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