Some companies are great for being customer-led, not only do they care but they change whole markets to work better for the customers they serve.

This guest post was written by Sean Meehan and Charlie Dawson.

What is a Customer-led Organisation?

Think of Amazon, easyJet, and Sky, they make things easier and improve what really matters.

These companies are customer-led, they are guided by what customers value – the underlying problems they are trying to solve or the outcomes they want – and then finding new and better ways to create this value, solve these problems or achieve these outcomes, leading in a market not following, inventing not benchmarking.

When companies do this well, their customers do well – they, or we, get a better quality of life, better solutions, lower costs of all kinds – financial but also effort, time, emotional pain, attention, and more.

It’s not just customers that benefit; companies do well too – reaping significant rewards from the increased value they provide.

Customer-led is Rare

Being customer-led is rare, our study of this subject led us to a discovery that explained why.

Despite being customer-led appearing both obvious and attractive, it depends on the shared beliefs people have in organisations.

Shared beliefs are tricky things to deal with, they are unspoken, about what gets you a pat on the back or a frown, and as social animals, we are highly attuned to the way a group works.

We are also programmed to try to fit in.

So even if you personally think something is wrong, it takes a brave soul to speak up and a lot more than that to change the practice.

Outside-in Not Natural

This might give a clue to our next big insight, which was that outside-in customer-led beliefs are not natural but that inside-out ways of doing things are.

• Inside-out beliefs prioritise the organisation’s success and agenda directly, people are set sale targets, rewarded if they hit them, and in trouble if they don’t. To begin with, this kind of approach will work. But in the long run the numbers become harder to hit and the organisation has to push, maybe even cheat. This is where Wells Fargo, historically customer-led but latterly with targets to sell eight products to every customer, went wrong. (A public mis-selling case and the firing of the CEO followed).

• Outside-in beliefs are not natural. Success is making things better for customers and people believe that doing well for them will also, in time, work out well for the organisation. They don’t need to prove it at every step, in advance.

Some companies get to be customer-led for a while; some never get there at all, without realising it and without conscious resistance, many extraordinary and great customer-led companies become detached from their customer-led beliefs.

Momentum Fades

Momentum fades and the shared conviction that ‘we are working for customers first’ becomes dulled and then lost.

Tesco maintained its customer-led, outside-in orbit for three decades – a remarkable feat.Yet, it eventually succumbed to the pull of inside-out gravity; under competing pressures, the clarity of the outside-in vision was compromised and blurred.

Shareholders’ interests usurped those of customers and normality reasserted itself. Short-term, self-referenced urgency won out over customer focus. Tesco eventually lost its resistance to the gravitational forces all businesses must contend with, the forces that customer-led businesses escape and then resist week in, week out, unless or until they can do so no longer.

As GE’s former CEO, the late Jack Welch, memorably put it, ‘Hierarchy in most organisations means everyone has their face toward the CEO and their ass toward the customer.’

Very few leadership teams break out from this gravitational pull.

To develop the shared beliefs that the world works the other way around, starting from where their customers stand, from the outside in, they will have followed a highly unusual path:

• A pre-condition, Burningness – an unusual word we use to describe the sense that something is burning, be it visceral feelings of pain, fear or ambition (in descending order of effectiveness). Whichever it is it needs to be strong enough to make continuing with business as usual simply unacceptable. For instance, for Tesco, whose customer-led beliefs propelled them from East London market stall to third-largest retailer in the world, burningness was an ambition to beat Sainsbury’s.

• An outside-in instinct to look beyond the market to customers to see what needs fixing on their behalf, finding inspiration in what is usually seen as impossible. Tesco’s outside-in instinct came from new CMO Terry Leahy, who believed ‘the customer should drive the entire business’.

• A first Moment of Belief to turn burningness into a bold step forward, a market-leading offer that creates value for customers in new and better ways, and that in time is shown to bring reward back to the business as well – customer-led actions tend to have definite costs now and less certain benefits that come later. Tesco created their first Moment of Belief with one-in-front queuing – promising that if any line had more than two customers waiting, an extra checkout would be opened. The cost was an estimated £60 million a year and the benefit to the customer was clear, but the benefit to the business was less so.

• A succession of Moments of Belief that follow the first success with a second and a third, until the stream of successful customer-led actions coalesces into a shared conviction that the organisation exists for customers first and succeeds by putting customers first. The pattern is established. Tesco followed their first Moment of Belief with a succession of others – from bag packing to creating a Tesco’s Finest range.

• Making outside-in activities systematic, establishing organisation-wide mechanisms for reinforcing the shared beliefs by constantly showing colleagues what matters to customers, where there are gaps and opportunities, how to go after them and then making it easy to respond in a distributed, widespread way.

Tesco made outside-in beliefs systemic with the introduction of Clubcard.

Conceived as a way of thanking existing customers for their loyalty, Clubcard encouraged them to spend more and brought in a flood of new shoppers (no fewer than 20 million in 2001 alone).

Tesco’s customer-led moves propelled it from a poorly placed #3 in UK food retailing in 1982 with a 12% market share to the undisputed leader with a 33% UK share and #3 in the world in 2012.

When this has worked, when the business has escaped gravity and achieved an outside-in orbit, the pull of normality remains, unrelenting, trying to draw the organisation back to earth.

Like a planet, the larger a business becomes – a natural corollary of success – the stronger the gravitational pull inwards.
Eventually, over many years, it overwhelms resistance at least in most cases.

The outside-in belief system comes crashing back down

This is exactly what happened in Tesco’s case, in 2014 after 30 years of uninterrupted growth, it reported its first profit decline in 20 years and declining like-for-like sales.

It issued two profit warnings and was forced to admit it had overstated half-year profits by £250m and posted a £6.4 billion pre-tax loss – one of the largest in UK corporate history.

The battle to stay aloft is sometimes longer and sometimes shorter. And there are cases where after several decades it is still being won, with Handelsbanken and W.L. Gore being two examples. But they remain exceptions to the rule and they fight continually to protect their shared outside-in beliefs.

The Customer Copernicus

The Customer Copernicus: How to be Customer-Led by Charlie Dawson and Seán Meehan is published by Routledge on 17 May, priced £26.99, available from Amazon and leading international booksellers