Should You Be Thinking More About The Customer… Or Less?
“The customer is always king” has long been a time-honored business adage. Peter Drucker, the most renowned management thinker of the 20th century, was probably best known for advocating a consumer-centric approach.
So I probably shouldn’t have been surprised that, when I said in a recent post that creating, delivering and capturing value are at the heart of any viable business model, several commenters felt the need to correct me. “You always start with the customer,” they said.
Forget about the fact that “creating, delivering and capturing value” implies that value is created for someone—and who, if not a customer? The truth is that a successful business must balance the needs of a variety of stakeholders. Focusing on customers to the exclusion of everyone and everything else can kill a business just as easily as neglect.
Creating A Customer
The idea that a business is made up of more than customers seems so simple that it should be obvious. Yet consumer advocacy has become so fashionable lately that it has become regarded as beyond question, no matter how extreme. Any deviation from orthodoxy is judged apostasy.
I think a lot of the confusion stems from a misunderstanding of what Drucker actually said, which was:
Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.
That’s quite a bit different than focusing on customers to the exclusion of everything else. It was, in fact, an attack on the production-obsessed management practices of an earlier age. What Drucker meant was that managers should focus on creating value rather than mere output.
And, as it turns out, many successful innovators have been positively derisive about listening to customers. Henry Ford reportedly said that if he asked people what they wanted, they would have said “a faster horse.” Steve Jobs didn’t think customers knew what they want until they saw it.
The truth is that nobody starts a business thinking about the customer. People start businesses thinking about their dreams. Some want to create technology that will change the world, others think they can make the best pizza in town and still others simply seek financial independence for their family.
The Stupidity of Crowds
There’s a reason why people like Henry Ford and Steve jobs don’t like listening to customers—customers are a crowd and crowds are often stupid. They usually represent the conventional wisdom of the present, rather than the possibilities of the future and following them often leads to mediocrity, not excellence.
Even worse, sometimes crowds are reflexive, feeding off themselves. That’s when they become dangerous, creating booms and busts, fads and one-hit wonders. Blindly following trends is more likely to lead to strategic confusion than a solid, profitable business.
That’s why truly visionary entrepreneurs make their fortune from betting against the crowd. They create something new, something nobody is asking for because they’ve never seen it before. It’s difficult to “start with the customer” when one doesn’t exist yet.
So it shouldn’t be surprising that most great entrepreneurs have big egos. They start businesses to aggrandize themselves and there’s nothing wrong with that. People who set out to achieve great things usually find others to share their dreams.
Which Consumer?
In Brick by Brick
, Wharton Professor David Robertson tells the story of the fall and rise of Lego, one of the world’s great consumer products. Strangely enough, its problems started not by ignoring customers, but by trying to serve more of them.
In the late 90’s, all of the consumer experts were pointing to the rise in electronic games. Lego, as a low-tech building toy, seemed irrelevant. With all the gizmos and doodads on the market, who would want to play with inert plastic bricks? So Lego moved quickly to expand their horizons.
It was a disaster. Most of the new products bombed and the company lost a ton of money. Relief only came when they started ignoring most customers, focused on those who liked building toys and put in reasonable cost controls and profitability targets. Lego, after all, only needs to sell to a small slice of potential consumers in order to be wildly successful.
That’s the problem with using customers as an exclusive lens, it’s basically a license to do anything. There are so many people who want so many things that treating them as a coherent entity is nonsensical.
The Mission Driven Organization
Great businesses businesses are not built by solely thinking about the consumer, but by creating a compelling mission that aligns consumers, employees, shareholders and communities. It is through forging a unity of purpose that culture of excellence emerges.
And that’s the irony of running a customer centric business: it doesn’t start with the customer, but with building an organization—including people, processes and practices— that are capable of serving the customer well.
Take a look at the world’s most valuable brands and it becomes obvious that what sets them apart is their commitment to excellence, which goes far beyond devotion to the consumer or any other stakeholder. It comes from a firm belief in the soul of the enterprise and an unshakeable faith that the task at hand is one worth doing.
Consumers, after all, are not served by mere good will, but by developing the means to meet their needs and desires.
– Greg
Greg – there are indeed many stakeholders. One is way more important. Its where the income comes from. Customers. Everyone who previously commented said to START with the customer, not just/only focus on the customer.
RE And, as it turns out, many successful innovators have been positively derisive about listening to customers. Henry Ford reportedly said that if he asked people what they wanted, they would have said “a faster horse.” Steve Jobs didn’t think customers knew what they want until they saw it.
Steve and Henry were just making untrue ego statements.
Steve certainly did have Market Research going on Ford was not the inventor of the car. People would not have answered “a faster horse.”
Re: “The truth is that nobody starts a business thinking about the customer. People start businesses thinking about their dreams. ”
Will explain in large measure why most dreams (new products and enterprises) fail dont you think?
There are no guanrantees, but if you dont understand what customers want then you are taking a very big gamble. Not only with your time and money invested, but with your dream; your employees and other stakeholds income and dreams as well.
Really not well conceived advice Sir
Brian Monger
Brian,
I guess we’ll have to agree to disagree. Thanks for sharing your thoughts Brian.
– Greg
Heaven help us then Greg. You are a smart guy and you dont get the basic logic of focusing on where the income and success come from.
Companies that focus inwardly and not on customers are taking big risks.
Techonolgy types are high among those who know better than those who have to buy and use the Product. Which is no doubt why so many probably good tech products fail to be a success.
You can start with your own idea of a good product, but start thinking of the market ASAP. They are the ultimate decision makers.
Brian
Good thing we only have to focus on B2B as our immediate goal. When we all in #radio build it, they will be shifted. Believe you me. The market is 200 a week listeners. 16 Billion a year market.
Brian,
With all due respect, you are terribly distorting what I actually said. I certainly never said that companies should ignore consumers, just that they are only one piece of the puzzle. Further, having worked with many entrepreneurs and starting a few companies myself, the “You always start with the consumer” mantra simply doesn’t ring true.
There are a number of companies, for instance, who say they want to focus on the consumer, but then mistreat their employees and don’t respect their communities and so end up failing their customers in the end. Others, falter because they never find a way to make a profit.
You have to walk and chew gum at the same time. By focusing on one aspect of the business to the exclusion of all others is not a recipe for success.
– Greg
Thanks for sharing, Robin.
– Greg
Not my intention to distort what you have said at all Greg.
I was only saying that you were saying that customers should not come first.
Not only have I started and operated a number of enterprises, managed some at Director level, I have also worked with hundreds (at least) of start ups and those seeking help. And many inventors and technology folk as well. I too have some idea about the real world – truly.
Yes so many organisations have no real idea at all about modern marketing – putting the customer first. Yes so many just do lip service about it. Which is why so many fail or fail to do as well as they can. I used to guarantee I could improve their performance by 30% pa. Not actually that hard – but they had to take my advice. Many thought that was unreasonable. LOL.
Yes. I think we can both agree that neglecting the customer is not a good idea. I just don’t think neglecting other significant aspects of the business is any better.
– Greg
It is unclear to me why you (and perhaps others) assume that I dont know and appreciate the other factors in establishing and running a successful business. Or that having a customer focus would mean turning over the keys to the business.
I advocate being customer-focused in the adoption of a primary focus and commitment to add value for customers, and in return receive value from them.
Well, saying that customers are always primary does imply that every other stakeholder is secondary or tertiary.
They may be. Not as importnat as putting the paying customer in the number one position.
Without paying customers the other stake holders will not have anything to have a stake in.
Brian
And on a very practical level for you – Why are you out and in public being seen as saying customers (like yours perhaps) are not your number one focus?
Its not pitched at your customer I guess, but they can see it.
Brian
Thanks for sharing your ideas Brian. It’s always interesting to hear your perspectives.
– Greg
To be honest, I would have no problem telling a customer that I care about my employees, my community and other stakeholders. In fact, I would question the value of a customer who didn’t want me to care about those things.
– Greg
I expect we all understand those things Greg. But I doubt a customer should care as much about them as the WIFFM – “Whats in it for me?”
Just like you do
Dear Greg, as usual very inspired article.
Innovation is at the heart of any market success, be it in commodities, high performance, fads, investment goods etc.
It’s just not the same innovation type (see G Moore’s excellent book on the issue “Dealing with and it’s not just the same marketing and sales positioning and communicating tactics that will apply.
Thanks JL. Great quote from Geoffrey Moore!
– Greg
My 2 cents: in order for a company to bring a viable, desirable and feasible offering to the market, boundaries within which to act must be set up. Specific target-users (customers is too loose a term) must be satisfied or delighted in using the offering for business to be successful. These specific target-users have diverse sets of needs based on their behaviors/habits that exist within the context of their specific lives. It seems to me that a company that has no target-user (or worse, too many) is a misguided company shooting from the hip.
Coming from a design field (service design), most of my innovations and marketing ideas are derived from in-depth user-centered research. If we take the Henry Ford “faster horses” example, we can abstract some deep user needs: ease of transport, for one, is implicated. Businesses can provide that through offering faster cars, more luxurious cars, more affordable cars, etc. because each user has a different perspective of what “ease of transport” means. Therefore, innovation and marketing occur because of a deep understanding of target-user needs/desires.
In sum: the specific user is the impetus for businesses to survive. Excellence is what transforms a company from offering something a user may like to something a user may love. I agree with many of your points, so apologies if this reads like a negative response. Thanks for getting me to think!
Excellent article Greg. Agree that our priority is to provide excellent service/product to our consumers. They are not right most of the time but listening to what they want will help us understand what they really need.
Jonathan,
I absolutely agree. All companies need to think about the consumer, especially when it comes to design. Even Steve Jobs said that when it came to designing progress, he always started with the consumer experience and worked back (although he always started out by thinking about products that he himself wanted).
However, we can recognize the importance of customers and still recognize other stakeholders as well. Saying that the customer is always primary implies that everybody else is always secondary or tertiary. That’s just not smart.
– Greg
Thanks Jayden.
– Greg
food for thought:
disruptive innovation are unanimously praised and have become the new corporate buzzword.
how many came out of listening to what the customer wants? How many were endorsed a posteriori by consumers who could see a potential use?
I don’t know the answer, but I sense that customers have a different time frame than dsiruptive innovators. Correct me if facts prove me wrong, I’ll learn something.
best
Jean Louis,
I do think some people would debate the point, because disruptive innovation targets consumers, just not existing consumers. However, I would tend to agree, that many disruptive innovators build the product first and then go look for consumers. In fact, Steve Blank outlined this process in a recent HBR article: http://hbr.org/2013/05/why-the-lean-start-up-changes-everything
– Greg
Hi Greg,
Great, thought provoking post.
I think it’s worth adding another quote from Drucker: the role of marketing is to understand the customer so well that the product or service sells itself.
For me that fits with the Ford/Jobs way of innovating (understanding the customer and the problems that face isn’t the same as asking a customer to tell you what you should develop but it is where the spark of innovation comes from) and as you rightly say I think it puts the business focus on all facets of the company – yes the customer but also people, process, technology, community etc.
All the best
Simon
Interesting responses to a suggestion that, maybe, customers are not the intelligent, sensible, quality product starved beings often portrayed in the strategy and marketing world. The business world is littered with poorly managed, moderately successful businesses, getting by on an insultingly poor understanding of customer desires. This state of affairs wouldn’t exist if customer focus was as important as the marketing crowd believe. Great post Greg.
Regards
Rohan.
Thanks Rohan.
– Greg