‘Why Customer-Centricity May Be Killing Your CX Strategy’, by Clare Muscutt
Writing one of my latest keynotes gave me a chance to explore why customer experience leaders focusing on a multitude of the 'wrong' things in an era of technology and digitisation is killing the profession. One of the 'wrong' things, in my opinion, is the profession's obsession with trying to change organisational culture and preaching customer-centricity. Allow me to explain…
I cannot count the number of times in coaching 121's that Women in CX members have cited organisational culture as their number one barrier to making change happen.
… Or the number of times that I've been told that the frustration of trying to change the way organisations think and behave about customers is affecting their health and wellbeing.
Perhaps it's time to stop banging our heads against this particular metaphorical wall. Perhaps we’ll stand a greater chance of success if we work with the business and its current culture instead.
Perhaps we would stand a greater chance of creating change from the inside out by taking on the much simpler challenge of making systems and processes people-focused.
Or even by stepping into the breach and developing the #1 capability being listed in today's CX job descriptions: customer experience design for customer-led innovation.
In this article, I will explore:
The problem with customer-centricity
Understanding it as a concept
Examples of successes and failures
The culture-CX paradox
The myth that CX correlates directly with culture
Alternative orientations to customer-centricity
Orientation in action with product-led vs customer-led growth
The optimal solution for CX
My suggested questions to ask yourself
As always, I’ll include case study examples and further reading where relevant (and a sprinkling of my own thoughts on the matter too!).
The Problem with Customer-Centricity
In the intricate world of business strategy and customer experience, customer-centricity has been hailed as the go-to approach for many CX professionals and organisations alike. The philosophy that positions 'the customer at the heart of every decision' has enjoyed widespread endorsement and has been implemented in many organisations globally. However, a deeper analysis reveals that an excessive emphasis on customer-centricity could potentially create a myopic view of the business landscape and, ironically, hamper the effectiveness of your CX strategy.
While the term ‘customer centricity’ is widely used in business discussions and strategic planning, some critics have dismissed it as an overused buzzword or even ‘bullsh*t’. Here are a few reasons why some might take a critical view:
1. Misinterpretation and Misuse of the Term:
The concept of customer-centricity is often misinterpreted or misused. Some businesses declare themselves to be customer-centric without truly understanding or implementing the systemic changes required to be truly customer-focused (Fader & Toms, 2020). In such cases, ‘customer centricity’ becomes more of a hollow slogan than a real business philosophy, which could lead to scepticism and dismissal of the term.
2. Inconsistencies Between Claim and Action:
Many companies claim to be customer-centric, but their actions do not align with their claims. They might still prioritise their product or service, sales targets, or short-term profits over the needs and interests of their customers (Shankar, 2020). This inconsistency can make the term ‘customer centricity’ seem meaningless or deceptive.
3. Overemphasis on the Customer:
The focus on customer centricity can lead to an overemphasis on serving customers at the expense of other important aspects of business such as employee well-being, product innovation, or operational efficiency (Zomerdijk & Voss, 2010). Critics argue that this narrow focus might not always be beneficial or sustainable in the long run.
4. Neglect of Non-Customer Stakeholders:
While focusing on customers is important, it should not result in neglecting other stakeholders such as employees, shareholders, or the community (Freeman, 2010). An overly customer-centric approach could lead to imbalances that might harm the organisation's overall health and sustainability.
5. Complexity and Difficulty in Implementation:
Implementing true customer centricity is complex and challenging. It requires deep customer understanding, cross-functional coordination, a long-term perspective, and often significant changes in organisational structure, processes, and culture (Galbraith, 2005). This complexity and difficulty can make some sceptical about the feasibility and value of customer centricity.
While these criticisms have some validity, it's important to note that when properly understood and implemented, customer centricity at the operating model level can offer significant benefits in the right context. But let's not pretend that's what most people are thinking/doing when they talk about customer-centricity in a CX context.
Read on to find out why it's more a question of striking the right balance between meeting customer needs and maintaining a sustainable and successful business.
Understanding the Concept
Businesses are in agreement on the fundamental importance of providing experiences for customers that meet or exceed customer expectations, but few manage to deliver against them. Driven by this understanding, organisations have attempted to gradually gravitate towards a customer-centric model.
The basic tenet of this approach involves grounding every business decision and action in customer needs and preferences. The customer-centric model has seen many success stories, with companies like Amazon, Apple, Netflix, Zappos, and Starbucks becoming synonymous with customer-focused strategies.
However, while customer-centricity is a laudable goal, it's crucial to approach it with a nuanced understanding. Not all businesses can – or should – employ this model to drive success. Many organisations, including Sears, Kodak, Nokia, and Blockbuster faced struggles despite implementing a seemingly customer-centric strategy. These failures often originate from an inability to truly comprehend and cater to ever-evolving customer preferences and market trends.
Hence, why the lesson here isn't about the supremacy of a customer-centric approach, but about the necessity of finding equilibrium among customer needs, organisational capabilities, and the dynamic business landscape.
This, my friends, is why I think the role of CX leaders and professionals needs to evolve. At present, CXers aren’t seeking equilibrium, but dominance of the customer agenda above all.
Case Study Examples of Customer-Centricity Winners
Amazon: Amazon is often touted as a prime example of customer centricity. The company's mission is "To be Earth's most customer-centric company." They constantly innovate and improve their services based on customer feedback, such as introducing one-click ordering, Prime delivery, and Amazon Go stores for a frictionless shopping experience (Amazon, 2023).
Apple: Apple's commitment to understanding customer needs and delivering high-quality, intuitive products has made it a leader in customer centricity. Their focus on creating seamless user experiences across devices, along with excellent customer service through Apple Care and their retail stores, further emphasises this commitment (Forbes, 2022).
Netflix: Netflix uses customer data to offer personalised content recommendations, enhancing customer satisfaction and engagement. The company has also been known to make strategic decisions – like their shift to streaming and original content production – based on customer behaviour and preferences (Investopedia, 2023).
Zappos: Online shoe and clothing retailer Zappos has always placed a strong emphasis on customer service. Their policy of free shipping both ways, a 365-day return policy, and a customer service team empowered to go above and beyond to assist customers exemplify their customer-centric approach (Zappos, 2022).
Starbucks: Starbucks emphasises a customer-centric approach in its mission to "Inspire and nurture the human spirit – one person, one cup, and one neighbourhood at a time." They focus on providing a unique, high-quality experience in their stores, and have leveraged technology with their mobile app to provide personalised offers and easy mobile ordering and payment options (Starbucks, 2022).
These companies embody this philosophy not only in their mission statements but also in their product development, customer service, marketing, operating model, processes and overall business strategy. One thing’s for sure, it’s not the job of a CX team or individual to drive this agenda.
Case Study Examples of Customer-Centricity Losers
Sears: Sears was once a retail giant, but it struggled to keep up with the evolving expectations of customers. Despite attempts to refocus on customer service and implement customer loyalty programs, the company failed to understand and adapt to changing customer preferences for online shopping and a modern in-store experience. This resulted in a gradual decline in customer base and eventually led to bankruptcy in 2018.
Kodak: While Kodak was a dominant player in the film and camera industry, it failed to properly anticipate and react to the rise of digital photography – a change driven by customer preferences for instant, reusable, and shareable digital photos. Despite developing a digital camera as early as 1975, Kodak was hesitant to fully commit to this new technology for fear of cannibalizing its film business. This short-sightedness led to a significant loss in market share and eventual bankruptcy in 2012.
Nokia: Nokia, once the world's top mobile phone maker, failed to respond to changing consumer needs and market trends. Despite early advancements, Nokia was unable to keep up with the shift toward smartphones, particularly with the rise of Apple's iPhone and the Android operating system. The company did not take into account the changing customer preferences for app ecosystems and intuitive touch interfaces. Despite attempts to change course, the brand failed to recover its former dominance in the industry.
Blockbuster: At its peak, Blockbuster was the global leader in movie and game rentals. However, it failed to respond to changes in customer preferences for consuming media, such as the rise of video streaming services like Netflix. While Blockbuster did try to launch its own online DVD rental service and streaming services, these efforts were too late and failed to provide the level of convenience and value that customers were receiving from competitors. Blockbuster filed for bankruptcy in 2010.
The above examples illustrate that to be customer-centric requires much more than just a stated focus on the customer. It requires truly understanding customer needs and preferences, the ability to anticipate and adapt to changes in these needs and in the market, and the willingness to make strategic shifts even if they disrupt current business models. Failure to do so can lead to a decline in relevance and market share, and in some cases, the ultimate downfall of the company.
So, therefore, we as CX leaders need to think more broadly about customer orientation in the business, market, and operational context too and check in with ourselves. When we talk about customer centricity, are we using the term correctly to mean aiming to change the business model? When we think of it like that it becomes clear why CXers are struggling.
The Culture-Customer Experience Paradox
The relationship between organisational culture and customer experience is complex yet fundamentally inseparable. A company's culture, comprising its collective attitudes, values, and behaviours, inevitably shapes the kind of experiences it provides to customers. Hence, many businesses attempt to positively influence or modify their culture to enhance CX.
However, such attempts can create more problems than they solve. Cultural change within an organisation is a complex process, often met with resistance. The larger the change we propose, the greater resistance we face. The time, resources, and effort required to drive a cultural shift can divert attention and resources away from immediate and tangible enhancements to the customer experience.
“A company's culture, comprising its collective attitudes, values, and behaviours, inevitably shapes the kind of experiences it provides to customers.”
As a result, customer experience professionals might find more value in focusing on actionable CX-enhancing initiatives that can provide immediate improvements to customers rather than getting mired in the challenging (and frustrating!) task of trying and failing to change the organisational culture.
Hopefully, by now you’re thinking, that in a non-customer-centric business model environment, CX teams and leaders trying to change the way an organisation thinks and behaves is essentially like trying to boil the ocean. Something impossible to accomplish. Read on to find out why culture may be a less important factor in influencing CX than you think...
The Correlation Myth
The CX profession preaches the correlation between culture and CX. However, there are several perspectives that challenge the view that a direct, strong correlation exists between organisational culture and customer experience.
Here are some counterpoints:
1. Multifactorial Nature of Customer Experience:
Some argue that customer experience is a complex phenomenon, influenced by a multitude of factors beyond organisational culture. These could include product or service quality, pricing, external market conditions, and individual customer preferences (Homburg, Jozić, & Kuehnl, 2017). Therefore, even an exceptional organisational culture may not always lead to a superior customer experience if other crucial aspects are lacking.
2. Individual Employee Characteristics:
Although organisational culture can shape employees' behaviours, individual personality traits also play a significant role (Barrick, Mount, & Judge, 2001). Two employees working in the same cultural environment might deliver different customer experiences based on their individual characteristics. Thus, customer experience may not be as closely linked to organisational culture as proposed.
3. Unintended Consequences of a Customer-Centric Culture:
While a customer-centric culture is often touted as beneficial, there can be potential drawbacks. For example, overly focusing on customer needs may lead to negligence of other important business areas such as innovation, operational efficiency, or regulatory compliance (Zomerdijk & Voss, 2010).
4. Discrepancies Between Espoused and Enacted Culture:
This is a biggie. In some cases, the culture that an organisation claims to have (‘espoused culture’) may be different from what is actually practised (‘enacted culture’). If employees do not truly experience the claimed positive culture, the effect on customer experience might be minimal or negative (Hogan & Coote, 2014).
These challenging views underline that while organisational culture is an important factor, it alone may not guarantee a superior customer experience. It’s essential for CXers to ensure a balanced and holistic approach, taking into consideration various other influencing factors.
If you're interested in myth-busting, I can highly recommend reading ‘The Halo Effect: How Managers Let Themselves be Deceived’ by Phil Rosenzweig.
Alternative Strategic Orientations
Beyond customer-centricity, several other strategic orientations offer diverse advantages depending on factors such as industry type, competitive environment, and organisational capabilities.
A product orientation, focusing on the quality and innovation of the product, might be more suitable for technology-driven industries. A sales orientation can provide short-term gains in highly competitive markets, while a market orientation can help organisations stay agile and responsive in rapidly evolving industries.
“Focusing on competitors or operational excellence can provide crucial advantages in specific situations.”
Alternatively, focusing on competitors or operational excellence can provide crucial advantages in specific situations. Emphasising employee engagement and well-being with an employee-centric orientation can lead to enhanced customer service, while an innovation orientation can help stay ahead in industries where technological advancements are key.
I think, more often than not when people talk about ‘customer centricity’, they’re referring to frontline employee engagement, which is directly impactful. Trying to engage every employee who is not customer-facing and hoping for results in customer experience improvement, is not and could be a huge waste of resources.
The following might help you better understand why your organisation is more reticent to adopt customer-centricity…
Product Orientation: In product-oriented companies, the primary focus is on the quality and attributes of the product itself. The goal is to create superior products in terms of design, functionality, or innovative features. This approach is common in technology-driven industries or where companies have a unique technical expertise. Apple's focus on the design and user interface of its products is a classic example of a product-oriented company.
Sales Orientation: A sales-oriented organisation focuses primarily on selling as many products or services as possible, without paying much attention to the needs or preferences of individual customers. This approach may work in situations where there is high competition or when the goal is to sell a large volume of homogeneous products. However, it may lead to short-term gains at the expense of long-term customer relationships.
Market Orientation: Market-oriented companies aim to understand and respond to market trends and changes. They continually monitor and analyse market data to guide their strategies. This orientation is beneficial in industries that are rapidly changing, highly competitive, or susceptible to shifts in consumer preferences. Market-oriented companies are good at adapting to changes in the external business environment.
Competitor Orientation: Organisations with a competitor orientation focus on understanding their competitors and aim to match or surpass their offerings. Competitive analysis and intelligence are central to their strategic decisions. While this orientation can drive companies to improve, it can also lead to an excessive focus on competition at the expense of understanding customer needs.
Operational Excellence Orientation: This orientation prioritises efficiency in operations with the goal of reducing costs and improving productivity. Companies with this orientation often focus on areas like supply chain management, lean manufacturing, and process optimisation. This approach can be effective in industries where cost leadership provides a competitive advantage.
Employee-Centric Orientation: Here, companies focus on their employees, believing that satisfied, engaged, and empowered employees will, in turn, create a better customer experience. This orientation is common in service industries where employees directly interact with customers, but it's gaining traction in many other sectors as well.
Innovation Orientation: Companies with an innovation orientation constantly strive to create new or improved products, services, or processes. They often invest heavily in research and development and encourage a culture of experimentation and risk-taking. This approach can be advantageous in industries where technological advancements or creative solutions are key drivers of competitive advantage.
Each orientation has its strengths and weaknesses and can lead to success if it aligns well with the company's environment, capabilities, and goals. Often, successful companies maintain a balance of multiple orientations. For example, a company may have a strong product orientation but also emphasises operational excellence and customer-centricity.
Orientation in Action
In tech and SaaS, the terms ‘product-led growth’ (PLG) and ‘customer-led growth’ (CLG) refer to two distinct business strategies that focus on different primary driving forces for business development and expansion.
1. Product-Led Growth (PLG):
Product-led growth is a business methodology where the product itself is the primary driver of customer acquisition, conversion, and expansion. In PLG, the aim is to create such a compelling, user-friendly, and value-adding product that it sells itself (Bajwa, et al., 2020). The focus is on product usage as the key driver of customer acquisition, retention, and expansion.
This model is particularly prevalent in the software-as-a-service (SaaS) industry, where free trials, freemium models, or self-service options allow customers to realise the product's value before committing to a purchase. Examples of product-led companies include Slack, Zoom, and Dropbox.
“While both strategies have their merits, the choice between PLG and CLG often depends on the nature of the business, the product, and the market.”
2. Customer-Led Growth (CLG):
In contrast, customer-led growth focuses on the customer's needs, preferences, and feedback as the primary driver of business growth. This strategy emphasises deeply understanding customer behaviour, tailoring offerings to meet customer needs, and continually iterating based on customer feedback (Van Bommel, et al., 2018). The aim is to develop a long-term, profitable relationship with the customer.
Customer-led growth often involves a high level of personalisation, superior customer service, and a focus on customer lifetime value (CLTV) over immediate sales. This strategy is common in industries where the customer decision-making process is complex and requires a high level of trust, like financial services or healthcare.
Comparative Analysis:
While both strategies have their merits, the choice between PLG and CLG often depends on the nature of the business, the product, and the market. Product-led growth might be more suitable for businesses with mass-market products where ease of use and scalability are key. On the other hand, customer-led growth could be more effective for businesses that offer high-value, complex solutions where trust, personalisation, and long-term relationships are critical.
Moreover, these strategies are not mutually exclusive. Many successful companies effectively combine elements of both. They create exceptional products (product-led) and listen to their customers to continuously improve and tailor their offerings (customer-led). For product-orientated organisations, they tend to lack any of the latter and that's why SaaS WiCX members are struggling to influence CX culture the most.
The Optimal Orientation?
The optimal organisational orientation depends on several factors, and there isn't a one-size-fits-all answer. The best approach can vary based on the company's industry, market conditions, internal capabilities, competitive landscape, customer behaviour, and strategic objectives.
Many CX professionals see customer-centricity as the only orientation to aim for and by taking this stance, alienate themselves from the business and its stakeholders. The reality is multiple orientations can co-exist successfully, and you are more likely to succeed by advocating for a blended approach as opposed to a completely different one.
It's also important to note that a balanced approach, combining elements of different orientations, can often be most effective. For instance, Amazon combines a strong customer-centric orientation with an equally strong innovation orientation.
Ultimately, the key is to choose to adopt the orientation that allows the company to create the most value for its customers while achieving its business objectives. Regular review and adjustment of the strategic orientation can also be beneficial as internal and external conditions change. So, stay flexible, everyone!
Conclusion
Customer-centricity, while valuable, is not a magic bullet for business or customer experience success. An overemphasis on this approach may inadvertently undermine your CX strategy. Instead, a balanced and nuanced approach that aligns customer needs with organisational strengths and market trends may be the key to sustainable success in the increasingly digitised, dynamic business landscape.
Instead of preaching customer-centricity and trying to change organisational culture, you might be better off focusing on helping the business to understand customer problems to solve with data, supporting with research on understanding customer needs and spending your time and resources on CX design and innovation instead.
“CX leaders should be striving for balance and aim to increase the level of customer orientation within existing organisational culture, not striving for customer-centricity.” – Clare Muscutt, 2023.
This way, you’ll also avoid feeling like you’re banging your head against a brick wall in an organisation where customer-centricity just doesn’t fit.
Alternatively, you can make the decision to leave and get hired by a customer-centric organisation where you'll never have to worry about stakeholders not getting it.
The key questions I suggest you start asking…
What is my organisation’s current dominant orientation and culture?
How can I work with ‘as is’, not against it, to increase the balance of customer orientation?
What small tangible project can I set into motion to demonstrate the business benefit of better balance?
What change, transformation, or innovation projects is the business working on next that will impact people (users, customers, employees, or stakeholders)?
How can I influence the outcome of strategic projects with the inclusion of considering customer and employee needs?
How can I employ CX/EX research and design to increase the human value delivered by these projects and produce measurable results?
What skills do I need to develop as a CX pro/leader to be most effective?
To conclude, CX leaders should be striving for balance and aim to increase the level of customer orientation within the existing organisational culture, not striving for customer-centricity.
