Developing an outside-in perspective requires more than just a look at market research or customer insights. In fact, today’s possibilities of digital communication make it much easier to access insights into your customers’ behavior and their needs. But the technology is only leading the way, it is not the whole solution. Really listening to customers means first finding out the actual problems they are dealing with. Data itself will not give you the essential answers, if you are not asking the right questions. Secondly, the outcomes may force you and your employees into new business strategies. Adapting to your customer’s needs can be the starting point for a crucial creative leap. That is why developing a customer viewpoint is a journey your entire company has to embark on together.
According to the outside-in approach conceived by Ranjay Gulati at Harvard Business School, this transformation to customer centricity can be seen in four stages. Each stage works by itself and is successfully practiced by many companies. But only the fourth stage leads to true economic evolution.
1. Stage: Companies claim: “If I build it, they will buy it”
On the first level, companies are generally focused on emphasizing their technological brilliance and the product benefits – without taking potential customers’ needs into account. One example for this stage is the story of Sony. The company was a successful hardware manufacturer as well as music producer and distributor back in the pre-digital era. When digitization began, Sony itself developed the compact disc and transformed their hero product, the Sony Walkman, into a portable CD player, the Discman. So far so good – at this time they were probably the leading driver of the music industry. But when the digital transformation of the music business arose, music was compressed to mp3 and illegally exchanged via the internet. Sony did not seize the chance to create a leading music ecosystem. In fact, they decided against developing a MP3 player to not cannibalize other Sony businesses.
This episode teaches us how focusing on product without being open to customer needs prevents that crucial creative leap to new business models. The rest is history: Originally far away from the music business, the IT company Apple took over with their ecosystem of iTunes and iPod.
2. Stage: Companies understand: “People are different. So are our customers”
By level 2 companies are using a customer centric approach and begin to understand their customers. They adopt first approaches toward segmentation. To achieve that, market research tools help them to get customer insights. Understanding the segmentation of different target groups is essential for product communication. And for now, these findings mainly apply to their sales efforts. But the main problem here is: Companies often remain here, in the belief that this is all they need to do in terms of customer centricity. They don’t apply the outcomes of their findings to their product development or business strategy.
To be clear: This is still more or less an inside-out perspective. To really change perspectives, companies have to ask the right questions. As Henry Ford already knew: The customers won’t tell you the solution. You have to listen closely to understand needs they might not even be aware of themselves. To return to the example of Apple, that’s what the company realized when it launched its iPods in a multitude of colors, shapes and sizes. The product itself, not just the marketing messaging was tailored to actual customer needs.
3. Stage: Companies implement: “Understanding is more than listening”
Allowing real transformation, companies evolve from stage 2 to stage 3, which affects both the company’s actions and its philosophy. True customer centricity means to be aware of the customers’ issues and to actively search for ways to address them. It also involves the new task of communicating this awareness. From here on, the business focus shifts from selling products towards providing solutions to customer problems.
This passage from insight to real action is a major operation, rendering strict divisions of departments and functions redundant. Most companies are typically divided into their internal silos of product development, communications, marketing and sales. Knowledge about the customers’ needs gained from digital marketing methods like social listening is valuable to all of these departments and needs to be exchanged. Therefore it is fundamental to not only obtain insights, but also to implement them in all business areas and dare to question the current state.
A good example is Netflix, who started their business by renting out DVDs via mail dispatch. When movie streaming became popular and they observed that customers preferred to download movies, even illegally, they changed their business model to a legal online streaming platform. From now on, their customers had access to the entire film library – even for a lower monthly fee. In effect, they cannibalized a part of their own business by providing a new way of distribution, meeting their customers’ demand for a legal way of streaming movies. And it was very successful: Now Netflix has more than 135 million subscribers worldwide.
4. Stage: Companies are truly “Creating a customer experience”
In stage 4 the company focuses entirely on delivering solutions to customers’ problems. To achieve this, they tap into all necessary resources internally and using a network of partners. Again, take Netflix: they started out by only distributing other people’s content over their online streaming platform. But the knowledge they amassed through the platform about their customers’ streaming behavior and preferences made them predestined to become producers themselves. By successfully partnering with production companies, broadcasters and marketing agencies, they are now able to provide content tailored to users’ needs and viewing habits. That makes Netflix a prime example for true customer centricity: They offer a perfect solution for customers – whether the content is theirs or produced by others.
In the evolution to complete customer centricity, there is a lot to learn. The transformation affects many different aspects of a modern company. For example, the change in perspective to outside-in makes a company much more open and collaborative. Opening up also means to internally question your own entrenched structures and externally to be bold and explorative. Digital tools like discovery campaigns are a great way to examine your own strategies. They can explore questions like: Am I addressing the right people? Do I have the right messages? At the touchpoints of digital communication you can reach your customers, but also form a connection between their issues and the relevant solutions. However, to really make your customers engage with your solutions you need to meet them as equals and communicate how you are listening to their issues. On this journey, we accompany you in every stage and meet you wherever you’re ready to implement customer centricity.