Competitive Advantage of Customer Centricity

341 Pages·2017·6.84 MB·English

by  Sathit Parniangtong (auth.)

Management for Professionals
Sathit Parniangtong
Competitive
Advantage
of Customer
Centricity
Management for Professionals
More information about this series at http://www.springer.com/series/10101
Sathit Parniangtong
Competitive Advantage
of Customer Centricity
Sathit Parniangtong
CMBT Strategy and Management
Consulting
Bangkok, Thailand
This work has been previously published as The Competitive Advantage of Customer
Centricity: Using Customer Centricity to Deliver Sustainable Success, Copyright 2014 by
Sathit Parniangtong.
ISSN 2192-8096 ISSN 2192-810X (electronic)
Management for Professionals
ISBN 978-981-10-4441-0 ISBN 978-981-10-4442-7 (eBook)
DOI 10.1007/978-981-10-4442-7
Library of Congress Control Number: 2017937751
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Preface
This book is about sources of sustained competitive advantage. It is about finding
logical explanations to how businesses achieve an enduring superior performance
and offers strategic solutions for businesses under different circumstances. How
businesses generate profit has been an interest of mine for as long as I can remem-
ber. What’s more fascinating is the various ways in which businesses organize
themselves, in different competitive environments, to create value to customers and
capture that value for shareholders to achieve superiority. This probably explains
why I have so enjoyed the more than two decades of working in academic and busi-
ness organizations under different capacities. Of course, venturing into both the
academic and business worlds has been a complementary affair.
My work as strategy consultant in the USA with two leading management con-
sultancy firms exposed me to the world’s erstwhile largest automaker in Detroit, a
handful of consumer product companies and retailers in the USA, a telecom com-
pany in London, state-owned enterprises in Moscow and Beijing, and transportation-
related operators in New Zealand, Columbia, and Brazil. The knowledge I gleaned
from my experience with a wide range of firms has given me a much wider perspec-
tive on, and deeper insight into, business operations than I would have previously
dared to imagine. All of these companies confronted unique challenges, but they
shared a common journey in how to take their business forward.
Working in my motherland, Thailand, as strategy professor, allows me to be at
the forefront of academic discoveries on “What makes certain companies tick?”
Becoming a professor at a business school was, for me, akin to being a child in a
candy store. I found a myriad of fascinating disciplines and theories to explore in
order to feed my intellectual curiosity, not to mention the absolute freedom to delve
deep into any specific field of interest that took my fancy. There seems to be no end
to how far I can go. But as I tried to comprehend certain academic articles, I came
to realize that many authors had abstracted themselves much further from reality
than I believed was necessary. It is no wonder then how over the years we have
witnessed a raft of academics flood the field with retrospective theories on how
certain companies have become successful (e.g., Southwest Airlines, Walmart,
Microsoft). But very few dare to take their new theory and show how it can be prac-
tically applied to turn around subpar companies. To me, a sizable gap remains
between the worlds of business and academia. If anything, this book attempts to
bring these two worlds a little closer together.
v
vi Preface
More recently, my roles as independent director and chair of the enumeration
and compensation committee at a handful of SET-listed companies in Thailand have
exposed me to corporate governance as an important factor in achieving an enduring
competitive advantage. Boardrooms are occupied with different strategic issues
depending on the situation a business is in. A market leader has to deploy strategies
to maintain its dominant position. Creating an enduring profitable growth becomes
the issue. If a company is a follower, its management is preoccupied with develop-
ing breakthroughs to leapfrog the market leader. Gaining an enduring competitive
advantage becomes a strategic issue. And if a company is struggling to stay alive,
the management dreams of generating a positive cash flow and becoming self-
sufficient. The means for achieving these various objectives is what strategy is all
about. With this, I have made one major change to the second edition of the book.
A new chapter on problem-solving in business strategy has been added to demon-
strate how a scientific approach can be used to direct business leaders in addressing
the most urgent strategic issues confronting their businesses.
Since the first edition of the book, the academic world has made substantial prog-
ress in the field of business models—the different ways businesses organize them-
selves to create and capture value. Fueled by Internet technology, assetless business
models have received increasing attention. With the success of Netflix (an online
movie and video game subscription provider), Groupon (an online coupon distribu-
tor), and Facebook, which have captured millions of loyal customers, more and
more executives are beginning to redefine the traditional build-and-sell business
model. In Thailand, we can witness commercial banks leveraging branch networks
to sell someone else’s insurance products. My luncheon conversation with a busi-
ness tycoon last year indicated that the largest retail chain in Thailand soon will
migrate from a build-and-operate model to a pay-for-service model.
What’s new to the second edition? A new chapter has been added on the scien-
tific approach to problem-solving in business strategy. This chapter highlights rigor-
ous problem decomposition to identify strategic issues, seek a clear understanding
of each issue, and then make use of creativity to restructure elements in the most
advantageous way to address the strategic issues. In addition, a new section on busi-
ness models captures the latest thinking on the subject matter. To enrich the original
theme of the book on customer centricity, a new section on measuring customer
satisfaction offers an alternative to the traditional customer satisfaction survey,
identifying loyal customers and turning loyal customers into advocates for the com-
pany. Finally, several changes have been updated from the original text and figures
for increased clarity and emphasis.
Creating a roadmap for these companies requires analyses to gain insight into
their unique strategic needs. In any case, many firms are in a rush to implement
developments adopted by leading companies in the USA. But this raises concerns
over the portability of the strategy; after all, a strategy that brings success to one
company is not guaranteed to work for another, and in extreme cases it could even
result in disaster. This book provides the framework and examples for analysis and
builds up strategic solutions to businesses under different circumstances. Specifically,
Preface vii
this book offers the latest thinking on business strategy and shows how to put this
thinking to work in a number of different, real-world circumstances:
• It presents an overview on the evolution of theories and concepts of strategy. This
overview is relevant to practitioners and offers discussions on the limitations and
applicability of these theories in the business world.
• This book lays down the latest strategic developments in customer centricity. It
not only provides different perspectives on customer centricity but also outlines
how to formulate strategy around customers.
• When strategy is scientifically approached as a problem-solving methodology,
the book offers detailed step-by-step approaches for formulating strategy, as
practiced by leading consultancy firms. While a new strategy must be deployed
when a firm experiences deteriorating performance, determining how to begin
the process of developing a more effective way to compete too often remains
elusive. Clarifying practical measures for doing so is what this book is about.
• Strategy tools such as industry trend analysis, competitor analysis, five forces,
value net framework, and SWOT analysis are analytical methods. The insight
they provide does not automatically result in developing a more effective com-
petitive strategy. In addition, strategy models such as Porter’s generic model,
experience curves, and the growth-share matrix have all proven to be short-lived
as they are too generic for unique business situations. This book demonstrates
ways to leverage analytical results and transform them into meaningful strategic
output.
Several examples and case studies garnered from the author’s consultancy work
are presented. Each chapter contains examples to illustrate the complexity execu-
tives are confronted with when having to address strategic issues. A process for
deploying relevant analyses beyond the strategy tools mentioned is outlined to pro-
vide a new strategic direction.
Customer centricity remains the highlight of this book. Many firms still nurture
misconceptions despite the idea being more than half a century old. Too often cus-
tomer centricity is seen as mere corporate gloss, with senior management remaining
unconvinced of its elusive goal of enhancing the lifetime value of customers, and
with most attempts to operationalize the concept kept within the narrow context of
marketing. Customer centricity advocates valuing customers as a firm’s most impor-
tant asset, one which needs to be acquired, developed, and cultivated to generate
profit over the lifetime of their relationship with the company. By recognizing that
not all satisfied customers will automatically become loyal customers and that loyal
customers are not always the most profitable, this book provides a comprehensive,
panoramic view of various customer management programs for enhancing customer
profitability and equity as a new source of competitive advantage.
Three distinct views of customer centricity are presented: the classical approach
to formulating customer-driven strategy; customer centricity viewed as a change in
journey which the entire company needs to take in order to realize more value from
viii Preface
customer relationships; and a collaborative approach which engages all supply
chain constituents to deliver more value to end-customers.
Who should read this book? This book is aimed at MBA students and business
executives who are interested in putting new strategy concepts to work. Those who
already have a handle on competitive strategy may be familiar with the content of
the first two chapters. If you are a practitioner interested in formulating a customer-
driven strategy, you should concentrate on Chaps. 4 and 5. Those looking to deploy
the latest thinking on customer centricity and turn a product-centric company into a
more customer-centric organization should focus on Chaps. 6, 7, and 8. Chapters 9
and 10 provide several ways for manufacturers to compete more effectively by cre-
ating more value for their customers.
Bangkok, Thailand Sathit Parniangtong
Acknowledgment
My first debt of gratitude must go to all business leaders and owners who allowed me
to participate in addressing the crucial issues confronting their organizations in and
outside the boardrooms. It seems that the stakes are high and their jobs, instead of
getting easier, are on the contrary becoming increasingly more complex, more
dynamic, and much larger in scope. Of course, addressing these issues head on
requires more than courage—it demands a drive and desire to achieve a new level of
excellence, something to inspire these individuals to endure the intense mental and
physical challenges that must be overcome. I hold a deep respect for all these people,
who continue to make our lives easier and this world a much better place to live in.
I would also like to thank Sasin Graduate Institute of Business Administration at
Chulalongkorn University for its support in giving me a work environment so con-
ducive to writing this book. Having the opportunity to update the book with my
latest discoveries is a dream come true. I have contemplated updating the book, as
my endeavor to bring the spheres of academia and business closer guides me to
uncover new “big things” in the field of strategy. The opportunity to work with the
business community as an independent board member and advisor while assuming
the role of professor at Sasin creates a virtuous cycle of knowledge which, at times,
seems endless.
The book’s origins lay in the consulting project reports, course packages, teach-
ing notes, and classroom materials I prepared for an advanced strategy course for
second-year MBA students at Sasin Graduate Institute of Business Administration.
This content has been updated to make it applicable for executive training as well.
As such, I would like to acknowledge all of those who have contributed to discus-
sions that have shaped this book.
This book is more than just new concepts and theories I have been recently
exposed to as a faculty member. My past and current experiences have shaped my
academic thinking. I am extremely grateful to all who have been in contact with me
during my time at Booz, Allen & Hamilton, and AT Kearney, as well as the numer-
ous business leaders I have worked with throughout my career. There were, at times,
difficult and challenging moments, but I have learned a great deal through coming
into contact with these visionary individuals. All of them have taken my abilities to
a new plateau, one that I could never before have imagined. It is difficult to acknowl-
edge all by name. But I am extremely grateful to everyone who has helped my
professional growth.
ix