This further exploration of G1 (the first generation of Business in the modern era) points out some of the key factors that enabled it to thrive largely unchallenged for two centuries and more, in the process training all of us to be a particular type of Customer. Along the way we’ll meet the Tech Two-Step Tango, the 5 per cent Rule and more. Plus, there are some thoughts about the ubiquitous term Customer Centricity.
Previously on The Notion of Customer …
G1, The first generation of Business in the modern era, was based upon Production. Suppliers produced things. Customers bought the things they produced.
The resulting primary success measure for Suppliers was Sales volume. The resulting primary success measure for Customers was the value directly attributable to the product - that is, Value-in-Exchange.
The accompanying Customer Behaviour Mode was Expectation & Entitlement whereby Customers ‘leaned back’ and waited for new Products to come along for their ‘goods-character’ to be assessed.
G1 relied upon as many brains as possible feeling confident to at least have a go at creating or sourcing some Product and building some sort of business venture.
The highly successful G1 model produced positive Business, Social and Political outcomes within a nation-state framework.
Entrepreneurship
G1 was a very Western, nation-state-based model in that it favored bottom-up freedom to pursue ideas and technological developments in order to build businesses: “You have an idea? Why not give it a shot? If you don’t try you’ll never know whether or not it might have been a big success.”
This encouragement of an ever-evolving cornucopia of Products and services was a foundational element of G1. With particular reference to technological innovations, it always involved two phases …
The Tech Two-Step Tango … plus the 5 per cent Rule … and ‘How does a falling cost line change the world?’
Innovation follows a two-step process:
STEP 1: A new technology starts out as a means to do some existing thing better, faster, cheaper than the then-current means. Let’s call this the TURBOCHARGE THE PRESENT step.
STEP 2: However, once the new technology gains a foothold, cost reductions (in the G1 era typically arriving at 5 per cent or 1/20th of the original cost) open up entirely new possibilities, at which point the dynamic changes to EMPOWER THE FUTURE.
An example:
For centuries ice was harvested to preserve food by keeping it cold until, in the nineteenth century, mechanical solutions were attempted. A hundred years ago, in 1923 – breakthrough! - Frigidaire developed the first all-in-one refrigerator. Early refrigerators cost the equivalent of around $5,500 at today’s prices.
So, at Step 1 - TURBOCHARGE THE PRESENT, the fridge replaced ice harvesting as a better way to solve the pre-existing problem of keeping food fresh for longer. But then tech development speeded up and the cost of a refrigerator fell to around 5 per cent of its original figure.
This triggered Step 2 - EMPOWER THE FUTURE, a swathe of entirely new possibilities: for example, in combination with the concurrently developing motor car, the refrigerator empowered hitherto unthought of advances including the SUPERMARKET, the WEEKLY SHOP and FOOD COST REDUCTIONS.
Another example, this time from the pivot point in time where G1 was joined by a new Customer-Supplier dynamic, G2 (about which, more next time):
In the 1970s Steve Jobs visited Xerox’s Palo Alto Research Center, Xerox PARC, and saw their plans for a computer with graphical user interface and mouse. Jobs’ biographer, Walter Isaacson, explained in a Harvard Business Review article:
[T]he Xerox mouse had three buttons and cost $300; Jobs went to a local industrial design firm and told one of its founders, Dean Hovey, that he wanted a simple, single-button model that cost $15. Hovey complied.1
So, in this case, the 95 per cent reduction, from $300 down to $15, happened in one fell swoop.
The moral of these examples? Technological developments happen in two steps, the transition from Step 1 to Step 2 being triggered by an ever-falling cost line. Think, what does the world look like if the technology we have today is half the price tomorrow and half the price again the day after?
Things may, in fact, become even more extreme. What would happen if, for example, quantum computing atomized the speed/cost factors of information processing and utilization? Is it conceivable that we end up looking at a 1 per cent rule or even an 0.1 per cent rule? Whatever the outcome, the crucial questions to keep in mind are ... How does a falling cost line change the world? And, what are the implications for the Customer?
Homage to the entrepreneur
Before we move on, next time, to G2, I can’t resist a brief summary of the astonishing achievements of one of the exemplar entrepreneurs of the G1 era - Thomas Edison.
Edison was born in 1847 into a lamp lit, parochial, pen & ink world that took its pleasures quietly and conducted its business, mostly, at short range. The world he left in 1931 was ablaze with electric light, dancing to jazz records on the Victrola, scanning the tickertape for an upturn in its fortunes, tuning valve radios to world news, dictating letters onto wax cylinders and mimeographing the transcriptions, doing transatlantic and transpacific deals by automatic telegraph and carbon-miked telephones, and escaping its troubles watching (and hearing!) the new talkies in the plush depths of motion picture theaters. Naturally, lots of other life-changing inventions had joined the party in the intervening years, but can you think of a more significant one-man roll call?
A caution about the future
Counter-intuitively, it is almost certainly true that, in the more complex age where we now find ourselves, there may be less maneuvering room to startle and captivate the world. For one thing, genius is now far more likely to be a team operation rather than an individual endeavor. Plus, we seem to have reached some hard stops regarding some key aspects of human activity because of potential impacts on the overall environment and on the longer-term well-being of our own and other species.
For these reasons and more, those ‘team operations’ are more likely, now, to actually include the Customer, and to take account of hopes and fears that are external to or beyond a specific product or solution.
Customer Centricity
To conclude this introduction to G1, let me bring in a term that is liberally used these days - Customer Centricity - and try initially to identify what it means in a G1 environment.
The phrase ‘Customer Centricity’ is everywhere in business commentary these days, almost always accompanied by the assertion that it is a must-have capability – something that, if left undone, will cause a business to suffer and even fail. But is that true? And, if so, why? And, most important to start with, what the heck does it mean?
For decades my specialist subject has been Customer Value which, I figure, means I should be in a reasonable position to investigate Customer Centricity. For a start I felt irritated that the term seems often to be used without first establishing clarity around its meaning. Then, a handful of years ago, I realized something really big was going on: broadly we are at an inflection point, a once-in-every-two-or-three-centuries upheaval that means the future will be radically different. So, the whole issue is more important and exciting than I at first thought. More about this later but let’s start with the basic challenge of the terminological inexactitude!
A lot of sources pitch Customer Centricity as a broad, diffusely expressed business requirement. Here’s an example from a self-proclaimed Primer on Customer Centricity:
When you put the customers in the heart or at the center of your business and its activities, day in and day out, customers are always the most important people in your business, evidenced by the way everyone in the company treats and serves them ...2
Well, yes, we get the idea, but it’s fuzzy, don’t you think? The research and advisory company Gallup has a similar sentiment but more crisply expressed as a strategic guiding policy:
Putting the customer as the sole purpose and core of everything a business does, to grow.
Note that the two definitions above don’t indicate any interactional dynamic. Are we talking Supplier to Customer? Customer to Supplier? Supplier and Customer together? The implication seems to be Supplier to Customer, but it’s not clear … which is an important omission.
Numerous commentators actually refer to the difficulty of definition. In the Primer already quoted, there is this:
Customer centricity is an elusive concept, difficult to define and even more difficult for some companies to comprehend and deliver. It is fundamentally about total value delivery, not just about improving customer interaction.3
This is interesting because the assertion that it is “not just about improving customer interaction” surely suggests that some people at least think it is all just about improving customer interactions. And the fact that the words are quoted from Bob Thomson, founder and editor-in-chief of the excellent online resource CustomerThink, I think adds weight to the assertion. Bob Thomson goes on to say this:
It [Customer Centricity] is not a loyalty program, nor customer experience management nor a destination but it is an evolution, meaning a journey with different stages of development. Customers know and appreciate it when they see it, and customers acknowledge it to be so. Its reward is customer loyalty and this is the point of being customer centric.4
Aha, the reward of Customer Centricity is customer loyalty, is it? That’s worth working towards, huh? Well, maybe, but might ‘customer loyalty’ prove to be just as elusive a term as ‘customer centricity’? After all, marketing often has a loose and rather hyperbolic approach to definitions. If you follow this series through, you’ll see that, later, I question the entire basis of how customer loyalty is often currently framed and used.
Where else does our content review take us? Well, here’s Deloitte on the topic:
[O]rganisations must always put themselves in the shoes of their customers when designing and delivering interactions to ensure that they minimise customer effort and maximise customer value. The evolution towards becoming a truly customer centric organisation is both complex and long, and rightly so. It is the holy grail of unlocking the true potential of customer value.5 (My emphases)
This explicitly connects Customer Centricity with the ‘improving customer interactions’ angle hinted at earlier. And, in turn, it takes us to the world of Customer Experience (CX) ... and that’s a whole other can of definitional worms, about which more later.
But, for now, and last in this brief review, there is the ‘Customer Centricity as strategic shift’ variant, referring to a shift from Product focus to Customer focus. For example:
Customer centricity is a strategy that aligns a company’s development and delivery of its products and services with the current and future needs of a select set of customers in order to maximize their long-term financial value to the firm.6
These are the words of Professor Peter Fader, Professor of Marketing at the renowned Wharton School of the University of Pennsylvania. He goes on to say this:
[T]he basics of customer centricity are to identify, research, serve, and profit from the most valuable customers your company has – what we call the “right” customers. ... [T]he adoption of customer centricity demands nothing less than a complete restructuring of your organization that will position it to serve precisely the right customers at the expense of pretty much everything else.7
This has the virtue of clarity and pragmatism but I’m not clear how it moves things on greatly from twentieth century market segmentation and targeting. Think, for instance, about the ‘complete restructuring’ by Alfred P. Sloan of General Motors as five brands targeted at different sets of “the right customers” (mentioned in #2 of this series). From lowest price up: Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac. This happened in the mid-twentieth century, and segmentation and graduated service levels have long-since been parts of the Marketing toolset.
There you have it: a brief review that shows several definitions of Customer Centricity that are in use. To sum up:
First, there’s the ‘put the customers in the heart or at the center of your business’ version, which, in my opinion, sounds noble but vague. Gallup’s definition with ‘the customer as the sole purpose and core of everything a business does, to grow’ takes the proposition further but still doesn’t mention the customer-supplier dynamic.
Second, there’s the ‘total value delivery’ version to deliver maximum value for the customer – again, noble-sounding but vague.
Third, there’s the ‘design and deliver interactions to ensure minimisation of customer effort’ version at least has the virtue of being clearer, but it’s more limited in scope. I label it the CX Version: the version that provides justification for CX activities even where a CX department is situated within a non-customer-centric company!
Fourth. there’s the post-Product Era strategic version. There are probably several sub-versions of this one. The one I highlighted was the ‘pick the most valuable customers’ variant.
So, what are we to make of it all? I submit this makes it possible – probable, even – for people to ‘discuss’ what they assume to be a single topic but actually mean different things. It may even help to explain why, when scouring various sources, I have come across the occasional push-back, as for example in famous text The Challenger Sale where the authors assert:
There are several ways to be “customer centric” that are actually bad for business.8
Interesting ... but I guess it depends on the definition the authors had in mind!
For the purposes of this dive into the whys and wherefores of G1, the applicable Customer Centricity mode is, I suggest, more towards the broad & vague end of the spectrum. Something like, “With the Customer in mind” although some successful Product-era players may well have been those who plumped for Peter Fader’s approach, No. 4.
Next time, in The Notion of Customer, we’ll sum up G1 and introduce G2 … and perhaps even mention G3!
Thanks for reading.
Isaacson, Walter. The Real leadership Lessons of Steve Jobs, Harvard Business Review (April, 2012)
Marishelle, Arnaldo G. Primer on Customer Centricity: A Comprehensive Guide to Customer Centricity (2019)
Marishelle, Arnaldo G. Ibid
Marishelle, Arnaldo G. Ibid
Fader, Peter S. Customer Centricity: Focus on the Right Customers for Strategic Advantage (2011, 2020)
Fader, Peter S. Ibid
Dixon, Matthew & Adamson, Brent. The Challenger Sale: Taking Control of the Customer Conversation (2011)