True belief in a customer-led approach - IMD Business School

True belief in a customer-led approach

Research conducted showed 63% of senior executives reckoned understanding customers and acting on that understanding was critical to success. Yet only 24% adopted a customer-led approach to running their businesses.
8 pages
May 2017

Data from 454 executives suggested they were either customer-led or efficiency-led, but that only the customer-led approach contributed to competitive success.

When asked to name the top three contributors to performance from 12 categories, respondents selected customer understanding and response, people, operational excellence, and innovation most. And the most common combination of “top three” factors were customer understanding and response, operational excellence and people.

Importance of factors contributing to competitive performance

performance drivers customer-centricity - IMD Business School

Yet the evidence suggests customers lose out to other, more influential, stakeholders, and to different priorities. While acknowledging the importance of customers, most respondents put customer understanding as just one of many important corporate factors, including product excellence, R&D leadership, scaling, cost cutting and operational improvement.

Analysis suggests two basic mutually exclusive approaches are followed; efficiency or customers.

Important differences emerge between customer-led companies and the rest. The former are characterized by gathering momentum, which over recent years has strengthened employees’ focus on customers; a shared understanding of key customers; an effort to satisfy clearly identified customer segments; an ability to bring customer propositions to market; and a high level of employee engagement.

Customer-led companies remain “focused on the numbers”, contributing to, not detracting, from their performance. Efficiency-led companies focus on the numbers and on lean. But they tend to be less adaptive and less responsive than customer-led ones.

Executives supporting the efficiency-led route may claim customers are one of their top three priorities, but do not experience the superior business performance to prove it. So while managers may claim, and possibly individually believe, customers are among the most important factors for competitive performance, nearly twice as many follow a more finance- and operations-led approach, despite resulting in less satisfactory competitive performance than those prioritizing a customer-led credo.

Download full report “The Belief Trade-off: Customers or Efficiency First?


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