Uber, Airbnb, Cree, Rent the Runway, Amazon.com, Google, and Facebook are all new age examples of how customer-first thinking has become the business model, not a part of it. If, as Peter Drucker says, “the purpose of a business is to create a customer,” these companies have hit the mark squarely. They have actually created fans, not just customers, and they are having a tremendous impact on the concept of business.
When Drucker first emphasized that the customer was the center of business strategy, he was ahead of his time. In an era dominated by the fact that creating shareholder value was considered the purpose of a business model, he was almost prophetic in insisting on customers being placed at the epicenter of an organizational purpose. Now, that philosophy seems obvious. Organizations, big and small, old and new, global and local, have to think of their businesses as in service to the customers and build their value proposition around it.
Bottom line, Drucker is astoundingly more relevant today than ever. He was a Millennial in his thinking before we knew of the Millennials. Drucker warned that the notion of the customer is not a static one—and that organizations need to be prepared for customers becoming more diverse, with their needs, wants, and aspirations continuously evolving over time. In this shape-shifting world of customers, he argued, a company’s success, therefore, depends on its contribution to its customers’ success. Keeping a close pulse on this dynamic world of customers will be key to a company’s survival—otherwise it runs the risk of becoming irrelevant, and, therefore, redundant.
General Electric (GE) is a 130-plus-year-old company. As the only company still on the original Dow Jones index, it has stayed relevant primarily because it has successfully morphed and kept itself young and fresh over its long history. At GE, Chairman Jeff Immelt is driving an initiative called simplification, a way of bringing about a small company mind-set in a big company body.
There are four key elements of simplification:
- Lean management: This directly takes the start-up toolkit and brings it into an organization like GE. The mind-set change required is that we need to be agile, nimble, and willing to experiment and learn to grow. Lean management calls for customers to be at the center of every decision—and have them be not just a recipient of our products and services but also a participant in the process. Lean management also has the urging to be intense, austere, and focused.
- Commercial and customer intensity: This part of simplification addresses the “getting to yes” for the customer. How do we organize ourselves to make sure that we deliver when, where, and how the customer wants products and services? Moments of truth with the customer are translated into organizational measures of success.
- A services focus: Increasingly, in a complex world, people look at products as a means to an end—and knowing the “end” and figuring out the value proposition around that is critical for success. For instance, you are not buying jet engines to power the airplane anymore; you are buying fuel efficiency. You are not buying a lightbulb but rather durability. You are going to the hospital to prevent diseases from happening, not just to cure what you already have. Value, therefore, has to be translated from the mind-set of the product to the mind-set of the customer.
- Technology: Perhaps the biggest lever that is available these days is the phenomenal world of technology. Cloud-based technology, the industrial Internet, the Internet of things, additive manufacturing, industrial automation, and other innovations have made available a range of tools to companies to make products and services faster, smarter, and cheaper. For instance, the light-emitting diode (LED) bulb that you can shut off and on remotely through your smart device is a simple example of the marriage of technology with traditional hardware.
In a corporation, the ultimate truth—the ultimate measure— is determined by the customer. Drucker was a pioneer in propounding the focus on the customer. Today we are seeing the benefit of that. Organizations form to rise to the challenge of an unmet need. As Drucker prophesized, the ultimate beneficiary is the customer.
Excerpted with permission of the publisher, Wiley, from “Peter Drucker’s Five Most Important Questions: Enduring Wisdom for Today’s Leaders” by Peter F. Drucker, Frances Hesselbein, and Joan Snyder Kuhl. Copyright (c) 2015 by Frances Hesselbein Leadership Institute. All rights reserved. This book is available at all bookstores and online booksellers. For information, visit http://www.wiley.com/WileyCDA/WileyTitle/productCd-1118979591.html
Raghu Krishnamoorthy is responsible for General Electric’s (GE) global talent pipeline, learning and development, and the Crotonville leadership development organization throughout the world. From 2009 to 2013, he was vice president, Human Resources, for GE Aviation, a $20 billion business. Before this, he was the human resources leader for GE Corporate’s Commercial and Communications organization, responsible for enhancing the company’s global commercial capabilities; he was also a member of GE’s commercial council.
