Fuse soft skills and digital for customer centricity on steroids

Companies must blend soft skills such as empathy, humility and audacity with digital innovation to achieve true customer centricity, write IMD Business School's Didier Bonnet, Katharina Lange and Frédéric Dalsace

This article is republished with permission from I by IMD, the knowledge platform of IMD Business School. You may access the original article here.

Digital transformation leaders are rarely psychologists. And there aren’t too many data scientists serving customers. But this divide must disappear if firms want to become truly customer-centric in our increasingly digital world.

We argue that three leadership traits remain central to advancing customer-centric business models: empathy, humility and audacity. And instead of being disconnected, digital innovation and leadership skills need to be joined at the hip.

From determinism to data-inspired empathy

For many years, marketing was an “informed guessing game”. First, we looked at customers in demographic terms. We’ve done surveys and conducted focus groups, all in the name of trying to understand customer needs and wants.

Then we got smarter. We started to codify actual customer journeys, got a granular understanding of purchasing intentions (e.g., through searches), and understood how we funnel customers through gated stages leading to transactions and repeat business.

And that’s all great. The problem is, because of these methods, customer understanding has become very linear and deterministic, which human beings are anything but! Customers have varied lives and experiences. They use shortcuts, change patterns and behaviours according to context, and quickly form new habits.  

To understand the choices customers are actually making, we need to get closer to their real lived experiences, and that’s hard. But in today’s digital world, it’s not impossible. In fact, just like in the pre-digital world, the key to understanding these true customer experiences is empathy.

We argue that empathy has evolved too. It has, itself, gone digital and become more data-centric. Why? Customer empathy is about understanding three aspects of the human condition:

• the cognitive part (how customers think in a given context)
• the affective part (the emotions behind customers’ choices)
• the behavioural part (the actions people take)

Today, data science has become the key to opening all three empathy doors. And we have mountains of it. From traditional structured data such as transaction information to unstructured data such as voice and video observations or sentiment on social media. We also have the digital technology to analyse and understand this information to inform business decisions.

But the promise of digital, data and analytics goes even further. We have the power to achieve a real-time understanding of customers’ real lived experiences: how customers behave, how and where they spend their time, and how they consume products and services.

Take the example of pet food subscriptions: Imagine a subscriber cancels their subscription for the dog food they have ordered for years. The same day, the same user subscribes for puppy food. The artificial intelligence of the software catches these data points and suggests sending a bouquet of flowers to the subscriber – as a gesture of congratulations on the new puppy.

Today, the human capability of empathy becomes increasingly skillfully enriched by data points. Rather than dehumanising the experience, today’s digital innovations enable us to understand more about – and respond to – our customers’ lives, needs and behaviours. When done well, data-centric empathy will bring you closer to true customer centricity and uncover new sources of value you never knew existed.

From “pick and dump” to technology-mediated humility

Many executives talk about being customer-centric, but much of the focus has remained on who controls the relationship between firms and customers. Consumer needs have been canvassed through limited interactions to pick the brains of customers, only to dump respondents immediately as the “adults” (read: the firm) took over. In the early days, the Mad Men era, it was a relatively straightforward broadcasting model. Those with the biggest marketing budget won the day and, through intense exposure, pretty much dictated what customers should buy.

That was turned upside down with the emergence of social media. Suddenly, customers had a platform to express what they really thought about their choices, preferences and experiences. Brands had to adapt as the power shifted to consumers.

But, with the harvesting of more and more data and the amazing progress in decision science, corporations are fighting back. Customers are watched, listened to and influenced through finely targeted advertising. Predictive analytics, allegedly, is able to anticipate customers' wants and needs.

So, it’s game over for customers, then? Well, not quite. The truth is, the balance of power in today’s digital economy rests neither with the firm nor the customers. It is a digitally-mediated reciprocal partnership. Research shows that the currency for creating value in these exchanges consists of data and customer participation. Therefore, in this reciprocal partnership, both sides have to relinquish some power.

This is where humility comes in. Humble leaders are highly self-aware, appreciate others and continue to learn from others. These leadership traits create cultures that are open to learning and advice. Humble organisations value inclusion and transparency.

In the digital age, these firms allow customers to participate in key elements of their traditional value chain. Many companies use digital technology to engage with their customers through new products, services and platforms. These touchpoints serve as channels that accelerate engagement.

Customers become collaborators and can engage across the entire value chain, from R&D and product development (Starbucks’ MyStarbucksIdea.com), content creation (LinkedIn’s Profiles) and logistics (UPS MyChoice) to services (iStockphoto inspectors). This requires a strong understanding of how customers connect with what you do in a functional and emotional way.

Giff Gaff, a mobile phone network owned by Telefonica, is leveraging its community to improve its customer service. Remarkably, unlike other operators, Giff Gaff has no customer service function. There is no phone number to call. Why? The company has invited its customers to take control of customer services and outsourced this function to the community. And it works. Customer queries are being resolved in record time.

Vincent Boon, Head of Community at Giff Gaff, explains: “The value generated by the community is incredible, and means that we can take the savings we make from not having a traditional, high cost, infrastructure, and pass that directly to our customers in terms of great product value. Everyone wins!”

This digital-mediated approach presents a paradox for the traditional way of doing business. We are asking customers to do part of the work, and they like it. They positively engage with the service because they are directly involved. That’s what makes their participation powerful and it means they feel more comfortable when it comes to sharing data.

To make this relationship work, companies must embrace humility to combine functional trust (required for transactions) with affective trust (required to build relationships and communities). Humble leaders create cultures that are perceived as open to input from all sides, especially the customer. Humble organisations value inclusion and transparency to build trust. As such, humility is a key leadership trait for customer centricity in a digital world.

From tug-of-war to digitally-enabled audacity

The combination of data-centric empathy and digitally-mediated humility can take you a long way. We argue that audacity is the final leadership ingredient for true customer centricity today, with digital technology as its catalyst.

Taking bold risks is normally the domain of the entrepreneur. But, in a digital world, all business leaders must embrace audacity through digital innovation if they want to delight customers and meet “latent” needs – needs that sometimes customers themselves don’t realise they have, sometimes with technology they don’t even know exists.

In addition to enabling firms to take more risks, digital technology also enables firms to reduce the risk for their customers – a welcome customer-centric mindset change.

Despite all the talk about customers being our partners, in practice, the traditional development of new products and services came with an implicit, dominant corporate logic: “The less we give them, the more we gain.” This created a de facto “tug of war” relationship with customers.

Against that backdrop, audacity is not about boldly launching into uncharted territories. It is about having a pragmatic growth mindset: “I win when you win because we are in the same boat.” It involves looking at business models from the customer perspective and being willing to share risk with customers, informed and enabled by digital technology.

For example, firms can share customers’ volume-related risk through the development of subscription (HP subscription ink model) or pay-per-use business models (Michelin pay-per-kilometre model). These new revenue models can only work because firms are able to develop seamless data-based interaction at scale with customers.

Data is also central to designing performance or outcome-based models which tie the firms’ revenues with the quality they offer their customers. These models are high risk as they rely on certain critical criteria. Will we be able to deliver as contracted upon performance? Will customers fulfill their obligations?

In both cases, digital technology plays a decisive role. Sensor data and IoT technology captures real-time data at the point of use, creating contractual transparency that enables enforcement.

A transportation firm may find it attractive to purchase a truck with a guaranteed “up-time” model, but to make this model work transparently, the truck manufacturer needs to know that the vehicle will be well maintained and operated properly. It’s this willingness and ability to spread risk through data-enabled transparency that makes audacity key for true customer centricity today.

Customer centricity on digital steroids

Understanding the importance of the human touch within digitally-enabled experiences is becoming a management imperative. Blending a deep understanding of how digital technology can create value with the leadership traits required to establish trusted win-win relationships with customers is critical. It requires a finetuned leadership combination of care – empathy and humility – with the courage to dare – audacity.

Organisations that nurture and employ these traits as they embrace digital innovation will put their customer interactions on steroids and move one step closer to true customer centricity.

Didier Bonnet is Affiliate Professor of Strategy and Digital Transformation, Katharina Lange is Affiliate Professor of Leadership and Frédéric Dalsace is Professor of Marketing and Strategy at IMD Business School.