Post on 27-Mar-2018
Harvard Business School
Customer Centric Innovation
Professor Rohit Deshpande
Harvard Business School
4 September 2013
6th Annual INALDE LAMS seminar
Cartagena, Colombia
Harvard Business School
Outline
• Understanding Customer Centricity
• Quick Deep Dive: Customer Centricity (and
Global Branding) research program
• Understanding Customers: The Importance of
“Customer Insights”
• Serving Customers: “Culture, Strategy &
Execution” in Customer Centricity
• Case Examples (throughout)
• Where to go from here: Additional Readings
Copyright R. Deshpandé 4 September 2013
Harvard Business School
• “The set of beliefs that puts the customer’s interests
first, while not excluding those of all other
stakeholders, in order to develop a long-term
profitable enterprise.”
• Deshpande, Farley, and Webster 1998
Copyright R. Deshpandé 4 September 2013
Customer-Centricity
Harvard Business School
“Because the purpose of business is to create a
customer, the business enterprise has two–and
only two–basic functions: marketing and innovation.
Marketing and innovation produce results; all the
rest are costs.”
Peter Drucker
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The Purpose of a Business
Harvard Business School
Deep Dive into Research Project:
The “Global High Performance
Firms” Study
• Over 600 senior managers in large firms in England, France, Germany, Japan, and the U.S. (“The Triad”)
• All quoted on major stock exchange (e.g., Nikkei, Bourse, etc.)
• Interviews in each of both Company and Customer/Client firms (B2B context)
• Replicated for largest firms in B.R.I.C. (Brazil, Russia, India, China)
Copyright R. Deshpandé 4 September 2013
Harvard Business School
Results? The highest performers look alike!
• There is no difference in the “success profile” by
country, industry, or other demographic
• The most successful American firms have the
same “success profile” as the most successful
Brazilian, Chinese, or Indian firms
Copyright R. Deshpandé 4 September 2013
Harvard Business School
What is the “Success Profile”?
Companies that:
1. Are customer-centric rather than product or
technology centric
2. Out-compete other firms in terms of deep
customer insights
3. Integrate branding with customer-centricity
4. Reward employees for customer-focused
innovation
l Entrepreneurial, open organizations
l Employee participation is encouraged
especially in delighting customers
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Harvard Business School
Understanding Customers: The
Importance of Customer Insights
Customer-centric firms know more about their customers and have deeper insights than
their competitors.
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Key Customer Insight
• Corona Beer (Mexico)
the “ritual of the lime”
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Source: http://camy.org/gallery/index.php?BrandID=317
Corona Print AdCorona Beer
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Harvard Business School
Serving Customers: Using Insights
Customer-centric firms know how to use
customer insights to out-compete in serving
their customers – not just customer satisfaction
but customer delight
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Case Example: Singapore Airlines
Evoking the elegant ambienceof an exclusive club,
our new First Class cabinoffers unparalleled privacyin just twelve SkySuites,*
upholstered in soft
Connolly leather andtrimmed with burr wood.Each SkySuite can reclineto any angle, including a
completely flat bed,which is then draped
with crisp linen and asoft duvet. You may alsoenjoy the widest choice of
entertainment in the airon the world’s largestinflight personal video
screen at 36 cm (14”).Our new menus offer
World Gourmet Cuisine,created by a panel of
seven world-renownedchefs and served
whenever you choose,accompanied by selections
from our wine masters.Singapore Airlines.
Now more than ever,a great way to fly.
*SkySuites are now available on all flights between Singapore and London, Frankfurt,
Sydney, New York JFK (Newark from 22 April). Daily services to San Francisco via Hong
Kong, Los Angeles via Tokyo from 30 May and Los Angeles via Taipei from 12 June.
Progressively being introduced on all other MEGATOP 747 series.
Singapore AirlinesNew First Class
Evoking the elegant ambienceof an exclusive club,
our new First Class cabinoffers unparalleled privacyin just twelve SkySuites,*
upholstered in soft
Connolly leather andtrimmed with burr wood.Each SkySuite can reclineto any angle, including a
completely flat bed,which is then draped
with crisp linen and asoft duvet. You may alsoenjoy the widest choice of
entertainment in the airon the world’s largestinflight personal video
screen at 36 cm (14”).Our new menus offer
World Gourmet Cuisine,created by a panel of
seven world-renownedchefs and served
whenever you choose,accompanied by selections
from our wine masters.Singapore Airlines.
Now more than ever,a great way to fly.
Evoking the elegant ambienceof an exclusive club,
our new First Class cabinoffers unparalleled privacyin just twelve SkySuites,*
upholstered in soft
Connolly leather andtrimmed with burr wood.Each SkySuite can reclineto any angle, including a
completely flat bed,which is then draped
with crisp linen and asoft duvet. You may alsoenjoy the widest choice of
entertainment in the airon the world’s largestinflight personal video
screen at 36 cm (14”).Our new menus offer
World Gourmet Cuisine,created by a panel of
seven world-renownedchefs and served
whenever you choose,accompanied by selections
from our wine masters.Singapore Airlines.
Now more than ever,a great way to fly.
*SkySuites are now available on all flights between Singapore and London, Frankfurt,
Sydney, New York JFK (Newark from 22 April). Daily services to San Francisco via Hong
Kong, Los Angeles via Tokyo from 30 May and Los Angeles via Taipei from 12 June.
Progressively being introduced on all other MEGATOP 747 series.
Singapore AirlinesNew First Class
Source: Company documents.
First-Class Seats
Copyright R. Deshpandé 4 September 2013
Harvard Business School
Key Customer Insight
• Singapore Airlines (Singapore)
Compete with software - not just hardware
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“Singapore Girl” Ad, 2000
Source: Company documents.
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Key Customer Insight
• Chocolates El Rey (Venezuela)
Having the very best product quality “(product
centricity”) is not enough
[the “better mousetrap fallacy”]
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Harvard Business School
Serving Customers: Using Insights
Customer-centric firms know how to motivate
employees to produce customer-focused
innovations
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Harvard Business School
Advertisement from the 1990s
Kikkoman
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Key Customer Insight
Kikkoman (Japan)
Customer-focused innovation means adapting to
local consumption habits rather than force feeding
foreign habits
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Customer-Centric Firms know how to integrate
branding into overall corporate strategy—why?
Copyright R. Deshpandé 4 September 2013
Serving Customers: The Importance of
Customer Centric Branding
Harvard Business School
• Branding provides the “inside-outside” connection
(Face of the company to customer)
• Sell the brand “inside” before you sell it “outside”
(employees are internal customers)
• Branding is about more than a logo, it’s about
Emotional Customer-Centric Connections (customers
& employees)
• A brand is a relationship and a promise
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Serving Customers: The Importance of
Customer Centric Branding
Integrating customer centricity and branding in
an M&A growth context:
The case of Citigroup
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New Citi Arc Logo
Source: Company documents.
Acquisition focus
Strong, separate
franchises
U.S. business
concentration
Strong expense
discipline – acquisition
synergies
Balanced approach
to growth
One face to the
client
Increasingly
international
Sharpened expense
discipline
Primarily organic
Breaking down silos
Greater international
investments
Structural review of
expenses, operating
efficiency
Past Today Future
Our Transition
“Company in Transition”—Slide from the World Tour 2007
Source: Company documents.
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To Summarize:
Customer-Centric Innovation means rethinking what
“Marketing” means to you
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“Customer Centricity” “Organizational Alignment”
Culture Operations
“Customer” “Brand”
Strategy MarketingH.R.Tactics
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Marketing not only as strategy and tactics but as
Culture
• Tactics: Managing the 4P’s
• Strategy: Developing a Value Proposition and
Competitive Positioning Based
on Customer Needs
• Culture: Being the Advocate for the Customer
Throughout the Organization
“Customer Centricity”
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Harvard Business School
Marketing’s Role in the “New HP”
Source: Company.
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Harvard Business School
February 11, 2005 15
One Voice Worldwide -- HP
Brand Design and Experience
Operation One Voice
Source: Company.
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Implications of Being Customer-Centric
• Marketing is not something you do to the
customer.
• It is how the customer gets to influence your
company.
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So…. It’s really about “Culture”
“The Customer-Centric Organization”
CULTURE:
– “The customer’s interest should always come first,
ahead of the owners.” (“Prioritize Stakeholders”)
– “I believe this business exists primarily to serve
customers.” (“Customer 1”)
– “We have a good sense of how our customers
view our products and services.”(“Deep Customer
Insights”)
(from: R. Deshpandé, Developing a Market
Orientation, 1999)
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Key Learning Principle #1
Innovate around your Customers
not just around your Products.
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Best Sources of Innovations…
…are sometimes disguised as customer problems!
The flip side of a “Customer Complaint” is a “New
Product Idea”.
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Key Learning Principle #2
View Your Customers as Strategic Assets, they Help
You Define Your Business and Identify New Business
Opportunities for Innovation.
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Characteristics of “Best Customers”
1. Ask you to do things you can do well.
2. Make demands that challenge you to develop your
distinctive competence.
3. Take you in directions consistent with your strategy.
4. Value the relationship with you as a major asset in
their business/work/lives.
5. Are willing to pay for the resources you commit to
solving their problem (“consultative selling”).
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Key Learning Principle #3
Stay Loyal to your Loyals.
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• Cognitive (the “head”) – frequency of repeat
purchases
-------------------------
• Emotional (the “heart”) – delight in the
customer experience
-------------------------
=> Net Promoter Score = (Promoters –
Detractors)
(The Ultimate Question, Fred Reichheld)
Customer Loyalty Metrics
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Key Learning Principle #4
Marketing is everybody’s job,
especially the CEO’s.
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“The Virtuous Customer-Centric Cycle”
Product
Innovations and
Superior
Customer Service
Customer-Centric
Values Driven
Organization
Shareholder
Value
Increases
Motivated
Employees
Profit
Growth
Increases
Revenue
Growth
Increases
Increased
Customer
SatisfactionReinvest
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Additional Reading
• Harvard Business School cases (use the HBP website)
– Branding Citigroup’s Consumer Business
– Citigroup: Re-Branding in 2007
– Chocolates El Rey
– Corona Beer
– Hewlett-Packard
– Kikkoman Corporation: Consumer-Focused Innovation
– Singapore Airlines: Customer Service Innovation
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