Magazine Article | August 1, 2019

Who Is At The Center Of Your Funding Universe: Employees, Products, Or Customers?

Source: Software Executive magazine

By Dr. Kristin Walle & Nicolle Paradise

This customer-centric operations model will help software companies reimagine how they make strategic decisions and, thus, funding allocation decisions.

“Would you tell me, please, which way I ought to go from here?”

“That depends a good deal on where you want to get to.”

“I don’t much care where. ...”

“Then it doesn’t matter which way you go.”

- Lewis Carroll, Alice in Wonderland

Reverberating from the halls and walls of companies is a common debate. Who (or what) should be the company’s priority, the center of its proverbial universe: its employees, customers, or the products themselves?

While it is tempting to dismiss this question as merely philosophical, its consequences have very practical implications. If a company doesn’t explicitly rank its priorities, then, similar to Lewis Carroll as in Alice In Wonderland, “it doesn’t matter which way you go” with your funding allocation. In order to determine where your strategic funding and annual budget priorities should be, we recommend this three-step exercise, which answers the question, “What should our company focus on?”

First, list three specific business goals your company is seeking to achieve during the period for which you are budgeting. For example:

  • Increase sales by X%
  • Reduce operating expense (OPEX) by X% or a specific $ amount
  • Increase capital expense (CAPEX) by X% or a specific $ amount.

Second, establish budgets for each of these goals, ensuring they align with the organization’s year-over-year strategic priorities.

Third, compare these new goals and budgets with the previous year’s goals and budgets. When measured, are they relatively aligned or misaligned, year over year?

"Customers are not product experts, but they are the product practitioners."

The exercise is valuable because companies often position themselves as balanced between employee-centric, customer-centric, and/or product-centric. When companies are forced to quantify this balance, however, the center of its proverbial universe is largely demonstrated by following the funding. For example, organizations who identify as predominantly “employee-centric” invest tens of thousands of dollars in employee engagement, though according to a 2017 report by Harvard Business Review (HBR), scores on engagement surveys remain abysmally low. Why? Because funding is typically allocated toward a one-time initiative within a given fiscal year, not an iterative, year-over-year strategic company priority. According to HBR, this fiscal allocation approach results in short-term improvements, though when not sustained year-over-year, results in an increased negative sentiment.


"Our position is that the most profitable, successful companies are the ones that have a customer-centric strategy, as measured by allocating a higher percentage of year-over-year funding toward iterative, customer-centric initiatives than product or employee-centric initiatives."

 

All of this means that while companies intend to equally balance their priorities among customers, product, and employees, the exercise above will quantify who (or what) is the primary financial priority of your company, currently.

In best practice, however, who (or what) should be the fiscal priority of the business? The customer. Now, to avoid a Twitter-storm of controversy, our customer-centric position makes some very basic assumptions:

  • Product: without a functioning product or service that solves the business need for which the customer is paying, no amount of customer-centricity will yield a successful, profitable business. So yes, the product or service has to deliver on its core value for which it was purchased.
  • Employees: without employees, (most) businesses cannot exist. And when employees are engaged, they stay longer. And when they stay longer, that yields company stability, which is good for the product, the company, and customers.

Those basic assumptions included, our position is that the most profitable, successful companies are the ones that have a customer-centric strategy, as measured by allocating a higher percentage of year-over-year funding toward iterative, customer-centric initiatives than product or employee-centric initiatives. Here’s why:

Customer-centricity leverages curiosity to understand what customers want, iteratively, so they’ll continually use your business for that product or service. That position is often countered via a Henry Ford quote: “If I had asked my customers what they wanted; they would have said a faster horse.”

Perhaps. Though surely, had he sought to understand what customers wanted, iteratively, he might have been told: “Yes, I’d like a faster horse, please. Also, I’m quite tired of getting rained on, so might you make a horse with a roof? Equally, it’d be helpful if the horse had a bit of storage?”

Customers are not product experts, but they are the product practitioners. While they will not know to call it a “car” and prioritize the appropriate features in a road map, they’ll be the first to tell you how their business is evolving and what products or services they as practitioners need, iteratively.

"Organizations willing to make customer-centricity the center of their funding universe are quite the opposite of Alice in Wonderland."

Some of the most successful methods we recommend for capturing customers’ perspectives are methods readers are likely familiar with: customer journey mapping, customer advisory boards, and surveys (NPS, tNPS, CSAT, CES). While these programs and methods require year-over-year, significant financial investment, their insights position companies to continually recalibrate products and services so as to maintain their unique competitive advantage.

Lesser known, however, is the customer-centric operations model. We developed it to help companies reimagine how they make strategic decisions and, thus, fund allocation decisions. Above is a side-by-side comparison chart of a traditional, company-centric model and our reimagined, best practices, customer-centric operations model.

These side-by-side comparisons demonstrate how to leverage curiosity for understanding what customers want and what they experience, iteratively. Its ROI is to provide businesses with a clearer understanding of what strategic funding is needed where, by when it is needed, and why it is needed year-over-year.

Earlier, we recommended a three-step exercise, which answered the question, “What should our company focus on?” This curiosity is rooted in company ROI. The customer-centric operations model is a financial complement to that exercise, as it answers, “What are the business outcomes customers realized with our products or services and how are they currently measuring that value?” This curiosity is rooted in customer ROI.

Organizations willing to make customer-centricity the center of their funding universe are quite the opposite of Alice in Wonderland. They are clear which way they ought to go from here, and they have the data to support where they want to get to.

DR. KRISTIN WALLE is a division vice president of global payments and compliance/shared services compliance solutions at ADP. She is a global operations and compliance expert and has incubated multiple strategic initiatives to operations while developing high-potential leadership teams to achieve positive results. She holds a doctorate in organizational leadership from Pepperdine University with her research focused on CFOs turned CEO. Kristin is an alumnus of Yale School of Management’s “Executive Education Women on Boards” program.

NICOLLE PARADISE is the senior director of customer experience at ADP. Her expertise is in the strategy and operations of client experience, with an acute focus on delivering both company ROI and customer ROI. She is a practitioner and speaker on customer experience and leadership, holds a bachelor’s degree in business management, and was selected for TEDWomen 2018. She lives in New York City, and more information can be found at: nicolleparadise.com.