Losing customer-led beliefs

As a jumper I try to defy gravity for as long as I can. But no matter how far I jump, I’ll always hit the earth eventually.

Greg Rutherford (British Olympic gold medallist

- long jump, 2012)

O2: From outside-in to inside-out

As with our first example, Tesco, the spectacular rise and subsequent decline of 02, the UK-based mobile telecom network, demonstrates that a customer-led approach that leads to great things at one point in a company’s lifecycle is no guarantee that it can sustain it in another. At the height of its success, 02 was responsible for a succession of customer firsts as it rewrote the rules of the mobile industry that had traditionally thrown all its efforts at recruiting new customers and almost none at keeping existing ones happy. In September 2002, less than a year after ВТ demerged mm02, as it was called then, analysts called it ‘a perpetual value destroyer’ and valued it at £3.65 billion.1 It was sold to Telefonica three years later for £17.7 billion.

02’s decision to reverse the standard industry practice by focusing on loyal existing customers rather than buying new ones with costly acquisition programmes constitutes a massive Moment of Belief. A stream of Moments of Belief followed in its wake, including an innovative sponsorship deal that transformed the maligned Millennium Dome in London into the world’s most popular entertainment venue offering priority tickets to 02 customers.

However, the combination of 02’s takeover by Telefonica in 2005 plus the pressures of the financial crash of 2008/9 on the Group and an ambitious diversification programme made it increasingly hard for the mobile company to maintain its laser-like focus on creating customer value above all else. Its distinctive outside-in beliefs were eventually undermined by Telefonica’s need for profit and the lure of ambitious expansion beyond the core. Like an invading virus attacking a healthy body, the outside-in beliefs were weakened, diluted and eventually killed off. 02 is a vivid illustration of reversion to the norm; even when a firm achieves outstanding success by establishing widely held customer-led shared beliefs, without superhuman effort, it can expect to lose its advantage as those beliefs weaken over time.

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