Why Canadian Enterprises should embrace Customer Strategy
Good business strategy is deciding which avenues for growth are worth pursuing. It is impractical (even irresponsible) for an enterprise to pursue every available avenue.
Even the largest enterprises, seemingly with cash to burn, would be better off concentrating finite resources on avenues that meaningfully move the needle.
For midsize enterprises, with more limited resources to invest, simplifying business strategy is essential to sustained success.
More so, midsize enterprises that centre strategy on what matters most can gain an edge on competitors bogged down by more complex, distributed strategy.
Don’t Hate the Playa, Hate the Game
Traditional business strategy is based on decades-old theories and frameworks designed for use within a very different business context.
The business environment over the last 20 years has been very different from the previous century:
- operating margin volatility has more than doubled
- correlation between profitability and industry share has all but disappeared
- median age of publicly traded companies has dropped significantly
Traditional approaches assume a stable and predictable world. Midsize enterprises (like any others) that embrace modern business strategy will perform better in today’s modern business context.
Mo’ Money Mo’ Problems
Traditional business strategy was designed for large enterprises.
In this new ever-evolving business environment, complicated legacy operations meant for a more stable, less dynamic environment can create more cost than opportunity:
- The more strategic initiatives in action at any given time, the greater the effort needed to coordinate, integrate and successfully execute them.
- The more strategic initiatives invested in at any given time, the less likely any one initiative has sufficient resources to materially move the business forward
- The more time required to adapt to changes in market dynamics, the fewer opportunities there are for an enterprise to capitalize on (and time to do so.)
Large enterprises are entrenched in traditional approaches. Midsize enterprises that embrace modern business strategy can cost-efficiently capitalize on new opportunities before slow-moving incumbents even know they exist.
Customers Matter Most
Sustained business performance is fueled by profit.
Profit is the result of creating substantial value for customers.
Spending time and money on creating substantial value for customers is good strategy. But attempting to create substantial value for every single customer segment is unreasonable and unwise:
- Some customers are much more valuable to a business than others.
- Some customers cost you more to acquire and keep than they’re worth.
- Semi-valuable customers could become high-value customers with the right strategy
Customer Strategy is the process of making business decisions based on a deep understanding of how customer segments differ in value to the business and what they value most from the business.
Investing in things that customers value will produce outcomes that businesses value:
- greater Willingness-to-Pay (higher prices)
- greater Willingness-to-Stay (lower churn rate)
Most enterprises would be better off over the long-term by concentrating strategy and resource allocation on things their customers value.
This is especially true for midsize enterprises.
Beyond necessity, midsize enterprises have an opportunity to gain ground and grow more profitably by embracing Customer Strategy.