The 1960s saw the birth of corporate strategy as thought leaders such as Michael Porter created the five forces and legends like Bruce Henderson laid the bedrock of numerous modern business paradigms. In these early days CEOs were instructed to focus on positioning and how to create economies of scale, to develop competitive advantage on barriers to entry, leverage market power and other external factors.
Soon positioning was eclipsed by a focus on execution as the Japanese emerged in the American business landscape acquiring market share with seemingly unstoppable brands such as Sony and Honda. The Japanese demonstrated that economies of scale were not needed and smaller but more efficient factories could outperform larger less efficient ones. This gave birth to the executioners who believed a company should focus on its core and deliver value through operational excellence.
The 90s spawned a new chapter in strategic evolution as globalization began to find its stride. This was a moment of intense change and companies like IBM began to lose billions almost overnight. With change came the focus on adaptation, and prolific authors such as Henry Mintzberg and his best seller “The Rise and Fall of Strategic Planning” were embraced by companies who were scrambling to become more agile.
Today, we may be on the dawn of a new chapter in the annals of corporate strategy as companies struggle to keep a foothold in an ever changing global market place. They are turning to what may seem like an obvious solution; focusing on your customer. While many may feel companies have always focused on the customer, freshly minted Chief Customer Officers would argue this is only mass delusion. Corporations are failing to understand their customers and are losing market share because of it.
The proof can be seen in the Fortune 500 where as much as 44% of the companies on the coveted list will not be present in the following year. That means that in any given year as much as 220 companies will be removed from the Fortune 500 list and replaced by new more effective and profitable ones. Wiped out by competition, obsolete products, archaic management or a host of other reasons; either way you look at it they are simply not creating sustainable market models.
Jim Collins in his bestselling book “Good To Great” describe the qualities of the world’s most successful and sustainable businesses only to watch almost every single one of his case studies crumble in the financial crisis, some of which, such as Fannie May, were in the eye of the storm. So we can see that even the most sophisticated boardroom denizens are falling to develop long-term sustainable winning strategies.
The corporation’s latest efforts to develop a cutting edge is best articulated in the Fortune 500s latest C-Suite executive, the Chief Customer Officer (CCO). A penetrating study conducted by the Chief Customer Officer Council in 2014 found that of the Fortune 1,000 companies 6.7% had a CCO, and more interestingly that of the Fortune 100, 22% had a CCO. The world’s most successful, most profitable companies are embracing a new customer centric strategy and the spearhead of this change is the Chief Customer Officer.
The CCO is a rapidly rising trend with the first CCO on record as early as 1999 when Jack Chambers was appointed by Texas New Mexico Power. This move is part of an explosion of new C-Suite roles which include the Chief Risk Officer, Chief Information Officer, Chief Technology, Chief Strategy Officer, Chief Digital Officer and many others to boot.
What corporations are really saying as they create a litany of new C-Suite officers, is that they do not have the capabilities to cope with the current environment. These appointments represent the development of new corporate capabilities.
In the 1960s companies did not need a Chief Information Officer, let alone having both a Chief Information Officer and a Chief Technology Officer. The first Risk Officer was appointed in 1993 by GE Capital and so we can see a recent expansion of C-level roles around the world.
(quotes in the same page)
“The essence of strategy is choosing what not to do”
– Micheal Porter
Your most dangerous competitors are those that are most like you.”
– Bruce Henderson
(2 Graphs)
- Companies that have CCO
- Rapid Increase of CXOs in the Last 50 years
Just as companies struggle to understand the new risks in the global market place, Companies will also struggle to understand their customers. We have more localized diversity than ever before. Take for example two people purchasing an iPhone today may wake up in the same city and one will eat Cheerios for breakfast while the other eats congee. One of your customers will be celebrating Diwali while the other celebrates Eid. Additionally, major consumer centers are migrating east with cities like Dubai, Singapore, Hong Kong, Beijing and others are quickly acquiring more global market share than ever before.
These new trends are providing companies with an eclectic mix of customers from different ethnicities, cultures, nationalities and demographics who will all visit the same point of sale. Understanding your customer has never been more difficult and this can be seen in Apple’s launch of the Apple Watch which many analysts are saying is generating less than 20% of the demand which forecasts predicted and only 7% of iPhone 5 and 6 customers buying one. Customers are simply not wearing watches anymore.
Companies who are serious about surviving in the 21st Century will have to be committed to identifying, attracting, and maximizing the purchases of their most profitable customers. They must intuitively understand what value the customer is seeking from their product or service and tailor their offering as needed. To be successful the voice of the customer must be institutionalized into the business.
The initial reaction by the world’s most profitable companies is to assign a CCO to the task. While the CCO is the newest edition to the boardroom, they are also the shortest lived. Most CCOs don’t last much more than two years in the job. So before you hire one, make sure you understand what skills they need to be successful as well as why they fail in the job. Our assessment guide has been developed to assist you in creating one of your most powerful competitive advantages available.
A suggested starting point for your assessment of a CCO is below, however every organization is different and has different business needs and will of course have different critical success factors. The ones suggested in this paper are just a starting point and it is recommended that you create a bespoke assessment based on your organizational needs. This guide covers the following sections;
- Customer Segmentation – the ability to identify and understand your most profitable customer group.
- Value – the ability to define the customer value equation and how it changes across customer segments.
- Operations – the ability to leverage value over cost.
- Ownership Culture – the ability to create an ownership culture across employees and customers.
- Talent – hiring, retaining, and rewarding employees who can maximize the company’s ability to deliver the customer value equation.
- Change Culture – the ability to drive organizational change.
Assessing The Chief Customer Officer
CUSTOMER SEGMENTATION
Your CCO must be able to answer the question – “Who are we providing value to and what value are they receiving from our product or service”. They will understand the different customer segments and will be able to conduct their own research to identify these segments and sub-segments. Additionally, they will have deep understanding of human psychology and what the Customer Value Equation (CVE) or Customer Value Proposition (CVP) is for each segment and where in the market these needs are being satiated. They will be able to identify the most profitable customers and devise strategies to activate, mobilize and maximize their purchasing.
SUGGESTED QUESTIONS:
- Describe a time you were involved in the customer segmentation process or a time when you identified a customer sub-segment? How did you alter your offering to access this segment more profitably?
- Describe a time you conducted more research to better understand the psychographic elements of your customer?
- Describe a time you identified a profitable customer segment that was previously being ignored? How did you engage this group and what was the result?
- Describe a time you found two different customer segments who were buying the same product or service but deriving different value from it?
- How do you calculate the customer acquisition cost? Describe a time you strategized effectively to reduce the customer acquisition cost?
- Describe a time you did an analysis of your competitors, their offerings and the customer segments they serve in relation to your company? How did you use this information to create a competitive advantage? Did you discover any customer needs that were not being met?
- Describe a time you defined your brand position in the market? Where did you brand sit in the mind of your customer and what were the insights?
VALUE
Value goes far beyond price and the CCO must be able to identify and define the other attributes that are attracting your customers. The CCO understands that each customer segment may buy the same product but that each one will derive a different value from the product. They will understand how to break down customer segments into their respective needs and will understand how to adjust the product or service offering to minimize cost and maximize value to the customer. This section tests the CCOs ability to identify, define and provide value to the company’s most profitable customers:
- Describe a time you led an analyses of the value perception of your brand across customer segments? How did you do it and what was the result?
- How do you know if the value you are putting in product is the value the customer is getting out of it? Describe a time you found a discrepancy in this equation?
- Describe a time you led the identification, development and communication of the Customer Value Equation or Customer Value Proposition?
- What is your approach to defining the value of a product or service?
OPERATIONS – LEVERAGING VALUE OVER COST
Your CCO must understand how operations effect the customer service experience. They will know which levers to pull in order to increase the organization’s ability to deliver against the Customer Value Equation (CVE) also referred to as Customer Value Proposition (CVP). They will have a proven history of changing operations of a company as it relates to the CVE. These can include things such as size of store, speed of manufacturing and delivering, what functions are outsourced and which are insourced, etc. For example Victoria’s Secret keeps bra design and manufacturing in house to enable it to deliver fresh designs quickly. Zara, a leading fashion retailer, purposely keeps its warehouses below capacity so they can handle last minute rushes of hot products that cycle from design, to distribution to their point of sale. Operations is the heart of your business and your preferred candidate must have innovative ideas that will deliver a competitive advantage for the group.
Candidates who are successful in this section will also understand what the “Deep Indicators” for the business are. Harvard professors James L. Heskett and W. Earl Sasser as well as Joe Wheeler, Executive Director of the Service Profit Chain Institute, argue in their book “The Ownership Quotient” that revenue, profit and cost are seen as lag indicators or as by-products of the business’s deep indicators. What are the critical behaviors and results your business must exhibit to deliver an unmatched customer experience? Get these deep indicators right and your revenue and profits will follow.
Your CCO must understand how to identify and measure the deep indicators and will re-engineer systems and work flows around them. These deep indicators are tied to delivering the customer experience and cascade across Marketing, Operations, Information Technology, and Human Resources, as well as other areas. The CCO who gets this right can actually reduce the cost of delivery a service or producing a product while at the same time increasing the value the customer receives from it.
- Describe a time you defined the delivery of the overall experience for customers as well as employees? (if already asked in value section just ask for employees) (Macro Vision of Customer Service Experience)
- Describe a time you were able to reduce the cost of producing a product or service while increasing the value for the customer? (Leveraging Value over Cost)
- Have you ever re-defined success for the organization in terms of its deep indicators? That is success metrics other than revenue, profit or cost? (Macro Vision of Customer Service Experience)
- Describe a time you process re-engineered or re-wrote policies procedures, or re-designed facilities to create mutually reinforcing systems aimed at an improved customer experience? (Creating mutual accountability across divisions and aligning the business to the Customer Service Vision)
- Describe a time you institutionalized process, procedures or created sustainable initiatives to capture the voice of the customer? (Voice of the Customer)
- Describe a time you led, facilitated or assisted with replacing, upgrading or changing technology, or software to support a better customer service experience? (Creating mutual accountability across divisions and aligning the business to the Customer Service Vision)
- Describe a time you were involved in re-writing or creating job descriptions, creating new roles to increase the quality of customer service at the organization? (Driving the right Talent to Deliver)
- Describe a time you changed or created performance metrics or KPIs for departments in the front office? In the back office? (Driving the right Talent to Deliver)
- Describe a time you have created new policies, procedures, or processes as it relates to acquiring talent for the organization as it relates to increasing Customer Service? (Driving the right Talent to Deliver)
- Have you ever changed the structure and systems that organize work to deliver a better customer service experience? (Leveraging Value over Cost)
OWNERSHIP CULTURE
The CCO can assist with creating an ownership culture. An ownership culture means that employees feel it is their business and are dedicated to making it a better place to work and contribute to the success of the business. This goes beyond their regular duties and the CCO will be able to create bottom up systems to allow staff to contribute to the business. Candidates who score high in this section will be adept at increasing both employee and customer ownership as the two go hand in hand, for if your employees are not attached to your brand your customers definitely will not be.
This feeling should also be echoed by customers who feel they own part of the brand and become ambassadors of the company’s products or services. The CCO should be able to design programs to increase customer ownership by institutionalizing processes and systems which allow customers to test new products, participate in the development of new products or services, provide insights to your R&D team, or participate in the work flow.
The CCO must understand how to get employees and customers involved in promoting the company’s success in the market, thus this section is split into two areas employee and customer ownership.
EMPLOYEE OWNERSHIP
- Describe a time you were able to significantly increase Employee Ownership at your organization?
- What behaviors should a company encourage to increase employee ownership? (Giving employees the ability to create, re-design and change services, products as well as operating procedures and the way services are delivered)
- What exposure have you had to creating an Employee Value Proposition (EVP)? What elements are necessary for a strong EVP? (Fair boss, opportunity to learn, working with winners, reasonable compensation, quality of work life, sense of justice, meritocracy etc..)
- Describe a time you felt Customer Service was low as a result of a low EVP? How did you identify the problem and define the EVP to start with and then how did you fix the issue? (Candidates should be able to provide examples of how they fine-tuned reward systems to promote an outstanding customer experience.)
- Have you ever participated in a process aimed at defining your EVP at your company? How involved were you and what was your role?
CUSTOMER OWNERSHIP
- Describe a time you created customer ownership of a brand or your company? (or) What are the different ways a company can create customer ownership and please provide an example of some you have used successfully?
- Describe a time you were able to increase customer loyalty? (or) Describe your most effective program aimed at increasing your customer’s identification with your brand?
- Describe a time you increased customer activation with a brand?
- Describe a time you were able to get customers to work for you either by promoting the brand, being involved in R&D, or actually working for free for the company? (E.g. IKEA customers assemble furniture, in some fashion companies customers create designs, Flake, a leading chocolate bar also used in cooking, customers create and share recipes that uses Flake, etc..)
- Describe a time you were able to create a direct feedback loop from customers to your organization that allowed customers to influence how your product or service is created, developed, delivered, looks, feels or otherwise? (or) How do you ensure the organization is listening to the customer’s voice and describe a time you created a system, process or other initiative to listen, measure and respond to the customer’s voice?
- Have you ever created a customer referral process?
- Describe a time you have engaged with customers by allowing them to deliver their own services where this improves quality and reduces cost? (E.g. Yo Sushi Japanese restaurants provide self-serve food or automated check-out at the grocery store – you swipe your own products which saves time)
TALENT – HIRING THE RIGHT PEOPLE AND DRIVING THE RIGHT BEHAVIORS TO DELIVER
The CCO will understand that delivering an outstanding customer experience starts with your talent. Candidates who score high in this section will understand how to course correct recruitment of talent to ensure only those people with the right attitude, values and skill sets to deliver the customer value proposition (CVP) are joining the team. This may take the place of getting new recruits to do role plays, case studies, panel interviews or other items aimed at ensuring the company is “hiring for owners”.
The CCO should have created, delivered or facilitated Training and Development programs to increase the organization’s ability to deliver the CVP. In addition, candidates who champion this section will have a deep understanding of incentives and reward programs and will have created bespoke recognition and reward systems aimed at motivating staff to deliver an outstanding customer experience. So this section touches on talent acquisition and retention, training and development and incentives and rewards as it relates to customer service.
- Employee selection – have you contributed to the selection process of employees? (Role playing, panel interviews, case studies, employee self-selection, etc.)
- Describe a time you have course corrected your company’s selection process to ensure the business was hiring the right talent to deliver your CVP?
- Have you helped instilled a “Hiring for Owners” program with HR or contributed to helping HR identify the traits the company requires to deliver its CVP? Please describe how you did that?
- Describe a training and development program you created to ensure the company’s CVP was being delivered? (Train & Develop)
- Describe a time you had to convince management to give front line employees more latitude in order to deliver more effectively? (Ability to offer discounts, freebies, or change and alter services or products to satisfy customers)
- Describe a time you created new incentives and rewards for employees as it relates to increasing the customer experience?
- Describe a time you institutionalized a system to identify and recognize star performers who were championing the CVP and delivering an excellent customer experience? (Recognize and Reward)
- Describe a time you created an incentive plan aimed at delivering the CVP?
- Describe a time you were able to increase the number of new employees who were being referred by other employees?
CHANGE CULTURE CHAMPION
The successful candidate will understand how to create organizational change. They will have outstanding communication skills which will thread oral, written, presentation as well as formal empirical and diagnostic reporting. Our preferred candidate will be able to quantify their results across the organization and will be able to effectively demonstrate the return on investment in customer centric campaigns and initiatives.
Additionally, the CCO will have to mobilize professionals who do not report to him or her, nor is he or she accountable in order to deliver results. This requires an in-depth understanding of human psychology as well as a deep understanding of the formal and informal communication channels in the organization. They will have to utilize the authority that is provided by their actual role but they will also have to borrow authority from the CEO and/or Board Members as needed to initially drive change, however they will also have the type of personality and character to build authority and a followership across the organization.
Candidates who score high on this section will have both a clear vision for driving change in the organization as well as possess the required knowledge of systems, software, reporting structures and so on that will create the necessary infrastructure to deliver a “Customer Centric Culture” across the group. The CCO is in fact driving a culture change across the organization and thus must have a blue print for doing so. Dr. Richard Jolly Professor of Organizational Behavior at London Business School sees some critical elements for driving change as being the ability of the senior leadership team to create a sense of urgency and need for change, successfully framing the issue, creating a shared vision, ensuring senior managers participate in solution generation, getting buy-in for action from all levels in the organization (creating political sponsorship), creating capability required to change, draft an implementation plan, develop enabling structures, to name a few. No matter what the particulars are, the CCO should have a clear plan of how to drive organizational change otherwise they will be doomed to fail. They should be ready to deal with passive resistors and must recognize the importance of creating impactful highly visible wins in the first 100 days in the job. Additionally, the CCO should understand how to reinforce and institutionalize the change once it has been successful.
Thus, this section covers communication, reporting and use of success metrics and use of authority.
- Describe a time you had to communicate a large organizational change to a significant group? What methods, channels and programs did you use to drive the change? What metrics and MIS dashboard did you create to measure the effectiveness of the change? What milestones did you use to measure your progress?
- Describe a time you communicated the same message three different ways?
- Describe a time that you had to adjust and change your personal operating style in order to work with a business unit leader more effectively?
- Describe a time you were able to get other people in the organization to take personal ownership of our idea or initiative? (or) Describe a time you willingly gave credit to others for one of your ideas or programs?
- Describe a time you had to make changes to the way a business unit approached their service delivery which did not report to you? How did you create influence and consensus with a business unit manager who did not report to you nor was he accountable to you?
- What are the key success metrics you are currently using to measure your improvements in customer experience?
- Describe a time you were responsible and accountable for a project of which you did not have the requisite authority to deliver?
- What is the difference between formal and informal communication channels and describe a time you used both to deliver a project successfully?
- What are the critical stages and steps the organization has to walk through in order to successfully drive organizational change?
SUMMARY
The CCO will be the spearhead of creating a customer centric culture at your organization. It is paramount to ensure he or she has the right skill set to succeed. From identifying your most profitable customer segment, to maximizing the value you provide to them while minimizing your cost to driving deep organizational change at all levels; the CCO’s influence will cascade across all business units and functions. The position requires a direct reporting line to the CEO and full support of the Chairman and the Board. The organization must also be ready to make the necessary changes which will see power shift to the consumer. However, with the consumer at the center of your business strategy you will realize an unmatched competitive advantage. We hope this assessment guide helps position your business for success.