Last week I met with executives from large traditional manufacturing firms. They asked me what the ideas of social business might mean for them. What kind of changes might be ahead?
There is a saying that without customers, you have no business being in business. Accordingly, customer focus has been the dominant idea in business since the 1960s. Businesses have focused on customers as an audience for products, services and marketing messages.
But unfortunately, many businesses consistently miss the big shift: customers have transformed from an audience to actors. Firms don’t create value for customers. The way customers use the products and services creates value. It is a process of co-creation, not consumption. There are no consumers any more!
Many troubled companies still focus mainly on the wrong things. Their turnaround efforts don’t typically involve the customer. Managers streamline the businesses mainly through cutting costs; they re-engineer the internal processes to make them more cost-efficient. But they regularly leave out the most important part of the equation. They don’t start from the outside, the customer, and work in. They don’t create customers first. Instead, they work from the inside out. Many of these initiatives save money, but don’t affect the revenue side.
There is a revolution going on at this very moment as a result of the new interactive tools and social platforms. Every organization, no matter how big, now has for the first time the ability to interact directly with its end customers. Every company has the potential to consolidate customer insights and to gain a much better picture of who its customers are, how customers use the products, which products they discuss, and where they discuss them?
The problem for many traditional businesses is the definition of who the customer is. The real customer for any business is the end user of the offering, the person or company who uses the product, not the ones who distribute the product to the user or even, necessarily, the ones who pay for it. If your actual end customers don’t value your product or service, sooner or later you’ll be out of business. The length of time it takes for customer dissatisfaction to put you out of business depends on the number of steps, the degree to which you are away from direct customer contact. This was one of the main concerns that the executives raised in our discussions.
Many companies I met had delegated customer interaction to their distribution channel as part of the overall value chain set-up. Very often the distribution channel “owns” the customer in exchange for the services given. The problem here is often letting that channel withhold information about customers as part of the trade-off.
In most markets, the demand for a direct relationship between producers and customers becomes more and more intense as the channels of distribution become shorter and more varied.
The marketing and sales departments used to be the customer’s proxy, with the exclusive role of interpreting changing customer needs. Social business necessarily transforms the marketing function and sales specialists by formally integrating the customer into every part of the organization. The customer of tomorrow interacts with, and should influence, every process.
For routine retail transactions, as we have known them, such direct customer influence may seem all but impossible. But improvements in interaction technologies and companies’ ability to handle big data, and customer-specific small data make it feasible to claim that the number one thing shaping the performance of the traditional manufacturing enterprise is the interactive capacity between producers and customers.
The good news is that I have seen a new breed of executives coming to power. The people I meet are technology-literate. They are not only the early adopters of the next hot gadgets. They are pragmatists. They are frustrated by antiquated information and CRM systems, firewalls and organizational silos that get in the way of streamlining customer-facing business processes. “There are no back offices any more”, said one of the executives. “All processes need to be customer-facing in order for us to be competitive and serve the new active customers.”
The Internet is not a simplistic agenda reserved for the Internet companies any more. Perhaps we should accordingly stop talking about social business. The timing is now right for those leaders who are willing to doubt accepted wisdom regarding how things are done and are prepared to experiment and interact with their customers in new ways.
“There is no business without rich customer interaction,” as one executive put it.
In the end it is about being closer to things that matter.
Thank you Tore Strandvik
Developing more effective systems of digital engagement.