Six activities fuelled by the outside-in leadership approach

During our examination of customer-led growth over many years, we have identified six activities that are disproportionately important in creating success, all of which are present in the Walkers story. This is what they look like in more detail. [1]

  • 2. Using guiding insight. What do you understand about customers that is not obvious, but which explains their real motivations and behaviours in a way you can act on, and that gives you an edge?
  • 3. Developing innovative propositions. How will you create a rounded offer that solves a customer’s problem or gives them the outcome they want as fully as possible, ahead of alternatives?
  • 4. Empowering people. How have you built teams so they are set up to be both consistent but also, crucially, flexible where it matters most to your customers?
  • 5. Rapidly learning. How do you ensure you continually grow the value that customers receive and recognise? Not every interaction will go to plan and elements of the offer will need to be improved. How do you create and maintain systematic, distributed feedback about what’s being delivered and how it rates with customers?
  • 6. Creating a business-wide customer plan. How do you put the actions and performance management in place to help the organisation succeed in your customers’ eyes, not just the business’s?

These were arrived at empirically, but we feel it is useful to know what good looks like at this level. By examining each of the six outside-in activities and using other examples alongside Walkers, it becomes even clearer what customer-led organisations look like.

Making clear customer choices

We have seen how, by looking at the world through customers’ eyes, Walkers was able to spot and choose to pursue fresh growth opportunities like evening snacking. Making clear customer choices is all about looking with new eyes and reframing markets. This can be tough to do when a company is dominated by inside-out metrics - building market share, growing shareholder value and the like.

Customer-led organisations make distinct decisions about the customers they choose to serve. They do not try to please everyone and satisfy all needs. For example, Ferrari understands its customers are genuine brand enthusiasts who desire a high-end image around performance, extrovert design and exclusivity. This appeal is maintained by making it hard work to become a customer and by choosing to limit supply. As Ferrari’s former president, Luca di Montezemolo, said to Businessweek magazine:

The quality of the sales is more important than the quantity ... Every company must grow, but growth isn’t solely about getting bigger.

If you increase volume too quickly, you can easily run into product or service quality issues and internal culture conflicts. By focusing instead on cultivating fierce customer loyalty, you can create not only a virtuous cycle of profit and reinvestment, but a growing sense of pride and satisfaction as well.22

In 1985, Unilever’s male deodorant Axe (Lynx in the UK) single-mind- edly targeted the male desire to get girls. ‘Spray to get laid’ became one of the most iconic global advertising ideas in the world and led to unprecedented brand growth for 20 years. Flowever, by 2014, it became clear that ‘The Axe Effect’ was out of step with modern society. The notion that a fragrance was enough to compel women into voluntary sexual surrender was offensive as well as misplaced. The world had changed, and Axe needed to reinvent itself to appeal to a new generation without losing distinctiveness. A new campaign, ‘Find Your Magic,’ rewrote the rules of masculinity and told young men that being yourself was a more confident and contemporary way to appeal to young women. It worked, and positive sentiment on social media leapt from 14.74% to 41.35%, while purchase consideration among the target audience in the US increased by 25%.23

Using guiding insight

A critical element in Walkers’ success was its team’s reliance on insight. They looked at the category and the competition through the lens of calories. The opportunity was to encourage people to switch their evening calorie consumption from peanuts or chocolate or ice cream, and to do so by adding value to the social interaction.

Using guiding insight reveals something about customers that is not obvious, but which explains their real motivations and behaviours in a way on which the whole business can act. It can be tough for many businesses to achieve because it involves looking at an industry in a fresh way to discover motivations that can be understood and then acted upon. For example, Dove’s insight that mature women find beauty a source of anxiety led to a celebration of real-life beauty that enabled Dove to become a confident and respected market leader. Similarly, 02’s insight that existing customers felt taken advantage of, despite their demonstration of loyalty, led to a whole new customer-led business model that rewarded rather than penalised loyal customers.

Developing innovative propositions

It’s much easier for organisations to make small tweaks to existing products. Walkers could have continued launching new flavours and creating news around its existing Walkers crisps, but this would never have created the same value as launching Doritos and Sensations.

Customer-led organisations create new markets and new business models. For example, Nespresso reframed the convenient coffee category by addressing a previously unserved segment. Nespresso’s success can be attributed to insight, but its ability to address the opportunity required innovation at every step of the value chain and has become a much-admired case study in business model innovation. This wholesale re-invention outperformed cafetieres, filter machines, percolators and the rest, in terms of enjoyment for customers and commercial value.

When Rolls-Royce Aero Engines, as number three in the market, needed to find a competitive edge, it developed an offering that answered the real needs of its customers. The usual practice was to sell jet engines to airline customers and then charge them again for servicing, maintenance and repairs. The more of this support the engine needs, the more it costs the customer. The new TotalCare offer meant that Rolls-Royce’s customers now don’t buy jet engines at all. Instead, they pay a rate for the jet engine thrust they use, which is the outcome they really want. This incentivises Rolls-Royce to make its engines as reliable as possible, so the revenue keeps flowing and the costs of servicing and aftercare are minimised. For customers, with fees known in advance, there is a more predictable cost of ownership and a minimisation of disruption.

TotalCare was first introduced in the mid-1990s, at which time Rolls- Royce entered into an agreement with Cathay Pacific. When Cathay Pacific’s first A330s went into service, it meant combining initial sales with aftermarket support by TotalCare, which transformed the organisation from a product to a service business. Together, they created a revolutionary new business model that flipped the industry on its head and created a lot of happy customers. Over time, TotalCare has proven to be a game changer for the industry. As Mark King, the president of Rolls-Royce’s civil aerospace business, explained:

Providing real-time support and maintenance to its airline customers for decades after the original purchase is now the biggest part of the business, generating 55 per cent of revenues last year. Rolls-Royce is not alone in recognising that it pays dividends to listen to your customers. Its two main rivals, General Electric and Pratt & Whitney, have both introduced similar packages over the years. It is a decision that has revolutionised the industry over the past two decades. For every engine it sells, Rolls-Royce offers a long-term service arrangement, such as the TotalCare package for its airline customers. About 70 per cent of the company’s airline customers have signed up to TotalCare. The system aligns the interests of the airline and the engine manufacturer.24

While the contract structure rectified an anomaly in the business model of the industry - rewarding manufacturers when their engines needed attention - aligning customer and manufacturer interests hasn’t been the only benefit. Customers covered by TotalCare also profit from improved on-wing time, higher residual values for their engines, reduced risk and better oversight. That last benefit is the result of the reams of performance and reliability data that Rolls-Royce generates from its numerous service contracts, data that is then used to fine-tune engine health monitoring software to spot potential problems before they occur, something that is now very much in Rolls-Royce’s interest.

Empowering people

We’ve seen how PepsiCo empowered the UK leadership teams behind Doritos and Sensations to meet its customers’ needs in new, creative and valuable ways. And Walkers also empowered its sales teams to ensure retailers properly understood and engaged with the new brands. For example, Walkers invested heavily in sales promotions and extensive in-store merchandising with Sensations. Working with retailers, Walkers positioned its big sharing packs near soft drinks and alcohol because they are often consumed at the same time.

In contrast, many international organisations fall back into command-and- control mode without empowering local teams to set their own direction.

Customer-led organisations recognise that steering the way your offer makes it to customers has to be done by the people closest to them. For example, W.L. Gore asks individuals to earn the respect of their peers rather than bestowing it upon them by virtue of title and an organisational chart. The process of earning respect comes from finding new opportunities to solve customers’ problems. There are no hierarchies, no titles and only high-level metrics. There are also transparent and frequent peer reviews and a strong focus on maintaining this culture.

Meanwhile, Transport for London (TfL) empowers its people to interpret its ethos that ‘every journey matters.’ This means people across TfL understand that in their different roles they each need to keep customers in a position to manage their time, and their emotions around time, well. Crucially they have freedom to do it their own way, leading to consistency of action but massive diversity in style and character across individual underground stations, bus drivers and digital service providers. It also leads to innovation, for example in lightening the mood with ‘quotes of the day’ shared on whiteboards at stations, something that grew spontaneously and organically throughout the organisation.

It began in Oval station in 2003, when customer services manager Anthony Gentles was inspired to perk up the ‘blank faces’ of commuters with a daily dose of wisdom from his favourite book Tao Те Chinq - the key text in the ancient Chinese philosophical tradition of Taoism. ‘Stations need not be sterile places,’ Gentles told the BBC25 (see Figure 2.1).

In a departure from the stereotype of the silent Tube user, passengers actually began chatting to staff. Some would stop to thank Gentles for writing the messages, while others started going out of their way to visit the station. Lunch clubs were even formed at workplaces to discuss the meaning behind the day’s thought.

In 2007, he passed the baton on to his colleague Glen Sutherland. Since then the customer services assistant has written more than 3,000 thoughts - and says he’s only repeated himself four times. Oval station now has over 20,000 followers on its Twitter account for thought for the day.

Transport for London, Oval Station, Thought for the Day. (Source

Figure 2.1 Transport for London, Oval Station, Thought for the Day. (Source: Transport for London - used with permission)

Moreover, Oval staff pipe out classical music and have installed plants and a book exchange to try to make the underground station a more pleasant environment for customers. Other Tube stations have followed, happily embracing ideas that have come from colleagues, not imposed from the top.

Rapidly learning

Customer-led organisations are on a quest for continual improvement. Not every business decision will be successful, and when this is the case, it provides an opportunity for learning. PepsiCo’s initial failure to launch Doritos into the UK market is a case in point. Instead of giving up, PepsiCo used the opportunity to understand what worked and what didn’t, then adapted for its second attempt. Learning from many sources and having a curious mindset were central to success. And critically Walker’s second attempt to launch corn tortilla chips into the UK market came with the awareness that learning fast would be critical to making it work.

Developing an innate culture of curiosity within an organisation does not come naturally. It means results can take longer. It means encouraging risks and, therefore, increasing the likelihood of failure. It means taking a long-term view over the pressures of short-term financial reporting. It means putting mechanisms in place to encourage and nurture learning. It means hiring people who are curious.

Customer-led organisations recognise the importance of continually improving. They understand that not every interaction will go to plan and elements of the offer will need to be improved, so how can a systematic, distributed way to get feedback about what’s being delivered and how it rates with customers be maintained? For example, Tata Group tackles one of the biggest barriers to learning by making its highest profile internal award all about failure, encouraging people to learn from their mistakes and take risks. This rapid learning or customer responsiveness is about being fast and right. The value of being right is obvious - customers get something that meets their needs. But the value also depends critically upon the speed with which the response is produced. The value of a course of action decays the longer it takes to be implemented. Sir Peter Davis, chief executive of retailer Sainsbury’s at the beginning of the century, recalls speaking to an executive and his team about a test that was operating in a store. He asked when the outcome would be clear. The response surprised him:

Well probably know within two or three months; but we need to test it properly and we need to let it run for a bit longer to be sure.

Davis then asked:

What would we do then?

The executive said:

I expect we’ll push it into another store.

Davis recalls:

When I said it would take 434 years to make it into the entire network at that rate, they all looked terribly hurt.26

Creating a business-u/ide customer plan

PepsiCo, like Tesco in the previous chapter, set objectives and plans that focused on customers rather than financials as it was building its case to launch Doritos and Sensations. A customer plan helped them steer towards success as an extended team.

How do you put the plans and performance management in place to help the organisation succeed in your customers’ eyes, not just the business’s? This is a challenge for many organisations when faced with shortterm financial and shareholder pressure.

While many companies will be familiar with the idea of a customer plan, an outside-in execution of one has some important characteristics. Customer-led organisations make space to focus on the customer in a planned and concerted way. Like Tesco, 02’s customer plan turns specific customer needs and opportunities into a systematic way of working to meet them. The business defined a set of specific outcomes valued by customers such as ‘the best network’ and created 02 promises that set the company’s ambition. This encouraged curiosity and the quest to work out what a headline idea really meant. For ‘the best network,’ an unexpected insight was that for customers, network quality was more about not dropping calls in cities than it was about reaching the remotest parts of the UK. Covering the map seems more obvious because it is easier to visualise, but it is product-led and ignores where people and their calls are. The calldropping insight was picked up by the teams who could, together, make it happen, and in this case, a network strategy emerged that used a pizza analogy, to go ‘deep pan not thin and crispy,’ to grow capacity in cities rather than extending reach further into the countryside. This customer planning process proved to be a good way of uniting people and their work around customers and customer-led key performance indicators (KPIs) rather than business-led ones.

  • [1] Making clear customer choices. Which customers and which needswill you serve, and which will you ignore?
 
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