After years of focusing on controlling costs, growth has moved to the top of the priority list for many companies and is now driving organizational transformations. While 93% of the 900 senior executives surveyed by KPMG say that their companies are “at some stage of undergoing or preparing to undergo a transformation,” few succeed. Organizational complexity is considered the biggest barrier to transformation success.
A McKinsey study found that successful transformation requires companies to do four things:
- Excel at the basics, create clear stretch targets and define a clear structure.
- Break down the change process into clearly defined smaller initiatives that can be celebrated
- Exhibit strong leadership and maintain energy for change
- Build capabilities, engage employees early to help change mind-sets or culture, or develop a capacity for continuous improvement
Clearly transformation takes more than sustaining solution innovation. It requires mobilizing the organization and investing differently – all while maintaining current performance. No small task. And one of the reasons why companies undergoing transition often bring in outside experts to transfer skills, maintain momentum and ensure that lessons learned are documented.
As a CEO, CMO, or other member of the leadership team perhaps you are undergoing a growth-driven transformation. If so, it will probably require you to alter how your company is organized.
Why Today’s Organizational Structures Must Evolve to Enable Growth
The organizational structure for many companies today is created from Max Weber’s and Frederick Taylor’s management theories developed in the first half of the 20th century. The approach is based on establishing clear lines of authority and control; there is a leader for each occupation/function and multiple layers of subordinates.
The market and business dynamics of occurring in the early 70s resulted in the concept referred to by Peter Drucker as “federal decentralization”. Companies were organized into a number of independent units operating simultaneously, each conducting its own activities. As the rate of change accelerated, Peter Senge proposed the concept of the learning organizations, “where organizations are continually enhancing their capacity to create.” The structure of companies today reflects a mix of all of these approaches, attempting to take the best from each. Sometimes the mix works well and other times not so much.
As the Age of the Customer where “empowered customers are shaping business strategy” continues to dominate, organizational structure and the metrics companies need to use survive, let alone thrive, must also evolve. What would that look like?
Use the Customer Experience Map as Your Transformational Structural Guide
Your customer experience map can serve as a structural guide. Mapping the customer journey is a key initiative for many companies and an important part of the transformation process. A customer experience map is an end-to-end diagram that illustrates the steps your customers (markets, segments or personas) go through in engaging with your company. You can capture their steps and the touchpoints, such as analyst reports, peer reviews/testimonials, demonstrations, solution information; and channels, such as phone, in person, online, etc. that they prefer in each part of the journey.
The customer experience map captures every stage of the journey. The map strings together the processes associated with each of these phases:
- Early stage of the prospective new customer as they make contact
- Moves from contact to consideration to purchase
- Purchasing and implementation/deployment experience
- Post purchase, such as support, billing, and problem resolution
- Loyalty, including repeat purchases, advisor for innovation and advocate
Ideally the map captures the process from the customer’s perspective with the company’s internal processes designed to support each phase. When the experience map is structured in this fashion, two things become evident:
- Each phase in the journey requires participation from multiple functions of the company, which in turn necessitates having a clear phase owner and a cross-functional team to support the phase.
- There are different quantifiable outcomes for each phase and a potential set of common customer-centric metrics.
Put Marketing at the Front and Center of Your Transformation to Improve Your Success Rate
Organizations thrive only if they can acquire and keep customers. No truer words were ever spoken than those of Peter Drucker, the “purpose of business is to create a customer.” If you subscribe to Peter Drucker’s philosophy and Phil Kotler’s position that it is Marketing’s purpose to find, keep and grow the value of customers, then Marketing must be at the center of the structure to drive your company’s value. What might that look like and how would it work? First and foremost, your Chief Marketing Officer (CMO) would become your Chief Value Officer (CVO) and would be responsible for managing all Customer Experience Phases.
Customer insights based on data and analytics would be applied to each phase to improve its effectiveness and efficiency. Data and analytics are used to help determine which marketing materials and assets, such as content, messaging, and positioning would be brought into play, how and when these would be distributed through channels, influencers, and partners. Marketing Operations serves as the central nervous system, facilitating the planning, performance management, resource management, and systems/tools and workflow to support the entire customer experience map. The following picture illustrates this idea of the structure for a customer/audience centric Marketing organization.
Set Your Outcomes and Metrics for the New Organization
This approach takes more than changing words on the organizational chart. This is an approach to support the transformation process designed to spur growth and mobilize your organization, especially your customer-facing functions. Modifications to your structure also has implications for how you set your outcomes and establish your metrics. Each customer process will need customer specific outcomes with customer equity becoming the overall measure of success.
Customer equity in any year = ((number of new customers * average revenue of new customers) – (Acquisition costs)) + ((number of old customers * average revenue of old customers) – (Servicing costs)) – (number of customers churned * average revenue of churned customers).
Each experience team would need to establish outcomes that tie to Customer Equity as the Key Performance Indicator (KPI). These outcome metrics might be on your new Marketing dashboard:
|Net Customer Revenue||Total Customer Purchases – Total Customer Returns|
|Customer Lifetime Value (CLV)||Average Order Total X Each Customer’s Average Number of Purchases Per Year / Churn Rate|
|Customer Profitability||Customer Revenue – (Known Customer-Specific Costs + a Percentage of Operating/Overhead Costs) / Customer Revenue|
|Customer Loyalty||A weighted combination of Repeat Business, Influence and Advocacy metrics. Or it may be as simple as the Net Promoter Score|
|Customer Share of Wallet||A comparison of a weighted combination of a particular Customer’s Revenue, Preference and Loyalty metrics for the company versus its competitors for the same factors|
|Customer Retention||Number of Customers Who Left /Total Number of Customers|
Operational and Output metrics would then need to be established, linked and monitored to support these outcomes, such as:
|Customer Renewal rate||Number of Repeat Customers within a specific time frame / Total Number of Customers within the same timeframe.|
|Customer Churn Rate||Number of Customers Lost within a specific timeframe / Total Number of customers at the beginning of the same timeframe|
|Customer Experience Rating for each Phase||Customer Satisfaction score for the specific phase. This could be gathered via post-purchase, post-implementation or customer support surveys.|
|Customer Satisfaction||The American Customer Satisfaction Index (ACSI) database, maintained by the University of Michigan serves as an excellent starting point for this work)|
|Customer Acquisition Rate||Number of New Customers / Total Number of Customers for a time period|
|Customer Acquisition Cost||Total Sales & Marketing Cost / Number of New Customers Added)|
|Customer Conversion Rate Across each Phase of the Customer Journey Map||Total number of prospects or customers who entered phase N – the number of people who did not move forward to a later phase (i.e. number of people who DID move forward) / total number of prospects or customers who entered phase N.|
The Materials/Assets, Distribution, Delivery, and Intelligence teams will also need measures that link their work to these metrics so that everyone is working towards the same end goals.
Successful transformation (from the initial signaling of a cultural shift to ongoing improvement) and the growth that ensues will require you to make changes to your organization structure. Your KPIs/metrics must also change to support your strategy and drive business results. And all of these changes must be aligned to your customers and their experience at each stage in their journey. So, if you have not yet mapped your customers’ buying journey that is a good place to start your transformation. Use this workbook to build your customer-centric metrics.
© 2016, Laura Patterson. All rights reserved.