When did “customer centric” first become the clichéd buzzword it has turned into today? Fifteen years ago, perhaps? “We’re CUSTOMER CENTRIC!” “The customer is always right; We put the customer first!” Yeah, yeah, yeah, blah, blah, blah … And then they trot out their customer-centric diagrams, typically something circular /radial with the CUSTOMER in the bulls-eye, depicted visually either as encircled like the Siege of Stalingrad, or else as being attacked like a parasite by assorted organizational macrophages. Over time these representations evolved into a pyramid structure, with the customer either at the BASE, purportedly demonstrating how everything at this organization emanates from the customer, or at the APEX, showing the customer as the ultimate goal of the organization’s functions and activities.
While I hope to demonstrate below how these circular and triangular images miss the mark, the truth, though, is that there is a lot of truth, a lot of substance and worthwhile intent, in having a customer-centric approach. In fact, a customer-centric approach is imperative, precisely because it is one of the four fundamental enterprise-wide processes that every organization must accommodate:
- Order Fulfillment (i.e. Supply chain + Production + Logistics)
- Customer Relationship Management (i.e. "Customer-centric")
The most common way that we represent, understand and manage our organizations is functionally - wonderfully siloed functions and departments, represented by the various vertical bars in the accompanying diagram. The clever customer-centric pioneers would shuffle these functions around, often as slices in a pyramid, with the addition of one extra layer to represent the customer. What’s missing from that sort of picture are the horizontal, cross-functional, enterprise-wide processes where organizational value is actually created, and which intersect and interact with each of the functions in turn (the "black arrows" on the diagram represent critical communication links between and among the four horizontal enterprise-wide processes).
To some greater or lesser extent, we all acknowledge the existence and importance of these enterprise-wide processes. However, it is when it comes to actually actively and effectively managing them that we resort to secondhand schemes that, as Macbeth put it, are full of sound and fury but mostly signify nothing. The typical approach is matrix management: we take a closely related functional VP and give them accountability, but no authority, over each specific horizontal enterprise-wide process. The tools of this trade are begging, pleading and negotiating. Either the head of R&D or the Chief Strategy Officer, if you’ve got one, gets INNOVATION; the VP of Production or Procurement gets ORDER FULFILLMENT; the CMO or the VP of Sales is assigned to CUSTOMER RELATIONSHIP MGMT, and Finance of course handles CASH.
Which is pretty much backwards from how, given the central importance of these cross-functional processes, this should be considered. The starting point and primacy of all organizational authority and responsibility should be the enterprise-wide processes themselves. This is where the value is created. All else should be in support of their essential missions. In fact, I predict that within ten years, if they want to remain relevant, MBA programs will be organized around these cross-functional processes, and you will receive your degree with a concentration in one of these four, instead of or in addition to our historical specialization in the vertical functions.
Notice something else about this construction – it effectively mirrors Michael Porter’s three “Generic Strategies” (Differentiation, Cost Leadership and Segmentation) and Treacy & Wiersema’s “Value-Discipline Model” (Product leadership, Operational excellence, Customer intimacy) (and further elaborated on in my post: “Hybrid strategy management”). This is not a coincidence. I haven’t identified anything new here by highlighting the first three enterprise-wide processes. They have been there all along, their critical importance previously noted by several distinguished management science academics. All I want to accomplish at this juncture is to associate them with the process approach we generally take to effectively managing an organization.
Furthermore, I propose that this construction represents the basic management team model required to run most self-contained operations, something you would assign to the purview of a “general manager” CEO (as opposed to the CEO of a conglomerate, holding company, or vertically integrated business). Such a CEO would have seven direct reports – one for each of the enterprise-wide processes, a COO, the general counsel, and a CIO/BIO (Business Information Officer – see my previous post: “The Attack of the 50 foot Cliché”). The COO’s role would be defined as encompassing the collective management of the vertical functions.
Lastly, under this construction, the BIO has a three-fold focus to his/her role:
- Tactical support of the vertical functions, such as Spend analysis, Asset utilization or Parts optimization
- Operational support of the enterprise-wide processes, such as Supply chain, Customer intelligence or Budgeting, planning and forecasting
- Strategic support for the entire matrixed intersection, collaboration, and cross-functional communication, such as Business Intelligence, Data integration, and Strategy management.
Since the emergence of management as a discipline in the first half of the 20th century, augmented by the information age tools of the second half, we have primarily focused our attention on the analytical needs of the vertical functions, which still remains a challenging undertaking to this day. The customer-centric mantra of the turn of this century awakened us to the preeminence of the enterprise-wide processes that drive organizational value creation. What lies ahead is the most daunting task of them all – the complete information /data management and business intelligence-driven integration of the entire organization. In fact, to push this model to its limits, this likely addresses my conundrum in "The nine-foot Aviator" regarding what exactly is the definition and nature of "Integrated Business Planning". And as I suggested and promised in one of my very early blogs (“Your Cutting Edge Tools of the Future”): ‘Investing in more complex functional models is just an exercise in diminishing returns if the critical path and the weak links are BETWEEN the functions. The VALUE ADD is in integrating the processes and models and functions across the organization.’