Leadership Platform 2.0:
Fostering Customer-Centric Leadership
Fostering Customer-Centric Leadership
“The purpose of business is to
create a customer.”
-Peter Drucker, Principles of Management (1954)
Recently a colleague of mine brought to my attention a fascinating article called “The Age of Customer Capitalism” (http://www.docin.com/p-44580712.html or http://hbr.org/2010/01/the-age-of-customer-capitalism/ar/1) written by Roger Martin, a modern day business guru. This is an article that is a long time in coming and over due. In this article Martin strongly advocates and supports with data the principle that placing customer value, as the top priority will enable organizations to produce sustainably higher shareholder returns, outperforming organizations whose top priority is maximizing shareholder value. Go figure!
In a nutshell, Martin’s point of view is that maximizing customer value will likely define a new and third major phase of modern capitalism. The first era, beginning in 1932, was defined by the introduction of professional business management. In 1976 the second era defined the primary purpose of every corporation was to maximize shareholder value. Martin demonstrates how modern corporations living by the rule of maximizing shareholder value provide a short term, but unsustainable gain for owners of the capital. By contrast, corporations that produce shareholder returns that are as high, but are sustainable have a focus on delivering customer value as their “true north”.
Who would have thought that placing customer value as top priority could be such a good idea?! Martin’s work places an MBA-friendly wrapper around what many people would say is common sense. But don’t short shrift the effort it takes to make common sense, common practice. It may sound easy, but there is a lot more to common sense than meets the eye. Or as Ralph Waldo Emerson reminds us – “Common sense is genius dressed in its working clothes.”
Over the past 10 years internal brand building has become the focus of our firm. During that evolution we have garnered a great appreciation for the effort it takes to create a shift in mindset and operations that support becoming a customer-centric organization. (Traditionally brand building was relegated as the marketing function. By definition this shortsighted perspective clearly under-delivered on growing customer value. It also allowed marketers to ignore the challenges of fostering a customer-centered organization.) For starters, shifting the organizational mindset from customer transactions to customer relationships can be disruptive and takes more time than one may think. As you might imagine a different mindset is only the beginning of the change that is required.
All meaningful organizational change starts with leadership. There has been plenty of smart thinking and evidence to support the fundamental importance of documented leadership platform that is well understood by all leaders in an organization. The basic leadership platform involves a combination of mission, vision and values. Depending upon what leadership guru one subscribes to, that platform may be modified to include a purpose statement, BHAG (Big Hairy Audacious Goal) or some other iteration of the core mission, vision, value paradigm. I call these status quo leadership frameworks as Leadership Platform 1.0.
Fostering a customer-centric organization requires a new perspective on a leadership platform. At the heart of a customer-centric organization is its deep commitment to customers. Its culture takes pride in its relationships with customers. Transactions between the organization and its customers are signals that the relationship is alive. Loyalty in the relationship is meaningful feedback that the distinctive qualities of the organization do create distinctive value for its customers; the relationship is alive and reciprocal. Making a difference for a customer serves to guide the higher purpose for the organization.
Martin provides two illuminating examples of organizational purpose statements that fit the profile of customer-centric organizations and produce high levels of stockholder value:
“We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services… We are responsible to our employees, the men and women who work with us throughout the world… We are responsible to the communities in which we live and work and to the world community as well… Our final responsibility is to our stockholders… When we operate according to these principles, the stockholders should realize a fair return.”
Johnson & Johnson
Statement of Purpose
“We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers. As a result, consumers will regard us with leadership sales, profit and value creation, allowing our people, our shareholders and the communities in which we live and work to prosper.”
P & G
Statement of Purpose
Integral to virtually all of our work over the past 10 years has been working closely with leadership teams to define an organization’s customer-relationship-focused leadership platform. Our work with these teams is steeped in two core principles – authenticity and customer relationship. The collaboration starts by discussing the existential question – ‘What are the proven unique qualities of the organization and how have they been used to create value for customers’?
In some cases developing Leadership Platform 2.0 frameworks only required us to extend the words of the Leadership Platform 1.0 to ensure the customer relationship intent was articulated in clear and precise words. As an example, a vision statement might need to be refined so that it clearly stated the organization’s long-term commitment to adding value to the customer relationship, which may have been implied, but not stated. In other cases we had to start from scratch coaching the leadership team to reorient their perspective to be consciously focused on the customer relationship as the driver of their leadership strategies and activities. Leadership Platform 2.0 is customer centric and places the customer relationship as the top priority for the organization.
Customer-centric organizations characteristically score the highest levels of customer engagement and employee engagement, two fundamental drivers of producing sustainable high levels of shareholder value. When customers believe an organization places their relationship at the center of its purpose, their loyalty is strong and grows. When employees believe their employer is committed to a purpose that makes a meaningful difference for a customer, their engagement level is off-the-charts.
We have seen many, many examples of how developing a Leadership Platform 2.0 is a solid starting point for creating the change necessary to become a customer-centric organization. Roger Martin has convinced me that the customer-centric organization will outperform its peers. Becoming customer-centric is not rocket science, but it will require taking a common-sense approach to placing customer relationships at the pinnacle of leadership’s focus.
How customer-centric is your organization? Maybe it’s time to modify the conventional business wisdom from being transactional to a focus on building customer relationships, embracing the wisdom of Theodore Levitt, a very well respected marketing guru, “The purpose of business is to create and keep a customer.”