In the movie The Sixth Sense, the young boy whispers, “I see dead people”. Well, I listen to smart people. I learn a lot that way. And when a large number of smart people agree on a subject and say it’s their highest priority, I really pay attention.
For example, I recently read the 2010 IBM Global CEO Study. For this research, they interviewed over 1,500 CEOs representing 33 industries from 60 countries. The report is divided into three major themes: embody creative leadership, reinvent customer relationships, and build operating dexterity. The study finds that customer intimacy is foremost on CEOs’minds. Eighty-eight percent of all CEOs, and an astounding 95 percent of standouts, picked getting closer to the customer as the most important dimension to realize their strategy in the next five years.
I find that statistic quite remarkable. They didn’t say get more innovative or get leaner. Hiring smart people or outperforming the competition didn’t end up on top. They took a very external, outside-in view and said they have to get closer to the customer.
To explore what they mean by getting closer, when asked how their customers’ expectations of them would change in the next five years:
82% of CEOs expect that customers will demand a better understanding of their needs,
70% said customers will expect new or different services,
69% said customers will expect more collaboration, information sharing, and
61% said customers will expect new or different products.
Notice that new or different products came out in fourth priority. I bet this is a surprise to many who believe that the key to business success is offering new and different products. The study noted a significant change in customer relations from previous years. “In the past, they told us they needed to be closer to customers; today they need to go much further and bring customers inside their organizations. These CEOs are convinced they must not only stay connected (or reconnect) with customers, but keep on learning how to strengthen those bonds.”
In my next post, I’ll explore what how CEOs plan to strengthen those bonds and get closer to their customers.
(To obtain a copy of the complete report and access complementary resources,
One of the biggest challenges in creating the company-wide business perspective of being a value delivery system is to help all the employees understand what value means to the intended customer. If your strategic perspective is product leadership, it’s relatively easy to have anyone in your company try your software and try your competitor’s software. That’s because the product is internal and you’re in direct control of the strategic focus.
As we’ve suggested in previous posts, value is the collection of user experiences and by definition, it occurs outside of the physical or virtual walls of your company. To understand the value you want to provide, you have to understand what your intended customer is trying to accomplish, what’s important to them, and what challenges they have along the way. If you’re one of the lucky ones who gets to visit customers on site, this isn’t too hard. Sales people, product managers and customer support personnel have the opportunity to observe the customer in their “native” environment and spend time with them face-to-face.
But what about employees in other functions who don’t have the opportunity to get out and meet the customers? If you work in HR, accounting or engineering for example, your opportunities to visit customer sites are limited. Second or third hand reports just aren’t very satisfying or informative. How many of you have read trip reports written by someone else who has visited a
customer? In many cases, these degenerate into a list of complaints or product enhancement ideas the author heard from the customer. It’s not a very effective way of developing deep insights or empathy for the customers’ situation.
One of the best alternatives I’ve seen is organizing meetings when a customer comes to your offices on business. Of course you don’t want to interfere with the primary objectives of the visit, but with some advanced planning, you can schedule informal gatherings between the customer and representatives of different functional groups. These tend to work best when they are unstructured, open dialogs where the attendees feel free to ask questions and the customer can describe what’s on the top of their mind. The subjects covered could include specific challenges, recent successes, concerns, or industry trends. A skilled moderator can help keep the discussion focused on the customer’s situation and steer away from trite questions such as “What features do you want in the next release of the software?” or “Wouldn’t yo like it if we added feature xyz to our product?”
There are many benefits to these meetings. First they provide balance to the internal perspective that most of your employees are enmeshed in daily by getting exposure to the world of your customers and what they do. It humanizes the problem and is motivating for employees. They get to hear what the customer thinks and is trying to accomplish. In many cases, the customer will be flattered by the interest the company shows in his/her problems which will increase customer loyalty. Finally it makes it easier to innovate. Instead of just programming a feature described in a document with little context, employees are better able to understand the problem to be solved and can approach the challenge with a broader perspective and hopefully propose a higher value and unique solution.
Besides spending time with customers visiting your office, what other ways have you brought the outside-in perspective to those who don’t get out much?
In my last post, I referenced an equation for value from the blogger, Maz Iqbal. His equation is:
Value = Benefit – Effort – Risk – Price +/- Treatment
I explained how the last component, plus or minus treatment, can affect the perceived value. I’ve thought more about this equation and realized there’s a factor which, although it isn’t stated explicitly, can have a major impact on value. That’s the effect of time.
Whenever we’re evaluating the value of something, I would guess most of us ask ourselves, when will I receive the benefits? Will I gain an advantage next week, next month, or next year? Anybody who has studied the time value of money and the equation for net present value remembers that a dollar today is worth more than a dollar a year from now. As an example, would you guess more people put money into an IRA for retirement decades from now or buy that new flat panel TV?
Effort also has a time element. In just about every case I can think of, you have to put in the effort before you can reap the benefits. In the case of software, you have to acquire it, install it, learn how to use in and often have to migrate legacy data to it before it contributes positively to your business.
There are risks that can reduce the value now and risks that can happen later that reduce the value. In the near term you can lose something in the implementation or the solution won’t immediately work as promised. Later on, something can change internally or externally so the product or services will deliver less than you expected. With the exception of subscription pricing
models, you have to pay now for the expectation that you will gain more revenue or incur less cost soon.
Treatment is spread out over the longest period of time. Beginning with awareness and going through the stages of investigation, evaluation, negotiation, purchase, installation, becoming operational, long-term support, obsolescence and replacement, the treatment you receive at each stage will add or detract from the value you receive.
I’ve suggested that each component of the value equation has a dimension of time that will affect your perception of potential value or attainment of real value. So what how can you use this insight to youra dvantage?
Think about how you can increase your customer’s value by factoring time into your plans. One way is to help them gain the benefits sooner. Don’t keep a major product in development for a long period of time. Get a subset of the functionality out quicker and add to it with subsequent releases.
Shorten the time between purchase and production use by streamlining and simplifying the effort required to get your solutions
contributing to their operations. An example from the B2C world is downloading a book to the Kindle. I can think of a book, order it, download it and be reading in about 1 minute. This sure has more value than driving to the bookstore and hoping they have it, or ordering it and waiting 3-5 days for delivery.
Use risk management, the whole product concept, and product roadmaps to minimize time-consuming and value deferring disruptions. Get creative with pricing models to change the usual model of all the payment up front and benefits come later. Focus on customer retention and loyalty programs which pay off financially and strategically. These build a strong relationship
which lasts longer than the simplistic exchange of payment for product.
Timing is everything. You can increase the value you provide to your customers by delivering benefits sooner, shortening the amount of effort required, reducing short and long term risk, delaying payment, and providing positive treatment throughout the relationship. Can you suggest other ways that you can use time to increase value?
I was reading an article titled “Thinking Strategically about Customer Experience: The 5 Components of Customer Value” by a blogger named Maz Iqbal. In it, he offers his equation for value:
Value = Benefit – Effort – Risk – Price +/- Treatment
In the article, he defines and explains the significance of each term in the equation. I won’t repeat those here although each is important and each term could serve as the theme for a separate write-up. The term that resonated with me was the last one, plus or minus treatment, because I had a real life example of that recently.
I was on a trip and while checking into the hotel, I checked the room rate they were going to charge me. It was higher than the rate I had been quoted when I made the reservation weeks earlier so I pointed out the discrepancy. I mentioned when I made the reservation that my AAA membership entitled me to a discount and that lowered the price. Instead of apologizing for the mix-up and acknowledging that the price on the registration should have matched the reservation quote, the clerk blamed me for not telling him about my AAA membership. So it was my fault the quotes were different because I didn’t give the same information to the same hotel twice when I shouldn’t have to.
In the grand scheme of things, it was minor and only concerned a few dollars but it was the accusation that I had done something wrong and was at fault that became a negative. As a result my perceived value of staying in that hotel went down dramatically. Treatment is an emotional issue and when it’s positive, it can make up for a lot. But when it’s negative, it can overshadow many of the benefits the company works hard to deliver.
Some companies think of value as the sum of the benefits they deliver per dollar charged. Either more benefits or a lower price increases the value. But don’t forget the treatment factor. Even in a B2B transaction there are many opportunities to increase the value as the total customer experience with positive treatment.
Can you offer an example where a particularly positive treatment had a major impact on your perceived