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Technology

Fuse soft skills and digital for customer centricity on steroids

Published 13 May 2021 in Technology ‚ÄĘ 8 min read

Technology alone cannot unlock all the answers for understanding customers. Companies must blend soft skills such as empathy, humility and audacity with digital innovation to achieve true customer centricity.  

Digital transformation leaders are rarely psychologists. And there aren’t too many data scientists serving customers. But, in our increasingly digital world, this divide must disappear if firms want to become truly customer-centric.  

We argue that three leadership traits remain central to advancing customer-centric business models: empathy, humility and audacity. And instead of being disconnected, digital innovation and leaderships skills need to be joined at the hip.  

From determinism to data-inspired empathy 

For many years, marketing¬†was¬†an¬†‚Äúinformed guessing game‚ÄĚ.¬†First, we¬†looked at customers in demographic terms.¬†We‚Äôve done surveys and¬†conducted focus groups, all in the name of trying to understand customer needs and wants.¬†¬†

Then we got smarter. We started to codify actual customer journeys, got a granular understanding of purchasing intentions (e.g., through searches), and understood how we funnel customers through gated stages leading to transactions and repeat business.  

And that’s all great. The problem is, because of these methods, customer understanding has become very linear and deterministic, which human beings are anything but! Customers have varied lives and experiences. They use shortcuts, change patterns and behaviors according to context, and quickly form new habits.   

To understand the choices customers are actually making, we need to get closer to their real lived experiences, and that’s hard. But in today’s digital world, it’s not impossible. In fact, just like in the pre-digital world, the key to understanding these true customer experiences is empathy.  

We argue that empathy has evolved too. It has, itself, gone digital and become more data-centric. Why?  

Customer empathy is about understanding three aspects of the human condition:  

  • the cognitive part (how customers think¬†in a given¬†context)¬†
  • the affective part (the emotions behind customers‚Äô choices)¬†¬†
  • the behavioral part (the¬†actions people take)¬†

Today, data science has become the key to opening all three empathy doors. And we have mountains of it. From traditional structured data such as transaction information to unstructured data such as voice and video observations or sentiment on social media. We also have the digital technology to analyze and understand this information to inform business decisions.  

But the promise of digital, data and analytics goes even further. We have the power to achieve a real-time understanding of customers’ real lived experiences: how customer behave, how and where they spend their time, and how they consume products and services. 

Take¬†the example of¬†pet food subscriptions: Imagine a subscriber cancels their subscription for the dog food they¬†have¬†ordered for years. The same day, the same user subscribes for puppy food. The artificial intelligence of the software catches these data points and suggests sending a bouquet of flowers to the subscriber ‚Ästas a gesture of congratulations on the¬†new¬†puppy.¬†

Today,¬†the human capability of¬†empathy¬†becomes increasingly skillfully enriched by data¬†points.¬†Rather than dehumanizing the experience, today‚Äôs digital innovations enable us to understand more about ‚Äď and respond to ‚Äď our customers‚Äô lives, needs and behaviors.¬†When done well, data-centric empathy will¬†bring¬†you¬†closer to true¬†customer¬†centricity¬†and uncover new sources of value you¬†never¬†knew existed.

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From¬†‚Äúpick and dump‚Ä̬†to¬†technology-mediated¬†humility¬†

Many executives talk about¬†being customer-centric,¬†but much of the focus has remained on¬†who controls the¬†relationship¬†between firms and customers.¬†Consumer¬†needs¬†have been¬†canvassed¬†through¬†limited interactions to¬†pick the brains¬†of customers, only to dump¬†respondents¬†immediately¬†as the ‚Äúadults‚Ä̬†(read: the firm) took over.¬†In the early days, the Mad Men era, it was¬†a relatively straightforward broadcasting model.¬†Those with the biggest marketing budget won the day and, through intense exposure, pretty much dictated what customers should buy.¬†¬†

That was turned upside down with the emergence of social media. Suddenly, customers had a platform to express what they really thought about their choices, preferences and experiences. Brands had to adapt as the power shifted to consumers.  

But, with the harvesting of more and more data and the amazing progress in decision science, corporations are fighting back. Customers are watched, listened to and influenced through finely targeted advertising. Predictive analytics, allegedly, being able to anticipate customers wants and needs.  

So, it’s game over for customers, then? Well, not quite. The truth is, the balance of power in today’s digital economy rests neither with the firm nor the customers. It is a digitally-mediated reciprocal partnership. Research shows that the currency for creating value in these exchanges consists of data and customer participation.i Therefore, in this reciprocal partnership, both sides have to relinquish some power.  

This is where humility comes in. Humble leaders are highly self-aware, appreciate others and continue to learn from others. These leadership traits create cultures that are open to learning and advice. Humble organizations value inclusion and transparencyii.  

In the digital age these firms allow customers to participate in key elements of their traditional value chain. Many companies use digital technology to engage with their customers through new products, services and platforms. These touch points serve as channels that accelerate engagement.  

Customers become collaborators and can engage across the entire value chain, from R&D and product development (Starbucks’ MyStarbucksIdea.com), content creation (LinkedIn’s Profiles) and logistics (UPS MyChoice) to services (iStockphoto inspectors). This requires a strong understanding of how customers connect with what you do in a functional and emotional way.  

Giff Gaff, a mobile phone network owned by Telefonica, is leveraging its community to improve its customer service. Remarkably, unlike other operators, Giff Gaff has no customer service function. There is no phone number to call. Why? The company has invited its customers to take control of customer services and outsourced this function to the community. And it works. Customer queries are being resolved in record time. 

Vincent Boon, Head of Community at¬†Giff¬†Gaff,¬†explains: ‚ÄúThe value generated by the community is incredible, and means that we can take the savings we make from not having a traditional, high cost, infrastructure, and pass that directly to our customers in terms of great product value. Everyone wins!‚ÄĚiii¬†

This digital-mediated approach presents a paradox for the traditional way of doing business. We are asking customers to do part of the work, and they like it. They positively engage with the service because they are directly involved. That’s what makes their participation powerful and it means they feel more comfortable when it comes to sharing data. 

To make this relationship work, companies must embrace humility to combine functional trust (required for transactions) with affective trust (required to build relationships and communities). Humble leaders create cultures that are perceived as open to input from all sides, especially the customer. Humble organizations value inclusion and transparency to build trust. As such, humility is a key leadership trait for customer centricity in a digital world.  

From tug-of-war to digitally-enabled audacity  

The combination of data-centric empathy and digitally-mediated humility can take you a long way. We argue that audacity is the final leadership ingredient for true customer centricity today, with digital technology as its catalyst.  

Taking bold risks is normally the domain of the entrepreneur.¬†But, in a digital world, all business leaders must embrace audacity¬†through digital innovation¬†if they want to¬†delight customers¬†and meet¬†‚Äúlatent‚Ä̬†needs¬†‚Äď needs¬†that sometimes customers themselves don‚Äôt realize they have, sometimes with technology they don‚Äôt¬†even know exists.¬†¬†

In addition¬†to enabling¬†firms to take more risks, digital technology also enables¬†firms to reduce the risk¬†for their customers¬†‚Äď a¬†welcome¬†customer-centric¬†mindset change.¬†¬†

Despite¬†all¬†the¬†talk about customers¬†being our¬†partners, in practice,¬†the¬†traditional¬†development of new¬†products and services¬†came with an¬†implicit,¬†dominant¬†corporate¬†logic:¬†‚ÄúThe less we give them, the more we gain.‚Ä̬†This created¬†a¬†de facto¬†‚Äútug of war‚Ä̬†relationship¬†with customers.¬†¬†

Against that backdrop, audacity is not about¬†boldly¬†launching into uncharted territories. It is about having a¬†pragmatic¬†growth mindset: ‚ÄúI win when you win because we are¬†in the same boat.‚Ä̬†It involves looking at business models¬†from the customer perspective and¬†being willing to share¬†risk¬†with customers, informed and enabled by digital¬†technology.¬†

For example, firms can share customers’ volume-related risk through the development of subscription (HP subscription ink model) or pay-per-use business models (Michelin pay-per-kilometer model). These new revenue models can only work because firms are able to develop seamless data-based interaction at scale with customers. 

Data is also central to designing performance or outcome-based models which tie the firms’ revenues with the quality they offer their customers. These models are high risk as they rely on certain critical criteria. Will we be able to deliver as contracted upon performance? Will customers fulfil their obligations?  

In both cases, digital technology plays a decisive role. Sensor data and IoT technology captures real-time data at the point of use, creating contractual transparency that enables enforcement.  

A¬†transportation firm¬†may¬†find it attractive to purchase a truck with¬†a¬†guaranteed ‚Äúup-time‚Ä̬†model, but to make¬†this model¬†work transparently,¬†the¬†truck¬†manufacturer¬†needs to know¬†that¬†the vehicle will be¬†well maintained and operated¬†properly.¬†It‚Äôs this¬†willingness and ability to spread risk through data-enabled¬†transparency that makes audacity¬†key¬†for true customer¬†centricity today.¬†

Customer centricity on digital steroids 

Understanding the importance of the human touch within digitally-enabled experiences is becoming a management imperative. Blending a deep understanding of how digital technology can create value with the leadership traits required to establish trusted win-win relationships with customers is critical. It requires a finetuned leadership combination of care Рempathy and humility Рwith the courage to dare Рaudacity.  

Organizations that nurture and employ these traits as they embrace digital innovation will put their customer interactions on steroids and move one step closer to true customer centricity.  

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Authors

Didier Bonnet

Professor of Strategy and Digital Transformation

Didier Bonnet is Professor of Strategy and Digital Transformation at IMD and program co-director for Digital Transformation in Practice (DTIP) and Leading Customer Centric Strategies (LCCS). He also teaches strategy and digital transformation in several open programs such as Leading Digital Business Transformation (LDBT), Digital Execution (DE) and Digital Transformation for Boards (DTB). He has more than 30 years’ experience in strategy development and business transformation for a range of global clients.

Katharina Lange

Affiliate Professor of Leadership

Katharina Lange is Affiliate Professor of Leadership at IMD. She specializes in self-leadership and cross-cultural team leadership in times of change. Before joining IMD, Katharina led the Office of Executive Development at Singapore Management University (SMU, where she directed Open Programs such as ALPINE (Asia Leaders Program in Infrastructure) and the J&J Hospital Management Program. She is Co-Program Director of the Leading Customer РCentric Strategies and IMD’s signature Orchestrating Winning Performance (OWP) program.

Frédéric Dalsace

Professor of Marketing and Strategy at IMD

Prior to IMD, Frédéric Dalsace spent 16 years as a Professor at HEC Paris where he held the Social Business / Enterprise and Poverty Chair presided by Nobel Laureate Professor Muhammad Yunus. Prior to his academic life, he accumulated more than 10 years of experience in the business world, both with industrial companies (Michelin and CarnaudMetalbox) and as a strategy consultant with McKinsey & Company. He is Co-Program Director of the Leading Customer РCentric Strategies program.

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