With the introduction of CIOs and CDOs, IT and business technologies have literally moved from the basement to the boardroom. For the past 18 years, Ramboll has annually examined developments and experiences with IT in the top 500 Danish companies. The impact of digital strategies grows rapidly, year after year. Some industries have used IT as a strategic weapon for years. Others are bound to follow.
Customers top the strategic agenda
The most recent results from Business Technology: Strategy, trends and experience – IT in Practice 2013
show that among companies having a business strategy based on growth rather than consolidation, 27% focus primarily on customer intimacy. In other words – closeness to customers, tailored products and services, reliability, and the ability to exceed customer expectations.
This development means that customer intimacy is now as strategically important as operational excellence which entails efficiency, low prices, streamlined processes and high capacity.
Ejvind Jørgensen, Director of Market and Clients in Ramboll Management Consulting and one of the initiators of the survey, believes that these patterns represent an emerging optimism in the market.
- The results paint a more optimistic business landscape than we have seen for quite some time. Optimising cash flow and risk management are slipping down the list of key elements for executing business strategies, and we can see that more CEOs consider mergers and acquisitions. This could indicate that companies are beginning to shrug off the crisis. At the same time, customer focus remains the most important element, he says.
Figure 1: Key elements in business strategies (CEOs) illustrate the emerging optimism and support customer intimacy strategies. (Click to enlarge)
The intensified customer focus is a global trend. Results from a MGI survey among C-level managers emphasise the growing engagement of senior executives in technology and digital opportunities that can bring companies and customers closer. 31% say CEOs personally sponsor digital initiatives compared to 23% in 2012, and out of five major digital trends, customer engagement ranks as the most important strategic priority, also representing the highest expected value.
CEO and CIO not aligned on customer focus
Meanwhile, CIOs do not share the same view as their superiors, IT in Practice shows. When asked about the key elements in executing business strategies, 63% of the CIOs highlight ongoing efficiency improvement, making it their number one priority. Customer focus only comes in second. The lack of alignment strengthens the need to review the portfolio, Ejvind Jørgensen claims:
- CIOs have to make sure that customer focus becomes a top priority in the project pipeline and portfolio. The investment portfolio must be in line with strategic objectives and maximise portfolio value, while also taking advantage of the technological opportunities. To succeed, CIOs have to perform an alignment and value review of their entire portfolio and also keep track of the latest IT trends, industry developments and macro trends to determine which will have the greatest impact on their opportunities and challenges, he says.
An approach to IT portfolio review – CIOs must review the portfolio with focus on alignment, value and new opportunities. (Click to enlarge)
The world leader in bioinnovation, Novozymes, develops enzymes for a long list of industries such as agriculture, bioenergy, textiles, food and beverages. In its IT organisation, gaining industry knowledge is a crucial area to pay attention to, according to CIO Anders Brøns Petersen:
- As a B2B company, we’re aware that our customers possess highly specialised sector knowledge that we depend on, in order to develop tailor-made products that make their products more efficient. Instead of trying to influence customers, we have to listen to them and innovate with them, because we recognise that they know more about the end users than we do, he explains.
Anders Brøns Petersen regards the IT organisation as the glue that binds a global enterprise together. In the years to come, his finest task will be to bring the products to the customers as quickly as possible.
- It’s all about providing the right products at the right time. We have to optimise our R&D portfolio by focusing on products that represent the highest value and ditch the ones that don’t.
Customer-focused IT as the decisive differentiator
Despite the conflicting priorities, CEOs and CIOs find common ground when they rank the areas in which IT holds the most promising potential to differentiate the company from its competitors. The top two differentiators are enhanced customer-oriented processes and customer experience, covering every aspect from experienced value, loyalty and commitment to flexible and innovative order-to-cash processes that fulfill and – even better – exceed the customer’s expectations.
One example is online clothing. Buying your clothes online is convenient, time-saving and often cheaper than strolling down the street to your regular store. And this goes for both buyer and seller. But the main challenge for online companies is to compensate for the fact that you cannot try it on. Consequently, companies constantly develop their design, e.g. by letting the customers try on products using high-quality pictures of their own bodies, offering co-creation of products and making it possible to watch the clothes in detail from every angle. All together in an attempt to re-create the experience and provide the same level of service as in the retail shop down the corner.
- It illustrates how customer-oriented IT processes can address rational efficiency and convenience issues and at the same time stimulate emotional needs. To become a true driver for differentiation, companies must find the right balance between the two and make sure that the technology supports both aspects of the experience, Ejvind Jørgensen explains.
Touching the customer in the right spots
Enabling business technology and the company as a whole to create unique customer experiences demands a well-structured approach. By introducing Customer Experience Management (CEM), companies can boost the bottom line, research reveals.
In cooperation with Copenhagen Business School, Ramboll Management Consulting annually tracks about 600 companies’ use of CEM. The research project has documented that a 10% increase in CEM contributes to a 9% increase in differentiation and a 5% increase in financial results.
Figure 3: The CEMindex highlights eight dimensions of Customer Experience Management that influence differentiation, market performance and financial results. (Click to enlarge)
Results from CEMindex 2013 reinforce the picture of an intensified customer focus at the highest strategic levels as the CEO is the main responsible for CEM in 43% of the companies. Stig Jørgensen, Director of Customer and Market Development in Ramboll Management Consulting, stresses that the implementation phase remains the most crucial challenge.
- More and more CEOs take responsibility. But they fail to execute. Less than half of them manage to communicate clearly how their organisation should work more customer-oriented and even less set concrete goals. This really underlines the need to map the customer’s journey across the entire value chain, define every touch point and set goals for the ideal emotional experience in each of them, he says.
According to CEMindex 2013, customer touch points and top management involvement have the biggest impact on differentiation. In Novozymes, these dimensions top the priority list.
- Close relations to our clients’ senior managers are essential. IT technology plays an important role in the maintenance of customer relations and keeping sales up, and when we connect our business systems with the clients’ systems, we create a degree of customer intimacy that is difficult to destroy, Anders Brøns Petersen says.
CEMindex identifies the CSO (Chief Sales Officer) and the CMO (Chief Marketing Officer) as the second and third most influential top managers. Consequently, they are important counterparts to the CIO when the company maps its journey. In a solid combination with the IT portfolio, the CEM programme acts as a pivotal catalyst for customer intimacy, architecting the differentiated customer experience.
Are you challenged by one particular digital issue? Find your answer on our list of suggestions for actions related to main strategic challenges
that companies face in the coming years.