Competing in arenas, as opposed to industry groups, may well unlock the way toward customer centricity in 2022.
In 2022, we continue living in the era of customer-centric reimagination of the future enterprise and the subsequent rethinking of business models. From a customer perspective, this has long meant customers avoid companies that are hard to do business with. What then makes a company easy to do business with in the new era? I would argue that customer experience is only the tip of an iceberg and that Value Architectures, the ways in which a company organizes and collaborates along the end-to-end value chain, provide the new basis for identifying and realising both customer centricity and economic value.
Furthermore, customers want an Amazon-like experience, from data transparency to just-in-time delivery. The rulebook for many industries is already “slow service equals no service”. According to my latest experiences, this rule is accelerating in industrial sectors as part of a broader set of trends such the convergence of B2C and B2B. Maybe the recent supply chain issues are partly to thank for also.
Taking the example of the industrial sector where process efficiency (efforts-to-outcomes) and customer experience (holistic perception of those efforts and outcomes) are particularly connected. The old way of measuring performance included comparisons to industry peers (with similar business model, assets etc.). A company may have manufacturing but rely on partners for materials, warehousing, logistics or customer support. However, the customer experience is the combination of these value chain activities regardless whether they are performed in-house or by others in the value chain. Similarly, rising trends and demands related to e.g. sustainability, are likely to affect not one but multiple value chain parties. Consequently rejecting the old thinking, the Value Architecture perspective means focusing less on making more money than your peers, and more about responding to customers’ “jobs to be done” and developing capabilities in the areas where a company may make a difference as a part of the end-to-end value chain. Asset ownership becomes secondary and the understanding of where, how and for whom the value is created and who steers the customer experience, becomes the central piece of the business model.
"Think holistically about the Value Architecture and jointly orchestrate in arenas", as Ron Adler put it, means organizing around the common elements: the customer segment, the offering (products and/or services), and the channel/ place of delivery (digital and/or physical).
The following includes a few concrete ways I have seen that industrial companies may consider from the Value Architecture perspective in their journey to become easier to do business with in 2022.
1. Customer segmentation is highly beneficial for steering value chain efforts to reduce friction and add new value. Segmentation provides benefits such as optimized cost to serve and the design of smooth experiences while reducing expenditure on less profitable segments. Segmentation also enables the use of strategic tactics such as contact channels, pricing, service levels and relationship management optimizations.
2. When it comes to digital, Customers and partners alike benefit from a digital experience. Typical room for improvements include a setup where sales and customer support are heavily reliant on personal interactions, data is disorganized and backend processes isolated. A simple way to reduce friction is to digitally aid the order-to-fulfilment process.
If for instance a customer self-service portal readily exists, rethinking its purpose to value chain collaboration is likely to bring value to customers in form of reduced complexity and increased convenience, customer service, and data transparency.
3. Think ways in which servitization may create new value. This implies reconfigurations of activities, resources and partnerships to include production activities (the design and delivery of the offering), problem-solving activities (the development of specific customer solutions), and platform activities (the management of platform systems such as customer account portals).
The most advanced companies for example in the Pharma industry are able to anticipate, assemble, and deliver hypersegmented and ultraindustrialized offerings based on modular “service bits”, mix-and-match like Lego bricks.
4. Lastly, take into account the wider trends that affect ways in which a company is perceived as a business partner. Look out for the growing consumer sentiment or EU Green Deal that will accelerate the ESG tug-of-wars and new standards.
Instead of merely realising economic value from Value Architecture design, the focus should also include reshaping how a company senses and acts on ESG* information. Value Architecture perspective enables to extend the current organization and facilitate cooperation to overcome sustainability and social limits - all that make a company a more favourable business partner.
* ESG stands for Environmental, Social and Governance. This is often called sustainability.