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,
I was reading a study on analytics by Accenture last week and found some statistics that didn’t add up for me. According to some recent research, 55% of executives rated their ability to target customers and provide them relevant experiences as either “ideal” or “very good”. My immediate reaction was that this number seemed unrealistic. Another statistic in the report confirmed my suspicions. Only 21% of consumers believe the companies they choose to do business with are good at providing them with tailored, relevant experiences.

This is quite a difference of opinion. Over half the CEOs think their companies are very good at delivering relevant experiences but only 1 in 5 consumers think they are. Because the consumer is the ultimate judge of the quality of the experiences, I conclude that the CEOs don’t have a realistic assessment of the situation. What accounts for the discrepancy?
I found some other statistics that give us some insight. When asked what resources senior managers used when making decisions about what their customers want, the most common response was personal experience. That makes sense. There’s nothing like being on site with customers, seeing their environment first-hand and using all your senses to really understand the customers’ situation and problems. But how often does this happen?
I couldn’t find a comprehensive study on the amount of time CEOs spend with customers but I ran across an anecdote about AG Lafley, CEO of Procter & Gamble. You’d assume a B2C company like P&G would invest heavily in understanding the customer up close and personal but Lafley reinstituted consumer home visits and store visits for himself and his senior
executives after discovering that P&Gs product managers spent on average only three percent of their time in contact with end consumers. Personally, I’ve observed very few CEOs that spend much time with customers or when they do it’s to calm down an irate client or to help a salesman close a large order. It’s rare a CEO will take the time to just listen in order to understand what his/her company could be doing better.
So here’s my summary. CEOs think they’re doing a much better job than their customers do based primarily on their personal experience from very little customer interaction. Andy Grove said only the paranoid survive. That implies the isolated and complacent have the odds stacked against them. It doesn’t seem like a very solid foundation on which to understand and deliver value.

In Delivering Profitable Value, Lanning claims the primary business objective is maximizing over the long-term the value the company delivers at a cost allowing profitable returns. As we’ve seen before, value is defined as the net desirability customers perceive in their resulting experiences. So if the company should be focused on improving those experiences, who specifically does that? Who does the research to learn what the desired experiences are? Who connects the capabilities of your products and services to those experiences? Who monitors whether the intended customers are gaining more value or less value over time?

In most companies, no one does. Some would argue the CEO should also be the Chief Value Officer. In theory that’s correct. The CEO must evangelize and support a value-driven perspective for the company. They must create a strategy, an organization, and operating plans for a profitable value-delivery system. But their responsibilities are so broad they can’t get involved in the details. They have to delegate the tactics and operations to others. But who?

Many would point to the Product Manager and to some extent I agree. Unfortunately, in many B2B companies the Product Manager is the expert on the product and spends most of his/her time helping develop new products or helping sell the existing ones. It’s rare the Product Manager has the time, the priority and the skills to do the market and customer research necessary to feed value-driven decisions.

The best solution I’ve seen is the creation of an industry or segment manager. With responsibilities orthogonal to the product managers, this position spends most of their time researching, monitoring and predicting the trends in the target market. Internally they become the champion for the intended user and represent in detail the experiences that add the greatest value.

How about at your company? Are there other positions that spend the majority of their time on the tactical and operational side of value delivery?