Copernicus, Customers and Companies – how to be customer-led

 Hello
 
On Thursday 24th June we held our second Forum of the year. A more dramatic way of putting it is that last week we held our first book launch in a 21+ year history of The Foundation.

The book is The Customer Copernicus. As Copernicus showed us the Earth is not at the centre of everything but peripheral to the sun, so we argue against a self-centred view of business and for one that has organisations peripheral to their customers, who are central.

It’s common for people at work to think their employer is what matters most, treating customers, competitors, colleagues and communities in ways that have to fit around the business, with the CEO as a sort of spiritual leader and shareholders a bit like gods.

It is less common to see customers and their decisions as having the power, with customers central and companies circling around them, vying for their attention.

Just as Copernicus found, the challenge with this way of thinking is that it goes against accepted wisdom, running contrary to widespread beliefs. That makes it hard to establish the ideas and even harder for businesses to work like this, putting customers first, even though when they do, the business does very well indeed.

To bring the reality of this thinking to life, we spent the evening with people who have first-hand knowledge of customer-led success, adding vivid stories and visceral experience to words on a page.

 A full summary of the conversation will be with you in a small number of weeks, and a video of the 80 minute discussion is here. But if you want the headlines and you want them now, then for us at The Foundation, they go like this:

• First with the framework around what a customer-led success is and how an organisation becomes one

• And then what our guests said that brought these ideas to life

The Customer Copernicus Framework – How To Be Customer-Led

Some companies are great for customers – not only do they care but they change whole markets to work better for the customers they serve. Think of Amazon, easyJet and Sky. They make things easier and improve what really matters – obvious, surely?  They have also enjoyed huge business success, growing and making plenty of money.

The Customer Copernicus answers the question that follows – if it’s obvious and attractive why is it so rare? And then it answers a second question, because Tesco, O2 and Wells Fargo were like this once. Why, having mastered it, would you ever stop? Because all three did, and two ended up in court.

In The Customer Copernicus book we explain how to become and how to stay customer-led, making things better for customers by going first, into uncharted territory. We tell the stories of 18 different organisations who have each become what we call customer pioneers, a shorthand description of the kinds of customer-led successes at the heart of our work.

The first thing we learned was that the crucial element explaining it all is belief – people’s shared belief about what matters inside an organisation, not a clever measurement technique or a magical structure. It is cultural but more precise than just ‘a customer-led culture’.  Building the relevant beliefs takes a particular kind of leadership, helping people across an organisation change deeply held shared-but-unspoken assumptions…

• From a starting point that is natural but not customer-led, based on looking from the inside-out, prioritising the organisation’s success, targets and agenda over that of customers

• To a belief system that is not natural, where success is defined by making things better for customers having understood what matters most to them, beliefs that presume doing well for them will also work out well for the organisation. These beliefs are outside-in

We learned that the journey from inside-out to outside-in goes through four stages

1. Burningness. Organisations only start this journey when the people involved feel burningness – the current situation is on fire, conventional action untenable if they are to succeed. Burningness has three possible causes – pain, fear or ambition, and that is in descending order of effectiveness. Pain is most commonly good at creating these conditions because things are going wrong, visibly, viscerally, now. No one can argue that action must be taken that is bold. Fear is a step less convincing because things are fine now, it’s just that they are clearly going to get worse at some point in the future. Ambition is the least likely cause of burningness to work, not because it is weak – far from it – but because ambition has to come entirely from within. There is no crisis visible and instead the leader or the leading team has a burning desire to reach somewhere further on, somewhere seriously stretching.

2. A first Moment of Belief. Stories and the like don’t change people’s shared beliefs. Only seeing something real that succeeds, clearly contradicting the prevailing assumptions, is strong enough to start the process. In this case it means seeing a customer-led initiative, obviously good for customers but clearly costly and risky for the organisation, actually work. Only the presence of burningness got them to try it in the first place. Seeing it not just benefit customers but also work for the organisation is convincing and challenges current shared belief. We call this a Moment of Belief, like a moment of truth but with the effect of shifting at least some individuals’ unspoken assumptions.

3. A flow of Moments of Belief. Having seen something counterintuitive work once, confidence grows that something similar might work again. So a second initiative is tried with a little more confidence. When that works the third follows and so on, eventually broadening the scope of customer-led activity. People across the organisation see a pattern emerging – ‘every time we do something great for customers it works for us too’. It becomes the way to earn approval, get a pat on the back or promotion

4. Sustaining the Outside-In belief system. Once the organisation is a customer-led success the shared beliefs still need attention. It remains unnatural to have widely shared assumptions that customers really do come first, ahead of hitting the quarterly numbers. So the leaders need to pay attention to their organisation’s belief system and its health, and ensure a continual flow of Moments of Belief to keep showing people ‘this is the way we do things around here.’

What our guests said that brought this to life – the headlines we took from the conversation

1. Tim Mason talked about Tesco’s journey in a way that brought the first two steps to life – Burningness and Moments of Belief. Tesco was not a relaxed place to be. It was driven. Obsessed about customers, paranoid about competitors, as Tim put it. He described the decision to invest in Clubcard, an idea whose principal value would be to tell the business more about what its customers did. Nice to have you might think – and the cost was £100m a year, one fifth of Tesco’s profits at the time. The rationale was based on the belief that MUCH better customer information couldn’t fail but to lead to a much more effective business. That’s a lot of money to spend on a largely unproven idea, but not if your ambition to lead by being better for customers is burning.

He also told a story that provided a Moment of Belief relating to the eventual value that Clubcard provided. Tesco was early to launch a range of Free From food products, and sales were disappointing. But that was as judged by looking only at Free From products. Clubcard gave them another way to see what was going on, and it showed that there were two types of Free From buyer. One was new to Tesco and they bought other things too. The other was already with Tesco but even they started to spend more than they had done before. On a customer basis, Free From was adding tremendous value, something visible only to a business capable of seeing customers not just products. Belief that this was a good way of doing things deepened another notch as Tesco’s business performance continued to go from strength to strength..

2. Deb Corless described what it felt like to run a crucial customer-facing part of the O2 business on two occasions – once when the business was at its customer-led best, the other when it had succumbed to natural inside-out pressures and become normal again. Her team in the first phase was responsible for retention. In a traditional mobile business, as O2 was for a while early on in its journey, they fielded calls from customers trying to leave, and they gave them offers not available normally to persuade them to stay. Customers hated the practice and O2, to its massive credit, bit the bullet and led on changing the model, promising existing customers they would always get the same deals as those who were new. This made running the retention team’s call centre a dream. Customers loved it and colleagues felt they could go to work and do the right thing all day. Hugely motivating. The business flourished as the bet more than paid off.

Deb left to work for another mobile business, 3, and returned five years later. What she found was very different. The global financial crisis had hit Telefonica, O2’s owners, hard. They had to prioritise short term financial performance and were considering selling O2, giving a further need to push profitability. The call centres were outsourced to South Africa and both the approach and performance suffered. Deb could see how it had come about – it wasn’t as simple as greed or hubris. It was natural, but it was also clearly intensely disappointing and shows how hard it is to retain a customer-led ethos through commonplace business ups and downs.

3. Mikael Sørensen brought to life what being CEO at Handelsbanken in the UK looks like, maintaining customer-led beliefs that have been in place for 48 years in a row so far. He is well aware of the need to be constantly active to retain the firm’s highly unusual ways of working. Customer relationships are managed by branches, close to customers, which means decisions including whether to lend and what prices to charge are made by the branch. All sales targets have been removed and teams look instead to offer customers the best possible advice for them, even if it’s not best for the bank in the short term.

This sounds clear enough, but the shared beliefs of people in the business only come from what’s done every day, not just reading words like these. Two examples made what this means clear. One strong Handelsbanken principle is decentralisation, and that means making decisions as close to customers as possible. Mikael described what happens if someone asks him to make a decision for them. He says no and asks them for their view. And whatever it is, that’s what they go with, no matter whether it’s a good one or one that’s terrible. If he over-ruled someone using his position he would be acting counter to Handelsbanken’s beliefs, and those beliefs would change to fit reality not theory. The second example related to sales targets and someone in a branch starting to keep track of sales, not just judging performance solely by the cost/income ratio that is the business’s only quantitative goal. He saw it and stopped it immediately – as he said, you have to, otherwise something like that will spread. The enemy in this case is just common sense and second nature. Keeping track of sales seems sensible and maybe it plays to our competitive spirit. So the CEO’s role is to keep the firm’s beliefs on track in the face of such natural enemies.

That’s one way of summing up what went on. If you made it then we hope this is a useful reminder. If you weren’t there then hopefully it whets the appetite for a more rounded record of what happened that will follow soon. Or maybe for the book, The Customer Copernicus, itself?
 
If you’d like to ask us more or share your ideas then do get in touch, on Twitter@TheFoundation

Hope to see you soon. And hope to see the world looking a step more Copernican soon too!