Customers are the source of a business`s revenue; this makes it almost impossible to spend too much time understanding who they are and why they buy products or services. This, the third part in a series on preparing business for growth, looks at the value of customer insight.
A few years ago I did some work with an explosives company undergoing a customer discovery process with a mining giant. Unexpectedly, an opportunity arose for the explosives company to manage a part of the mine that had been experiencing severe problems resulting from a lack of skilled resources.
Three years on, the two companies are still engaged. The explosives company is constantly finding new opportunities to grow its business through the mine, which has handed over a core part of its business - the drilling and blasting of rock.
What is most important is that value is being created in the customer`s own currency, with the explosives company billing the mining company on a cost per ton of rock basis.
Ultimately, this developed from understanding the customer`s profile, business drivers (the problem and opportunity pressures that create the need for change), and business initiatives (the projects, programmes or plans that address the business drivers).
Customer insight
In today`s economy, building in-depth knowledge of the customer base - known as customer insight - is no longer simply about knowing everything about the customer. Instead, it`s about understanding how customers create value for their customers, and how they in turn create value for their own set of customers. Building an awareness and understanding of this continuous flow of value chains will enable companies to make crucial progress in preparing for growth.
What is most important is that value is being created in the customer`s own currency.
Ian Widdop is director of business transformation at Growth Partners.
Understanding the value customers have to offer their customers entails taking a far more proactive approach to a customers` business. Let`s look at outsourcing, which is really nothing more than a clever supplier saying, "Look at what I can do for you. You may do this internally now, but it does not fit in with your business model and I can do it better and far more efficiently".
If the supplier proves that he can manage the task more effectively, he can offer the customer improved efficiencies and thus greater revenue or profit. Understanding the customer`s needs at this level involves understanding his business spheres, the different degrees of complexity in which he operates, and the different degrees of scale of opportunity that exist for the supplier.
SWOT analysis
Much detail is required and account profiles can be lengthy documents. Who are the customer`s directors? What can be learned about their long-term direction? How are they achieving their strategy? What do they do on a day-to-day basis to move them in the right direction? Are they doing it well? Can a way to engage with them be found in which greater value is offered by helping them to do things more efficiently? Constructing a SWOT analysis of the customer provides the ability to create a strategic plan for them. Much of the information sought may be closely guarded; talk to them to gain access to the data needed, check with them constantly to gain further insight, and to turn that data into information, and then customer intelligence.
Once an understanding of where value can be added is achieved, that value must be defined to the customer. This involves the following steps:
* Determine methods to bring capabilities and solutions to bear on the customer`s business drivers.
* Tell customer what solutions are delivering in bottom-line terms and maintain this approach consistently.
* Get the customer to agree and sign off on these improvements.
* Set up systems of measurement and ensure the customer owns and operates them.
Unique value can be offered when services closely match the customer`s needs - which brings within reach a closed sale.
Being proactive here is key. Constantly ask yourself: how would I think my way into a customer`s organisation? If done on a consistent basis and if the required behaviours are adopted, opportunities for growth will constantly arise. We operate in a complex business environment and customers are simply no longer interested in products - the only differentiator is how the sale is made.
The way customers are approached will determine whether companies survive and grow, or die.
* Ian Widdop is director of business transformation at Growth Partners.
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