Businesses Don’t Really Care About You

Question: What are the new rules when it comes to doing \r\nbusiness in the 21st century? 

Ranjay Gulati: I think \r\nwhat’s important to realize is that in the last few years, people are \r\nrealizing that we are perhaps operating in a different business \r\nenvironment than ever before. What some people have called the "new \r\nnormal." And the essential idea here is that we are operating in a world\r\n that is much more interconnected; we have global competition; we have \r\ncustomers who are more informed and have more choices. So, you combine \r\nthose ideas, you have customers with more information and more choices \r\nand you have lowering of entry barriers, you have competitors who get \r\ninto the marketplaces very quickly and can imitate very quickly. So we \r\nhave fast followers coming into the marketplace, puts tremendous \r\npressure on price and margin for businesses. 

"How do I compete \r\nin a marketplace that is much more competitive than before?" And you \r\ncombine that with one more wrinkle, which is, you see a maturing \r\ntechnology space where products and services start to mature, and you \r\nare in what we call incremental hell. How do I create differentiation in\r\n that space? How do I compete in that space? And you combine yet another\r\n factor into that, that’s my demand side of the equation. On the supply \r\nside, I am now interconnecting much more complicated pieces coming \r\ntogether. And so I have to rely more and more on a network of suppliers.\r\n I have to look for innovation, not just within my organization, but \r\nalso outside my organization. 

So I have demand-side complexity, \r\nand I have supply side complexity. And I have to figure out as a \r\nbusiness, how am I going to compete effectively where I have to produce \r\nand sell something that the customer wants and I can do that in a \r\ncost-effective and competitive viable manner. 

Question:\r\n You challenge the notion that companies are customer-centric. Why? 

Ranjay\r\n Gulati: Customer-centricity is kind of a platitude. You ask any \r\nbusiness, are you customer-centric? And most likely the leadership in \r\nthe company will say, of course we are. It’s a platitude. It’s like, are\r\n you a good person? Who’s going to say, I’m not a good person? So I \r\ndon’t know if there’s a self-presentation issue of trying to say, "Yes, I\r\n am customer-centric," or if there is a self-delusion issue that I \r\nbelieve I am customer-centric. So an idea as obvious as businesses are \r\ncustomer-centric doesn’t always actually really happen. There’s a \r\nconfusion around what exactly does it mean to be customer-centric. As \r\nlong as customers are buying what I have to sell, what does it mean? Am I\r\n customer-centric or not? And so in the course of my own research, what I\r\n have found is that companies have a much harder time being \r\ncustomer-centric then they are willing to... I would say in some cases \r\nadmit, but in many cases they are willing to admit. And the barriers to \r\nbeing customer-centric have to do with both awareness of what does it \r\nmean to be customer-centric and also action. So it’s really awareness \r\nand being able to act on it. 

So, let me unpack this a little \r\nbit. Awareness is the first one. And awareness is not just looking at \r\nyour customers through traditional market research, focus groups, you \r\nknow, market research and things like that which typically tend to look \r\nat the customer through the lens of your product. Do you like my \r\nproduct? What do you like about it? What don’t you like about it? \r\nInstead, you have to look beyond to understand what is really happening \r\nin the life of my customer. That’s awareness. You look at bag salad. No \r\nlettuce company would have thought with bag salad if all they were \r\nasking was, do you like my lettuce? What do you like about my lettuce? \r\nHow can I make it better for you? Bag salad came by asking a more \r\nprofound and deeper set of questions. 

And to really get there \r\nwith those questions, you have to have a sense of curiosity and \r\nhumility, not always in good supply in many organizations. That’s the \r\nawareness side. 

But then there’s the action side of this whole \r\nstory. I feel a much bigger barrier is in action. And action means \r\ngetting your organization aligned and reinforcing customer focus, if you\r\n will. Organizations are set up to solve 20th century problems. In the \r\n20th century the biggest barriers organizations faced were production, \r\nand distribution. So companies had to be organized, managed, measured \r\naround production and distribution, which is by product or by \r\ngeography. 

But today, what we are seeing is the biggest obstacle\r\n is in the demand side is uniqueness in the eyes of the customer which \r\nrequires you to have a much deeper engagement, understanding of what is \r\nreally happening in my customer’s life around my product and service. \r\nWhatever that might be. And I think that line of sight doesn’t happen \r\nbecause of the silos that exist in organizations that don’t always \r\ncommunicate, collaborate with each other to go to market in a corrective\r\n fashion. 

Take an example, for instance. Look at Best Buy. \r\nRight? Largest consumer retail in this country. You know, discovers that\r\n 55% of their customers are women. This is a store designed by guys for \r\nguys. And women universally hate the shopping experience at Best Buy. \r\nSo, now I got to figure out what women want. Women tend to buy things in\r\n clusters. Not individually like men do. So, the guy who is in charge of\r\n buying and placing televisions, doesn’t necessarily have to, or wants \r\nto talk to the guy or person who is stocking DVD players. Even though \r\nthey should be, or how do I get the digital camera person to talk to the\r\n printer person to talk to the accessories person to talk to the \r\nsoftware person so we can assemble all of those pieces and say, we have a\r\n coordinated plan for this group of customers.

So, it’s the \r\nawareness issue and there’s an action issue and I think both of those \r\ntrip organizations up.

Recorded on April 20, 2010

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