Chapter 1

Strategy—Creating and Destroying Customer Value

It’s estimated that as many as 90 percent of strategies fail to deliver the value or results they were intended to.1 In most cases, that “value” is generally interpreted to mean shareholder value, return on capital employed, or some other proxy for a predictable and dependable return on investment. Some of those failures are significant, some are modest, and some are incremental—but in all cases, the feeling is . . . they could have done better.

Our experience shows two main reasons why strategies fail to deliver as promised. They were either faulty in design, or they were faulty in implementation. And oftentimes, it’s some of both. This holds true whether you’re trying to develop a broad business strategy or a more specific customer focus strategy. Chances are, if your organization has a formal customer focus strategy, you feel pretty good about its chances for success. And if you personally played a role in designing that strategy, you’re most likely feeling quite bullish about it. Let’s see. The following pages contain a brief assessment that will give you some insight into what you might realistically expect about your customer focus strategy’s likelihood of success.

Assessing Your Strategy’s Potential for Success

This self-assessment is meant to help you evaluate the potential for success of your business growth strategy and its underlying customer focus. Generally, the higher your score in a given question or area, the greater potential your organization has of succeeding in its customer focus efforts—thus generating the growth you want from your business strategy.

The thirty (30) questions address various aspects of the Customer Focus Maturity Model® (CFMM) and 10-Point Customer Focus Framework, which will be covered in great detail throughout this book. We’ve chosen questions that represent a wide range of customer focus critical success factors, but it is not meant to be an exhaustive or all-inclusive list of such questions.

NOTE: There are no right or wrong answers, only the answers that most closely reflect your company’s current state. Some of the questions may sound similar, so please read them carefully to understand the difference they’re meant to capture. You may struggle a bit on some of them trying to differentiate between a specific department or function in your company and the company as a whole. For this assessment, we are focusing on your company as a whole. Reflect the answer that most closely describes your views about the entire company. Once you have answered all thirty questions, there are instructions at the end of the assessment to help you through the next steps.

To begin, for each question, indicate which answer most appropriately reflects your current view of your company (note we use the term “company” to mean both for-profit and non-profit organizations).

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Access this assessment online at www.ANTICIPATEtheExperience.com/assessment or scan the QR code.

Once you’ve recorded your answer for each of the thirty questions, add up your totals for sections A, B, and C, as well as your Grand Total Score. Then look to the comments below to understand the implications of your ratings.

Look at your scores for each of the three areas, and see which area(s) you might have the most room for improving relative to another. You can pay particular attention to the relatively weaker area(s) as you proceed through the book.

You can also look at your Grand Total Score. Generally speaking, we find that companies’ scores for this assessment correspond to the following maturity levels in the Customer Focus Maturity Model® (CFMM):

Anticipate is about identifying selected customers or customer segments, and taking specific steps to move them along your Customer Focus efforts to increasingly more mature levels; with the ultimate goal of gaining the mutual profitability associated with Level III relationships.

As you’ll see in our early discussions, we don’t believe a business strategy, if it truly is intended to drive growth and create value, will succeed unless it is built on the design and implementation of a strong customer focus. To better appreciate why and how organizations miss out on creating value, let’s look at some commonly held beliefs about the customer–strategy connection.

Debunking Some Key Myths

One thing about commonly held beliefs: They don’t always reflect the reality of the situation, or the wisdom to recognize it.

Myth #1: A Strategy Must Inspire Your People

First and foremost, at the heart of, and running throughout, any worthwhile business strategy must be the goal of creating customer value. It’s not the shareholders, C-level executives, or board members that tell you whether or not your strategy was successful. It’s your customers—and the decisions they make each day about your products and services and those of your competitors—that determine your strategy’s success. It’s those customer decisions that translate into sales, profits, and your ultimate return on investment. A good strategy must and should inspire your people—but it first must inspire your customers to act. If it doesn’t, then you end up with an inspired organization that isn’t as successful as it wants to be. If your desired end state is to be happy or inspired, regardless of your business’s success, then you don’t need a strategy. It’s pretty easy to end up happy, but broke.

To make customers act, an effectively designed strategy must recognize that growth isn’t about finding new customers for your products and services as much as it is about finding new ways to create value for your customers (both existing and prospective customers). That value often comes from being able to identify and meet the customers’ unmet, unstated, and unknown needs better than, or before, your competitors do. And that ability comes from building and leveraging a relationship and sense of partnership with a customer that uniquely positions you to anticipate future value streams that mutually profit both sides.

Myth #2: Not All Strategies Produce Change

They better! If they don’t . . . why bother?

Without getting bogged down in theory or academic definitions, a strategy is about the decisions an organization makes, that when implemented, create the most value over time. Strategies are about creating new, more productive, faster or cheaper, more unique, or more sustainable sources of value. Their core purpose is to create a future state that’s better than the current state. They are every bit about change!

And that is precisely one of the reasons strategies often fail or underperform in implementation. Companies fail to recognize the extent to which a strategy requires change—change in culture, change in leadership practices, change in customer-facing processes, change in customer decisions, change in employee behaviors, change in business systems, and so forth. Strategies are about anticipating where the next value-creating opportunities might be in the marketplace, determining what changes the company might have to make to exploit those opportunities, and then ensuring the company has the capabilities needed to execute them effectively. We’ll spend a significant amount of time understanding and addressing the change factors—both those that accelerate and those that frustrate—in the implementation of an otherwise sound growth strategy.

Myth #3: Strategies Must Be Achievable

Unfortunately, many organizations first determine what they can afford, or what their current capabilities are, and then use those parameters to shape (limit) their strategic ambitions and choices. So “achievable” often first becomes a question of being affordable or readily doable. We disagree with that thinking in two very important respects.

First of all, no strategy should be developed in a vacuum. A company’s financial capacity must certainly be a key consideration because no company has enough money to tackle all the things they want to tackle at a given point in time. There’s only so much money to go around. But too often the financial considerations come into play before the rigorous market considerations, or they’re considered simultaneously. Either way, the outcome is usually a strategy that was based more on affordability than on market opportunity.

An effectively designed strategy must first be based on an unrestricted, blue-sky search for the most promising market opportunities or investment options we might pursue. Some of those options might be totally out of reach financially, but they should still be on the long list of strategic possibilities. Once that long list is developed, then financial considerations can come into play to help prioritize which of the options on the long list we can afford to pursue. It’s a cart-before-the-horse kind of situation. We shouldn’t look at what we can afford first and then look for options that fit within those financial parameters. We should develop our list of most optimal options first, and then see which ones we can afford—which ones have the most favorable cost-benefit value. It might seem like a play on words, but it’s a very real and significant mindset that can mean the difference between a breakthrough strategy and a benign strategy. (See Figure 1.1.)

Figure 1.1 Improving the Flow of Strategic Planning

Secondly, we agree a strategy must be doable, but we also believe it must represent some degree of stretch. It’s better to achieve 80 percent of a strategy that dramatically changes the game for your company or your industry, than to achieve 100 percent of a strategy that creates only modest or minimal change or improvements in your results. If you aim high in your growth goals, you may or may not get there. But if you aim low, you certainly won’t get there. Too many companies talk about game-changing results but settle for incremental tactics or initiatives when building their strategy.

There are many possible reasons companies end up creating a strategy that lacks sufficient stretch. One of the more common ones we see is fear of missing your strategic targets. Sentiments that we’ve heard in more than one strategic planning meeting often sound something like this: Let’s set ourselves up for success and commit to strategic goals that we know we can hit. Who would argue the logic of that? We would!

In 2000, a popular movie, The Patriot, portrayed selected battles of the American Revolutionary War. In one scene, a Continental solider and two of his young sons are staging an ambush of British soldiers. His instructions to his sons, each armed with musket in hand, was “aim small—miss small.”

Similarly, when it comes to a company’s customer focus, far too many companies also aim small. They settle for the low-hanging fruit. Things like customer service skills and recovery techniques, voice of the customer (VOC) programs, customer satisfaction measures (CSM), or loyalty metrics such as net promoter scores (NPS) and others—while playing an important and valuable role—are small hits that usually yield small or incremental wins.

As we’ll discuss, an organization’s ability to achieve great things with its strategy will depend on its willingness to commit to a customer focus that stretches well beyond these and other incremental steps.

Myth #4: Strategy Defines a Desired State or Vision

This myth is somewhat viable but not sufficiently true. The business journals are stacked high with examples of strategies having a compelling vision or desired state but where that vision was only partly or minimally achieved. Just as important as that desired state or vision, if not more important, is that a strategy must also define a roadmap for reaching that end state. We’re continually surprised by the number of times an executive team will think their strategic planning job is done because they have fully vetted, defined, and justified the company’s strategic direction. Then they mistakenly assume they can just “turn it over” to the next level of management to implement it. Effective planners must also focus on the doing, or execution phase, of their strategy. Similarly, those who will be tasked with managing the execution should have involvement in the defining and planning of it. Far too often, those who plan and those who execute are separated by two discrete processes. An effective strategy should focus on implementation as much as it focuses on planning.

The same challenge often exists in the company’s customer focus. We have seen numerous companies launch a specific customer-centric practice or an initiative du jour only to see it die on the vine. Among the myriad reasons or causes for false starts or short-lived initiatives, common causes typically include:

• Not engaging the customer before designing and/or launching the initiative.
• Not ensuring everyone internally is aligned and equally motivated to support it.
• Not knowing what to do with the results or not having a longer-term plan or process in place for continually leveraging the effort.
• Not anticipating or dealing with the types of resistance or obstacles one might encounter.

These so-called execution derailers create problems that many companies don’t anticipate and can’t overcome or effectively manage. As a result, implementation of their customer-centric initiative, or their strategy in general, fails or falls short. In sum, you need a solid customer focus to shape and drive your strategy, and you need to be a great implementer of both.

Any source of competitive advantage that is not based on doing something truly unique, wonderful, and imaginative for customers, is simply going to disappear.

—Gary Hamel, named by Fortune magazine as “the world’s leading expert on business strategy”

Customer Focus—One Part Plan, One Part Roadmap

An effective business strategy must first and foremost inspire your customers to act. It must produce a change inside and outside that is more valuable to your customers than the current state. It must represent an achievable stretch. And it must include both the desired new end state, as well as a path for getting there.

Over the years, we have come to recognize that any customer-centric business strategy generating any amount of success has contained the same 10 key elements. These 10 elements have proven to be critical for both effective design and effective implementation. And the degree of success for a given organization’s strategy depends on two variables around these key elements. Those two variables are:

In the chapters to come, we’ll use our 10-Point Customer Focus Framework to illustrate the key steps, techniques, and examples companies use in each element to create a clear and compelling linkage between their customer focus and broader growth strategy. This framework, in effect, provides the template for a solid customer focus plan.

The 10 elements are presented in Figure 1.2. We have listed them in the most logical order such that each subsequent element builds on the prior one. Please note, however, that in practice we have seen many different sequences followed. We have even seen some companies try to skip one or two particular steps—only to learn a tough lesson from it later down the road. More on some of those lessons later.

Figure 1.2 10-Point Framework for Customer Focus

As for that roadmap we’ve been placing so much emphasis on, a company typically goes through different stages or levels of success in terms of implementing its customer-centric strategies. Using our Customer Focus Maturity Model® (CFMM), we’ll show you the three main stages (maturity levels) of that implementation journey, the tips and traps (lessons learned) of each stage, and suggested techniques and examples to move the organization from one stage (or level) to the next. The basic version of the CFMM is shown in Figure 1.3.

Figure 1.3 Customer Focus Maturity Model®

Our CFMM is based on more than two decades of working with various organizations in the design and implementation of their customer-focused strategies. It is based on the efforts, results, and learning of those organizations over time and describes the path or journey most organizations take as they seek to put customers first among their business priorities. The model is used to identify the drivers, opportunities, and techniques needed to increasingly optimize an organization’s customer-centric strategy by continually progressing until they reach Level III, which represents optimal profitability for both customer and supplier.

The model uses four dimensions to define the customer–supplier relationship: the supplier’s approach to the relationship; the customer’s view of the value provided by the supplier; the types of customer–supplier connections involved; and the supplier’s maturity level in terms of leveraging the total relationship into mutual profit growth.

The model uses three maturity levels (Levels I, II, and III) to describe and evaluate the techniques used in, and the interactions between, each of the four dimensions—and the resultant impact on mutual profitability at each level.

Our ultimate goal is to show you the benefits of and the way to achieve a Level III customer focus. This is the level where your organization operates as an end-to-end process that exists for one sole purpose: to anticipate, deliver, and profit from creating customer value. A level where everyone in every function is aligned—from the executive level to the entry level—and from employees who face the customer to employees whose faces you never see, around that one common purpose: developing a culture that connects the things going on inside your company to the things going on outside—both with your customers and your suppliers—to create a new way of viewing and leveraging your entire value chain.

Both the 10-Point Customer Focus Framework and the Customer Focus Maturity Model® will be used to guide us through the planning, design, and effective implementation of a truly customer-centric business strategy. As such, we will move back and forth between the two models frequently, showing how and when companies deploy a part of the framework to improve a certain level of customer-focus maturity or how they apply it to get to the next level of maturity. In general, the two models map together as shown in Figure 1.4.

Figure 1.4 Two Models for a Customer-Centric Business Strategy

In the next chapter we will begin with the strategic drivers that should, but too often don’t, form the basis of starting any customer-centric strategy or initiative.

1 Scott Glatstein, “Why Strategies Fail: Bridging the Gap between Thinkers and Doers,” MWORLD, Fall 2008; The Journal of the American Management Association, Volume 7, Number 3, page 26.