Eight Ways Customer Value is Killing Your Business

Eight Ways Customer Value is Killing Your Business

Tl;Dr – A blind faith in the idea of “customer value” can cause many more problems than it solves.

Some folks seem to believe in “customer value” like it was the New Church.

The idea appears to have transcended logical enquiry and consideration, and become some kind of sacred cow. So be it. I do not subscribe. I guess that makes me an apostate.

My view? I see organisations that focus on customer value putting their business in jeopardy. Of course, there are numerous other ways to do that, too. But this particular path seems deeply ironic, given the number of self-styled experts who hail “customer value” as the salvation of business.

So, here are eight ways in which an incautious and credulous emphasis on “customer value” can undermine business success:

  1. If you don’t mean it
  2. What about everyone else?
  3. Narrow definition of “Customer” and “Value”
  4. Confusion of Value Disciplines
  5. Unintended Consequences
  6. Choosing the Wrong Kind of Value
  7. Conflating means with ends
  8. Strangles Innovation

1. If You Don’t Mean It

Is your organisation just striking a pose with regard to caring about delivering value to its customers? If so, they will find you out soon enough, and quickly spread word of your duplicity far and wide. Poor service and/or product quality is the norm in most businesses today, but pretend that you’re different when you’re not, and the backlash increases dramatically. More than the effect on disaffected customers, consider the effect on staff, too. How long can they go on living a lie? How will their chagrin affect their attitude to customers?

Aside: Becoming really customer-focused demands fundamental changes in organisations – in their collective mindsets, in their structures and in their daily actions. I’d go so far as to say that it’s a challenge far beyond the capacity of the Analytic mindset.

2. What About Everyone Else?

When a business truly places its customers on a pedestal, other stakeholders typically suffer. Employees and their issues get short-changed, managers are overworked or trapped in continual fire-fighting, and other stakeholders similarly lose out. Disaffection in key stakeholder groups, especially front-line employees, leads to a poorer customer experience, too. How about considering the value of balance, rather than unilateralism? How about attending to everyone’s needs?

3. Narrow Definition of “Customer” and “Value”

Who do you regard as your customer? How do you decide what is of value to them? Do you define customers as (just) those folks that sign the cheques? And do you define value in terms of simple hard cash? If so, what about all those other folks who suffer your goods and services without a voice? And what about their (non-cash) experiences?

4. Confusion of Value Disciplines

Michael Treacy and Fred Wiersma describe three generic value disciplines: operational excellence, customer intimacy and product leadership in their book The Discipline of Market Leaders (1997). They go on to make the case that any given business can and must focus on just one out of these three disciplines. Many organisations have yet to realise this.

5. Unintended Consequences

In his book “Obliquity”, Alan Kay makes the case for approaching one’s goals obliquely. Rushing headlong at “customer value” can often result in many unintended consequences. A more indirect approach, such as providing value to customers by building an organisation or workforce with the capability to do so “baked-in”, and evolving continuously, can avoid many of these unintended consequences.

6. Choosing the Wrong Kind of Value

There’s a story about Frank WIlliams and his Williams Formula One team. When any of his engineers came up with a modification to the car he would ask “does it make the car go faster?” Some folks cite this as an example of excellence of focus, and a great heuristic or metric (how much faster will the car go). But in Formula One, having a faster car is not necessarily the optimal strategy, all things considered. Better questions might be “will we win more races?”, “will we take the Championship?”, or even “will we get more sponsorship?”. If you give folks a goal, they’ll strive to meet it, even when it’s the “wrong” goal. Even when it destroys the company. And how likely is it that, even if senior managers do choose the “right” kind of customer value, folks across the organisation will understand and deliver on that?

7. Conflating Means With Ends

In his book The Goal, Eliyahu Goldratt asks the fundamental question “Why are you in business? What’s your goal?” Having happy customers is a means to a commercial organisations’ goal, not an end in itself. Yes, even a necessary means (see: Necessary But Not Sufficient). But not sufficient.

8. Strangles Innovation

Focusing blindly on customer value can drive short-termism in the organisation, because the connection between longer-term investment in e.g. innovation and the customer value of such proposed innovations is often hard to see.

I hope this piece has provided you with some food for thought. Maybe even… some value?

– Bob

Acknowledgements

My special thanks to @drunkcod for his valuable contributions to this post.

Further Reading

The Discipline of Market Leaders ~ Treacey & Weirsma
Goals Can Kill a Company ~ Rafael Aguayo
7 Reasons Why Most Organizations Don’t Know Their Customer ~ Karen Martin

 

10 comments
  1. This is spot on “A more indirect approach, such as providing value to customers by building an organisation or workforce with the capability to do so “baked-in”, and evolving continuously, can avoid many of these unintended consequences.”

    Given the focus of this blog is software engineering I’d include the software itself as part of that capability building.

    • Hi Andy,

      Thanks for joining the conversation on this topic. I’m interested you believe the focus of this blog to be software engineering. Would you be willing to share the things that led you to this?

      Would you also be willing to expand on what you mean by “include the software itself”?

      – Bob

      • Perhaps that post is not specific, but I meant The Blog as a whole.

        When you stop thinking project and start thinking “stream of customer value” then the aim is to build a capability in an evolutionary way for delivering value as a result of the symbiotic relationship between the people (team, software etc.) and software.

        I suspect you’d talking about how that relationship fulfils the needs of the people and in many contexts I’d agree🙂

        Does that make any sense?

      • Woops typo … it should read “the people (team, customer)”

      • Another point while I think of it, customer value is incredibly hard to pin down. I imagine it to be similar in prinple to the idea of “quality” in Zen and the Art … so the relationship also exists between the people and the software and the value. You kinda know it when you see it kind of thing.

  2. 1: if you don’t mean it
    If you state ANYTHING and don’t mean it, it is risky! If you don’t mean to be a safe and healthy workplace, you’ll probably end up being a dangerous and unhealthy one. if you don’t “mean it”, it’s irrelevant what you are not meaning, the thing that is the problem is the hypocrisy of pretence. Not what is being pretended.

    2. What About Everyone Else?
    “other stakeholders typically suffer” Evidence, or an anecdote to illustrate? Here’s my anecdote. The few times I’ve been lucky enough to be in an environment where customers where placed as purpose, everybody benefited. Staff loved it, managers found new purpose, it was cheaper so accountants would be pleased etc. I think it is simplistic to describe this is a zero-sum game. Giving more to the customer gave more to everybody.

    5: Unintended consequences
    Other unintended consequences of focussing on customer value are…see bullet point 2 above.

    6. Choosing the Wrong Kind of Value
    Customers do that. Not senior managers. They can DISCOVER it, but they don’t decide it, because then its not the customers’ value. Its the senior manager’s

    8. Strangles Innovation
    It is hard to see the long term link between innovation and ANYTHING purely because it is LONG-TERM. This is not a feature of focusing on customer value, more a feature of innovation and the long-term as a time-frame.

  3. Tobias said:

    I take it you mean “Customer Value” as a buzz-term, not actual value delivered to customers. Speaking as a customer (of clothes, food, technology…) I absolutely seek value in the things I buy. Why would I not?

    In the world of knowledge work we are always creating new things, not mass producing popular items. Customer (i.e. end user) value is harder to determine and requires dialog between the maker and the user. It is certainly easy to go down the wrong path, e.g. by believing “the customer is always right”, but if we make the effort to truly understand the need, and are able to make offers to delight then we create purpose for the whole making organization, and purpose is a fundamental principle in creating a meaningful, engaging workplace.

    If you /actually/ believe that offering value to a customer undermines an organization, I have to say I’m gob smacked.

    • Hi Tobias,

      Thanks for joining the conversation. Yes, when I write “customer value” here, I’m referring to the idea that providing customer value is “a good thing”, not any actual value so provided.

      Actually, I wonder would you be willing to introspect a while on your assertion that you “absolutely seek value in the things I buy”? Have you read e.g. “Buyology” by Martin Lindstrom?

      Also, have you seen my post: “What is Value”? https://flowchainsensei.wordpress.com/2012/05/06/what-is-value/

      I had hoped my reference to Goldratt’s “Necessary But Not Sufficient” had indicated my belief that the idea of delivering value is *necessary* (but not sufficient). Can you help me understand how I might make this clearer?

      – Bob

  4. Tobias said:

    I agree with this: “In summary, if you are a software supplier, software house, or in-house software development shop, unless and until you understand your customer’s organisation well enough to know where its current constraint lies, you will never be in a position to deliver real value, except by sheer chance.” (“What is Value”?)

    This is why I emphasize that the delivery (or perhaps better expressed, the gift) of value “requires dialog between the maker and the [customer]”. It seems to me that no relationship, of any kind, benefits from making assumptions. I don’t think this is restricted to providing “customer value”. How about relationship value, friendship value, service value… How often, for example, have well-meaning charity organizations utterly failed to help those they set out to help—in some cases actually making situations far worse then they were at the start. Believing we know what another person or group needs, without listening and seeking to understand is a sure recipe for failure, and even great pain.

    I do seek value in the foods/clothes, etc. I purchase. I am frequently disappointed. Dialog would help, but given there is a wealth of choice in those markets I simply look around for something that offers a value more aligned with what I seek.

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