Driving Customer-Centric IT

Growth remains a top priority for CEOs. Revenue growth and increasing market share outstrip lowering the cost base as strategic priorities. Enterprises seek to deepen their penetration in home markets, and enter new markets.

Unsurprisingly enterprises are looking to sharpen their customer focus as a way of attaining growth. Much technology investment is being targeted at front-office areas as CEOs see greater opportunities for return on investment from customer-facing IT investments than back-office investments. The challenge for CIOs is to understand in detail their enterprise's growth strategy, and focus on supporting it.

This fact alters the focus for the CIO. "To be a successful CIO you have to know where to focus. The bottom line is we are in business to make money, and that money comes from our customers. Everything you do has to begin and end with the customers, otherwise you shouldn't be doing it", as one CIO of a multinational put it to us recently.

To be able to focus on the right things, you have to know what your enterprise's customer-centric strategy is. Here the work of management gurus Michael Treacy and Fred Wiersema in their book, The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market (HarperCollins Publishers Incorporated, 1997) can help. To grow, these authors describe the three and only three strategies that enterprises follow.

Product leadership. Enterprises concentrate on offering products and services that push the performance boundaries. Their proposition to customers is to offer the best product or service, full stop.

Operational excellence. Enterprises that pursue this are not primarily product or service innovators, nor do they cultivate deep one-to-one relationships. Their proposition to customers is simple: low price and a hassle free service.

Customer Intimate. Enterprises focus on delivering not what the market wants, but what specific customers want. Customer-intimate companies do not pursue one-time transactions, they cultivate relationships. Their proposition to customers is: We have the best solution for you, and will support you to achieve optimum results.

Organize IS to fulfil the customer growth strategy. "Most companies are organized for the convenience of their management and not for the convenience of the customer," says Jay R Galbraith, senior research scientist at the Centre for Effective Organizations at the University of Southern California. Instead, an enterprise should be organized according to whether its customer strategy pursues product leadership, operational excellence or customer intimacy.

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Each of these growth strategies requires the appropriate IS model to support it. For the product leadership and operational excellence models, the IS organization tends to be a support function focusing more strongly on internal customers. But for customer intimacy, the IS organization moves into the front office and focuses strongly on the external customer. This often leads to the most radical changes in the IS organizational model and in the skills needed to support it.

To be customer-centric, the IS organization must be flexible and agile and able to respond quickly and efficiently to customer needs. IS must evolve its capabilities and organize around the customer. The degree depends on the enterprise's customer strategy.

Put simply, being customer-centric means getting close enough to customers to understand their needs. For many CIOs this has meant using the Gartner IS Lite model to reorganize IS. IS Lite advocates pushing IS resources into the business (either the business processes or customer segments), retaining a core of key skills and, if needed, outsourcing some IT services provision.

The skills or capabilities now required to be customer-centric are often found in consulting organizations. Many CIOs talk in terms of reshaping IS to be more like a consultancy, offering key skills and services across the enterprise. These skills focus on being able to identify a customer's needs and translate them quickly and efficiently into a solution.

Another way to make IS more responsive to the needs of the customer is to put IS resources into the customer-facing organizational units, such as business processes or segments. Typically, many enterprises locate relationship managers and business analysts in the front office who then work closely with executives and feed demand signals back into the core of IS.

The amount of resources going into the customer-facing groups depends on a number of factors. Typically, a product leadership approach often only requires relationship management in product and service groups, and sales and marketing. Operational excellence and customer intimacy strategies require relationship management, business analysis and, in some cases, project management by business process.

However, many CIOs and business executives express frustration with the relationship management role. Their argument is that the role is too weak and not responsive enough to the customers' demands. For this reason, they are bolstering the relationship management role, adding in an external customer-facing component, such as responsibility for customer information, and making relationship managers more responsible for projects and service levels in their areas.

Agility and responsiveness to customer needs are key to being customer centric. For operational excellence and customer intimacy, customer needs must drive IS prioritization. This requires business executives, embedded staff and core IS groups to work closely together in a coordinated way. There are four key mechanisms to do this.

Governance Designing an effective governance model allows key decisions to be made quickly and effectively. The governance model identifies key decision domains — typically project identification and prioritization, and project management — and defines the key stakeholders from business executives through to core IS, and the process by which decisions are made.

IT processes Many IT processes are customer facing and run across the entire IT organization — for example, a root cause process that begins when a customer having trouble with a Web site contacts a help desk. These calls would initiate a process that would involve stakeholders across the business and IS in resolution and, along the way, might uncover an innovative way to make the site easier to use.

Competency centres Many enterprises consolidate key IS support skills into "competency centres". Such skills can include project management, enterprise architecture, business modelling and, where it's widely used, SAP. Competency centres provide frameworks, templates, methodology and advice. These centres have an integrative function, as they offer a standard approach to the whole of IS.

Culture But the most powerful, and subtle, linking mechanism is a customer-facing culture, with the dominant beliefs, values and behaviours emphasizing the generation of superior customer value and the continual quest for new sources of advantage. Such a culture emphasizes teamwork and collaboration.

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Becoming customer-centric requires building a new set of skills and/or capabilities inside IS. These skills centre on using a fact-based management approach to identify a customer need or opportunity, and rapidly create and implement a high-quality solution — skills often found in management consultancies. To build these skills, CIOs must assess their existing competency models and create development plans to get there. Another, faster, route is to recruit individuals with these skills directly from the marketplace.

Use IT to synchronize the business and the customer. Experience has shown that many customer relationship management implementations fail because they don't clearly connect with customer needs. Before developing any system, get a clear statement of the customer strategy and the particular focus within it. Make sure you can connect each IT strategy element with a defined customer need and can see clearly how this will deliver business benefit.

The customer strategy your enterprise is following will provide a guide. Each of the three customer strategies — product leadership, operational excellence and customer intimacy — has clearly defined IT needs.

However, with the sponsorship of a senior executive, there are four things a CIO can do to sharpen the enterprise's customer focus, whatever the customer strategy:

• Synchronize the enterprise around customers.
• Create a knowledge base to share information across the enterprise.
• Provide customer metrics.
• Present a unified face to the customer.

Customer centricity is increasingly becoming the domain of the CIO. The number of channels is proliferating; almost every customer-facing business process is IT enabled; information is being used to create value-added services for customers; and, increasingly, customers want to be heard and work with the company to co-create value.

This dependence on IT represents an opportunity for CIOs to come out of the back office and become key players in enabling growth and innovation by helping their enterprises connect closely with customers. The challenge for CIOs and their IS organizations is to help their enterprises become truly customer-centric.

Andrew Rowsell-Jones is vice president and research director for Gartner's CIO Executive Programs