. Data position: to accomplish Customer Centricity, data are to be collected back from individual customers and used for control across the entire enterprise specifically adapted according to customer priorities: from sales over to production, from prognosis of the future over into profit- and loss auditing. 4. Strategic extensions: from this not only consistently is derived the raising of the potentials attained from past business, but also the closing of strategic market performance gaps with new products or services, through new market channels and strategic alliances and/or in new country markets. 5. Reverse Code I: Customer Centricity begins at the individual client, to think recursively from there into the enterprise. The first consequences thereby derive for the area of the "promised performance", i.e. sales, marketing and communica- tion. And this applies to all identified direct and indirect customers, such as buying customers, recommenders, brokers, dealers or shareholders, as well as stockholders or investors. 6. Reverse Code II: The findings also lead to changes in control of the "service fulfillment" [disposition / make or buy, production, logistics] and in innovation management. The customer, especially the single customer, remains in the focus of all decisions and actions. Change in architecture 1. Change process: along with the conversion or continuation of Customer Centricity a good change management is required. This is comprised of tasks and measures that are effecting a comprehensive, cross-sectoral and contentwise far-reaching change to the implementation of the Customer Centricity strategy, -structures, -systems, -processes and - behavior. 2. Change alignment: the transition to Customer Centricity is aimed at both managers and employees, as well as customers. 3. Core measures: 1) plotting of a first Customer Centricity future concept with relevant executives and key employees; (2) strategic communication with all executives; and then (3) employees; (4) strategic communication with all identified cus- tomers, as buying direct and indirect customers, banks, etc. Through Customer Centricity as a corporate vision, the internal and external customer understanding and customer relationship are consistently established. All management decisions are passing through the CC-focus. The entire organization is configured as a platform for the fulfillment of individual customer requirements. To lead the entire company in reference to the individual customer is a specific leadership-, management- as well as strategy- and implementation approach. That's Customer Centricity! Peter S. Fader (1961) is professor of marketing at the Wharton Business School of the University of Pennsylvania. He was one of the first who demanded an essential change of attitude in regard to the customer. "Customer Centricity is a strategy that reconciles the company's development and product- and service delivery with the current and future needs of selected customers in order to maximize the long-term financial assets of the company". Erfolgsketten Management Germany reaches beyond this definition [see above] and its consequences.
  5. 5. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 5 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE o survive, firstly people needed products. This was rarely as simple as finding fruits in nature. One had to lend a hand to get dressed. Craftsmanship was neces- sary. Products, tools and services were the beginning of every human as well as economic existence. But then something changed drastically. The customer was born. It began very archaic. One hunted, another collected fruits, a third cooked everything. The division of labor began with physical, tangible products. We don't know when someone was the first to invent a story and then narrated it against a chunk of roasted wild boar in a fashion that boasted with experience. We can only speculate how physical products were joined by mental, abstract "products" (= story) and services (= narration) side by side. But during thousands of years this was the core of barter exchange, the "elixir of life" between people. Manufacturing what oneself could do exceptionally well In this context people had reason to be proud of it and cultivated the performance and quality of service at an increasing rate. Wasn't it natural at some point, that someone who could do something special teamed up with others? He sought young people, whom he could teach something. And from isolated single-rounders not only guilds grew together, but also a special mindset emerged. It is an attitude marked by an awareness of material, progressive developments of tools and personal skills as well as delight in quality oriented work. It's a commitment to a particular work ethic and social responsibility in the framework of crafting. In the Middle Ages crafts were largely individual contract works. Later it developed initially into a combination of for instance a mass production of finger rings with simultaneous single manufactur- ing according to measure and request of individual customers. Eventually, series production parted from one-off production, and the standard production from individual manufacture. One was always driven by the skill that was mastered to perfection by oneself. Since then the world has radically changed The attitude of the crafts also conveyed to industrial production, the industrial foreman and engineer. After the Second World War, Europe was initially still a seller's market. Everything was destroyed and everything could be used. Production was far behind the volume that was demanded. Product delivery and services as traditionally continued to remain in the central view of the enterprise. The customer took what was available. Latest in the 1960s, the world began to turn and with globalization, everything changed: the customer market determines direction. But this development was not joined in by the "master-, engineer- and product psyche" mindset in companies. Partly to this day the pride of product performance remained the center of contemplation while pride in the satisfaction of customers through market performance could not keep up against that. Therefore, up until today products are often still the focal point in the business models of organizations. The traditional orientation towards the product is shaping the work of managers and their goals. Thus a lot of time is spent on concocting plans for the development of new technologies and products. 2. Traditionally the product is in the focus of attention T
  6. 6. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 6 According to our experience this also reflects in the factual recognition of groups within the enterprise: research and development are prominently at the top, marketing is deemed more important than sales. And the bigger and more pompous the field staff meetings are, the more "unimportant" the customer is rated within the company. Even though many areas within the company do know the products, they don't know the customer. Evolving from product- to customer paradigm In this the world will not change further: the product paradigm is losing success and another area of solution and experience is lining up. The customer is increasingly urging towards pull-models. He is demanding from the enterprise a configuration of a market performance system, in which he (!) by independent interaction assembles product and service features individually or gets the market performance modularly assembled and delivered according to conditions named by him. The business model is transmuting. The paradigm of success is transforming away from Product Centricity towards the customers. That's Customer Centricity. Fritjof Capra (1939), physicist and systems theorist as well as director of the Center for Ecoliteracy in Berkeley, described a social (or even management related) paradigm as the same constellation, "which is shared by a community and forms a particular vision of reality as the basis of the way the community organizes itself ... A single person can have an ideology, but a paradigm is shared by a community.“
  7. 7. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 7 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE anguard enterprises are not only economically much more successful in their industry, but they also mainly share market leadership. Whether as a successful "first mover", "early adopter" or "fast follower", in all cases the top management has recognized that the single customer is the most vital factor of success for the organization. Customer Centricity is the central point of all considerations of vanguard enterprises and shapes the entire management, system of leadership, operational processes and the bearing of all employees. One does not necessarily have to pursue a sales-related job to understand that customers have changed fundamentally in recent decades. Everyone feels it with himself in his own role as a consumer. If, for instance, in a purchase transaction, the seller - regardless of whether in a department store, in a restaurant or a craftsman - does not establish a satisfactory relationship with the customer, we as a consumer are used to respond immediately. We make the other clearly recognize that we are not satisfied. As need be we may cancel the purchase process. Equivalent mechanisms are obviously applicable also in the BtoB segment. Generating customer satisfaction and customer loyalty Customer satisfaction is brought about by all transactions between customer and "supplier" (i. e.: course of purchasing process, customer care, complaint handling, etc.). Not by perhaps just an excellent key product or through a perfect market performance. Even if the dissatisfied customer still makes that one purchase while grinding his teeth, he will definitely not be back for a second time! Loyalty is based on satisfaction, experiences and favourable emotions. Determining the lasting good customer relationship as a central strategic target value A customer is fostering a good supplier relationship or is willing to permanently sustain it, if he obtains an adequate "net benefit" (= total value of customer benefits minus total costs) from it. But the assessment of his net benefit is done by each customer individually depending on the fulfillment of his specific requirements. In doing this assessment he only includes his specific and his latent needs (but not those of other clients). Placing Customer Centricity into the focus of the enterprise If a supplier wants to form a lasting and successful customer relationship, he has to: 3. Vanguard enterprises are focussing on Customer Centricity V -90 % -50 % -30 % -10 %-70 % + 10 % + 50 % + 70 % + 90 %+ 30 % Market performances are fulfilling customer expectations Market performances are not up to customer expactations Market performances exceed customer expectations + +50%+70%+90%+30%-90%-50%-30%-70% Degree of customer satisfaction Customer is frustrated Customer is fascinated Enticing market performance => pull-effect Market performance arouses avid interest Market performance is a must Market performance is received positively Market performance is not desired – it only annoys Indifference-zone
  8. 8. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 8 isolate (discover) the individual needs of each single customer, devise an attractive and individual service offering from them, offer an individual and perceivable net benefit, and with each transaction (delivery performance, customer care after delivery, service, complaint response, etc.) to ascertain a symmetric intraorganizational and social relationship between his own employees and those of the customer, geared to the needs of the customer and not to the inherent limitations within his company. This means that all customer transactions are carried out with an honest and compelling attitude towards the customer, and with a confidence-building behavior of every employee. A successful business puts Customer Centricity into the center of its business- and management philosophy. In doing so the conviction in Customer Centricity must be supported by the supervisory authorities as well as by top management, operational management, and ultimately by every employee within the company. Only in such fashion can the customer sense it credibly. A successful enterprise conceives backwards from the customer into the business Customer Centricity is thus an attitude with underlying values and a management philosophy. The mindset is shaping the conduct of management and employees. Both of them together are forming the foundation for establishment and maintenance of good customer relations. Therefore, successful vanguard enterprises are aligned to durably good customer relations overall. Not only operational processes, but also communication, the development of new applications, products, services, everything is geared to the needs of the individual customer. The individual relationship between customer and business can not be considered as singular instance of transaction, but rather as a network of mutual, expectancy- and experience based decisions of the involved partners. It is accompanied by marketing instruments that satisfy demands and beat the competition. The guiding principle of a successful enterprise is the satisfied individual customer. A sustainable profit is one of the results, not the primary goal. That's Customer Centricity. Hans Ulrich (1919 – 1997) was a professor and spiritual father of the "St. Gallen system-oriented management theory" and of the original version of the "St. Gallen Management Model." With its simple and clear language, he made one of the world's most significant contributions in order that leadership could be conceptualized, organized and systematized. For him, management was the comprehensive design, control and development of the company as a wholistic unit, centered around only one important factor - the customer.
  9. 9. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 9 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE here are many methods of strategy and thus strategies. They are formulated and based on a few fundamental considerations. But ultimately, they are not merged throughout the company and need a single mental focus. Businesses must be led and their managers must implement this leadership vigorously. Thereby they have to tackle two different tasks: The task of strategic leadership is the search for, the building and maintaining of sufficiently high and reliable potentials of success while taking into consideration the long-term liquidity effect associated with it. The duty of operative management is the optimum realization of the inherent success potential of each successive after-period - without harming the potentials for success in subsequent periods.This includes the safeguarding of ongoing liquidity. Managers worldwide are using different partial strategies market strategies such as 7 Ps or product life cycle consulting standards strategies such as Boston Matrix (growth-share matrix) or experience curve effects growth strategies such as Ansoff matrix (diversification), franchising, long-tailing competition strategies such as competitive positioning, Porter's value chain resource strategies such as competence leadership or benchmarking process strategies such as lean management and reengineering innovation strategies such as Schumpeter's destruction, disruptive innovation cooperative strategies such as contractual partnerships, value networks value strategies such as value migration or blue ocean These strategies are not clear-cut and solve selective areas of concern These strategies are not clear-cut and solve selective areas of concern. Partial strategies lead to conflicts Isn't it true also that strategies often cover only one realm of business and in competition lead to conflicts within the company and with the market? The head of R&D wants to introduce new products / services, the distribution department doesn't want to cooperate with other distributors and the competition strategist argues solely from the benchmarks of competitors. Are strategy problems not ultimately leading to confusion of the market, which then turns away directly or insidiously? So a pharmacist does not understand, 4. Enterprises need a permanent strategic focus-point T
  10. 10. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 10 why a pharmaceutical company suddenly offers him with compression stockings thanks to a distribution agreement. Thus, for example, a consumer does not appreciate that a skin care brand deals in fashion, only because fashion brands also feature fragrances. Hence strategies can fail. For one, if they do not interlink strategic and operational leadership tightly and/or for example, rely on one of the mentioned selection strategies. On the other hand, if the bundle of strategy does not have a mental superstructure, a strategic focus, namely the focal point of "customer". Because it's not "only" about competition or innovation, not "only" resources or values, not about short- and long term. All these selection strategies are excellent and correct. But what do they align themselves towards? Only to that which they are obliged to: the well-being of the customer. All sub-strategies can have only one meaning: to serve the customer excellently in his needs and according to his require- ments. The focal point of every strategy is always the customer. That's Customer Centricity. Aloys Gälweiler ( – 1984) was director of corporate planning at the BBC Mannheim and Professor in, amongst others, Cologne and St. Gallen. He was both an entrepreneur and scientist in one and was one of the first who joined together corporate strategy into a comprehensive whole in Germany. "Strategy means, before commencement, to act from the very beginning in a way so that success comes about in the long run." stable environ instable environ Time Action Action Action Action Action Action Action Action Action Action Action Action Strategic Corridor Action Action Action Action Action Action Action The concept „Strategy“
  11. 11. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 11 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE he purpose of an enterprise has to be defined precisely, so that all in the business are marching in the same direction. Yet even this is no easy feat. Why does the company actually do its job? This requires a good reason or purpose. In the olden days it was simple: the shoemaker made shoes so that people have shoes. For that perhaps he got bread from the baker. And ultimately, all did produce something that the other urgently needed - and in consequence they could live by that. Then came the division of labor and in addition the separation of capital and labor. Shareholder- or customer value is now the modernized central concern of management. Basically, you can say that financially dependent companies are emphasizing the shareholder value while performance dependent companies emphasize customer value. In this matter there was a long time paradigmatic tussle of the economy sciences as well as within management practice. The American economist Alfred Rappaport conceived shareholder value as a long-term profit orientation and as the only sustainable goal of a business. Soon this was picked up by the financial markets and declared a short-term purpose of the company - expressed in terms of one to three month reports. The purpose of the shareholders is confused with the purpose of the enterprise Management expert Fredmund Malik stresses that the capital, in his view, derives from satisfied customers and therefore not primarily from the shareholder. “What we have here is an - easily to be recognized - confusion of the purpose of shareholders with the purpose of the company and a highly questionable equating of the two. The purpose of a company should be seen in establishing customers. If yet the creation of values should have significance ..., so customer value instead of shareholder value must be consistently and continuously the controlling factor of corporate governance. Profit must be understood as the most important gauge of how well a company serves its real purpose, which is to create satisfied customers through its market performance.” The most recent investigations on this by Roger Martin are corroborating this impressively in a comprehensive study. He concludes that nothing indicates that investors earn more if their interests are paramount. And why is that so, you have to wonder. Because the heads of Customer Centricity enterprises can focus on their essential business, instead of having to deal with the expectations of investors in ever smaller intervals. A better recipe is to deliver what is important to the customers and to focus on satisfying them at an acceptable yield. A customer does not buy from a company for the investors to earn more. There is only one sensible corporate purpose The purpose of the enterprise, according to management pioneer Peter F. Drucker, "must lie outside of the company itself; it must lie in society, since an economical enterprise is an organ of society." Thereby society is represented by the customer, as only he orders and only he pays. 5. The good vision / mission does not focus on profit, but on customer’s purpose T
  12. 12. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 12 "The purpose of an enterprise is to put the customer in a position that best serves his purpose." There is only one sensible purpose of a business: to make satisfied customers. Not jobs, not profit not generating taxes. Satisfied customers are the purpose - profits are the consequences! Two examples: The (generic) purpose of a pharmacy is the secure acceptance and handing over of a medication as well as the monitoring and consulting of patient clients in relation to secure application. If the pharmacy is doing it well, the customer patient gets the best possible chance of recovery - and the pharmacist makes a reasonable profit. The purpose of our business consultancy Erfolgsketten Management Germany is: to place each and every customer of our customer in the focus of performance of his entire enterprise. Thus, our [industry-, trade-, etc.] customer can optimally serve his customers. Corporate purpose is only the satisfied customer. That’s Customer Centricity. Roger Martin (1956) is dean of the Rotman School of Management of the University of Toronto/Canada. The professor of Strategic Management was elected No. 6 among the 50 most influential living management thinkers in the world by Harvard Business Review in 2011. For his contribution on Customer Capitalism, also in 2011 he received the HBR McKinsey Award for the best article of the year. Following his research on the issue of shareholder- vs. customer value he names Customer Centricty quite striking as: "the age of customer capitalism".
  13. 13. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 13 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE alues, attitudes and particular conduct of the own employees are the basic re- quirements for building good customer relationships and preserve them perma- nently. What makes a company successful is not their own pride in their products, but the ability of staff to recognize the needs of the customer and to configure an adequate market performance that is also delivered to the customer. The customer and thus his expectations have changed severely in recent years. So it is more than rational if also the supplier companies adapt to the changing customer demands. Thus this fundamental insight naturally has to reflect also in the business- and leadership strategy. Precisely defining the duties of corporate and management strategy Of course, the overall corporate and management strategy does not change entirely. However, the two strategies which build up on each other need to be adjusted in some substantial areas. In businesses we can distinguish between three integral approaches to interpretation or to anchoring the corporate and management strategy or the requirement of management: Strategic business areas and consistent alignment of all decisions to the requirements and needs of individual customers. Thereby business areas are not defined in the inherent confinements of the market performance portfolio, but naturally according to what the market desires. Now also key services are determined. Coordinated application of communicative and market-shaping instruments. To achieve this, the company needs to establish a definite communication and not just two persons as in field representative and buyer. Otherwise it will never get to know the entirety of the requirements. The recognition or processing of specific requirements and latent desires within customer relationships is of vital importance in the progressive development of the existing market performances or the existing business model. Transparent internal and external decision-making and values-oriented management of competent and autonomous employees. This includes a cooperative management style for employees who are acting independently and autonomously in alignment with agreed values. Adjusting the existing corporate strategy The existing corporate strategy is processed mainly at the level of indirect strategy understanding related to the design and confinement of strategic business areas as well as at the level of the necessary communicative and market-shaping elements from the perspective of the individual customer. The strategic consequences in the operational processes for the satisfaction of individual customers are defined and transduced into a solution. Communicative and market-shaping strategies are supplemented. 6. Corporate- and management-strategy are newly adjusted V
  14. 14. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 14 Adjusting the existing management strategy The strategy of leadership is undergoing a stronger emphasis on other management functions (on organization, management style, etc.), on the intervention levels of language and communication, on the tension ratio between objective and constructed reality and the importance of competencies (value enlightenment, development and maintenance of symmetrical relations, specialized skills). Taking into account the success factors of the strategy The stronger all stakeholders are involved in the strategy-finding and strategy decision process, the more sustainable the strategy can be anchored within the company and the more successful the operational implementation will succeed on a broad basis. To align the corporate strategy to the individual customer does not primarily mean to put a particular technology, an outstanding competence or key products in the foreground, but to understand the business portfolio of the individual customer as a conglomerate of requirements for your own long-term success. The ability of one's own employees to recognize the latent customer needs early enough and derive new or changed market services from that, as well as the professionalism of management to permanently promote these and to concurrently examine and adjust one's own business models again and again is termed the supreme discipline of Customer Centricity. Only with a consistent implementation of corporate and management strategy do employees also have an orientation for autonomous decisions. That’s Customer Centricity. Heribert Meffert (1937) was one of the first professors of marketing, most recently at the University of Münster.As a member of the board and advisory council in internationally operating companies, he has also been successful in the tangible operational practicability of his research results. The author of the standard work known as the "blue bible": "Marketing - Fundamentals of market-oriented management", has always considered market performances as the "source of satisfaction of customers' requirements".
  15. 15. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 15 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE n many companies the contemplation of market share at the annual conferences is of emotional prominence. Often the market share is an important controlling parameter in marketing and further the market leadership is a core message in communication. But cohort thinking leads to fuzzy conclusions. Strategically and operationally more important is the customer share. It's said frequently that the market is not convinced. It's a look at a cohort, a group of market participants. There are two reasons that have led to the viewpoint that market and therefore market share and market leadership are considered of such dominance. Firstly, in history: the practical and scientific methodological development of "marketing" began essentially with final consumer products. The organization of the enterprise was broken down on the individual market by the product manager. In 1919 Libby, Mc Neil and Libby experimented with the system for the first time, 1928 Procter & Gamble for a soap. To grasp the individual final customer seemed impossible. Secondly, in the faith of controlling cohorts: in the 1970s Philip Kotler researched effective relationships between marketing application and revenue and developed a linear system, which he called the "fundamental theorem of market share determination." His formula: Market Share = volume of one's own marketing activities, diveded by volume of marketing activities of the market. Qualitative differences should be balancing out over time. But such is not reality. Do we not all hold examples that high expenses could not prevent the flop and that low expenditures may generate wins in market share? Erfolgsketten Management Germany has consulted a company which objectively was the market leader in its segment - and still was deeply stuck in a marketing- and customer crisis. Dealing with market leadership is problematic The market segment is "arbitrarily" chosen by the enterprise, not by the customer. Does he differentiate, for example, in rum, spirits, cocktail-rum, white or brown, country of origin? Only the customer determines the segment. Is a market share of 6% in markets, where all others have a market share of 5.5%, a market leadership that is recognized?Market leadership and -dominance is primarily a perceptual phenomenon. Can't 10 major customers lead to formal market leadership in BtoB - and yet one is still not perceived in the market by the medium and small customers? Market shares can be distributed unilaterally. Achieving more by viewing shares of individual customers Today one can address individual customers (commercial, industrial, importer, etc.) in all sectors. And even at the level of end user, individual customers can be identified and addressed well through loyalty cards, customer clubs, internet systems, despite data privacy policies. Whether 400, 4000 or 40000. What actually describes the requirements of a customer? In fact, often it's really just what our company wants to offer him. Hence the class of offer. But the customer thinks differently, namely in terms of his needs and requirements. He formulates classes of demand. Of this demand class, one's own company can: 7. Market domination has no particular significance I
  16. 16. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 16 not deliver some products / services. We call them the strategic gap. never acquire some orders because the customer always has at least a second supplier or will try something new. We call this the customer resistance. deliver some products / services every now and then, based on the trust that was developed. We call that our customer share. not deliver some products / services at this time, because others will be summoned instead. We call this the operative gap. For the operational gap the fact is: the customer could buy, but he is not yet convinced of the offered market performance of one's own business. Subsequently, the customer buys from a competitor. Here it is indicated to repress these from the customers attention through accurate customer focussing. Only here you can grow at this customer without new products. A high proportion with a certain customer leads to customer leadership. Individual customers can be precisely planned. Thus market shares are the summation of all customer shares. A bottom-up planning with utmost precision, as it has never been achieved by market share planning. Only a bottom-up planning from individual customer share leads to result-oriented, strategic and operational consequences. That’s Customer Centricity. Philip Kotler (1931) is a professor at the Kellogg School of Management at Northwestern University in Chicago. He is considered a pioneer and as the most renowned expert in the field of marketing. While he initially thought and argued in terms of customer groups and market segments, he deviated from this in the last few years under the impression of feasibility and digitalization and now progressively considers the individual customer down to the individual person. "More power to the customer and consumer." Non-reachable supply share Strategic gap Self-supplied share Operative gap
  17. 17. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 17 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE ur parents' generation can still remember very accurately. The social community was all that mattered, the individual had to submit. Leading sociologists ascer- tained a change of values in society since approximately 1965. This shift in values towards individualistic and hedonistic values also influenced the business relationships between customer and suppliers (both in the BtoB and BtoC sectors). Already at the beginning of the seventies, Helmut Klages discovered the synthesis of values as a key direction of develop- ment of changing values in modern societies. The well-known set of "duty and acceptance values" (e.g. discipline, obedience, performance, diligence, order as well as materialism and security), turned into a rather heterogeneous value complex of "self- expression values" (e.g. society-related idealism, but also individualistic or hedonistic values such as, amongst others, creativity, pleasure, adventure, suspense, variety, spontaneity, freedom and self-realization). The modified values have changed people's behavior. Markets have undergone severe transformations in modern societies Parallel to the change in values also the markets in these societies converted from demand- to provider markets. This development was associated with an unprecedented optimization of the value creation processes towards an ever greater division of labor and integrated value-adding partnerships. Suppliers are increasingly evolving from simple product and service suppliers towards solution providers with a wide range of hybrid products or complex market performances. In the private sector it has become obvious for everyone. No telephony services provider sends out a new phone without having it previously configured for the user. Mostly the cellphones have also been produced specifically to the requirements of these phone companies. Local agencies carry out the last individualization. Without this change in market performance of the cellular service providers the triumph of mobile communications would not have been possible. For the majority of companies also their own competitional intensity has thus changed or moved emphasis. Differentiation takes place less and less through product features and increasingly by their own individual creation of value. This development has caused an enormous increase in the importance of the supplier. This goes along with the huge increase in demands on the supplier to furnish an individualized solution for each customer. The individual customer is the measure of all things In the eyes of a customer the performance of a provider reduces only to these three simple questions: To what extent and at what cost are my needs being fullfilled? Which net benefit is offered to me by which supplier? Is the market capacity available and with how much certainty and when can the market capacity be made available? The convinced individual customer stands by his needs. 8. Only the individual customer is important O
  18. 18. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 18 The evaluation of suppliers and their solution portfolios is done by the demander according to his own individual requirements and not according to the requirements of the other buyers. Neither an average performance (derived from the needs and wishes of all demanders) nor a performance offer aligned to one's own constraints will be able to convince the individual customer. Customer Centricity can be experienced by the individual customer A customer can be convinced only by the ability to take his needs and wishes seriously and to allow for them convincingly in one's own offered range of services. In fact, there are seven core elements that make Customer Centricity perceptible and coming alive for the individual customer - whether it be a business or an end user: 1. Unique customer understanding by all employees of the supplier. 2. A distinguished ability to discern and understand customer needs. 3. The ability to implement the customers' needs in unique market performances. 4. A structured political and cultural creation process within one's own enterprise. 5. Dedicated management of customer interaction on several levels. 6. Unreserved fulfillment of the promised performance. 7. Convincing customer care beyond the instance of acute performance compliance. The total (!) orientation of an enterprise towards each individual customer is the understanding of Customer Centricity. Customer Centricity is not nearly to be confused with customer orientation or CRM, but is a fundamentally new leadership- and management- as well as strategy- and implementation approach. Thereby it doesn't matter whether the customer is an internal or external customer. in the center of the entire entrepreneurial performance. That’s Customer Centricity. Helmut Klages (1930) is professor emeritus of organizational and administrative sociology and taught at the university of administrative sciences in Speyer.With his research in values and value change, he was a pioneer to demonstrate social changes and to awaken our understanding of the importance of values in the world of work. From this also the conception emerged that a theory of the change of values in a society can not be established without consideration of the psychological behavior patterns of the acting persons and their repercussions on culture.
  19. 19. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 19 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE hat does the personality structure of a customer really consist of? It is not the corporate culture or his positioning, but it's the managers and/or employees who are taking on a distinct social role in the customer-supplier relationship. A customer relationship consists of intraorganizational and social intrapersonal relation- ships between people. The customer is not just a legal or natural person, there are primarily people. It is to these people that managers and/or employees of any company are building a relationship which they cherish. The individual quality of relationships (social intrapersonal relationship) between the key people of the two companies determines the intrinsic quality of the customer relationship (intraorganizational relationship). There is not a customer relationship to Lufthansa, Stada or machinery factory Meyer, but hopefully to the employees or Managers who are concerned with the evaluation of the offer. These will hopefully have the decision-making authority within the company in relation to the booking / the order, the delivered service, etc. In the world of division of labor that one is used to today, the tasks of individual employees and their power of choices are outlined firmly in each company. To accept and respect this is the basic prerequisite for building or maintaining a symmetrical customer relationship. Five scopes of action in successfully describing a customer How often do we ask ourselves: "do I really know this person?" Sometimes we are completely surprised by the behavior of a person and drastically correct our image. That's annoying, but nothing more. And yet we still don't know how this person beholds ourselves. But if this happens to you with your customers, in the extreme case this can cost the loss of an important customer relationship. Therefore a change of perspective must be made: not only is important what my company and my employees think about the customer, but all the customer's persons involved in the supplier-customer transactions have to be reached in their individual world of values with their individual needs. Only then does an intraorganizational customer satisfaction arise in the wake of an intrapersonal social relationship satisfaction. To document the uniqueness of each individual customer, in Customer Centricity the customers are best described in five scopes of action. Only thus can the existing customer relationships and further revenue- and margin-potentials be raised to a new level. The enterprise The most important data of the client corporation are summarized and filed systematically: type of corporation or legal form, involvement in a consolidated group, divisions, business area(s), … 9. What really comprises a customer W
  20. 20. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 20 Persons in the "Buying and Selling Centre" There are not individual decision makers acting in companies today, but so called "Buying or Selling Centres". This is a group of managers/employees in their role of company officials who are acting formally and informally as a team to per- form a purchasing or sales task. Often people will be joining in from outside the company, who are participating as influ- encers or even co-deciders on the purchasing or sales process. It is crucial whether all holders of a role in the "Buying or Selling Centre" are known, and if all of them are actively involved in the transactions. Fascination One's own market services are perceived by the customer as either a standard, or they differentiate against the competi- tion. In this respect one needs to discover which market services bring forth the highest appreciative emotions and buying incentives. The unit: potentials, requirements, needs and demands Economically, demand is crucial. It substantiates the desire of an enterprise for a certain purchasable market perfor- mance. A demand arises when both the purchasing power and will to buy corresponding to the requirement are present. The potential mirrors the total demand of a customer, which could be satisfied by the market performances of one's own company. And this regardless of whether or not the customer has ever placed an order for it to one's own company. Finances In this scope of action, all the necessary data are collected about revenues, the underlying market services, the margins achieved, even better the customer contribution margins, about liquidity, the credit worthiness, payment terms, etc. Addi- tionally, also the data about one's own pricing policy, the terms policy, etc., are important information and must be imme- diately retrievable too. Most of this information is either already available and is therefore only structurally filed, or instead it is collected by distribu- tion, sales, or by the field representatives according to systematic approaches that were specifically prepared for one's own company. A key element in the analysis and management of the customer relationship is to comprehend the customer as unique and not to conceive him as a class. That’s Customer Centricity. Frederick F. „Fred“ Webster was Professor of Management and Marketing, most recently at the University of Arizona. As early as at the beginning of the 1970s, he described the organizational behavior of professional, industrial buying centres. He combined this with industrial marketing and thereby described the two sides of the same medal. He created the Webster/Wind model of purchasing behavior with different roles of individual persons.
  21. 21. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 21 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE hat actually, is a customer? The question sounds so simple, but nevertheless, it can tempt various sections of an enterprise to different answers. Is it the dealer, the final consumer, the industrial corporation or even the recommender? In the concept of Customer Centricity there is a clear answer - practically they are "all". Economy always refers to the end user. This is one of the natural laws of economics. Someone who breeds cattle, from which leather is made so that shoes can be manufactured that are sold to an importer who sells them to a retailer who in turn delivers them to final consumers - will rarely keep this chain in mind. And yet he is dependent on this final shoe customer. Everyone in the chain is. Some branches of industry see this and call themselves "Business to Customer" companies. But actually, only retailers are BtoC companies, because all the others nevertheless firstly deliver to professional traders and industrial companies. With this designation they want to express that they are yet specially focussed on end consumers - in contrast to business-to-business companies. One can also differentiate the pattern as follows: B2B [end of transaction] = partly capital goods, consumer goods, services ... B2B [trade] 2C = food, fashion ... B2B2B = screws, compressors, which are incorporated into other industrial parts From supply chain to order network And yet, if you think ahead, you always end up with the end customer, hence B2B2B2B2C. By digitalization and globalization of communication the chain meanwhile transmuted into a seamless network, where customers can be competitors at the same time. Everyone communicates with everyone else, everyone influences everyone in the respective business - and the very supply chain itself progressively transforms into demand and supply networks. The direct and indirect customer have different, sometimes conflicting interests and needs, and must be served equally as a customer. In the direct customers the customer status is constituted by: contractable organization or contractable individual clear expression of the intent to make use of a market performance ability to communicate and assessment of alternative decisions autonomy in the (purchasing) decision and ability to pay and willingness to pay (also through third parties such as insurance companies). However, the direct customer concept often falls short. Isn't the medical doctor as prescriber of a medication also important as a recommender? Doesn't an environmental protection policy or a subsidy of the state directly affect the business? Does a supplier in an oligopoly position no longer have to be treated like a customer? 10. Customer centricity defines customers very broadly W
  22. 22. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 22 Large enterprises deal with such groups, but are keeping these organizationally totally dispersed throughout the entire company, and therefore have no uniform view and target direction. Identifying stakeholders as customers In the Customer Centricity-Concept every stake holder is individually examined in respect to the company, as to what extent he has a direct or indirect importance as a customer for the performance process of the company, and is then processed as a single customer. Potential conflicts of interest between the clients (i.e. retailers and final consumers) against the company have to be manage by it strategically and tactically . Nowadays, even semi- state public utilitiy works are developing their own customer's perspective in such a way. However, from the view of Customer Centricity this classification is wrong. Direct and indirect customers are defined independently in a customer- stakeholder-concept and are treated holistically with identical methods. That’s Customer Centricity. Ralph J. Cordiner (1900 - 1973) was the CEO and president of General Electric. In the early 1950s he formulated the Stakeholder Concept in which the interests of all "stakeholders" should be balanced as best as possible. To date, the question can not be answered, what specific (!) services and results the company should respectively achieve and how the responsibility of management is defined. Customer Centricity uses this approach in so far, as specific customers are defined from within the stakeholder network who are to be served in the frame of economical performance directly or indirectly by identical methods.
  23. 23. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 23 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE he customer is king, that's a popular figurative to characterize the customer relationship. In these cartoons, the customer is seated on a throne, wearing the royal robe and a scepter. This associates that the king customer commands and that there is an asymmetrical relationship between the customer and his supplier. In contrast to this, Customer Centricity leads to a symmetric customer relationship. The company dignifies the needs and wishes of the customer and does everything to assemble an economical offer of market performances to satisfy the needs with an adequate net benefit. In return the customer appreciates the efforts of the supplier, even if he has chosen another supplier after considering all net benefits. The same symmetrical customer-supplier relation- ship continues anyway after issuance of an order and in a durable customer relationship. Quality of relationship is the main objective, but ... The goal of Customer Centricity is the creation and maintenance of permanently successful and symmetrical customer relationships. The corporate- and management-philosophy are describing values and understanding of a symmetrical, fair and successful customer relationship. Thereby each client is treated individually according to his needs. But then the result of each individual customer relationship must also be a relationship that yields a comfortable "adequate" profit. Only then can the provider company too finance its innovations, preserve its competitiveness and thus sustainably ensure its continued existence. As Customer Centricity focuses on the individual customer, it also requires that the economic success of all customer transactions with this customer can be visualized in a transparent and timely manner. This then also requires that in customer profit accounting all costs are calculated directly on each individual customer as much as may be feasible. If one also regards in this the temporal status of the customer relationship (e.g. in progress of establishment, stable and successful, to be discontinued) then for each temporal state a maximum investment (absolute cumulative negative return) and a minimum yield (average annual profit) can be determined for each customer relationship. Lump-sum costs open new perspectives In industrial enterprises flat distribution costs of 15% are not uncommon. A mind game clarifies the urgency of the resulting findings: In a typical ABC-classification of all customer relationships in a supplier company (no evaluating label for the customer, but only a classification of the annual revenue from that customer) the result is always that an A-customer generates at least more than 100, sometimes more than 250 times as much revenue as is generated by a C- customer. 11. Priorities in customer care still need to be set T
  24. 24. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 24 In case of a flat proportion of distribution costs, only a maximum of 1/100 of the absolute distribution costs for an A- customer remain for the C-client as a budget approach. Would the provider company choose the same form of distribution for the C-customers, most likely none of the C-customers would ever be able to generate a positive return. Here the solution lies in distribution systems that are appropriate to the types of customer and in the limitation of the "absolute" single customer marketing budget. A successful and lasting relationship can be sought only when in a symmetrical and equitable customer relationship, the transaction costs of the supplier are in an acceptable relation to the earnings with the client. Otherwise the provider company jeopardizes its survival or needs a donations receipt from its customers. Priority in customer processing mirrors transaction potential If one takes into account also the total purchasing volume of a customer in a business range, then the total operative potential of the supplier results from the difference to the existing order volume for a supplier in that year. This is the purchasing volume that the customer transacts anyway, but the crucial factor is who gets the orders and how much of the total volume. Also from the goals concerning the development of potentials, priorities in customer care are derived for one's own distribution department. In this however, the basic supply of service must be guaranteed anyway. Not one's own expectation of large profits is rewarded by the customer, but adequate performance for the customer's purchasing volume. That’s Customer Centricity. Kenichi Ohmae “Mr. Strategy“ (1943), was a corporate consultant who was mentioned in the Financial Times of London as "Japan's only management guru". He developed the strategic triangle with three corners: (1) customers who bring in revenue (2) competitors who are fighting for the same revenues, and (3) the company that provides deliviery to the customers. The three points are interdependent. Ohmae postulated that Western and particularly American companies are much too intensely focussing on competition-based strategies. "Customers are the foundation of any business activity, they belong into the center of strategic contemplation."
  25. 25. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 25 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE ustomer Centricity is also and especially a management philosophy. To be suc- cessful, it has to be represented and sustained by the entire enterprise. Customer Centricity aims for a fair and symmetrical intrapersonal relationship between the employees of the customer and those of the supplier, which is ideally transformed into an intraorganizational, lasting and successful relationship between the companies. Customer Centricity, as the central management and leadership principle, must finally be anchored in both corporate philosophy as well as management philosophy. To obtain a normative character, a company or management philosophy must therefore accomplish more. The corporate philosophy has to provide the basis for meaning- and purpose-oriented entrepre- neurial activity in its intrinsic design. Management philosophy influences the thinking and acting On the other hand, the management philosophy includes the basic assumptions about standards and value adjudications which should influence the thinking and actions of the key executives in an enterprise. Further, it should stimulate processes of a value development inside and outside of the company which permits a value integration and shared determination of meaning. The corporate philosophy constitutes the basis for Customer Centricity Thus the corporate philosophy provides the basis of meaning- and purpose-oriented business activities. It expresses the individual fundamental economical, societal, social and ecological concepts of values and objectives as a conscious and unconscious guiding vision of an enterprise relative to itself and in relationship to its reference groups (stakeholders). The corporate philosophy is actually molded in the vision, mission and business principles. The Customer Centricity concept is splendidly designed to introduce CC into the enterprise according to a finalized construct. Moreover, it is very well suited to define the boundaries of responsibility between the stakeholders, the top management and the strategic and operational management as well as the employees. But the prerequisite is that the top management involves all the stakeholders and that these stand behind the overall management approach without reservations. Customer Centricity is integrated into four corporate levels Economic political level: shared regulatory responsibility of management Design or further development of the framework conditions for one's own industry or economic sector 12. The newly adjusted management system in Customer Centricity C
  26. 26. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 26 Corporate political level: normative management Building up of enterprise political mutual agreement-, credibility- and value adherence-potentials Corporate strategic level: strategic management Building up of strategic customer success potentials on the basis of ethically viable corporate politics Operational level: operational management Building up and exploitation of operational productivity- and cost reduction-potentials while ethically taking into consideration the social, ecological and economic scarcities. The personnel actions of employees are corroborated by operational management. Motivation and commitment arise from the fact that the employee internalizes the vision and believes in its realization! Objectives and appropriate regulatory framework are successfully modifying enterprises A largely autonomous and value-oriented conduct, coupled with a value-appreciating and good communication (external and internal) are comprising the basic requirement for a successful long-term customer relationship. Only then can the overall organization, in an adequate period of time, discover the specific and latent customer needs, turn them into a proposal of market performances and explain the total proposed offer and the net benefit to the customer in a communicative, objective, but also emotionally inspiring fashion. And only because of this "all are pulling together" to implement the organization's promised performance within the agreed schedule while heeding the same premises (appreciative, communicative and professionally competent). Not the personal appeasement of the employee's need is at the center of his actions, but the establishment of a long-term and successful customer relationship. That’s Customer Centricity. William G. “Bill” Ouchi (1943) was a management professor at UCLA, the University of California in Los Angeles. He developed the theory Z and distinguished three styles of management: (1) the American type A, in which the individual employee is at the center, (2) the Japanese type J, a jointly or collectively organized enterprise, and (3) the mixed type Z. Success through type Z requires early inclusion of dedicated employees in the decision making process and to highly respect them as a person. Just as in Customer Centricty, the highest respect is due to the customer at eye level. Thus type Z and Customer Centricty are particularly compatible.
  27. 27. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 27 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE rand name and brand leadership are strategically viewed by many companies as very far ahead of all other systems. But the brand, as a psychosocial system, remains too vague as a starting point for a strategy, but has a firm and valuable position in Customer Centricity. A brand is a mental image (!) anchored within the psyche of the customer - whether consumer, industrial company or merchant - of a market performance. Mental images are not reflecting only on facts and, beyond the product, include all perceptions as price range, advertising, etc. Product and brand are therefore a substantial difference. A product has a life cycle. Ascension when it is modern and in demand, descent when it is becoming technically and emotionally obsolete. The objective of the brand is to overcome the natural life cycle. So the brand remains the "Old", but the encompassed product and market performance is continually renewed and often has hardly anything left to do with the initial product(s). The product, which was named Aspirin in 1897, is now purer in substance, buffered, has very modern applications - and yet still remains Aspirin. Or as experts say, Persil remains Persil (the brand) - because Persil yet does not remain Persil (the product). But the one who does not renew the product, the advertising, the packaging, the perception continually, is due to ruin his brand over time. Thus at launch there may be a naming, but this is not yet a brand and may perhaps never become one. "The goal of the branding technology is securing a monopoly position in the psyche of consumers", said Hans Domizlaff. When one thinks of a sports car or processor, a thermos flask or rotary printing press, then just a few, even better only one brand, shall come to mind spontaneously, and generate a sense of trust . Branding technology is therefore also a war of brand differentiation. A war for the minds of the customers. Brand is not in the pole position of marketing Brands are not the actual reason why customers buy, industrial companies issue an order, doctors prescribe or patrons give something for present. Brands are the result within a Customer Centricity chain: purpose of the enterprise market services for the retail customer attitude and [selling-]behavior towards different customers derived from that the image from that brand as the condensed image from that the reputation This sequence is not reversible. Also, it's impossible to start with the brand. Brands are not being purchased, but ultimately market services are. The brand is the concave burning mirror that bundles market performances and not only exclusively the product performance. 13. Brand name is not a replacement for Customer Centricity B
  28. 28. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 28 So market performance is a "technical" marketing consideration, brand is a social technology that is primarily designed by communication and behavior. Market performance is an inductive approach, while brand is a deductive approach. If market performance is good, working hard at it, then one can develop it into a brand. In this, the brand serves to reduce the complexity of the perception by customers. The brand tells in short, where the recording of the market performance elements of an offer is too lengthy. Market performance is not automatically brand Two terms are posed seemingly against each other and yet in a clear relationship: First there is the market performance. It bundles all sales-active physical and psycho-social elements of the demand into an offer that a customer wants to buy as a complete performance. The individual customer sorts these individual elements according to his own relevance and then decides. The product / service is a sub-element within the market performance. This is opposed by the brand. It can be understood as the sum of all the conceptions that a brand name or a trademark evokes or should evoke in the customer, in order to distinguish the goods or services of one company from those of other companies. The conceptions are established by names, terms, characters, logos, symbols or combina- tions thereof, to serve as an aid of identification and orientation in the selection of products or services. What comprises a brand is strongly influenced by subjective impressions and primarily happens in the heads and imaginations of the consumers. The brand is based on a customer-requested market performance and communication that reduces complexity. That’s Customer Centricity. Hans Domizlaff (1882 – 1971) was an advertising specialist and is regarded as the father of branding technology, who worked predominantly at Siemens and Reemtsma. In 1939 his book "The gaining of public confidence - a textbook of brand engineering" was issued, wich currently, as of 2005, perseveres in its 7th edition. He formulated 22 fundamental laws of natural brand establishment as "laws of nature". "Even though it's said that the brand technician creates a brand, that's just but a linguistic simplification. The brand technician to a certain extent only provides a material composition that is particularly suitable and seductive ...". Complexity reducing brand Market performance elements Consumer
  29. 29. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 29 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE nnovation denotes something new for the market, which is adopted by it. A new product that even offers additional value is not yet an innovation. Innovation is not limited to products and has its own market rules. Only the customer's acceptance of something makes it a factual innovation. Innovation is a term that is not only used specific to a subject. The populace speaks of "innovation initiatives in education or technology" just as easily as of potatoes or vacations. Thus the fate of innovation is just as what occurred to the words libido, depression, manipulation, marketing or financial economics. They are used colloquially and professionally in a very different fashion. And hence misunderstandings in both areas can not always be avoided. Innovations are not always related to products, also technology or new services, but innovation can be included in customer service, the funding, the processes or even the application consultation of the customer. This was evident in leasing as a financial innovation, without which the automobile market would be much smaller today. In case of Amazon's commencement the innovation lay in an ingenious online-, ordering- and rating-tool. Innovations may lie in all elements of an offer that constitute a value for the customer. Differentiating types of innovation (1) Trivial, trite or banal innovations are so named because one can copy them immediately. Even a new (!) type of advertis- ing as it used to be the slogan "I'm really not daft / stinginess is horny" is hard work and innovative if the customer accepts and uses it. And mostly it is not being copied. In copyable innovations the lead can be obliterated by rapid competition. (2) Step-innovations are concerned with continuously improving something existing. This results in a continuous lead in time if one does not subside one's efforts. The grand prowess are (3) so called breakthrough innovations. They modify the strategic playing field for both customers and businesses and are therefore rare. The new service Micro-Banking initially in India and Bangladesh and the technological innovation of the cellular phone are good examples for this. Observing the diffusion in launching innovation Innovations are closely linked to diffusion research. Innovations are not suddenly adopted by everybody, but in succession by different groups, from the innovators up to traditionalists. Various criteria conduce the market acceptance of an innovation in different groups as "early adopters" etc.: 1. The subjective benefit of an innovation (e.g. prestige- or attention-gain, etc.) 2. Compatibility with an existing system of values (e.g. ecology) 3. The complexity or respectively the perceived simplicity at first contact (e.g. One-Click ordering) 4. The try out capacity (e.g. experimental opportunity "record your own CD") 5. The visibility of the innovation (e.g. as in mobile cellphone) 14. What innovation management should re- ally deal with I
  30. 30. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 30 When Erfolgsketten Management Germany introduces or readjusts innovation management systems, it often becomes obvious that companies have considered too much on the product side and from their own viewpoint. But even the "father of innovation" Joseph Schumpeter, one of the greatest economists of the last century, differentiated sharply between finding and inventing. The entrepreneur carries out innovations, but is not an inventor. Ultimately it's not even about creativity, but about the action of implementation. If the new, implemented is accepted - mostly for cash - by the market, only then can it be called an innovation. C. K. Prahalad worked out systematically, that the business model of the future lies in developing increased value along with the customer, and to deliver him with what he had desired. Thereby the actual head of the innovation- and production-process is the customer. Value-added innovation may only be developed as induced by the customer or along with him. That’s Customer Centricity. Joseph Alois Schumpeter (1883 - 1950) was an Austrian-American economist and lastly professor at Harvard. Schumpeter aspired to become the best economist in the world, Austria's best equestrian (horseman) and the most desired lover of Vienna - of which goals he did achieve only two, by his own words. His most important work was about innovation. Innovations are improvements in value that are accepted by the market. Thereby they supersede existing offers - sometimes abruptly - what Schumpeter called "creative destruction". "Doing the old in a new way - that's innovation."
  31. 31. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 31 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE he customer buys the product, says the sales representative. The customer buys the brand, says the product manager. The customer wants our superior technology, is asserted by the development engineer. None of them is mistaken. And yet, the customer ultimately is interested in something entirely different - the market performance. Product centricity permeates through many companies. When a new product / new service is launched, then the product is in the focus. But a new guarantee service in contrast is rarely introduced with a similar effort, internally or externally. But we are erring if we believe that customers just simply buy products. It never happened, since this earth is round. But then what do customers buy? And why do so many believe that it centers around the product? The product or the service is often the initially only single physical or experiencable component of the purchase. A car or fur can be caressed by the hand, the machine can be operated. The transfer of a bank is digitally detectable at least in the online account. Here also lies the specious illusion that it only revolves about this. Whether consumer or BtoB-customer, he assesses the market performance elements selectively (!) for himself - consciously and unconsciously - objectively and subjectively. In case of the car we think of the construction and design, we're talking about the instruction manual, tools, spare tires and service intervals, about insurance fees and active or passive safety. But one must also know about gasoline- and oil consumption, acceleration and braking capacity, about delivery- and repair service, leasing and financing, about color and seating comfort. And still the customer doesn't know the entire market performance. Everywhere the market performance is a package of individual elements: the core services, such as product/service, packaging, instruction manuals, price, warranty services, etc.; the paid or unpaid additional or systemical services, such as application consulting, samples, seminars, verification tests, etc., as well as the frequently - but not always - unpaid gratuity-, experience-, emotion- and advertising-services. That's what each customer buys. But not each everything and not each with the same significance. Developing fascination-elements within the market performance There have to be outstanding, differentiating market performance elements that especially excite the customer. Let's call these fascination-elements. Noriaki Kano developed a model for the analysis of customer requirements, which has been evolved further by Erfolgsketten Management (Success Chain Management), devised as geared to the individual customer. We are identifying five elements related to the individual client as much as possible: 15. What the customer actually demands and buys T
  32. 32. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 32 Frustration: favorably intentioned market performance elements that but annoy the customer: e.g. too many identical brochures in the letterbox, too many offers at the purchasing officer, too much "small print" ... Dissatisfaction: it's about the compulsory or basic elements. Often enough the product. One does only perceive a basic service if it doesn't turn out all right, e.g. an invoice not correctly issued. Attraction: many are offering the element, but only the emotionalization effects differentiation from other suppliers. Push is necessary. Enthusiasm: few are offering the element, the differentiation and incentive to buy are thus increased. Fascination: a market performance element that is offered only by a "unique" and thus triggers intrinsic motivation in the customer. Fascination has to be developed creatively and endowed with emotion These beloved up to idolized fascination-elements, which may be the main purchase motivation, are not always contained in the product itself. They stem from, for example: from the strong force of a leader: as formerly Steve Jobs at Apple from unusual distribution: such as house parties, e.g. at Tupper, direct sales at Dell from creative advertising communication: as Sixt, Jägermeister from pricing contrary to the industry trend: as the price changes of West, Ikea from the technology: such as Post-It from metaconcepts: like iPad / iPod with digital "mobility" from the conscious competition in opposition: such as Focus vs. Spiegel, Coca Cola vs. Pepsi from culture and values: as at Weleda, dm from composite partnerships: such as Symbian (Nokia, Ericsson, Motorola), etc. For the individual customer one needs to compile individual market perfor- mance elements reaching far beyond the product and get him excited about it. That’s Customer Centricity. Noriaki Kano (1931) was a professor at the Tokyo University of Science. The Kano-Model of customer requirements, named after him, has been developed by him in the 1970s for Konica (Minolta cameras).He turned around the general notion of companies that "more is better" and that with the customer it's always the same thing, or even just the product that matters.
  33. 33. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 33 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE he product or the service are only a medium, but not what the company has to deliver eventually. In the Customer Centricity concept the supplying companies understand that customers are driven to their choice of purchases particularly by two value conceptions: individualism and selfishness. As early as in the 1950s Theodore Levitt described four product terms: The product: aircraft, medication, machine tool, locking systems, drinking-milk or toilet paper, fountain pen.The service: business consulting, building cleaning, tax consultant, advertising agency, pharmacist, or dance teacher. The expected product: with the right delivery times, payment terms, technical support. The extended product: with elements of attractiveness as perhaps a special settlement system. The potential product: with the chance to fulfill new latent needs. The completely new core idea in this system was already that one has to extend the product or the service, or even takes on a new, future perspective. In the late 1950s Levitt started with the question "what business are you in?", which led to the consideration of complete market performance systems. The customer buys three fundamental values What does your customer actually buy today? It's only three values , says Jens Beckert. And only two of them promise unlimited growth ... Many products or services are not needed by the customer at all, or not from us as a supplier. Abundance is everywhere. Markets in want are rare. And yet final consumers buy, as well as in the tough professional business of BtoB companies, more and more goods. The customer is driven especially by these values: 1. The functional value: this value is especially known in BtoB. The tire rolls longer, the spring lasts longer. The distribution department communicates features and their impact, costs, system costs, user friendliness. From the perspective of the buyer these are investments to generate earnings for himself. Here, the value can be expressed directly in money as a benefit. 2. The positional value: in addition to the functional value it's important here that the buyer positions himself and poses his status. It's about showing oneself socially in a group and taking on a positioning. "We only buy from market leaders" is such a statement. The "brand" or even more imaginary the "quality" is often mentioned in this context. 3. The imaginative value: this is the form of value that evokes the notions of proximity to otherwise unreachable places, persons or even ideals. In extreme these are lottery tickets, where the buyer doesn't believe at all that he will win, but moves into the vicinity of the wealthy. Sustainability is to be found in this category, where the customer can deem himself as savior of the world. Fashion works with this approach - but also in BtoB it's advantageous to have employed an international designer - without this necessarily having improved the function. 16. What an enterprise must factually deliver today T
  34. 34. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 34 Individualization that improves life / business In the Customer Centricity approach it holds true that the "quality" in the products and services is not inherent automatically, but has individual meaning for each individual customer. He (!) determines the value and the value form. And he determines the combination that he purchases. To modularize the entire market performance accordingly and to offer it as a combination of a selection, is questioning from the individual customer's point of view, what he might wish for and purchase: choose from 3 different machines, 5 colors, 3 payment schemes, with or without packaging ... This small selection alone leads to 90 different combinations. The customer's feeling suggests him being provided with an individual production that is tailored just for him. This serves to satisfy his individuality. The gift of a construction kit. But finally something else can be realized from looking at what customers really buy. Their rightful egoism. The final consumer requests what improves his life from his personal point of view. The professional customer only buys what improves his business. Sometimes directly, because he resells it as a retailer, sometimes indirectly, because he has to install his purchase into his value generating process. And on his part not only the question arises, what he would like to have delivered with which individual fascination, but also what he makes of it, in order to then supply his customer individually with fascination. Both final consumer and individual BtoB customers want individualized market performances that improve their lives or their business. That’s Customer Centricity. Jens Beckert (1967) is professor and director at the Max-Planck-Institute for Societal Research. He pointed out that today's economic growth in the industrialized world is based on value forms of positional and imaginative values. Economy is not only rational, but also takes place with individual, single customer focused societal symbolic values which are classified as a value; "There are no limits to growth in these markets, because the desire for symbolic outdoing is infinite."
  35. 35. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 35 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE o satisfy customer needs in full scope is often associated with the production of individual single performances only, thereby incurring the expectation of signifi- cantly higher production costs. Yet everyone has already acquired a fitted kitchen that was individually produced and built according to only his taste and his room dimensions. No one would accept in this purchase, that a gap remains between the wall and the cabinet, because the measures of the room are not up to the standard of the manufacturer. And no one would pay extra for it! If one takes the trouble to look through the entire order of a fitted kitchen and to identify the order-specific parts, he will be amazed at how few parts are affected. Most of the time there are a few upper and lower cabinets that do not match the standard width, and the individually customized worktop. The worktop however is obtained from the kitchen manufacturer in a standardized width and thickness. All others are default components that were custom selected and installed. The same result is achieved in the analysis of a customer-specific manufacturing line. Offering customized market performance competitively An individual compilation of market services (customized solution) generally includes more standard- or mass-products, respectively standardly configured services. With mostly just a few single performances that are individually customized, the customer gets a notably individualized integrated bundle of market performances (of material goods and services), developed and put together according to his needs or respective problems. This is offered at prices corresponding to the customer's willingness to pay. This willingness of customers to pay also determines the degree of customization desired or accepted by the customer. For the readiness of customers to purchase, it is crucial whether they can credibly perceive the willingness of the companies to offer customized solutions. Also the competitiveness of the customers of their customers depends on how far they as a providing enterprise can preserve or create their customer's competitive edge through a customized solution. A central competitive factor for solution providers is the combination of: competencies in the development and implementation of customized solutions with competencies in development and preparation of repeatable scalable market perfomances The added economic value of customized solutions is therefore also based on making use of marketable products and/or repeatable services. Customer Centricity is also for the partners in value creation Almost all companies with their own value-chain process are themselves part of a value-creation network. Only a part of their overall performance is rendered by themselves, another - often an essential part - is provided by other suppliers. One's own commitment to Customer Centricity therefore also requires an integration of value-chain partners. 17. Individual customer focus even works without single production T
  36. 36. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 36 If necessary, value-chain partners also have to go through an increase in the variant diversity, etc. They too need to be brought to align their own value-chain process to that of the customer - and therefore to your company. Throwing conventional process flows overboard Crucial for the consistent implementation of customer requirements and the promised performance is the "individualization" of one's own services. In this interactive process between buyer and supplier, a co-design of individualized market performances comes about. Ultimately, the demander is thus integrated into the value-chain. To organize this and support it by appropriate tools requires a separate "co-design process". Empirical studies confirm the high importance of the process- and potential- design for customer satisfaction at the time of deciding the purchase. In progressive processes the classic Tayloristic mass production, as well as "agile manufacturing" and lean manufacturing are replaced by a "mass customization". Although the concept of "mass customization" is actually an oxymoron (contradiction), it still accurately describes the challenges in the implementation of Customer Centricity in the provision of performances. According to Frank T. Piller individualizing does not imply a change in market segment into exclusive niches, such as this would be the case with traditional single unit production. Erfolgsketten Management Germany perceives that Customer Centricity in the provision of service, actually rather increases the competitiveness in the existing segment. In many cases, one's own market segment is extended and thereby the business area coverage is increased. Of course, the mass required single services can continue to be produced anony- mously. With introduction of the "made-to-order principle" the value creation process is splitted into a partial process for anonymous production (e.g. according to sales forecasts) and the other process for individual production to specific individual customer orders in co-design. Everything proceeds from the customer. Therefore also the customer specific promised performance must be fulfilled individually in performance delivery. That’s Customer Centricity. Frank T. Piller (1969) is a professor at the RWTH University of Aachen and co-director and faculty member, MIT Smart Customization Group, MIT Design Lab, Massachusetts Institute of Technology (MIT), Cambridge, MA, USA. He has been researching for more than a decade on issues of interactive value creation between businesses and customers. Piller conceives one of the biggest tasks in the development of new products is to design them according to the customer's requirements. The growing heterogeneity of demand, growing markets with very low marginal costs, increase in product complexity and an increasing number of creative consumers are the entrepreneurial challenges.
  37. 37. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany 37 Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE hange is an ever ongoing process, but the transformation to Customer Centricity is a particular technical and mental challenge for the enterprise. None of the details are really new in this, but they are reassembled and therefore handled differently. So it is due - to initially capture the current state of the company. Customer Centricity itself is apparently an evolutionary approach. On one hand, Peter F. Drucker has already formulated the pertaining core sentence in 1954: "It is the customer who determines what a business is, what it produces, and whether it is flourishing." Creepingly there is, at least in the broader field of marketing/sales, a progressive development, but it is only theoretically clearly defined in hindsight. But actually companies are in very different individual situations. Especially if one, as does Erfolgsket- ten Management Germany, understands Customer Centricity as a central assignment for the entire (!) enterprise. In this case usually there must be more changes in the business. Change management is the systematic, goal-oriented planning, implementation and control for modifications that are wide- ranging, cross-bordering and to be newly implemented thematically. This special management perspective is taken on to implement new strategies, structures, systems, processes or behavioral practices in an organization. The functional, instrumental and institutional changes have to be made primarily within the enterprise. Customer Centricity is always introduced by a change-process There are three reasons making it clear that Customer Centricity and change management are closely linked today: The company is hard pressed to question older but probably outdated strategies such as product centricity or branding as central strategies of performance The company holds the view that the general, or specific - if related to individual groups, customer proximity of the 1990s is identical to a fully fledged Customer Centricity approach of the entire enterprise The company falsely deems itself already strategically and operationally prepared for Customer Centricity, just because it serves the terminologies related to Customer Centricity We can generally distinguish three types of change: (1) evolution (2) migration (3) revolution. Yet for reason of security the companies will prefer to seek the evolutionary change. But for several reasons this approach is often not satisfactory for the current (!) situation. 18. Successfully making the change to Cus- tomer Centricity C
  38. 38. Erfolgsketten Management Wilkes Stange GbR PO-Box 61 02 04, 22422 Hamburg, Germany Customer CENTRICITY MALTE W. WILKES & KLAUS STANGE 38 Even in evolution the staff's resistance to changes is high.In our experience it is a myth that slow changes are implemented particularly positive and efficient.One generates no "evolution yield" per se. The market evolves faster than a corporate evolution permits.Permanent changes are necessary - for example also the conquest of unfamiliar overseas markets Customer Centricity indicates a systemic change of an enterprise which at this time affects many, if not all areas of the enterprise at the same time Customer Centricity requires a top-down - bottom-up change management in 4 steps The first step is the commitment of top management to Customer Centricity. This decision is fundamental and is principally no longer discussed thereafter. The second step is always an inventory of existing missions, corporate purpose, goals, methods, tools, as well as cognitions. This is done top-down with internal and external experts and thus the participation of all internal stake- holders. Timewise this is an effort of 4 days to 4 weeks as influenced by appropriate preparation. The third step is the evaluation of the findings and drafting of an implementation plan with all the work packages described in step two. The fourth step is the immediate (!) implementation with monitoring accompaniment and coaching of all those in- volved. Important is the raising of immediate successes. The time frame depending on industry sector and enterprise is about 6 to 36 months. Transparent and ongoing communica- tion with all those involved and affected is the first but not last requirement. Change Management and Customer Centricity belong together, to integrate everyone in the company and to make the customer quickly and competently the starting position of all activities. That’s Customer Centricity. Isaac Newton (1643 – 1727) was one of the most important scientists of his time. His core assertion: Hypotheses non fingo. Approximately: It's not just hypotheses that I proclaim, but proven statements.It was mostly natural laws that abstractly told were not innovations, but new combinations of thought - therefore new compounds of reconfigured already known and new bits of knowledge. Joseph A. Schumpeter and Hans Domizlaff also formulated - now in the frame of economy or branding technology - natural laws that essentially hold true until today. As to Customer Centricity, the motto of Erfolgsketten Management Germany is also "Hypotheses non fingo".