The Customer Centric Enterprise - SAP[1]

8/7/2019 The Customer Centric Enterprise - SAP[1]

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2009, Strati vit y Group, Inc. All rights reserved. CCE WP 1009

No part of this material may be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording,or otherwise, without written permission from the Strativity Group, Inc.

Strativity Group, Inc. 365 West Passaic Street, Suite 255 Rochelle Park, NJ 07662, USA [email protected]

The Cust om er Cent r ic Enter pr ise:Part 1 New Customer Strategies for Competitive

Advantage in the Millennium

80% of executives focus on the customer experience, new study reveals
http://www.strativity.com/mailto:[email protected]:[email protected]://www.strativity.com/


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Table of Content s

Executive Summary ............................................................................................... 3

Customer Centricity A Work in Progress ............................................................. 3

The Complete Customer Ecosystem All Touch Points ........................................ 7

Beyond Parity to Exceeding Expectations The New Organizational Target ........ 9

From Product Centric to Customer Centric Making the Leap ............................ 10

The Customer Relationship Evolution From Dominance to Equality ................. 12

Consequences of Not Transforming Into a Customer Centric Organization ......... 15

About Strativity Group .......................................................................................... 17

About SAP ........................................................................................................... 17


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White Paper: The Customer Centric Enterprise: Part 1 New CustomerStrategies for Competi t ive Advantage in the New Mil lennium

3

2009, Strativity Group, Inc.

Executive Summary

Companies investing at least

10% of their revenue in the

customer experience realize

greater economic benefit than

organizations that opt to

invest less than a

corresponding percentage of

their revenues.

Customer centric transformation strategies are continuing at an accelerated pace

throughout organizations worldwide, as companies try to establish competitive

advantages through greater customer intimacy and by delivering exceptional

customer experiences.

At the same time, customers are demanding increasingly greater value from

products and services and innovative experiences that satisfy their needs.

Moreover, they also have a louder voice than ever before through the Internet

through which they share their positive or negative experiences will millions of

people.

The proliferation of social media platforms is ushering in a new business- to-

person era (B2P) where the voice of the customer travels at Internet business

velocity making it more influential than ever.

A 2009 Global Customer Experience Management Benchmark study by StrativityGroup reveals that 80% of executives place a greater emphasis on customer

strategies than they did three years ago. A majority of them are also increasing

their investments in the customer experience. However, a majority of

respondents are experiencing difficulties in delivering high quality experiences

owing to a lack of effective cross functional cooperation. Similarly, just 39% of

executives report that their employees have the tools and authority to resolve

customer issues. In the absence of effective cross-functional cooperation and the

requisite tools and authority, employees will simply be unable to deliver the types

of experiences that customers have come to expect.

Customer Centricity A Work in Progress80% (of executives)

declaring that customer

strategies are high on their

corporate agendas and are

even more important than

they were three years ago.

As customers increasingly take greater control over their destinies and demand

personalized and customized value from their business vendors, companies are

struggling to adapt their business models to meet this new challenge. Growing

competitive pressures and evolving customer demands are driving organizations

to pursue customer centric strategies and leave their product centric business

models in the dust bin.

Companies that are agile and willing to listen to their customers will develop

innovative customer centric business models that will provide them with a

competitive advantage and ensure their survival.

Strativity Groups 2009 Global Customer Experience Management Benchmark

Study identified the driving forces behind organizations customer centric

transformations. The survey of 869 executives found 80% declaring that

customer strategies are high on their corporate agendas and are even more

important than they were three years ago. The study also found that, although

cost considerations weigh most heavily on customers minds, demands for more

complete and personalized solutions delivered at greater speeds remain high

priorities. These demands, illustrated in the chart below, highlight an opportunity


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for companies to address these customer demands and deliver the complete

experience that customers are seeking.

Our analysis indicates that companies investing at least 10% of their revenue in

the customer experience realize greater economic benefit than organizations that

opt to invest less than a corresponding percentage of their revenues. This benefit

can take a number of forms including:

Greater purchasing (frequency or volume) from existing customers

Increase in referrals from existing customers resulting in a lower cost of newcustomer acquisitions

Higher customer satisfaction corresponding to lower cost of relationshipmaintenance


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The companies that invest

10% or more of their revenues

in their customer experience

realize a far greater number of

customer-driven referrals,

experience or customer

strategy.

The chart above highlights the correlation between organizations investing

heavily in the customer experience and the percentage of customer referrals.

These companies realize a far greater number of customer-driven referrals than

companies that invest less in their customer experience or customer strategy.

Moreover, the study found a division in customer experience initiatives and their

associated strategies. The majority of companies focus their customer

experience investments on process enhancements reflecting a reactive mode to

addressing their customer strategy inefficiencies. These organizations

predominantly listen, respond and address customer complaints and challenges.In contrast, a relatively small but growing minority of organizations are taking a

proactive approach to their customer strategies by innovating and redefining the

overall value they deliver to customers. It is this latter type of organization that

recognizes the importance of differentiating their experiences through the

creation and delivery of additional value, through which to drive long-term

customer loyalty. Yet despite the desire to improve the experience through

product and service innovation, many companies struggle with one of the

greatest impediments to customer experience success organizational

alignment.


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One of the root causes behind

the failure to implement

successful customer centric

strategies is the inability to

work collaboratively across

functions.

As the chart above indicates, a majority of companies fail to work collaboratively

or operate in a unified fashion when serving customers. Underpinning this lack of

collaboration is the lack of employee tools and authority to completely address

customer needs and solve their problems. Moreover, even when employees

possess such tools and authority, they are often at a loss to provide the right

experience because such a customer experience is rarely defined and articulated

by the employees companies. These impediments are common in product-

centric organizations because organizational functions or departments operate in

a siloed fashion; each silo attempts to optimize its own processes without any

concern for the impact on other functions. These product-centric organizations

view their business operations (e.g. sales, manufacturing, legal and customerservice) as a series of distinct processes that function separately from each other

and without any interconnectedness. However, this product-centric approach fails

to look at the holistic needs of the customer. Companies attempting to transform

their product centric cultures into customer centric ones must retool and

reorganize their operations to view the customer in a unified fashion and treat

him or her as a unique individual.

One of the root causes behind the failure to implement successful customer

centric strategies is the inability to identify clear customer experience financial

drivers and the inability to define the economics of the customer experience. The

majority of survey respondents to the Benchmark Study could not quantify the

basic financial drivers and costs associated with customer relationships

regarding complaints, issue resolution, attrition and acquisition. The inability to

quantify these key financial drivers will ultimately lead companies to rely on their

product centric heritages because they are unable to quantify the financial benefit

of an improved customer experience.


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The Complete Customer Ecosystem All Touch Points

To deliver an exceptional

customer experience,

companies must review theirvalue proposition across all

touch points and every type

of interaction.

Product centric organizations operate as a federation of siloed functions, each

with their own set of internal measurements. The assumption among many

companies is that their success is predicated upon the ability of each function toachieve their individual objectives. This philosophy works only if customer issues

can be resolved without working across siloes. However, in an environment

where solving customer issues requires cross-functional collaboration, such a

philosophy is obsolete and is detrimental to the health and longevity of the

customer-company relationship. Increasingly, customers simply refuse to be a

cog in anyones process, and companies that treat customers as such, do so at

their own peril. What customers seek and demand is a complete, consistent,

deliberate and delightful experience that provides value. Customers expect the

whole organization to act in complete harmony, and refuse to accept

discrepancies between organizational promises and the fulfillment of those

promises.

Customers define the customer experience as the complete value proposition

across all touch points through every type of interaction. It is this customer

experience that will define the longevity and profitability of customer

relationships. To deliver an exceptional customer experience, companies must

review their value proposition across all touch points and every type of

interaction. Every touch point and interaction can enhance or degrade the overall

experience, and consequently, the profitability of the relationship.

As the chart above illustrates, the customer experience lives in an ecosystem of

customer facing (e.g. retail branch, customer service, sales and website) and

back office touch points (e.g. manufacturing, operations, research and

development, product management, legal and finance). These back office touch

points should also utilize customer value and history as a basis for task

prioritization and resource allocation. For example, Finance should consider


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customer value and any open customer service issues when prioritizing accounts

for collection. Similarly, personnel in the Legal department should have direct

access to any comments provided by customers regarding legal documents,

particularly those which they are asked to sign. These two examples illustrate

how back office functions can incorporate the customer and customer value intotheir decision making process. Added to these internal functions are a growing

number of independent or external touch points such as social media forums

(e.g. Facebook, Twitter and YouTube), portals, blogs and opinion sites. These

touch points in their aggregate represent the customer experience ecosystem

that requires ongoing management and delivery of differentiated value. While

companies do not always have the ability to fully manage the growing number of

external touch points, they do have the ability to influence messaging,

interactions and the nature and frequency of communication.


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Beyond Parity to Exceeding Expectations The New

Organizational Target

Companies that deliverexperiences that merely meet

expectations will, in short

order, face the prospect of

experience commoditization,

and eventually, attrition.

Meeting customer expectations is no longer a recipe for long-term success in anage where customer centric organizations deliver experiences that exceed

customer expectations. Many companies even have difficulty understanding the

meaning of the customer experience. At its most basic level, the customer

experience is defined as the complete value proposition delivered to customer

across all touch points and interactions. This incorporates everything from the

web experience to sales meetings, product demos, product usage, help desk,

customer service, legal documents, invoice and every medium or touch point

through which companies interact with the customer and create an experience.

The customer experience is the sum total of all those interactions. Companies

are increasingly turning to the management of their value propositions as a way

to differentiate themselves and gain customer loyalty hence the emergence of

customer experience management.

Companies that deliver experiences that merely meet expectations will, in short

order, face the prospect of experience commoditization, and eventually, attrition.

Alternatively, companies that seek to differentiate their experiences do so to

deliver unique value that will delight customers and keep them coming back for

more. In their attempt to exceed their customers expectations, these

organizations pursue the wow factor that will make the customers eyes light up

in surprise and appreciation. This wow factor creates memorable experiences

and leads to more frequent and passionate customer engagement with the

brand. When designing experiences it is imperative to understand which touch

points require wow or differentiating factors, and which should deliver functionalor rudimentary experiences. Customers do not view and treat each touch point

as equal and assign varying degrees of importance to each one. Companies

need to ensure that they invest heavily only in those touch points which

customers rank as highly important for their experiences. For other touch points,

companies must nonetheless ensure that the experience while not innovative

remains constantly functional and essentially hassle free. Yet for those highly

important touch points companies need to answer one question Did we wow

our customers? If these companies are able to answer this question in the

affirmative, they will succeed in differentiating themselves from their competitors,

and, consequently, establishing and enhancing customer loyalty.


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From Product Centric to Customer Centric Making the Leap

Everything from the

customers state of mind,

needs, hopes and dreams aretaken into account when

designing experiences for

customers.

Closing the experience gap

between customer facing and

back office functions is not

merely a philosophicaldiscussion but represents a

pressing operational

challenge

Despite their best intentions, many product centric companies have been unable

to successfully transform into customer centric organizations. Research of

successful and unsuccessful organizations highlight what is among the greatestchallenges facing attempts to become customer centric the inherent conflict.

The graphic below illustrates this challenge. The circle on the left hand side

depicts a classic product centric ecosystem with the product or service at the

center of operations. These operations focus on everything relating to the

product including product development, channel distribution and a host of related

issues. The two gravitational forces affecting business operations are how to

increase margins and reduce costs.

The right side of the graphic highlights a customer centric ecosystem with the

customer at the center of operations. In such organizations, all business

decisions include an analysis of the impact on the customer. Everything from the

customers state of mind, needs, hopes and dreams are taken into account when

designing experiences for customers. In these customer centric organizations,

the two gravitational forces affecting business operations are how to increase

customers experience satisfaction and lower costs. Lowering costs while

increasing experience satisfaction requires companies to increase the relevance

of their customer experiences. The inherent conflict lies between these two

ecosystems. For product centric companies, lowering costs often equates with

lowering the quality of the customer experience leading to customer demands

for lower prices. Past experiences confirm that product centric companies often

accelerate their own commoditization by failing to understand the customer

ecosystem, and opting to make business decisions based upon their gravitationa

forces rather than those of their customers.


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While sales, marketing and

customer service continually

strive to increase the

experience variability

according to the customersunique needs and challenges,

back office touch points

continually strive to decrease

the experience variability

through six sigma and related

methods.

Closing the experience gap between customer facing and back office functions is

not merely a philosophical discussion but represents a pressing operational

challenge. While sales, marketing and customer service continually strive to

increase the experience variability according to the customers unique needs and

challenges, back office touch points continually strive to decrease the experiencevariability through six sigma and related methods. What many organizations fail

to recognize is that these two approaches cannot coexist without damaging the

customer relationship. Since employees in back office functions act as

experience enablers where their actions enable their counterparts in customer

facing functions to deliver high quality experiences to customers, it is incumbent

upon organizations to ensure that both the back and customer facing functions

work collaboratively to ensure the consistency and quality of the experience.

However, until back office functions develop a performance platform that allows

them to treat each customer individually, the organization will operate on a

product centric model leading sales and marketing personnel to make promises

that they will be unable to fulfill.


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The Customer Relationship Evolution From Dominance to

Equality

Their aim is to establish atruly co-equal relationship

where both company and

customer play a role in the

design or creation of the

overall experience.

Behind the trend of companies moving from product centric to customer centricstrategies is a fundamental shift in the nature of customer relationships.

Historically, limited competition and the inability of customers to communicate

with each other en masse, allowed companies to dominate and control customer

relationships. In such relationships, companies could dictate terms and

conditions to customers, who had little choice but to accept. During this era of

domination, companies would use sales force automation (SFA) and customer

relationship management (CRM) platforms to squeeze concessions from

customers regardless of the actual value delivered in return. While companies

rarely fulfilled their promises made to customers, limited choice and internet-

based communication vehicles available to customers meant that they would

(begrudgingly) continue to conduct business with these vendors.

The following chart illustrates the ongoing transition from this period of

dominance to the emerging era of relationship equality. The grey graphic on the

bottom left reflects the period of dominance characterized by a uni-directional

relationship where companies controlled the relationship through a heavy focus

on sales-oriented interactions. Companies generally viewed customers through a

one-size-fits-all (OSFA) prism and often refrained from providing a customized

experience to customers. The technology of choice was sales force automation

(SFA) systems that would detail every type of sales interaction with customers.

The top right of the chart reflects the new era of relationship equality.

Recognizing their inability to command customer loyalty, companies have been

implementing CEM tools to boost communication with customers, and establish a

relationship of equals. However, some companies have taken this a step further.

As reflected by the graphic in the top right hand corner, a number of companies

are implementing systems that place the customer in the driver seat of the

experience. Their aim is to establish a truly co-equal relationship where both

company and customer play a role in the design or creation of the overall

experience. From co-creation of commercials (e.g. NFL, Doritos) to footwear

(e.g. NIKE, Timberland), these companies believe that this approach and type of

relationship will lead to long term customer loyalty.


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Social media tools have

empowered customers and

created a significant measure

of equality between them and

their vendors.

As new market entrants challenged industry veterans, and as customers

leveraged the internet to communicate with not tens but thousands and millions

of people, the era of corporate dominance over the customer relationship is

coming to an end. This new era of equality has been a boon to customers

seeking equality and even payback for years of mistreatment. In this new era,

companies are increasingly focusing on experience challenges and are, among

other things, deploying a new generation of platforms and tools to improve

communications with customers and the overall value of their experiences.

Social media tools have empowered customers and created a significant

measure of equality between them and their vendors. Such equality is present in

both the ability to communicate and the power to create. Customers now use thepower to broadcast their views to millions just as vendors can. Additionally,

customers are increasingly gaining influence over product design and vendors

operating models by sharing their opinions and demanding alternatives. The

earliest application of social media was the broadcast of customer opinions

regarding the products and services they use. However, the customer embrace

of social media is not limited exclusively to expressions of dissatisfaction. The

customer opinion site Yelp.com reports that for every negative comment, they

also receive six positive comments. Customers are also embracing social media

to provide positive comments and feedback. They view social media as an open

communication tool that is not controlled by companies where questions can be

asked and opinions shared regardless if they are positive or negative.Additionally, companies are increasingly utilizing social media tools in their efforts

to create positive word of mouth and enhance the customer experience. The

expectation shared by many observers is that the trend of customers and

companies embracing social media will only reinforce the equality in

relationships.


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These Social Media Mavens

on average grew 18% in

revenue over the last 12

months, compared to the

least engaged companies

who on average witnessed

their revenue decline 6% in

revenue during the same

period.

This new era of equality can be categorized in stages. The first can be

characterized in the manner in which organizations communicate with customers

Companies are increasingly modifying language to ensure that customers

understand and feel comfortable with all forms of written and verbal

communication. They are also opening mediums through which they can conductrespectful and reciprocal dialogue including forums and social media platforms.

According to research, companies measured as having the greatest breadth and

depth of social media engagement are realizing significant positive financial

results. These Social Media Mavens on average grew 18% in revenue over the

last 12 months, compared to the least engaged companies who on average

witnessed their revenue decline 6% in revenue during the same period. Findings

for other financial metrics including gross margin and net profit showed similar

results. While companies recognize the consequences of failing to develop an

effective social media platform they are nonetheless investing in such platforms

in order to realize the immense financial benefits that can result from the

implementation of a comprehensive and experiential social media strategy.

The second stage is characterized by the holy grail of customer experiences

equality of creation. Customers are increasingly seeking to do business with

companies that will facilitate the joint creation of products and services. In this

environment, companies will have to develop platforms and fundamentally

change business operations to treat customers as equal creators in their final

products and services.

For many companies, adapting to this new reality reflects a radical paradigm shift

that many are unwilling or unable to make. This shift is simply too painful and

challenging for companies entrenched in another time where they controlled the

customer relationship and had the means to ensure the survivability of their

brands. Now and in the future, those organizations that internalize and overcomethese challenges will find themselves better placed to remain relevant, maintain

customer loyalty and grow their businesses.

1Altimeter Group: ENGAGEMENTdb-Ranking the Top 100 Brands, July 2009


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Consequences of Not Transforming Into a Customer Centric

Organization

Companies fail to recognizethat there is no such thing as

an average customer. Each

customer is unique and needs

to be treated as such.

Siloed companies operate

without visibility into

complete customer value and

history, enabling customers

to take advantage of

corporate blindness and

continue receiving products

without paying for them.

The failure to adopt customer centric business models comes with a steep cost.In a world where customers demand individualized treatment, companies that

continue operating under product centric business models and treating

customers through a one-size-fits-all (OSFA) prism will suffer a number of

adverse consequences:

Wasted resources Treating customers through a one-size-fits-all modelleads companies to unnecessarily waste valuable resources. Organizationsfrequently fall into the trap of treating profitable and unprofitable customersidentically and do not allocate or prioritize limited resources according tocustomer value. As a result, the best talent and most expensive channels areoften allocated to customers who are often unprofitable while lower qualitytalent is unintentionally allocated to or extensively used by profitablecustomers. This scenario, so common among many organizations, has adebilitating affect on the loyalty of profitable customers and the profitability oflower-end customers.

Sales Misalignment Under a product centric business model salespersonnel pursue orders and respond to customer requests in a disjointedfashion. Closely related to the aforementioned wasting resources example,sales will often fulfill countless requests for alignment meetings, escalationsand on-site visits to satisfy their customers, irrespective of customer value.Instead of pursuing additional business and concentrating on their mostprofitable customers, they treat all customers similarly and consequently, failto retain the current volume of business and generate new business from newand existing customers. Aside from the effect on customer loyalty and theirown P&L, this leads to lower employee productivity and morale.

Disappointed customers As customers increasingly seek personalizedexperiences, they will ultimately reject a one-size-fits-all value proposition.This disappointment will not be relegated to customer satisfaction metrics insurveys but will manifest itself through decreases in the size and frequency ofpurchases, higher attrition, negative word of mouth and increased demandsfor discounts.

Unproductive working environment The lack of coordination betweencustomer facing and non customer facing business functions often results inorganizations constantly operating in crisis mode characterized by a chaotic,frenzied and jaded environments adversely affecting customers andemployees alike. This chaos not only wastes limited resources butdemoralizes employees who are trying to perform their jobs effectively and

help customers. Moreover, chaotic work environments impede anorganizations ability to innovate the customer experience and provide valueto customers during each interaction.

Decreased loyalty One-size-fits-all treatment of customers ultimately fulfillsthe needs of only a small portion of customers. Many companies fail torecognize that there is no such thing as an average customer. Eachcustomer is different and has unique needs that need to be addressed or elsethey will seek a competitive alternative that better fulfills their needs. Howeverrather than focusing on the impact to customer loyalty, executives focus on


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cost reduction initiatives and process redesign programs issues rarely ofconcern to customers. When these executives finally recognize that they arenot delivering the right value to customers, they discover that improperlydesigned cost reduction initiatives and one-size-fits-all processes come at a

steep price customer profitability and loyalty.

During the course of a consulting engagement, Strativity Group discovered thatalthough a number of customers had outstanding invoices that were overdue byat least one year, sales personnel nonetheless continued taking orders andapproving product shipments to those clients. Similar scenarios take place inmany siloed companies where departments operate without visibility intocomplete customer value and history, enabling customers to take advantage ofcorporate blindness and continue receiving products without paying for them.


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About Strativity Group

Strativity Group, Inc. is a global research and consulting firm advising organizations on creating lasting and profitablerelationships with their customers and employees through the transformation and execution of their strategies to revolve

around the customer experience.Strativity Group, Inc. works with both Global 2000 companies as well as emerging businesses around the world. Ourclients include Nokia, Computer Associates, SAP, American Management Association, Seagate Technology, Honeywell,Siemens, Dimension Data, FedEx, CATIC, Circle K, University of Pennsylvania, The Fund, Capital One, Jacada, Wyeth,Sage, Herbalife, Akibia, National, Lockheed Martin and Crown Plaza Hotels & Resorts and Nordea.

About SAP

SAP supports end-to-end, integrated processes, with built-in industry best practices, including:

Optimizing sales and marketing investments: Align marketing plans with trade promotions and sales execution, as wellas demand planning, financials, and claims processing. Analyze customer profitability and promotion effectiveness to

inform ongoing strategic planning. Accelerating lead to cash: Improve margin and revenue potential with multi channel sales execution covering focused

account planning, forecasting, campaign and lead generation, collaborative pipeline management, advanced price andmargin management, available-to-promise and credit checks, quotes, order capture, and financial settlement.

Creating the optimal offer: Leverage a true 360-degree view of the customer, to better understand and identifyprofitable customer segments and to create and deliver compelling offers. Target the right customers with the rightproduct or package, at the right time and at the right price.

Differentiating through service excellence: Reduce service costs and increase customer satisfaction and retention byresolving customer problems at first contact. Help transform the service operation from a cost center to a profit center.

Documents

The Customer Centric Enterprise - SAP[1]