Disruption Demands 'Customer-Obsessed' Model

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Technology-empowered consumers are so radically disrupting the traditional competitive scenario across industries that companies must now be "customer-obsessed," not just "customer-centric," in order to survive and thrive, contends a new report from Forrester Research, Inc.

This isn't mere jargon -- it requires willingness to make fundamental thinking, strategic and investment shifts -- including redistributing money spent on brand advertising and other traditional dominance-creating areas, stresses Josh Bernoff, senior vice president, idea development for Forrester Research and primary author of the report, "Competitive Strategy In the Age of the Customer."

"A customer-obsessed company focuses its strategy, its energy, and its budget on processes that enhance knowledge of engagement with customers, and prioritizes these over maintaining traditional competitive barriers," Bernoff explains in a Forrester blog. "Previous sources of competitive dominance -- manufacturing, distribution, even information mastery -- are now just table stakes."

Customers want things faster, better, cheaper and with a high degree of service, and technology-enabled access to full information about products, service levels, actual market prices and even supplier costs has put all of this within their grasp, Bernoff points out. The other competitive forces originally defined by economist Michael E. Porter and used as strategic guides by companies for decades have also changed, he says: Barriers to entry are lower; substitute products and channels are gutting profits; employees have greater power over companies (if key talent leaves, customers will follow knowledge, ideas and relationships to other companies); and strategies and tactics are now instantly obtainable by competitors.

Result? Customer engagement and relationships -- "understanding, delighting, connecting with and serving customers" -- are the only advantages that will enable companies to survive the continuous disruption that will define business going forward, Bernoff says.

To be customer-obsessed, a company must pull budget dollars from brand advertising, distribution lock-up, mergers for scale and supplier relationships, and invest in four priority areas, according to the report: real-time customer intelligence; customer experience and customer service; sales channels that deliver customer intelligence; and useful content and interactive marketing. 

Companies that make this corporate-wide thinking shift, master the customer data flow and improve front-line customer staff will grow and thrive; those that "keep riding their current model and attempt to lock in customers are doomed," maintains Bernoff. "They're dead men walking. They just don't know it yet."

Companies including Circuit City, Tower Records, Borders and Blockbuster have succumbed or gone into bankruptcy because their traditional strengths -- business models, distribution and supplier relationships -- were not sufficient to keep them competitive in the face of rapidly shifting customer expectations, the report concludes. In contrast, companies such as IBM, Best Buy and Amazon.com have embraced the new, customer-driven model.

Attributes of customer-obsessed companies, according to Forrester, include: nimbleness and emphasizing speed over strength (management structures that permit rapid pursuit of customers in new markets and channels); valuing versatility over customer lock-in tactics (building true loyalty rather than blocking customer abandonment with contracts, proprietary technology, frequent-flier programs, etc.); global reach and strategy (in supply, demand and markets); and information-rich services (continuously updated information about products/services with mobile accessibility).

While the specific dynamics are somewhat different for each industry, one example cited is the CPG industry. The industry's historic "sources of lock-in" have been mass advertising, shelf space and shopper behavior; current sources of disruption include e-commerce and mobile distribution, pricing, and new forms of consumer awareness and advocacy; and examples of disruption include private-label  goods, Amazon, Drugstore.com, Shopkick, FreshDirect and Groupon.

Bernoff highlights some of the specific changes that go into transforming to the customer-obsessed model:

* Research: Spend less on surveys that generate results too late to act on, and more on real-time listening to social media and the search for customers' unarticulated needs.

* Service: Invest in a comprehensive, cross-channel customer experience program, and stop treating call-center workers as "slaves" (hire carefully for problem-solving mentality, train for conversation skills, and measure and reward problem-solving excellence over speed).

* Sales: Stop incentivizing the sales force to "cram the channel," and concentrate on connecting directly with end consumers. Obsess about repeat customers, rather than new business. Take money from email and advertising blasts and spend it on interactive content and mobile apps that create real connections.

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