We recently surveyed 45 business executives to understand their firms’ approaches to capturing and using insights into customers. To start, we asked about their top five strategic priorities. “Customer” was by far the most-mentioned word.
But many companies are not walking the talk. To be truly customer centric, companies must use customer insights in most major business decisions and core processes, not just customer-facing ones. Our analysis indicates that this is rarely the case.
In a recent study involving more than 90 companies, we benchmarked 32 types of business decisions and found that in practice less than half (47%) reflected customer insights. Surprisingly, for more-strategic decisions in areas such as strategic planning, portfolio strategy, capital investments, and mergers and acquisitions, that figure dropped to one-third (35%).
Interestingly, devoting more resources to customer insights does not necessarily improve customer centricity. We plotted customer centricity (measured as the percentage of business decisions influenced by customer insights) against spending on customer insights (as a percentage of sales). (See Exhibit 1.) Companies vary in their degree of support for customer insights (x-axis), but we see no correlation between this and customer centricity (y-axis).
What matters more than overall spending is having mechanisms and capabilities to interpret a changing environment and translate insights into actions. To assess that, we benchmarked the role of customer insights across companies and segmented companies into four levels. (See Exhibit 2.)
Only one in five companies attained the two highest levels, in which customer insights play a strategic role. That is, in four out of five companies, customer insights are limited to providing input to commercial departments such as sales and marketing and do not directly impact the larger strategic agenda.
Our research suggests that customer insights are underexploited in business decision making; and regardless of how much a company spends on customer insights, the capability to capture and integrate them is often poorly developed. In other words, many companies are effectively “introverted,” underutilizing external information and signals from customers.