Senior Partner & Managing Director
The more you engage with customers, the clearer things become and the easier it is to determine what you should be doing.
— John Russell, former managing director, Harley-Davidson Europe
Eyes wide shut? Most business leaders stress the importance of understanding customers to stay relevant in today’s fast-changing competitive environment. Why, then, do many companies focus inward and, as a result, overlook or underestimate change signals?
In previous research, we showed that the pace of change in business has increased1: companies move through their life cycles twice as quickly as they did 30 years ago. Those that do not stay in sync with change risk falling behind the competition, sometimes for good. It’s no surprise, then, that one in three public companies will not survive the next five years2.
To survive and flourish, it follows that companies must continually match strategy and implementation3 to their competitive environments. A minimum condition to adapt to external change is that we detect and understand it. Customers provide an essential window into change not only in their perceptions, needs, preferences, behaviors, and emotions but also in the technology, competition, and other factors shaping these.
We recently surveyed 45 business executives to understand their firms’ approaches to capturing and using insights into customers. To start, we asked about their top five strategic priorities. “Customer” was by far the most-mentioned word.
But many companies are not walking the talk. To be truly customer centric, companies must use customer insights in most major business decisions and core processes, not just customer-facing ones. Our analysis indicates that this is rarely the case.
In a recent study involving more than 90 companies, we benchmarked 32 types of business decisions and found that in practice less than half (47%) reflected customer insights. Surprisingly, for more-strategic decisions in areas such as strategic planning, portfolio strategy, capital investments, and mergers and acquisitions, that figure dropped to one-third (35%).
Interestingly, devoting more resources to customer insights does not necessarily improve customer centricity. We plotted customer centricity (measured as the percentage of business decisions influenced by customer insights) against spending on customer insights (as a percentage of sales). (See Exhibit 1.) Companies vary in their degree of support for customer insights (x-axis), but we see no correlation between this and customer centricity (y-axis).