Customer intimacy goes beyond just data extraction and the subsequent pontification of what it means, says Douglas Kent. In the launch of his new column, "The Chain Reaction", Kent argues that businesses that continue to rely mostly on technology and product innovation for their competitive advantage are likely to lose their position on the battleground.
There is a lot of chatter these days about the importance and benefits of gaining ‘customer intimacy’. Deceptively simple? I think so... Why now? Increasing levels of demand volatility and competitive pressures... Why bother? Let’s explore...
Theoretically speaking it seems to make perfect sense. Want to do a better job of positioning your product or service to your customers? Then, you must strive to consistently understand more about what your customers’ value most and react quickly to any patterns of change in that ‘value statement’. In fact, this is the main platform upon which ‘lean methodology’ is built. Within Lean, we measure waste against the continuum of ‘customer value’. That which the customer does not value and essentially is "not willing to pay for" - is considered to be ‘waste’ and we should rid ourselves of as much of it as possible!
Customer intimacy is not easy. Gaining this necessary insight means we must tap into that Voice of the Customer (VOC) input and use this information throughout our entire value chain. Of course, the VOC input influences our product design and development process - but also our supply chain (SC) processes. Within the SC in particular, we attempt to get more ‘intimate’ with the customer so we can better understand - or rather predict - any changes in buying behavior and we use this insight as one of the key inputs into our Demand Planning process.
Businesses that continue to rely mostly on technology and product innovation for their competitive advantage are likely to lose their position on the battleground which is now filling with companies that recognize that the "invent something cool and they will come" mentality is truly a ‘Field of Dreams’ philosophy.
Intimacy goes beyond just data extraction and the subsequent pontification of what this means. If it were that simple we could simply plug lots of data into a computer and let the computer generate our demand forecast. IBM just introduced a new computer called Watson that was pumped full of incredible terabytes of data that successfully allowed it to compete against some of the best human minds in the world - in the popular American game show, Jeopardy. Watson was up against two of the best players in the show’s history and with its data base filled with reference books along with software code that allowed it to understand questions in regular human speech - it easily beat its ‘live’ competitors.
But there is reason that this sort of applied technology - as marvelous as it appears - is still called, "Artificial Intelligence"! Can this amazing achievement be considered a replacement for true customer intimacy - "me thinks not"! At the risk of ridicule from my ‘techie brethren’ - I go on record to say - the computer will not replace the complexities involved in thinking! What we have to remember is that our customer in this instance is the ‘consumer’ who still for the most part - takes a buying decision that is impacted by more than just facts - but also emotion!
Even some of the best companies in the world have lost the plot on customer intimacy. One of the electronics industry heroes in the past is struggling to regain the market share loss they are currently suffering because they took their "eye off the ball". Nokia is in fact in what some are calling "the fight of its life". Known for its non-glitzy handsets, it has struggled to adapt its products to meet the increasing demand for its users - to use a phone as also a minicomputer of sorts and for some, as a fashion accessory. Stephen Elop, the recently appointed CEO stated in his recent ‘Burning Platform’ memo to employees, "...there is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem. They changed the game, and today, Apple owns the high-end range."
As the Financial Times (FT) recently noted, "At stake is both the survival of the world’s biggest phone maker, and Europe’s ability to compete against America and Asia at the cutting edge of consumer technology."
Equally as aggressive as the mobile handset market is the "supermarket". Two leading executives in this increasingly assertive market place stated the importance of intimacy. Mike Coupe, commercial director of J.Sainsbury says that "food retailers can do well in difficult economic times, even when nonfood sales are more volatile." As he stated in the FT, "One of the big things for supermarkets is that people stop eating out and think more about the big night in. This leads to a demand for higher end products." In the same article Mark Price, managing director from Waitrose says, "The consumer behaves in a very complex way when we go into periods where there is a dip in confidence."
Supermarkets including the likes of ASDA (Walmart-owned) have begun to introduce two (2) versions of their own-brand products - one lower end targeted towards the discount seeking customer and another for those looking for a ‘special treat’. As such, retailers are responding quickly with premium offerings to their customers that not only help build their relationships with the customer but often have the added benefit of a higher margin!
In summary - getting intimate with the customer cannot be automated. We can’t use the IBM "Watson" creation to do our thinking for us. A loss of focus on what the customer value’s most and a failure to shift our value chain responses might result in uncomfortable market share losses - as well as cost savings opportunity loss - as we build a glut of inventory in products no one wants.
The changes required to meet this challenge may require our company to extend a product range or offer different and perhaps more dynamic, promotional offerings in an effort to "shape demand" and increase our predictability.