Ability of an Organization to Term Paper
- Length: 40 pages
- Subject: Business
- Type: Term Paper
- Paper: #26969335
Excerpt from Term Paper :
Customer centricity then can also have a significant impact on the perspective an organization has of its market and the opportunities inherent within it and other, tangential and territory market areas as well. This aspect of blue ocean strategies being driven by customer's perspectives, preferences, unmet needs and wants further underscores its inherent value and also its usefulness from a strategy perspective. The ability to find uncontested markets, which is a key aspect of blue ocean strategies, is predicated on how customer-centric an organization is as well (Kim, Mauborgne, 2004). The concept of a blue ocean strategy is one of finding an untested market space and exploiting it not through massive amounts of Research & Development (R&D) spending, but through the development of innovative approaches to anticipating and responding to current and future customer needs. As a result, blue oceans or uncontested markets are often found by more customer-centric organizations, versus those that are product- focused and organized around transactions. Companies who have a high reliance on a product-centric approaches to managing their businesses run the risk of entering "red" oceans or those markets where price is used as a differentiator and often loss of profitability results (Kim, Mauborgne, 2004).
Whether customer-centric organizations can attain consistently higher levels of profitability varies by their industry, process efficiency and overall ability to generate greater sales from products and services aligned to user's needs. Customer centricity alone will not drive profitable revenue growth, yet it does create a culture that can attain more alignment to customer' requirements, lead to greater customer intimacy, and define greater levels of mutually agreed on growth. In effect customer centricity sets the stage and mindset for embracing and even aggressively seeking out change in the name of customers' needs.
As a result customer-centric organizations often have an organizational structure that reflects their centricity on how their customers think. They have morphed their organizational structures into segment-based and market-based organizations. Examples of this include Dell Computer Corporation's focus on small & medium business, K-12 Schools, universities, and enterprises or those organizations with sales over $1B in revenue. Organizing their functional areas by customer segments has given Dell the ability to create domain experts in each area. These domain experts continually study the key buying criteria of each customer audience in their customer segment of responsibility, concentrating on how to guide Dell into the product and services direction to stay relevant to prospects and customers. This customer centricity is critical for Dell in their rapidly shifting product lifecycles, as the underlying and future needs of customer needs guide product development on a continual, nearly daily basis at the computer manufacturer to ensure the company's revenue targets can be attained through new products.
Dell's culture is an interesting one from a customer centricity standpoint as a result. On the one hand they are highly attuned to production efficiencies, lean manufacturing, and their build-to-order strategies for producing highly customized PCs and laptops. On the other they have designed an entire organizational structure to be aligned to customer segments, with specific focus on the unmet needs, preferences, wants, and future possible requirements of users (Selden, Colvin, 2004). A hybrid organization that blends production efficiency with customer-centrism, Dell is typical of many companies who compete in high tech, software and other areas of rapid technological change where anchoring the organization and its value to customers' perceptions and requirements of value, preferences and needs are important. Best practices in customer centricity then within high tech organizations is more predicated on keeping a balance on production and lean manufacturing efficiency and defining organizational structures that can compensate between both, achieving equilibrium (Strikwerda, Stoelhorst, 2009). This equilibrium is specifically accomplished by making each production process, each manufacturing lean strategy and continual process improvement requirement all centered on its contributions to customer satisfaction and customers attaining their goals. Even in hybrid organizations where manufacturing and customer centric organization structures have been created to reflect the company's segmentation strategies, aligning each area of manufacturing to be as responsible and accountable as possible is key.
Customer centricity will also dictate if an organization will choose to be myopic and concentrate only on the internal factors critical for their success, and in so doing perpetuate an inward-centric mentality, or choose to concentrate on the external factors and their accountability for making results happen for customers. From an organizational focus perspective, customer centricity requires senior management to model the behaviors they expect the organization to adopt and eventually engrain into the daily performance of the processes, procedures and tasks to be done (Chakravarthy, Lorange, 2007). When this occurs the shift moves away from metrics that approximate the market dynamics to really knowing exactly what is happening in the market. The shift from attempting to quantify the market from the outside is transformed into actual relationships with customers. Employees are customer advocates in organizations that have a highly customer centric focus and mindset. The focus is on customer satisfaction and growth through customer loyalty beyond transactions. As a result, organizations tend to place much greater emphasis on valuing the relationships and insights gained from conversations with customers over any amount of internal, and often distanced, analysis. Changing the organizational focus of an organization however is exceptionally difficult and requires that senior management concentrate on the most critical pressing tasks to keep their companies customer-centric over time. Removing outmoded procedures that may get in the way of listening to customers, getting rid of outmoded ideas of how to manage customer service, replacing no longer relevant support and service programs, and also removing any and all factors that can deter customer data driving innovation must be addressed by senior management for lasting change to occur (Chakravarthy, Lorange, 2007). A customer-centric organizational focus requires continual vigilance and a continual level of support from senior management to stay as a predominant force in an organizational culture (Chakravarthy, Lorange, 2007). In comparing those customer-centric organizations that excel in every aspect of their businesses, the delineation of minimally acceptable vs. exceptional performance is in the ability to create a passion for customer centricity that is not easily replaced. The role of senior management is crucial in this regard with the celebrating of customer-centric, often selfless acts on the part of employees, being critical for the culture to continue growing and strengthening itself over time.
In evaluating the differences between product-centric and customer-centric organizations the use of performance metrics is markedly different. In product-centric organizations there is total focus on profitability per product line, costs and P/L by product group, and a focus on getting as many products out as possible in the shortest period of time. This product-centric focus tends push out any metrics having to do with customers as a result, and often leads to bundling products, attempting to overstate the performance and value of features, and the inevitable reliance on price over value (Nolan, 2009). Yet in a customer-centric organization the metrics are more attuned to lifetime customer value, customer satisfaction measures including the use of SERVQUAL, and the development of ongoing customer relationships that are reflected in lifetime customer equity as well. In short there is no single area that more starkly and completely defines the differences between a product-centric and customer-centric organization than the metrics chosen to measure performance over time. Product-centric organizations also over time tend to celebrate milestones that are entirely focused within the organization, with a new product launch being a critical one. Instead of celebrating a customers' first use of the product or better yet, the first customer satisfaction survey or questionnaire received with a perfect score, product-centric organizations develop a more insulated view of the world that perpetuates cause-and-effect thinking. This cause-and-effect thinking is driven by the dollars and time spent on the product driving it into existence with customer's adoption being seen as a given. In fact celebrating the overall success of a new product when it launches and is adopted by customers is more indicative of customer-centric organizations as it means finally the connection has been made from all the internal efforts paying off with customers' needs being met. Customer centricity then from a product development standpoint is all about racing to stay in touch with their evolving, sometimes rapidly changing needs and delivering a product that reflects those requirements (Nolan, 2009).
Finally the differences between product-centric and customer-centric organizations become evident in how information and knowledge is used. In customer-centric organizations knowledge and intelligence are used to make every interaction with the customer as insightful and useful as possible. Intelligence and information within the company is used to attain higher levels of customer satisfaction and greater levels of customer loyalty. The ability to take all available customer information and create an agile, market-driven architecture that can respond quickly to their changing requirements is a competitive asset (Strikwerda, Stoelhorst, 2009). In product-centric organizations however information of all forms is used for customer control and compliance. The use of advanced techniques for managing customer variation…