How the customer is killing the CEOby
The Customer Economy will lead to the demise of CEOs who continue to focus on short-term profit and traditional business models, as Chris Adlard explains.
Following reports that companies are advertising on Facebook for users willing to post fake reviews, a recent Which? investigation revealed that popular comparison sites like TripAdvisor are plagued with reviews posted by hotels trying to boost their online ratings to drive bookings. These incidents emphasise not only the importance of customer reviews for businesses today, but also how dramatically the role of the customer has changed in the digital age.
In a world of social media influencers and online reviews, customers have usurped the traditional salesforce, with their testimonies proving more persuasive for fellow customers than regular advertising or sales techniques. Wielding this considerable power, the individual customer has become more influential to businesses than traditional priorities such as shareholders and corporate structure, and CEOs are beginning to take notice.
In August 2019, The Business Roundtable, made up of CEOs from nearly 200 major US businesses including Apple, Amazon and Bank of America, issued a statement committing to a more customer-centric focus. In this statement, they redefined the ‘purpose of a corporation’ as investing in employees and delivering value to customers, rather than serving shareholders and maximising profit, underlining the new customer-centric direction in which the business world is moving.
Nowhere is this focus more evident than in US video conferencing firm Zoom, which has created a corporate culture centred entirely around the customer. The San Jose based tech company is constantly adapting its business model based on customer feedback. It uses systems designed to be intuitive and simple, and invests heavily in its Customer Success team to improve user experience and resolve issues. This approach hasn’t just boosted customer loyalty, with annual revenues in the last year of over US$330 million, it has had a positive impact on employees. Zoom’s CEO Eric Yuan has been named as the highest-rated CEO on employee review site Glassdoor, with an employee approval rating of 99%.
Zoom is not alone in reaping the benefits of adapting to the newfound power of the customer. Signify (formerly Phillips Lighting) recognised the influence of its customers, collaborating with them on the research, development and design of the Philips Hue Outdoor Light strip, a completely new smart lighting product, in 2018. This consumer lighting innovation proved a worthy investment, winning numerous design awards and garnering Signify its highest ever rating on Amazon. And this revolution is not isolated to the tech industry; even traditionally profit-focused sectors such as finance are reinventing themselves to prioritise the customer.
Starling Bank set itself apart from traditional retail banks with an innovative, digital platform which provided an intuitive customer journey, based on their actual usage. This approach proved to be highly effective, with Starling Bank gaining just under a million customers within three years and being voted Best British Bank by the public at the British Bank Awards in 2018 and 2019.
Clearly a customer-centric approach not only benefits the user; it also allows businesses to thrive. Recently, Forbes reported that customer-led companies which had invested heavily in improving and simplifying their customer experience outperformed those who had not. Those investing in the Dow Jones Index during the 10-year period from 2009 to 2018, would have seen their portfolio increase by 184%, those investing in the S&P would have experienced an increase of 207%. In contrast, if you had invested in the 10 companies ranked in Siegel+Gale’s World’s Simplest Brands report, you would have outperformed the average of the major indexes by a staggering 679%. Putting the customer first is no longer just a PR exercise; it makes business sense and drives profitable growth.
But if the benefits of prioritising the customer are so clear, why are all companies not following the example of Zoom?
The current make-up of many corporate organisations represents an obstacle for growth. According to the Global Accounting Network in 2018, 51% of the FTSE 100 CEOs had a background in finance, meaning that many leaders have limited exposure to existing and prospective customers, focusing instead on the finances of the business.
This theory is supported further by Peter Cheese, CEO of global professional body The Chartered Institute of Personnel and Development (CIPD), who argues that “Part of the problem is that too many businesses have lost sight of their purpose and their customers with a singular focus on financial outcomes and the financial stakeholder. Understanding all of the organisation’s stakeholders is critical, and in particular, the employees who ultimately are responsible for delivery of the value to customers.”
We have seen many companies struggle to prioritise customer experience and suffer for it. Thomas Cook and HMV are recent examples of businesses not understanding customer journeys, ignoring customer expectations when it comes to service and products, and finding themselves shunned for it. Even John Lewis, famous for its positive customer experience, is falling behind on key areas of customer-centric growth strategy, particularly digital, which is becoming increasingly important as shoppers migrate online. When businesses ignore important areas of customer experience, growth falters and customers are more likely to go elsewhere.
How to benefit from the Customer Economy
In order to share in the benefits of the Customer Economy, businesses must genuinely understand the needs and expectations of the customer, and be willing to centre their organisations around them, with no areas off limits. Prioritising customers includes removing rigid departmental siloes in order for customer journeys to be made easier. This includes providing effective digital channels and creating business cultures that empower employees to assist customers directly without unnecessary complications.
Furthermore, this needs to be a real commitment, not just lip service, as customers will see through insincere pledges as soon as they are tested. This has been shown in recent months with the British Airways strikes, during which the company’s commitment to customer service was called into question as customers found themselves struggling to contact any helplines and being given misinformation about flights.
Ultimately, it is up to individual businesses and their CEOs as to how they choose to ride the rising wave of customer influence. Those that think about their business from the customer experience and make real changes to how their organisations run are finding themselves reaping the rewards of the Customer Economy: improving customer experience and loyalty; and achieving sustainable growth as a result. Those CEOs keen to focus on short-term profit and stick to the traditional business models of a bygone age risk losing their customer base to more progressive, rival firms.
Consequently, there needs to be a C-change (with 'C' representing the customer) in which CEOs become customer-led and move away from the short-term, financially led goals which are not going to cut it in the Customer Economy. If not, those one-dimensional CEOs risk becoming obsolete, the latest victim of the customer revolution.