Ignore your customers (some of the time)
Blog: The Digital Enterprise
“Be obsessed with the customer”, is one of the seven habits of highly successful digital enterprises, highlighted in my recent McKinsey Quarterly article. Firms that understand the meaning of customer obsession have much in common. They make the customer an integral part of their processes, incentivise the right behaviours at all levels of the organisation, and solve problems rapidly. Critically, they also excel at listening to their customers to understand stated and implied needs, using a wide variety of data sources including market research, click-stream & social media. But listening to customers is perhaps the hardest thing to get right. Companies who truly excel at listening also know when to ignore their customers. The iPad story is already well told – consumers didn’t perceive a need for such a device, but that didn’t stop the tablet becoming a whole new product category. But the same phenomenon applies in other categories too. In the banking sector, listening to customers may result in opening new bank branches, as the majority of customers still value proximity to a physical outlet. But opening branches makes little sense in the context of an underlying shift away from branches towards digital channels. In healthcare, consumers want improved service levels but are unlikely to describe the benefits of remote health monitoring and services delivered over video-conference. These examples suggest three situations when ignoring your customers can make sense:
Firstly, when planning a product/service that doesn’t meet a perceived need. The iPad created a need that didn’t exist before.
Secondly, when planning a product/service that challenges customers perceptions of how their needs should be met. The public have accessed healthcare services through physical channels for hundreds of years, and many find it hard to perceive of alternative delivery channels.
Finally, when making long term investments in a fast-changing market. The majority of customers prefer to bank in branches. But by the time that new branches are built, the majority will prefer to bank digitally.
In practice, what steps should companies take? Successful companies make a clear distinction between operational and strategic processes and listen to customers in different ways in each process. Operational processes such as sales and customer service can, and should, be oriented around customer listening, with feedback loops to ensure customer feedback drives changes to processes and behaviours. Strategic processes such as capital allocation and R&D need a more nuanced approach that augments customers listening with innovation, experimentation and healthy challenge.