Making Customer Centricity Work For Your Company

By David De Cremer

One essential ingredient in doing business today is customer centricity. Taking after the effective approach of telecom giant Huawei, the author not only directs us on how to make customer centricity work for your company but further provides 5 key dimensions toward a success.

 

Prospects for global growth remain pretty pessimistic making companies act in conservative and risk aversive ways. Despite this reality, at the same time some interesting economic and geopolitical changes are taking place that will significantly shape the long-term competitiveness and survival of organisations worldwide. And, no, it is not something that was unknown until now. In fact, the development that is taking place is an old and familiar face: The ability to make “customer centricity” part of your organisational culture and strategy. Why?

A development that is currently taking place involves the growth of the middle-class population. In 2009 the middle-class numbered about 1.8 million and it is expected that this number will reach 3.2 billion in 2025. The further development of emerging markets and the realisation that social inequality has to be addressed more firmly will move more people to the middle-class. Interestingly, the majority of this growth will be heavily concentrated in Asia. As the corporate world has adopted a global leadership approach, it follows that an important challenge for companies worldwide will be to adapt to a growing number of customers characterised by a diversity of cultural needs and preferences. Moreover, in the near future the rapid developments in the mobile digital technology will push an increasing number of high-tech customers in the mode of demanding more and better customer experiences. All these developments bring the notion of “customer centricity” more to the foreground than it has ever been.

Pro-active companies fostering their competitiveness must realise that efforts have to be devoted to making customer centricity a sincere and inclusive business strategy. Important to stress is that customer centricity is more than simply offering great service. It is also about how the company does business and how it puts customers at the core of their business. What can we learn from companies out there that are putting customers at the heart of their business? Since Asia represents the biggest growth opportunities for those companies managing customer centricity in efficient ways, I will discuss the example of a Chinese multinational company that has succeeded – since its foundation in 1987 – to make customer centricity their guideline in both strategy and purpose. This company is Huawei. Ever since 2012, when Huawei surpassed Ericsson as world leader in terms of sales revenue and net profit, revenue has only increased each year. In the fiscal year of 2016 Huawei’s revenue reached CNY521,574 billion (US$75,103 billion) and CNY37,052 billion (US$5,335 billion) in net profit.

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The Chinese business context is an intriguing one since after years of being focussed only on manufacturing – which earned the country to nickname “factory of the world” – its economy recently shifted towards an economy with a focus on internal consumption.1 The Chinese government marked this shift by moving towards a new economic “normal” in which structural reforms are needed to rely increasingly more on service industries. In a service-driven economy, customers demand high-quality products that they can identify with delivered by companies that sincerely care about their customers. In other words, the customer becomes an important force to be reckoned with to determine what the purpose, direction, and face of your company will be. Companies that are not committed to optimise these elements will fail to differentiate themselves from the competition and undermine their long-term existence. It is at this intersection where considering customers as your company purpose meet with building your policies and strategies around this purpose that Huawei has built its competitive advantage. Below, I will discuss the way Huawei has embraced “customer centricity” as their business strategy by focussing on the dimensions of purpose, perspective-taking, self-sacrifice, service and organisational culture (see Table 1).

Purpose. As Ben Stein, an American writer puts it: “The indispensable first step to getting the things you want out of life is this: decide what you want.” The founder of Huawei, Ren Zhengfei, is a testament to this wisdom by being a leader who is clear about what his company is about and what it wants to achieve. According to Ren Zhengfei, the purpose of Huawei is helping customers to realise their dreams. This focus has become somewhat of a religious belief at Huawei. For example, Ren Zhengfei once said, “We will always treat our customers with religious faith…serving customers is the only reason Huawei exists.”2

Being clear about your purpose enables to mobilise your employees and use resources in a focussed manner. In Huawei’s case, employees are mobilised to achieve the dream of connecting people via communication. Purpose at Huawei thus drives actions of employees to use information technology in the best way possible to serve their customers. As Ren Zhengfei noted (italics added): “We need all our employees to take action… [to pursue] only one clear value proposition: serve our customers.” Of course, many companies have issued mission statements in which the customer is the focal point of attention, but what distinguishes Huawei is its tendency to keep reflecting and questioning their business practices on a regular basis to see whether their focus on “customer centricity” stays intact. Indeed, a value is recognised as authentic and sincere if one dares to challenge oneself in ways that test one’s loyalty to this value.

Ren Zhengfei cautions regularly that people should not care too much about their bosses, because this is time taken away from customers.

A question often asked in Huawei is whether their customers are still most important, and not their executives. Ren Zhengfei cautions regularly that people should not care too much about their bosses, because this is time taken away from customers. In light of this comment, Ren uttered the famous statements that “Everyone in the company must turn their eyes to their customers and their back to their bosses.” An anecdote that is telling in this respect concerns the visit of an institutional investor delegation led by Stephen Roach, chief economist for Morgan Stanley, to Huawei.3 Huawei hosts such visits by venture investors hoping to get a buy in to the company on a regular basis. For this specific visit, Ren Zhengfei asked Fei Min, his executive vice president of R&D, to welcome the delegation.  Roach and his delegation were disappointed and did not understand why “he was rejecting a team worth $3 trillion.” Ren Zhengfei his explanation was very simple and straightforward: he is willing to meet any customer in person, no matter how small they were, but Roach and his delegation were not customers.

Perspective-taking. A problem with many companies is that custom centricity does not actually translate in the work that employees do on a daily business. One potential reason for this failure is the fact that the organisation and its employees do not succeed in taking the perspective of the customer. Perspective-taking can be defined as the process to entertain the psychological point of view of another party (in this case the customer). This ability to take perspective of the customer allows the organisation to translate customer centricity into true action. And, it is exactly this type of action orientation that defines Huawei. A famous example to illustrate this perspective-taking strategy concerns the company’s provision of services in desert and rural areas in China.4 In those environments, rats often gnawed the telecom wires, severing customers’ connections. At that time the foreign multinational telecom companies providing service at that time did not consider the rat problem to be their problem, but a problem of their customers. This attitude reflected a clear breach in the social contract. Huawei approached the situation differently and viewed the rat problem as one the company had the responsibility to solve.

This example also reflects that for Huawei the essence of customer centricity is to go beyond it as a general concept and attach concrete meaning to it. As rotating CEO Guo Ping mentioned in 2014: “We should not aim to simply please our customers. To be accountable for customer satisfaction, we need to take their perspectives into consideration, and then draw clear lines for product quality and innovation that we will not cross.”5 This emphasis on perspective-taking makes clear that Huawei expects to consider the interest of the customer as their primary concern. It is this kind of attitude that led Ren Zhengfei to say in 2017 that, when discussing his fear about high management costs, “customers will never pay for our own high costs”.

Self-Sacrifice. Living the value of customer centricity by putting the interests of the customer first (even at a cost to oneself) signals a deeply rooted value in the organisation that demands self-sacrificial behaviour. And, indeed, the norm to act in self-sacrificial ways is widely shared within Huawei. Huawei’s efforts to build the highest wireless-communication base station in the world represent an insightful example of such dedicated type of behaviour. In August 2007, Huawei was asked by China Mobile to build two mobile communication base stations on the Mount Everest, with the highest base at 6,500 metres. At this altitude oxygen levels are more than 50% lower than at sea level, making the four engineers from Huawei suffer from dizziness, headaches, swollen lips, sleeplessness and even nosebleeds for several days.6 In line with Huawei’s philosophy of going through hardship, these engineers nevertheless persisted and eventually were successful in their assignment. The feelings of pride of such extraordinary effort were shared within the company and continue to serve as examples of dedicated customer service.

Huawei has referred to those employees willing to unleash their full potential and achieve high quality solutions for its customers as their heroes.

Service. Making the dreams of customers come alive by means of suffering is clearly a value that is embodied by any Huawei employee at every level. It is therefore no surprise that providing the best service possible is key to the success of the company. In the early years of Huawei (late 80s and early 90s), Ren Zhengfei was very much aware that their products did not meet the standards of those of its foreign competitors. For that reason, he looked for alternative ways to attract customers. In his view this could only be achieved by providing excellent services. It was therefore the case that for a long time, “Huawei” meant low prices, poor quality, but excellent service. An illustrative example concerns the memory of a Chinese domestic operator remembering that Huawei’s telecom switches were not very reliable and often broke down, but that their service was excellent. As he recalled, Huawei employees were available around the clock and that none of them ever argued with their customers.7 In other words, the wish of the customer was their demand.

The strategy adopted early by Huawei was thus to respond to customers 24/7. This was a practice that differed significantly at that time from the practice used by Western companies, which, despite having advanced technologies and equipment, were relatively ignorant toward their services sector. Over time, however, Huawei kept investing in its R&D to make their products better. In the last 10 years, Huawei has invested, for example, CNY240 billion in R&D and innovation and of their 170,000 employees, over 45% are involved in R&D.8 This focus on R&D was motivated by the wish to combine their excellent service with innovative solutions for customer’s solutions. All these efforts have paid off, making Huawei one of the main companies delivering patents and solutions in the ICT industry. This desire of Huawei to provide services and products to customers that are solving their problems was reflected nicely in one of their marketing campaigns, which was launched early February 2016. This campaign used a picture of CERN (see below), the European Organization for Nuclear Research, which sits astride the Franco-Swiss border at the time that the so-called God particle (the particle that helps giving other particles mass) was discovered. This picture was selected by Ren Zhengfei himself and in Huawei’s view reflects the sacrifice and desire of the company to go the extra mile to provide the best and most innovative solutions possible.

Organisational Culture. Companies may be spending all the lip service possible to articulate the company’s purpose but the mission will fail over time if there is no organisational culture in place that embodies the value set implied in its purpose. As a leader, Ren Zhengfei provides an important input to the development of such a culture by constantly reminding employees to focus on the one thing that really matters, which is, as mentioned earlier, to help customers achieve their dreams. In this sense, his leadership style relies very much on emphasising a focus on one thing to eventually become the best at it.9 To illustrate his leadership philosophy, Ren Zhengfei sometimes uses the example that water is soft, but using high-pressure water even cuts steel plates. In a similar way, his constant focus on customer centricity as the reason why Huawei exists has made the company a champion of excellence in its industry. One specific way that Ren uses to get this message across is the use of story-telling. Ren Zhengfei is known for drawing parallels with many scientific and historic events to emphasise the importance of Huawei’s work and that employees should work hard to keep this tradition intact by developing products and delivering service of the highest quality.10

Working hard to achieve the best they can is without a doubt a central value in the organisational culture of Huawei. The limitless energy and dedication of Ren Zhengfei embodies this value and serves as one of the primary criteria to promote people within the company. Specifically, it is those who are regarded as being dedicated and willing to suffer (see e.g. the Mount Everest project mentioned earlier) in order to promote the most value for their customers that will be looked at when promotions are made. For example, at a meeting in 2010, Ren Zhengfei noted that “Huawei should and will promote those who turn their eyes to their customers and their back to their bosses. For those who turn their backs to their customers while focussing on their leaders, we will absolutely let them go.” In more recent years, Huawei has referred to those employees willing to unleash their full potential and achieve high quality solutions for its customers as their heroes. What is intriguing when this notion of heroes is used is that the company does not only have a “superman” type of employee in mind. Rather, every employee being generous in its efforts, willing to learn, and focussed in his/her dedication to the customer can earn this label of heroes. In fact, it is one of the company’s current ambitions to build a culture in which failure is allowed as long as it helps to learn and make progress, or, as mentioned by Ren Zhengfei to encourage employees to “yield more crops and make our soil more fertile”.

 

Conclusion

The recent global challenges and the ever continuing growth of the world population have moved the idea of customer centric centre-stage once more again. Combined with all the technological developments taking place nowadays a deeper understanding of customer centricity is needed. It is important to realise that it is not only about satisfying customers but that it requires an integrative approach in which every employee and the organisational culture as a whole embodies a motivation to incorporate the perspective of the customer in every decision that is made.

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About the Author

David De Cremer is the KPMG Professor of Management Studies at the Judge Business School, University of Cambridge, UK, where he heads the Department of Organisational Leadership and Decision-Making. He is the author of the book Pro-active Leadership: How to overcome procrastination and be a bold decision-maker (2013) and co-author of “Huawei: Leadership, culture and connectivity” (2017).

 

References

1. De Cremer, D., & Shaw, J. (2016). What China’s shift to a service-oriented economy means to its managers. Harvard Business Review. July.
2. Tian, T., De Cremer, D., & Chunbo, Wu, C. (2017). Huawei: Leadership, culture and connectivity. Sage Publishing.
3. De Cremer, D. & Tian, T. (2015a). Huawei: A case study of when profit sharing works. Harvard Business Review, September.
4. De Cremer, D., & Tian, T. (2015b). Leading Huawei: Seven leadership lessons of Ren Zhengfei. The European Business Review, September/October, 30-35.
5. Tian, T., et. al. (2017). Huawei: Leadership, culture and connectivity. Sage Publishing.
6. Ibid.
7. Ibid.
8. De Cremer, D., & Tian, T. (2016). Creating Effective Organizational Systems through Experimenting with Human Nature. The European Business Review, November/December, 6-10.
9. De Cremer, D. & Zhang, J. (2016). Why Focus-based Leadership is important to Huawei’s Business Strategy. The European Business Review, May/June, 40-43.
10. De Cremer & Tao, 2015b

 

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of All China Review.