Five guides to customer-centricity
One response to my last article, “Why Top Management Must Change Fundamental Assumptions”, which highlighted Fred Reichheld’s new book, Winning On Purpose (HBRP, 2021), has been a requests for further guidance on how top management can escape from their current conceptual prison of shareholder-value primacy and make the transition to the riches of customer-centric leadership. While change is difficult, it is not impossible. These five books provide useful guidance.
1. Satya Nadella’s Hit Refresh
Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone (Harper Business, 2017) by Microsoft CEO, Satya Nadella offers a comprehensive seven-step playbook that could serve as a useful blueprint for many firms.
· Kill Losing Business Models: Most firms undertaking a digital transformation soldier on with their losing, industrial-era business models, while they dabble in digital innovation on the side. Nadella did the opposite. At the outset, he did the unthinkable. He gave Windows away for free and dropped the Nokia phone. In so doing, he freed up energy for promising domains.
· Define Areas Of Opportunity: Nadella defined the two main areas of opportunity—mobility and the cloud. While Microsoft’s competitors defined their products as mobile, Microsoft was about the mobility of human experiences, experiences made possible by Microsoft’s cloud technologies.
· Establish A Customer-Focused Purpose: Nadella spelt out how the firm will create value for customers. Microsoft would not waste time chasing Apple’s iPhone or replacing Google’s search. Instead, Microsoft’s mission is help empower people wherever they are, whatever device they are using. Nadella’s simple purpose of empowering everyone on the planet inspired staff.
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· Define Areas Of Opportunity: Nadella defined the two main areas of opportunity—mobility and the cloud. While Microsoft’s competitors defined their products as mobile, Microsoft was about the mobility of human experiences, experiences made possible by Microsoft’s cloud technologies.
· Address Culture Up Front: Nadella recognized that culture, as the unspoken—sometimes unconscious—set of values, habits and assumptions about ‘how things are done around here,’ is hard and tangible. Microsoft’s previous confrontational culture of ‘us versus them’ had deep historical roots in the firm. It was the antithesis of what was needed to succeed in the digital economy. So Nadella confronted culture on day one and announced that from then on, the culture would be one of collaboration and finding mutually profitable solutions. Instead of ‘us vs them’, it would be ‘us with them.’
· Make Empathy Central: Nadella took another risk in making empathy the centerpiece of his culture initiative. Nadella saw that without empathy, Microsoft would never succeed in understanding customer needs—particularly needs customers themselves didn’t know they had—and delivering solutions to meet those needs. The bet paid off, as Microsoft’s staff found ways to upgrade and enhance products that had users exclaiming, “I didn’t know I could do that!”
· Obsessively Measure Customer Usage: Nadella’s sixth step became apparent during implementation. He gave operational substance to the abstract concepts of mission, culture and empathy through his personal obsession with customer numbers. As Brad Anderson, Corporate Vice President of Enterprise Client and Mobility at Microsoft would say later, staff found that if they were having a meeting with Nadella, they had to begin with the numbers of customer usage, not technology, schedules, sales, or profits. This underlined the principle that customers were truly number one. It turned Nadella’s concept of empathy into something tangible and measurable.
· Inspire and Unleash The Hidden Agile Army: Six years before Nadella became CEO, around 2008, many lower-level teams began exploring Agile software development practices, without top support. By 2014, there was an army of thousands of enthusiastic Agilists who remained stifled by the warlike culture at the top. Nadella’s culture of collaboration enabled this army to come out of the shadows and perform their magic with official, top-management blessing. They became Microsoft’s mainstream, rather than fighting daily battles as renegades.
2. Vivek Wadhwa’s From Incremental To Exponential
In From Incremental To Exponential: How Large Companies Can See the Future and Rethink Innovation (Harper Business, 2021), Vivek Wadhwa, Alex Salkever and Ismail Amla show how big, old firms can innovate if they combine the power of exponential new technologies with customer-centric management.
The particular value of tech experts, Vivek Wadhwa and his fellow authors, lies in their treatment of technology. Collectively, the authors have a vast array of experience in exponentially advancing technologies such as artificial intelligence, computing, digital medicine, robots, sensors, synthetic biology, and quantum computing.
The book shows how big firms have huge advantages over startups if they choose to take advantage of them. Established companies can create new markets, accelerate growth, and remake their businesses by combining technology and mindset to exploit the advantages of of incumbency: massive customer data, strong brand equity, robust distribution channels, enormous financial asserts.
3. Colin Bryar and Bill Carr: Working Backwards
Working Backwards: Insights, Stories, and Secrets from Inside Amazon (Macmillan, 2021) by long-time Amazon insiders Colin Bryar and Bill Carr tells the story of how Amazon transformed not only the world of retail but also a slew of other sectors. It gives a blow by blow account of how Amazon came to espouse its way of doing business.
The book shows why firms need to be working backwards from unmet customer needs and imagining what meeting those needs would entail. Thus, the key management difference between our current digital age and the industrial era isn’t any particular process or system or structure. It’s a different way of thinking.
While industrial-era strategy focused on coping with competition, digital-era strategy as exemplified by Amazon’s PR/FAQ process, does the opposite. As shown in Figure 2, it starts from the customer’s needs in the future and works backwards to how that need can be met by a unique approach, regardless of the firm’s current products and services.
4. Darrell Rigby’s Doing Agile Right
Amid the excitement of the emerging digital age, it is often overlooked that the benefits of digital technology will flow from the adoption of digital technology alone. The essential foundation of every digital transformations is a solid grounding Agile management and the associated Agile mindset. Doing Agile Right: Transformation Without Chaos (HBRP, 2020) by Darrell Rigby, Sarah Elk and Steve Berez provides a comprehensive overview of what that involves.
It shows how agile thinking is being applied to every aspect of its business: to innovation, to operations, to back-office functions, to corporate headquarters, to top management, and even to the agile transformation process itself. The book shows how even a large firm can do all this in an orderly fashion.
5. Rita McGrath’s Seeing Around Corners
Disruption, which happens gradually then suddenly, is both a risk and an opportunity. In her important book on strategic agility, Seeing Around Corners (Houghton Mifflin Harcourt, 2019), Rita McGrath shows us how Agile firms must not only see around corners. Even more important, they must take action.
New ventures call for a company to envision what is unknown, uncertain, and not yet obvious to the competition. The safe, reliable, predictable knowledge of the well-understood business has not yet emerged. Discovery-driven planning systematically converts assumptions into knowledge as a strategic venture unfolds. When new data are uncovered, they are incorporated into the evolving plan. The real potential of the venture is discovered as it develops.
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