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Customer oriented business models

The era of digital transformation has given rise to a number of established businesses and start-ups that combine digital technologies with unconventional business models, to disrupt competitors and even entire industries.

The convergence of cloud, mobile, social, cognitive, big data/analytics, and IoT provides a platform for a variety of important transformations, including a shift from traditional product-centric to customer-value-centric business models.

However, many organizations are structured around business models that assume that all the value is generated through a product transaction. It is built on the manufacturing model that arose in the 18th century when production was long term and with little variation in product or customer. This results in a customer environment that may be product rich but experience poor, and disconnected across the organization.

In today’s digital economy, value is often generated through the cultivation of successful client relationships. Companies need to break down structural silos and work cross-functionally, align customer needs and organization design and ensure that implementation is rapid and error-free. This is driving businesses to rethink their business models and think more connectively.

Such change affects how they think and operate and is the root cause of inconsistency in experience delivery. Connective thinking links concepts in new ways to drive innovation and step-change improvement. The processes of thinking about the customer are as important as the underlying business or transaction processes.

Our brains prefer to work by means of connections; connecting ideas and concepts to form new ones. Unfortunately, modern organizational life has led to mechanical thinking, meaning that we are ruled by habits, automatic departmental associations, and historic responses.

Getting stuck in fixed patterns of thought leads us to make fewer and fewer connections and, as a result, firms are being left behind by new start-ups and digital tech firms unencumbered by the past. It is the quality of their customer ideas that has propelled the leading organizations in our research to the top of our rankings.

However, few businesses are structured in a way that facilitates integrated holistic thinking about customers and their needs. Organization design for many companies is an outcome not an input.

The advent of customer journey mapping is accelerating this shift, as firms realize that they cannot manage customer journeys through conventional, departmental, functional structures.

"Future-focused businesses are shaping new operating models in which every part of the organization, from marketing and sales through to the supply chain, is working collectively to deliver against the customer’s expectations."

Miriam Hernandez-Kakol, Global Head of Management Consulting, KPMG International

The 8 capabilities of connected organizations

High-performing organizations are getting connected by making significant investments across eight capabilities. They are doing this to a greater degree than less mature organizations.

 

Insight–driven strategiesand actions

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Insight–driven strategiesand actions

Harness data, advanced analytics and actionable insights with a real-time understanding of the customer and the business, to shape integrated business decisions.

 

Innovative products
and services

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Innovative products
and services

Develop compelling customer value propositions on price, products and services to engage the most attractive customer and drive profitable growth.

 

Experience centricity
by design

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Experience centricity
by design

Design seamless, intentional experience for customers, employees and partners, supporting the customer value propositions and business objectives.

 

Seamless interactions
and commerce

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Seamless interactions
and commerce

Interact and transact with customers and prospects across marketing, sales and service and achieve measurable results.

 

Responsive operations
and supply chain

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Responsive operations
and supply chain

Operate the business with efficiency and agility to fulfill the customer promise in a consistent and profitable way.

 

Aligned and
empowered workforce

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Aligned and
empowered workforce

Build a customer-centric organization and culture that inspires people to deliver on the customer promise and drive up business performance.

 

Digitally-enabled
technology architecture

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Digitally-enabled
technology architecture

Create intelligent and agile services, technology and platforms, enabling the customer agenda with solutions that are secure, scalable and cost – effective.

 

Integrated partner
and alliance ecosystem

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Integrated partner
and alliance ecosystem

Engage, integrate and manage third parties to increase speed to market, reduce cost, mitigate risk and close capability gaps to deliver the customer promise.

Firms such as USAA are organizing around customer life events, while New Zealand’s KiwiBank operates cross functional ‘journey’ and customer needs teams. In the UK, Santander has changed its business model to reflect the importance of customer insight, the impact of insight on customer products and propositions, and introduced rapid time to market thorough agile delivery teams.

The Harvard Business Review found that over a third of Fortune 500 companies have restructured around the customer, using needs, segments and journeys as the organizing principle. Not every transformation has been immediately successful. For example, the cutting of well-worn communication paths and channels, as existing structures are torn down and new ones implemented, takes time to rebuild – possibly years for companies who have not thought this through.

Nonetheless many of the high-ranking brands in this year’s research have successfully made this journey. USAA, Tumi and American Express in the US are examples of successful customer centric structures. Airlines such as Singapore Airlines, Emirates and Air New Zealand are forsaking conventional structures for formats that are more suited to delivering their customer promise.

These organizations ranking highly in our research recognize that becoming truly customer centric requires more than just connecting strategy with implementation. That is a vital first step. But at the heart of a customer centered business is a connected enterprise – one where front, middle and back office processes are aligned and interconnected. Where partners and intermediaries start with the customer and work backwards through the value chain.

When faced with complex value chains, the temptation for many companies is to look at the next link in the chain as being the customer. However, industries that manage complex value chains – such as high technology firms – start with the end customer and work backwards with their partners. A failure to do so can result in disintermediation, as the UK asset management industry discovered when new entrant Vanguard bypassed the entire value chain and went straight to the end customer.

An organization that is connected across the whole value chain is an essential precursor for digital success.

"Connected Enterprises focus every process, function and relationship of their organization on a single purpose, harnessing the power and potential of customers to fuel profitable and sustainable growth."

Adrian Clamp, Head of Digital Transformation,
KPMG in the UK


With the customer at the core, some of the critical questions that organizations should ask themselves here are:

Employees
  • Are staff empowered and enabled to deliver the customer promise through having the right tools, knowledge and training?
  • Are they clear on what they are supposed to deliver?
  • Are they motivated by a culture of customer-centricity and teamwork to excel?
  • Are they leveraging technology and AI in the right way?
Front, middle, back offices
  • Are they motivated by a culture of customer-centricity and teamwork to excel?
  • Are they pulling in the same direction – rather than trying to fulfil their own individual targets at the expense of the company’s vision and purpose – and the customer?
Channel and business partners
  • These are essential parts of the delivery dynamic, and in the customers’ eyes are a proxy for the brand itself. Are they aligned with the customer’s expectations and helping to deliver in a way that stays true to the brand promise?
Market dynamics, digital signals
  • Are teams constantly monitoring the market including social channels to pick up the signals of customer sentiment and demand?
  • Does our organization design accelerate or hinder the achievement of our strategy?

Picking up and rapidly responding to these signals is key.