thinking like a customer

thinking like a customer

Lower Your Risk by Getting Close to Your Customers

By on November 18, 2009

Customer closeness is the secret weapon that high-performing organizations use to minimize the risk in their businesses. We can distill that approach down to two key techniques that great companies employ.

90% of the current business literature highlights large corporations. Yet, there are many customer-centered companies, which are “flying under the radar,” that are better models to follow. Hermann Simon, in Hidden Champions of the Twenty-First Century, describes 46 companies that have a single-minded vision to be customer-centric. They all describe their greatest strength as the “long-term relationship with their customers.”

First, these hidden champions collaborate with customers on innovations. They operate in narrow target markets instead of chasing diversification and they work fanatically Signon serving the customer needs in those markets. This is not lip service. They avoid the risk of distraction from their core business by connecting with customers to develop incremental improvements. To offset the risks of being attacked by standard products, which will endanger their premium positions, they wisely resort to being the closest to their customers. Zumtobel, for example, used a strong understanding of customer needs to develop adjustable dimming-on-demand lighting and ribbons-of-light installations for modular uses in modern buildings. The focus on meeting customers’ needs has fostered growth which has made these hidden champions the best performers in their industry, because they have, through customer closeness, become what Simon calls “great innovators.”

Secondly, they are, to borrow Peter Drucker’s term, “monomaniacs with a mission.” They are obsessed with focusing their resources on their customers. Direct customer relationships are critical success factors. It is not just theory. According to Simon, the percentage of employees from these hidden champions in regular contact with customers is five times higher than in large companies. By being closer to the customer than their competitors, they also are poised for “swift reactions to changes in customer needs or new technological developments.” Because they embody a strategy to avoid weaknesses through communications which insures that technology and customer needs do not drift apart, Simon aptly describes them as “ferocious defenders.”

It is refreshing to study success in organizations which, by Simon’s own description, are “normal,” instead of trying to imitate only large corporations. But these companies are far from average. These hidden champions have been willing to do the work necessary to structure a business model that is advantageous to customers. Rather than operating in an environment of risk and uncertainty, they embrace their customers’ needs to make their own organizations better. They are customer-centered role models for businesses everywhere.

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2 Responses to “Lower Your Risk by Getting Close to Your Customers”

  1. Mark Price says:

    Bill: Sounds like this is an excellent book -- I will put it on my reading list. Thanks for featuring it.

    Your post highlights the advantage that companies gain by being closer to their customers, quite appropriately so. I wonder, though, how much of the benefit of being closer is seizing new opportunities and how much is due to gaining an increasing share of customer needs in existing products and services.

    Best Customers spend an increasing share of wallet at companies with which they feel a closer sense of relationship. They also tend to buy a bit less on promotion and refer friends who resemble them to the company, thereby continuing to drive incremental revenue.

    I see Drucker's "monomaniacal" approach applying both to the commitment to being closer to the customer and also to a strong focus on the core business and mission of the company. That focus makes it easier to customers to slot or "bucket" the company in a certain set of products and services, making the choice process easier.

  2. Heidi Miller says:

    Thanks for the review--I'll have to check that out!

    Here's what stood out for me:

    "According to Simon, the percentage of employees from these hidden champions in regular contact with customers is five times higher than in large companies"

    So true; there is no substitute for interacting directly with customers and fans. This is something that sits at the top of my mind when evaluating a social media engagement strategy--if our goal is to interact with hidden champions five times more often, we've got to figure out where they are, what they want to talk about and what type of content, conversations and products will be useful to them.

    In short, no substitute for getting to know the customer.

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