For too many companies, ensuring that every customer has a tailored experience remains an elusive goal. Indeed, in a 2010 survey of more than 140 North American companies, just 3 percent were identified as truly “customer-centric organizations.” Fully a third were found to be “customer oblivious.”

The stakes are high. Some studies suggest that failing to deliver a high-quality customer experience can result in a staggering erosion of a company’s customer base—a loss of as much as 50 percent over a five-year period.

Why do some companies succeed while so many fail? Often, the cause is internal barriers. Even the best-intentioned attempts at customer-centricity can be sabotaged by siloed strategies, organizations, processes, technologies and data, which can result in disconnected sales, marketing and service functions. Your customer views all of your functions and business units as a single company. Shouldn’t you?

Merely adding customer-centricity to your vision statement isn’t enough. Thinking like your customer is the first challenge, and delivering a positive customer experience is even harder. Achieving customer-centricity requires rethinking the way business is done. And this, in turn, requires a holistic approach that encompasses everything from analytics and insights to strategy and customer experience, from operating model design and execution to governance and transformation management.

Identifying the obstacles
The rethinking begins by breaking down the challenge into its constituent parts.

Your competition is expanding. In the past, competitive intelligence from outside your industry wasn’t required. But today’s consumers compare their experience with your company not just to their interactions with your immediate competitors but to their experiences with companies in general. The pampered luxury car customer expects the same attention from the cable provider and at the retail store at the mall. Are you prepared to meet that expectation?

Your customers are evolving. The traditional shopper has been joined by the digitally oriented, multichannel customer; as a result, operating models must accommodate both. The traditional customer may still be reluctant to share personal information, but the growing base of digital customers tends to be more open with data, especially if it is used to provide them with a better product or service experience.

Nike did exactly that with its Nike + iPod Sport Kit, partnering with Apple to change the running shoe forever. Anticipating that runners would be eager to adopt technology and online channels to augment their training, the company developed a sensor for the left shoe that sends workout data wirelessly to an iPod. The sensor tracks distance, time, pace and calories burned—and even tells runners if they’ve beaten their personal best. Back at home, Nike’s online portal enables the runner to plot goals and compete with others. Can you identify similar ways to reinvent yourself as markets evolve?

The voice of dissatisfaction echoes louder than ever before. Social media sites and online research are accelerating word of mouth. According to conventional wisdom, a dissatisfied customer might tell 10 people of a negative experience; today, social media enables that same customer to reach thousands with a few keystrokes. Do you have a strategy to address negative feedback hitting the Web?

You must kill the back-office mentality. The days of a cloistered back office are over. What once seemed like smart organization—discrete processes, databases and designated teams designed for efficiency—creates siloed operating models that prevent companies from coordinating interactions and customer experiences. Is there a backroom firewall at your company that’s become a liability?

You need effective connectivity, not just flashy capabilities. Few companies understand what actually happens as a customer moves from one interaction to another. To offer the best customer experience, it is necessary to connect customer-facing and non-customer-facing functions. For example, an increasing number of companies are connecting internal data and analytical capabilities such as “next-best-action” decision making to enable contact centers and sales forces to dynamically drive interactions based on real-time customer insight. Look closely at your own company: Are handoffs seamless and informed? Are the right people armed with the right information, at the right time, to anticipate and address customer needs?

Having familiarized yourself with the obstacles in the dramatically altered customer environment, you can begin to build a framework for a customer-centric operating model. There are five areas of focus surrounding the customer.

Analysis and insights
Your strategy and operations must be guided by the people they’re meant to serve: your customers.

Once you’ve resolved to pursue customer-centricity, market research and analytics can help you understand what you’re aiming for. Next, auditing your company’s current performance in meeting customer needs and wants can help you improve your products and services.

Research conducted by Wells Fargo offers a case in point. Even as account holders flock to new services online, at ATMs and via mobile devices, the bank’s analysis revealed that 60 percent of ATM transactions are made by customers who still prefer banking with a teller.

That insight, along with others, led to Wells Fargo’s decision to tie platforms together, meaning a customer can open an account online, make a deposit at a branch, withdraw cash from an ATM and check balances on a mobile device, confident that everything will work just as it would with a teller. Wells Fargo’s investment in multiple integrated channels thus makes for a unified customer experience.

Your analysis will produce more valuable insights if you keep a few simple rules in mind.

Don’t be afraid to collect criticism. Unaddressed customer feedback can have harmful repercussions, but if you develop the ability to gather and organize customer reactions, you can use them to inform and enhance your operations. Links across functions are usually required, since a poor customer experience with one channel is often communicated through another, only to have a third group tasked with resolution. Think car rentals: Reservations are made online or by phone, then the consumer encounters different employee teams at pickup and drop-off.

Conduct an “enterprise customer experience audit.” The audit aims to assess the effectiveness of customer-facing and internal capabilities of working in unison to deliver the intended customer experience. Navigate a series of interactions with your company from your customer’s perspective, understanding not just the external but also the internal capabilities that drive the experience. Be on the lookout for awkward transitions—for example, where the customer moves from browsing to purchase and on to service, shifting from retail store to Internet or other mediums of communication.

On the back end, determine whether the right information gets to the appropriate people at the right time to delight the customer. The intelligence gained in a customer experience audit will provide the insights required to move from vision to execution.

Powerful information
Customer experience audits can act as internal benchmarks as well. If analyzed and conducted routinely, they will guide the journey toward customer-centricity.

Harness the power of reporting and analytics. Tools that provide a 360-degree view of customer profile information, preferences and behaviors give leaders in customer-centricity a more complete understanding of their customers. By building on such a foundation with technologies that drive predictive modeling and next-best-action decision making, you can anticipate a customer’s needs or actions in order to tailor messages or offers to that customer, distinguishing your company from the competition.

Although some companies long ago implemented vital strategies like these, few have fully realized the potential. One financial services provider has, however. A multichannel analytics strategy that drew upon Web and phone data provided insights into which channels were preferred by customers in different age brackets. By matching the evolving financial and insurance needs of aging customers with its products, the company improved both service delivery and marketing effectiveness.

Understanding industry dynamics, assessing your internal capabilities and leveraging insights to deliver responsive service and make operational improvements are all essential to enhancing the experience of your customers.

Strategy and customer experience
Customer experience is the North Star of your company’s strategy.

Simple insight can lead to powerful business models. Take leading online shoe retailer Zappos.com. In typical offbeat style, Zappos calls its policy “WOW,” and it reflects a basic insight into selling footwear: No consumer can know from a catalog whether a shoe fits. So Zappos offers free shipping and returns. By removing the risks, Zappos makes shopping online the next-best thing to walking into a shoe store.

Again, a few simple principles:

Design from the top down and the bottom up via a “customer experience blueprint.” First, define the big picture by establishing a strategic vision. Next, define what “good” looks like on the ground, outlining the ideal customer experience blueprint at the tactical level. Make clear for your employees the step-by-step path you expect your customers to follow. When compared to your existing enterprise architecture, the blueprint can reveal changes that will ease customer access, and may offer insights into how to phase in such changes. Finally, connect the top-down vision with the bottom-up blueprint, and define the roadmap to make both a reality.

There are lots of ways to rearrange resources, whether they’re people, processes, technologies or data. But leaders in customer-centricity have found that the right plan creates both customer value and business value. Zappos is a prime example.

Establish collaborative planning across functions and business units. Isolated planning can lead to fragmentation—the survival of those dreaded silos—at the product or functional level, or both. Integrated planning—going to market with a cohesive, unified approach and integrated customer experience blueprint—leads to compatibility between customer and product strategies and collaborative execution across business units and customer-facing functions.

Consider expanding core products and services. Adopting a customer-centric strategy may require growth beyond the current product portfolio or service model. Think of Nike as a purveyor of digital fitness services, or Ford Motor Co. as a provider of electric vehicle management services. The two companies provided important new value propositions to their customers by shifting both their product lines and operating models.

The proposition doesn’t have to be that big or far-reaching. US restaurant chain Applebee’s, for example, expanded its menu and provided increased nutrition information in a partnership with Weight Watchers International. Adopting the Weight Watchers points system helped reposition Applebee’s as a restaurant offering healthy choices to customers looking for healthier lifestyles.

Operating model design and execution
A successful operating model merges strategies, people, processes, technologies and data.

Designing and implementing an operating model means taking a holistic approach as you address issues ranging from corporate culture to IT. While the biggest challenge is to achieve unity in design and execution, that often means—once again—dismantling silos. As with an orchestra, everyone must play from the same score and follow the conductor if an operating model is to produce a harmonious customer experience.

Refine customer-focused processes. Connecting processes, linking organizational structures and integrating systems can ease the flow of information. Be prepared to define customer-impacting processes as they will define activities, drive technology and channel requirements, and define roles and responsibilities. A customer-focused process architecture makes clear where customer handoffs occur; which steps shape the customer experience; and how data, technology, processes and people must be leveraged.

Build new internal- and external-facing capabilities. Some companies using advanced CRM capabilities know whether the customer contacting the call center has previously voiced opinions about a product online, prompting the agent who answers to deliver relevant messaging or offers. The result is a more personalized interaction.

Keep in mind that new platforms such as online portals, capabilities like mobile-enabled video chat and other advanced tools are not, in themselves, the answer. During the customer-centric transformation, technology becomes an important focus across the company as new foundational, operational, process management and decision-making technologies are needed to manage the operating model. The result will be greater precision in executing the customer experience blueprint.

Consider connectivity. Collaboration is key in a customer-centric operating model. Once your company decides to break the silos, you must decide how this should happen. The answer, dependent on culture, could vary from formally connecting processes across the organization to fostering collaboration in a less structured way. Before redefining an operating model, examine your company’s capacity for collaboration. Processes are very structured at some organizations; at others, they are more flexible. How does collaboration work in your company? Is there a willingness to change? Be realistic about what is appropriate for your company’s culture. If the changes seem too radical in the short term, consider smaller steps that can be made now and plan for larger shifts over time. Leverage individual objectives and incentive compensation to get employees moving in the direction of collaboration.

Governance
This is the glue that holds together a customer-centric operating model.

As your company shifts from a product-centric to a customer-centric model, there are many questions to ask when establishing governance. Among the most important: How flexible do you want your vision to be? How are decisions made, and who has the power to make them? Both questions affect the essential tension between maintaining discipline and encouraging creativity.

By definition, governance is about making decisions and handling exceptions. Yet too rigid an approach may limit innovation and the autonomy of individual managers to make the best decision for their parts of the business. On the other hand, leaders need to be wary of promoting an undisciplined “Wild West” mentality. Deciding where to draw such lines requires a thoughtful reading of company culture and behaviors.

Typically, governance involves creating a board from various customer-facing and impacting functions that is responsible for an array of issues, including maintaining the vision, creating a roadmap for evolving enterprise architecture, initiating an approach for sourcing new capabilities and stemming deviations from customer-centric decisions. Governance is the conductor; when one section starts playing from a different score, the sound of the whole orchestra changes.

Maintain a shared vision and control scope. Adhering to a vision can be difficult because different stakeholders have different priorities and new information can drive decision makers to stray from the path. Visions evolve based on new insights, but traditionally, that evolution is deliberate. When individuals are asked to adhere to a vision they do not fully understand, they tend to make decisions that are not aligned with that vision, thus requiring governance. If one function within the organization deviates from the larger plan, a formal escalation process needs to be in place to manage any potential negative impact. The governance team needs to be in a position to make the right calls so that everyone keeps focused on the same goals.

Be explicit about who owns customer relationships. The governance board must decide where ownership lies based on the company and its products; it can be at the corporate, franchise or brand level. Clear ownership of the customer helps to ensure a deliberate and consistent customer experience. If ownership is not clear, inconsistent customer experiences or internal turf battles for share of voice may ensue. If multiple business units or brands within a company have overlapping customer segments, the company will need to be careful not to oversaturate its customers with proactive and unsolicited communications.

Keep track of touchpoints. Analytically driven capabilities and commonsense rules concerning how the company interacts with its customers can prevent oversaturation. A governance committee can help define the appropriate business rules around frequency and cadence of customer touchpoints. When a company proactively engages its customers too frequently, the contacts become spam; therefore, it should establish business rules around the ideal number of customer touchpoints so that the contacts drive a positive experience. Coordination is even more critical when multiple business units or brands share targeted customers.

Transformation management
These initiatives integrate new behaviors and allow the business to serve customers without interruptions to operations.

Ensuring adoption of a customer-centric focus across the organization requires a strong leadership commitment to managing change. A traditional project management office won’t be enough. Significant attention needs to be dedicated to the behavioral changes, cultural implications, operational impacts and interim plans.

How do you get to the new? One of the greatest challenges during the transition from the old operating model to the new is building the new model while simultaneously continuing to operate the old without disruption. How do you balance the old world with the new? How do you prepare your team for these changes? Your company’s culture may embrace or resist change, but to realize the full return of customer-centricity programs, employees and vendors need guidance during the transition.

Establish a customer experience champion at the executive level. Dedicated senior leadership involvement demonstrates the importance of the program. It will also make it easier for the organization to evolve its customer vision by having this leader focus on both high-level strategy and tactical execution. This individual will take a cross-functional perspective to connecting the discrete pieces into a comprehensive approach to customer interactions, enforcing the breaking of silos.

Don’t expect these changes to just happen. Some organizations assume these changes will take care of themselves over time. This is rarely the case, so resist the it-just-sort-of-happens mindset. The most successful transforming companies have a robust change management program that includes training—skills and knowledge—and communications.

Create a change management program for training and communications. Some of the most challenging moments of change take place after you go live. Plan for support beyond initial milestones until your organization has truly institutionalized your vision.

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Customers today expect an imaginative, high-quality experience in a multichannel environment. Failure to adapt to this new reality will mean not only lost business but a growing gap in product development. If you’re not listening and responding to your customers, chances are you’re not anticipating new needs and demands.

Industry leaders are constantly enhancing their customer-centric operating models and raising customer expectations; therefore, it’s critical for your company to get customer-centricity right. Regard this as an opportunity: Your company can leverage new processes, roles and data to create operations capable of making good on your customer-centric promise and growing your business.

But you must put the focus of your company’s thinking on the customer, even if it means entering unchartered waters.

 MyFord Mobile: Serving the digital customer

Fear of the unknown is to be expected—so Ford Motor Co. decided to harness it. Recognizing that owning a 2012 Ford Focus Electric will be a new adventure, the company devised a mobile application called MyFord Mobile to give the customer more control of the electric car experience.

MyFord Mobile will help Focus Electric owners plan trips, monitor their vehicle’s state of charge and receive vehicle alerts. The multipurpose app ranges in capability from identifying cost-effective electricity purchases to helping the owner find where the car is parked.

Electric cars represent the emergence of a new demographic among car owners, and Ford aims to serve customers keen to engage digital capabilities for their convenience. Are there ways you can anticipate your customers’ needs and, in turn, drive brand advocacy? (Back to story. )

Sidebar 2 | LEGO: Beyond the block
For decades, LEGO has been the dominant manufacturer of interlocking bricks for children. But as consumers have increasingly shifted playtime to the digital frontier, the Danish company has introduced new capabilities: What used to be just a box of plastic bricks is now a multichannel experience that neatly adapts the timeless LEGO product to the high-tech tastes of today’s consumer.

LEGO’s operating model enables connectivity, creating links between its traditional, store-bought products and new, flashy digital channels and services. Children can learn to build like the pros through an MBA—“Master Builder Academy”—program, which sends subscribers new models with special building instructions directly to their home every two months, and allows builders to show off their creations in an online community. Teens can now test their building skills through mobile phone applications and challenge their friends to build-offs using their tablets.