How to Move from Product Centricity to Customer Centricity
A telecom operator’s level of commitment to a new strategy can mean the difference between success and failure.
by Tom O’Malley and Sami Rejeb, September 2011
At their inception, most telecom operators started by providing one range of service technology, such as mobile or fixed. However, regulators have lowered barriers to increase competition on pure players. Deregulation has pushed the telecom operators to offer more than one service technology, and convergent products and services, to be competitive. This convergence is pushing the telecom operator to invest heavily in new network technologies, such as LTE, 4G, WIMAX, and IP, in a more competitive market, which is putting significant pressures on the margin. To protect the margin, which also affected by diminishing returns on traditional products, telecom operators are focusing on customer wallet share by creating innovative products and promotion bundles. Innovation is now a critical part of survival for the telecom operators, especially given the growing number of connected devices and the emergence of new IT players such as Google, Apple, Skype, and Facebook.
All three components of growth are under heavy pressures:
Average revenue per user - Price competition, cross-product bundling
Market share - New entrants, new licenses, landline-to-mobile bleeding
Customer base - Market saturation, more demanding users, less loyal customers, laws limiting contracts
Telecom operators most prevalently talk about customer centricity as a strategy, and its implied tactics:
Aligning customer data to allow for deep segmentation and new market development
Aligning marketing, sales, and service processes toward one customer experience
Standardizing offer delivery across product groups to maximize customer satisfaction and maximize days billing
Standardizing offer design across product groups to get to market quickly and outpace competition
There are few markets in the world that are not facing the same pressures, and almost all are seeking a similar customer-centric strategy. However, moving from a product-centric business model to a customer-centric one is an overwhelming transformation for most, as it implies huge operational redesign, process re-engineering, political risk, and extraordinary investment. Though almost everyone talks about it, most fail to make the transition — which leaves plenty of room for those that do to gain a significant competitive advantage.
So, what distinguishes the winners from the losers? Well, we can look to an old adage about the traditional ham-and-egg breakfast, that’s often taken for granted. The story goes that while the hen that laid the two glowing sunny-side-up eggs was involved in the meal, the pig that made the bacon/ham possible was committed to the breakfast. As in a business transformation, there is also a large gap in outcomes between involvement and commitment. Suffice to say, however, that our analogy is helpful only to demonstrate the gap, for it is the chickens that lose in a business transformation, while it is the pigs that win the spoils. To demonstrate the point, we can look at a couple of scenarios:
The Rubber Chicken Strategy This is the most common business strategy. As the senior managers get into the details, it soon becomes clear that their technology applications are the main inhibitors for a transformation. Without much hesitation, the vision inevitably is categorized as a technical transformation. To avoid mounting cost and apparent risk, the transformation gets chopped up into a three- to five-year roadmap focused on the replacement of applications. About 12 to 18 months into the roadmap, it is rarely referred to as a transformation anymore, as it looks more like independent projects, each with its own politics and issues, that result in their independent, compromised roll-outs. Whatever new applications did get migrated are running at 50 to 70 percent effectiveness, because they were customized to fit into a legacy IT architecture and expected to support the existing handicapped processes. The “transformation” the CEO once dreamed of is fundamentally lost, as the involved business leaders carefully distance themselves from the vision with unspoken rationale of political suicide for being associated with such abysmal outcomes.
This example illustrates two main pitfalls that most companies fall into as they attempt to cross the road from product focus to customer centricity:
Business involvement: Technology is often a red herring. Simply because it can be the obvious bottleneck, that does not mean it is the fundamental issue. The real issue is likely to be organizational design and product-centric profit and loss, which dictates siloed processes, which then cause the fragmented architecture. The catalyst of change must come from a true commitment of the business to ensure resilience, and to drive the process change required for success. This point is simple to remember: “IT transformations fail.”
Application-focused commitment: Breaking up the roadmap by application implies a “rip and replace” implementation strategy requiring a skill set far beyond the skills of the day-to-day IT team. Additionally, many core processes reside across applications, so interdependencies are critical. However, as new applications roll out alongside the legacy applications, it is difficult to adopt new processes, and the custom integrations often multiply the risk of running over time and over budget. Finally, cost and feature-focused procurement processes force managers into a best-of-breed, independent application approach, resulting in inoperability issues, thus more silos and/or more custom integrations. The thing to remember about roadmaps is thus: “Customization = time, and time kills everything.”
The Flying Pig Scenario The CEO realizes the significance of the opportunity to surpass the competition and insists the transformation be managed by business and IT working as one. The CEO stays closely engaged in the early stages to ensure the organization is committed to the same outcome. The CEO realigns any remaining product-centric lines of business to customer segments. The business and IT’s efforts focus the transformation on processes more than IT components, and due diligence teams across IT and business plan the transformation for each line of business. A green field implementation strategy is chosen that implies building a pristine application stack completely separate from the legacy stack. New processes are based on out-of-the-box, best-in-class practices that come prebuilt in the applications; the term “customize” is deemed to be a swear word by the business and IT. Critical processes such as data management, marketing, sales, service, order capture, order management, and offer management are dissected and redefined. The lines of business then decide which customers are going to migrate into the new processes first, depending on complexity and their respective value to the business. Call center agents and other users are trained on the new systems and remain separate from those dependent on the “old way.” From day one until the last customer is migrated over to the new process and new technology stack, it is a business-led transformation that the IT team was able to support with ease, having avoided all custom integrations, and completing on time and on budget.
Customer centricity is a strategy that goes beyond rhetoric and requires an unwavering commitment to the customer. It is abandoning one’s self-centric perspective, and/or product-centric processes, and committing to a new way of business. It requires large investment, but promises great rewards for the company that can be first in its market to prepare for the new era of high competition, more demanding customers, high agility of rapid product introductions, and a solution-oriented marketing, sales, and service front. After all, it was only a decade ago that people argued that the day a telco operator could sell on customer value, would be the day pigs could fly. Well that day has come, and those that can, will survive and thrive, while the chickens meandering across the road will certainly get run over.
Sami Rejeb and Tom O’Malley are senior directors of Industry Strategy and Insight at Oracle.