Customers Are Critical to TransformationBy Faisal Hoque | Posted 2010-09-13 Email Print
Transformational changes to a business need to be driven by customer needs, or they aren't worth doing. Can you tell the difference?
The customer remains king, and enterprises that engage in transformative strategies must always take customer needs and perceptions into consideration. Sears, the pioneer in catalog and retail department stores, provides the perfect examples of what happens when transformative strategies are applied well and poorly.
In the 1990s, Sears Canada created a state-of-the-art customer database that brought together, for the first time, each customer’s in-store and catalog activity. The catalog was Sears’ first presence in Canada. As sales grew, the company began building retail stores.
The two channels were managed separately. While customers could order catalog items in the store, the catalog kiosks were placed in the far reaches of the buildings and were difficult to find. A study of the combined database found that customers who shopped both in the stores and through the catalog were spending twice as much as single-channel customers. Sears Canada consolidated management of both channels and made the in-store catalog kiosks easier to find. The result was a sales increase that amounted to adding another mid-size store to the chain – for practically no cost.
Conversely, Sears Holding Company, the parent of the retail chain, in 2007 decided to take advantage of the social networking wave rolling over the Internet. By creating a community of shoppers, Sears hoped to create viral buzz around its products and services, and increase sales. Unfortunately, a flaw in the system revealed customers’ purchasing habits to the entire world. It also revealed the intrusive level in which Sears was tracking customer activity. The result was a creation of extreme mistrust among consumers that forced Sears to modify its social networking ambitions to the point of where such initiatives are essentially irrelevant today.
The contrasting Sears cases show how the goal of transformation must not be for transformation itself, but rather some objective that is found valuable by the end customer. In the age of blogging and rapid-fire social networks, customers on all levels—from large enterprises to individual consumers—are able to sniff out half-hearted attempts to feign transformation. This makes management’s development and use of a Strategic Enterprise Architecture (SEA) critically important in any transformative process.
Dealing with a Shift in Mindset
A transformed company is a new and different type of organization, one in which everything is constantly questioned. Even the metrics used to measure progress and success must be continuously questioned to ensure that management is measuring the right activities and getting the right output from them. And with every cycle of data collection and analysis, management should review the inputs, outputs and goals to make needed adjustments in the metrics. Some will say that metrics shouldn’t be adjusted so frequently - that doing so puts you at increased risk for a loss of trending data. That is true, but that shouldn’t prevent the inclusion of adjustments and new data sets to capture new intelligence as business and market conditions change.
Enterprises must pay particular attention to customer metrics. The customer – existing and potential – is at the heart of all successful transformation efforts. As Harvard University’s Clayton Christensen pointed out, simply continuing to please your current customers as you always have is a huge risk and leaves a company open to disruptive forces. Just as you do not want your company to become a white elephant, you do not want to find yourself mindlessly feeding white elephants, as comfortable as it may be.