As I mentioned last week, the idea of being a customer-focused company or having a customer-centric culture is all over the place. Over the past few months I’ve been looking into this concept in more detail and came upon an interesting finding – there is no coherent stream of academic research on being "customer focused" or "customer centric"!
After more digging and consultation with colleagues I stumbled on an idea that should have dawned on me earlier: The concept of customer focus is embedded in a larger theoretical framework known as Market Orientation, which is a strong research theme with its roots in the writings of Peter Drucker back in the 1950s.
Market orientation may not be a top of mind term, but it’s a familiar concept to any modern business person. It is defined as being focused externally on customer needs, competitive context, and market trends while developing an internal structure that allows companies to quickly respond and capitalize on this market intelligence.
A few different views of market orientation have been developed and tested, but I favor a conceptualization of market orientation with three dimensions (Kohli & Jaworski 1990):
- Intelligence generation. The ability of firms to gather and understand customer preferences and needs along with the market forces affecting their needs and preferences now and in the future. All key functions in the company need to be involved in generating market intelligence. Market factors like the competitive landscape, the pace of technological change, and general economic conditions are of equal importance as customer intelligence.
- Intelligence dissemination. Market intelligence needs to be communicated, disseminated, and sometimes even sold to all relevant departments and individuals in the organization. This dissemination is symmetrical – flowing to and from all relevant departments.
- Responsiveness. This is the key action step. Unless an organization is capable of changing processes, products and services based on good market intelligence, it will never realize the rewards of being a market oriented company.
Speaking of the rewards of market orientation, there are scores of empirical studies establishing a link between market orientation and firm performance (e.g., long-term profitability, customer acquisition, product innovation, etc.). See this article by Ellis for a meta-analysis of 56 studies.
We can still refer to market orientation as being "customer focused" or "customer centric" because the root of the concept is understanding and responding to customers. But the breadth and comprehensiveness of our customer focus needs to be continually challenged by our understanding of market orientation.
Asking your customers to rate their experiences with your products and services and using that to prioritize incremental improvement areas is NOT enough to call yourself a customer focused organization. A true customer focused organization will display a deep-seated desire to adapt the focus and direction of any part of the organization based on their detailed understanding of current and future customer needs acquired through their unique and comprehensive customer and market intelligence.
Future posts will focus on measuring an organization’s market orientation (operationalizing the theoretical concept), outlining its validated pre-cursors, and discussing factors affecting the ideal level of market orientation for different contexts.
Troy Powell, Ph.D.
VP, Statistical Solutions
List of all posts in this series: