Web Sight - Let Your Customers Lead

Customers today are incredibly demanding. There's no way that any company can serve more than five target groups well. So the best companies will be very particular about who they want their customers to be. The customer is always right, but not all customers are always right for you.

The reason why so many companies are willing to do business with so many kinds of customers has nothing to do with wanting to provide good service. It has a lot more to do with locking up their physical distribution channels. Have you been to a big sporting-goods store lately? There must be hundreds of models of Nike sneakers on the shelves. Why? Because Nike wants to dominate the shelves at such retailers.

The logic is simple: By generating more products, a company can occupy more shelf space, thereby denying that space to its competitors. As the big physical retailers get even bigger, companies like Nike need to make even more products in order to maintain their power position. It's a business strategy that's completely distribution-driven, rather than customer-driven. Because the Web breaks the distribution bottleneck -- it has unlimited "shelf space," after all -- it forces companies to think harder about what they can do to serve their customers better, rather than about what they can do to dominate a particular distribution channel.

Let's discuss the second question: How do you put your customers in charge of your company?

Once you figure out who your best customers are, those customers can then lead your company in new directions -- if you let them. But that will require you to rethink the very nature of your organization. You have to give your employees and your customers a set of tools for working together, and then get out of the way. That's the corporate culture of the future.

If you really care about customers, if you really want to put them in charge, then you have to reorganize your entire company around customers. A car company should have a division for commuters, a division for families, and a division for sports-driving enthusiasts. I want to see consumer-products companies create job titles like "director of kids," "vice president of seniors," and "chief parents officer." Sure, you still need departments like engineering and HR, but the customer divisions should be the power players: They should be able to partner with anyone to get whatever their customers want. By creating customer-led divisions, a company can encourage conversations that will allow its customers to "gang up" on it and pull the company in the direction that they want it to go.

Perhaps the biggest difference between how we do business today and how we'll do business tomorrow is that in the future we'll all have to be better listeners. And that means that people will have to change the way that they define their jobs, their responsibilities, and what's important to them.

In a customer-led company, people should work themselves out of a job every 18 months. If you're doing what customers want you to do, there's no way that you'll be working the same way 18 months from now. By then, customers will be on to the next thing, and you'll need to be there with them. In a customer-led company, rank-and-file employees have more freedom than ever before. They're not just executing someone else's 10-month-old vision; they're bringing customers into every process and every planning session. They're constantly trying out new ideas on their chosen customer group -- starting fires and adding fuel to the ones that seem to be catching on. Any customer-led team that sees results will become that much more attached to its customers -- and will be that much smarter the next time around.

Are companies beginning to embrace these ideas?

We're starting to see two models emerge: the customer-led company, and the company with customer-led divisions. Volkswagen is an extremely customer-led company. It focuses primarily on people between the ages of 28 and 38 -- singles and younger parents -- rather than trying to do everything for everyone.

Priceline.com is another great example of a company that follows its customers' lead. Priceline's customers aren't business travelers; they're low-budget travelers -- in other words, the customers whom nobody else wants. Of course, if you get a lot of them and you keep costs down, you can make some real money. Priceline monitors customer demand closely and tries to offer whatever people want: airline tickets, hotel reservations, phone service, and so on. Do you ever hear people talking about how sophisticated the priceline.com site is? No. It became a great company by building its business model around its customers' wants: "Tell us what you want and how much you're willing to pay for it. We'll try to help you get it."