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The customer-centricity challenge

(Image credit: Image source: Shutterstock/Shutter_M)

IT leaders across organisations know that in the ‘age of the customer’, developing products and services that provide flexible and responsive customer experiences is key. The bar is set high by the leading tech giants such as Apple and Amazon and this has shaped customer expectations across the board.

But the evidence from this year’s Harvey Nash/KPMG CIO survey (opens in new tab) backs up the reality that this is one of the hardest things to actually achieve. While most organisations aspire to become customer centric, many are struggling. Only just over a quarter of IT leaders (27 per cent) view themselves as very effective across five key customer-focused capabilities.

This matters because the survey also showed that being customer-centric directly supports revenue and profit growth. We identified a small group of leaders and 56 per cent of them reported revenue growth exceeding that of their competitors in the last year, versus 44 per cent for the global average.

A similar picture is painted with profitability – with 54 per cent of customer-centric organisations enjoying greater profitability than their competitors versus 39 per cent globally.

The signs are that where last year a significant group of companies had put in place the foundations needed to become ‘digital leaders’ (around 18 per cent of survey participants), now they are building on their successes to become better connected, digitally-enabled, customer-centric enterprises.

Customer-centric priorities

These customer-centric leaders have a different set of priorities to the global average. What sets them apart is their focus on enabling revenue growth and supporting the introduction of new products, services and customer experiences. In fact, developing innovative new products and services is their number one priority, whereas amongst the rest of the survey base it is to improve business processes – a far more internally-focused concern.

Our research showed that the larger the organisation, when measured through the size of its IT budget, the greater its effectiveness at customer-centric capabilities.  However, with the advent of scalable, cloud-based customer management solutions there is no reason why a smaller organisation with a smaller IT budget can’t develop customer-centric approaches.

The five key customer capabilities that we measured against in the survey were:

  • Measuring profitability by customer
  • Creating engaging customer experiences
  • Generating actionable insights from customer data
  • Having a single view of customer interactions across all service channels
  • Leveraging customer data to deliver personalised customer experiences

What are the steps that organisations should take to help achieve these things and close the gap on customer-centric leaders?

Engaging customer experiences

Prioritising the delivery of engaging customer experiences is an excellent place to start. Leaders are adopting design thinking methods and employing agile development techniques to build engaging and frictionless digital experiences for their customers. 

Most companies have begun this journey. It usually means connecting new front-end, customer-facing websites, apps, chatbots and telephony via application programming interfaces (APIs) to back-end systems. It’s worth noting however that there comes a point at which the value or return from investing in these front-end technologies tails off. The back-end applications need to be simplified and modernised too. In order to keep pace with customer expectations it is crucial that the pace of agile, customer-centric innovation passes through from the front-end systems to the legacy environment.

Turning data into insight

Another important step involves generating customer insight from data. Clearly, creating a single view is an important foundation but the amount of customer data being generated is increasing exponentially – and the critical challenge is how to turn that data into actionable insight about the customer. What do customers want and need? When are they interacting with you most? Which customers are most likely to be interested in which product, which offer, which image, at which price, presented via which channel?

There’s no doubt that customer-centric organisations are making extensive use of the cloud for handling customer data and performing analytics to generate insight. To date, the cloud has mainly been used for non-sensitive data – but we are reaching the tipping point where leading companies will begin to host core applications in the cloud. In future, the cloud will host most sources of structured and unstructured data to form rich profiles of customers. Certainly, we have reached the point where a growing number of organisations are seriously planning for a “cloud first” customer data future.

Sophisticated segmentation

Any organisation that wants to become more customer-centric also has to get serious about organising customer data so that it can be analysed and personalised. This means that organisations now need to look at segmenting their data in new ways: times have changed and the outdated and often quite binary segmentation models of old are not sophisticated enough anymore.  The young = digital channels, old = telephone channels paradigm no longer holds. Millennials = fickle, Generation X = faithful is similarly outdated.

Segmenting your customer base in advanced and fine-tuned ways is an essential ingredient for responding to changing demographic and social trends and delivering personalised digital experiences.

The rise of the platform

Another trend that we are seeing develop amongst the most advanced customer-centric organisations is that they are taking a more platform-based approach to delivering their services. A platform provides a marketplace which creates better outcomes for customers. Platform-based businesses models connect marketplaces of buyers and sellers. Platform businesses like Airbnb and Uber haven’t only revolutionised the business of travel: the ripples have spread far beyond.

The rise of the platform/aggregator model, built around partnerships which extend the enterprise by leveraging the services provided by others (eg Uber integrating Stripe’s payment service) is only set to grow. One example is the brewer Heineken setting up a digital platform that allows micro-brewers to trade. Why is it in Heineken’s interest to bring micro-brewers to consumers? It provides a service to the customer and builds a deeper relationship with them in product lines that are popular.

Prepared to experiment

Finally – to support their better-connected, customer-centric enterprises, IT leaders will need to think outside the box and take some calculated risks. Our survey found that having an “innovative, experimental culture” was deemed critically important by nearly half (49 per cent) of IT leaders at customer-centric organisations, compared to just 32 per cent of others. Enabling IT to support fast test-and-learn environments is likely to be needed. Using agile methodologies rather than old waterfall techniques (or at least, a blend of the two) is another imperative. 

Quite simply, if you want to put the customer at the heart of what you do, you have to push the boundaries of traditional IT approaches.

Lisa Heneghan, Global Head of Technology, Management Consulting, KPMG in the UK (opens in new tab)
Adrian Clamp, Head of Customer & Digital Advisory, KPMG in the UK
Image source: Shutterstock/Shutter_M

Lisa Heneghan is Global Head of Technology, Management Consulting at KPMG. The 2017 Harvey Nash/KPMG CIO Survey, the world’s largest survey of IT leadership, was launched on 23rd May 2017.