Bob Thompson is an international authority on customer-centric business management who has researched and shaped leading industry trends 
since 1998. Bob is founder and CEO of CustomerThink Corporation which includes being editor-in-chief of CustomerThink.com, the world’s largest online community dedicated to helping business leaders develop and implement customer-centric business strategies. Bob’s new book, Hooked On Customers: The Five Habits of Legendary Customer-Centric Companies takes a fresh look at customer-centric business management, exploring what Bob Thompson has identified as the five key organizational habits that enable any company to execute its business strategy more effectively and, ultimately, to outperform its competitors.
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Related Podcast: The Origin of Customer Think & What It Really Means To Be Customer Centric
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Transcription of the Podcast
Joe Dager: Welcome everyone! This is Joe Dager the host of the Business901 podcast. With me today is Bob Thompson. Bob is an international authority on customer-centric business management who has researched and shaped leading industry trends since 1998. He is founder and CEO of CustomerThink Corporation which includes being editor-in-chief of CustomerThink.com, the world’s largest online community dedicated to helping business leaders develop and implement customer-centric business strategies. His new book Hooked on Customers reveals the five habits of leading customer-centric firms. Bob you’ve been publishing for an awful long time now and I guess my first question is, what took you so long to write a book?
Bob Thompson: Well first of all Joe, thank you very much for having me on your program. It’s truly a pleasure. Okay, so why did it take me so long? I am a slow writer. I actually have been noodling over a book for probably the last five years and I’ve been doing research for going on fifteen. I’ve published big research reports and lots of whitepapers and I co-authored a book about ten years ago on CRM. I guess what took me so long is as my research went on, what I found was that you can take just about any popular business methodology or in fact technology category as well, and you can find very nice correlations with business success. So I would research CRM and I would find that better practitioners tended to be associated with better business performance. I had researched CEM, customer experience management, and found the same thing.
Looking at the use of analytics, process management, a number of different ideas and methods that have come along over the years. And it started to occur to me that none of these individually explained why some companies really set themselves apart. And that’s really what has been kind of gnawing at me over the years is, what it is about these very successful customer-oriented firms? The customers love them, the stockholders love them, and the employees love them; what are they doing? The basic conclusion I finally came to and that’s why it took me so long is that it wasn’t about any one sort of magic pill or a particular methodology. It was really an integration or a synergy of five different habits. That insight finally came to me about two years ago and then finally manifested itself in the book in the recent past.
Joe: I’m actually very intrigued by your lineage. And you started out I believe with IBM. Did you?
Bob: Yeah, that’s right.
Joe: How do you think that shaped your career?
Bob: There’s kind of a cultural aspect at IBM that’s probably as important to anything technical I learned. I mean I got a lot of great experience working with large complex customers and it became clear, in that market at least, that long term relationships are the only way you can win. You’re trying to sell and create value for your company; you can’t do that in a way that doesn’t satisfy your customers. So these relationships are very, very important. The culture of IBM is I think best expressed through the three basic beliefs. Respect for the individual which is all about in today’s terminology would be called employee engagement or empowerment, best possible customer service. So the customer experience is the hot trend right now and service is part of that. And then the third basic belief was excellence in everything you do. So innovation, providing great products and so on. There’s nothing magical about any one of those three things. But the way IBM executed for most of its life – I mean it’s had some pretty rough patches but that’s sort of the foundation in employees and customers. When IBM went off the rails in the 80’s and in the 90’s is when they lost track of that. They didn’t deliver enough value to customers, they didn’t remain competitive. Maybe they got too employee-centric for a time. That’s probably the things that’s left the biggest mark on me is just that long term focus on customers and employees.
Joe: How did you get CustomerThink started?
Bob: Well it started with just a handful of people. Mei Lin Fung, Dick Lee, Bill Brendler and I, I think were the first four. I hope I didn’t leave somebody out. But we started with this small number of people and the idea was very simple. I got into the industry in 1998 and I said, “Okay I’m going to be a CRM consultant.” I had done some consulting while I was at IBM and I was watching this CRM trend and I thought it looked very interesting. It’s to me a combination of business strategy, customer orientation, and technology is also a part of it. And I had a technology background. So I said “All right, it looks like this is a very rich expanding area. I’m going to throw my hat in the ring and see if I can create a business out of that.” To make a long story short, I started an email newsletter as a hobby. That turned into a website to archive the newsletters and discussions that we started. Again all this was just done on the side for fun. And then I went to some of the colleagues that I had met and I said, “The CRM thing is too big and complicated for any one person to really be master of it all.” Bill Brendler for example was an organization behavior specialist and Dick Lee was more of a process guy and so on. And at that time I was specializing more in channel partner relationships. So I said, “Look why don’t we join forces? I’ll put up the website and put some resources into that and then we’ll create an environment where people can ask questions,” and that was mainly what we did in the very early goings is just a place where people could ask questions. You know the early days of forums. And ours was very, very basic at that time. Fast forward over a period of years and I invited more and more specialists basically to join in. And then in 2007 by then we probably had I don’t know 30, 40, 50 authors. Maybe it was 100. It was a relatively small number compared to what we have now. We changed the name of the site from CRM-Guru.com which was how we launched initially around 2000. We changed it to CustomerThink. We wanted to have a broader umbrella for all things customer. And we opened up blogging. And over the last several years we’ve gone from 50 or 100 authors to over 1,500. So it all started with this little kernel of ‘why can’t we collaborate and try to help the industry or help business people figure out this CRM thing and be successful with it?’
Joe: I admire you because you were really one of the first to start building community as I guess I would put it.
Bob: Yeah, exactly.
Joe: You took something in a fairly narrow focus really and then just let it grow from there. That’s kind of my take on it.
Bob: Yeah, I mean we had no grand ambitions. And in fact if I knew then what I know now maybe I wouldn’t have done it because this has been a lot more work than I ever thought it would be. But it’s also been a lot more fun. I certainly met a lot of people that are smarter about many things than I am and I’ve learned from them and got an environment where people can debate and argue about some of these concepts that we all are pushing. And I think we end up being smarter for it. So at least that’s the way I feel about it. And those are the kinds of people that enjoy participating in CustomerThink. It’s like a good debate, one that doesn’t get nasty but is productive.
Joe: No I do really admire you and think you’ve really done a great job monitoring it and handling it through the years. But let’s get back to the book. Let’s talk about that. Hooked on Customers is of course about customer centricity. But to me those words Customer Centricity kind of blends into whatever someone wants it mean.
Bob: Yeah.
Joe: What does Customer Centricity mean to you?
Bob: Well you are absolutely right Joe. I kind of struggled with the term Customer Centricity for many years because first of all I had sort of staked out my business as being a CRM consultancy and I really abandoned that; not because CRM’s a bad idea but because it headed off to become this kind of technology centric idea of how you extract value from your customers. That’s part of any good business but it’s not the only thing. So there are some other terms in the industry that are used. And frankly I tell people to use whatever term makes you feel good. Customer driven – some people like that term. I think that’s what IBM uses. Of course Amazon is famous for saying they’re going to create a customer-centric company; they’ve done pretty well. I think Intuit uses that term, customer focused. I try not to get too hung up on claiming the purity of the term because regardless of which term you use, and I’ve done a lot of research on this, it’s a very muddled idea. What does it mean to be customer-focused or customer centric? Well it means whatever you think it means. Part of what I did in my book and was a little bit of history was try to describe these different ways of thinking about the idea. And there’s a notoriety model that I present to kind of help people think about ‘where are they’ because part of my goal is to sort of open the eyes and say, “Look, you may think customer centricity is all about,” – and this is more about, this more about the Peppers and Rogers sort of thinking – “organizing your marketing around customers.” Doing better targeting so that you’re not independently marketing products to the same customers. You got to be more organized than that. Well that’s true. That was a good idea ten years ago. But you take the other extreme and you have companies like Amazon that are constantly innovating, creating new products or services. They just came out with the new phone. They’ve been willing to take a lot of risks to add value to their current customer base without out an obvious ROI on it. That’s another flavor of it, a more advanced one I would argue. It’s all about value delivery not just value extraction or efficient marketing. So I present these different sort of steps along the evolutionary path and try to encourage people to think about where they are. And these habits sort of overlay that. The companies that tend to be more mature exercise habits like Create and Delight more effectively than other companies that are just kind of running the business and keeping it afloat.
Joe: Well you center on five habits, could you just name them and just briefly explain what they are?
Bob: Yes sure. The habits are, number one is Listen. And so this has two dimensions to it. If I’m not making this too complicated, there’s kind of a strategic way of listening through market research and understanding what your customers really care about, what drives their loyalty. And then there’s more of the tactical feedback sort of listening, making sure that you know how good an experience you’re actually delivering to them. So there’s a lot of ways to do both of those things. But I put it under the umbrella of listen. Habit two is Think, which is about making good fact-based decisions. You know there’s a lot of hype about using analytics and Big Data. Basically what I found is that the best businesses have this kind of collaboration of man and machine. They have very good decision making skills as business leaders but they use technology effectively to help them. They don’t turn over their decisions to some tool. So making these decisions sounds so straightforward but actually very few companies do it really well. There’s a lot of sort of ingrained habits of making decisions because we’ve always done things that way as opposed to looking at it objectively with a fresh eye. Habit three is empowerment. It’s to empower employees to use the information, the resources, and deliver the value to customers that you want them to deliver and not forcing them to check back with the boss for every little thing. So to me that’s kind of a litmus test for empower. If you say your employees are empowered but then you give them a rule book that’s six inches thick and say “You’re empowered to do only what’s in this rule book,” then I’d say they’re not empowered; they might as well be a robot, or you should automate that task if they have no latitude whatsoever. And there’s plenty of examples in the book about companies that are able to create value in interesting ways because their employees are more engaged and empowered to do what they need to do. Habit four is Create. It’s frankly just another word, a word I prefer to innovate. The reason I prefer it is because innovate, just like customer centricity is one of those terms that everybody claims they do and very few companies actually do a very good job of it. So what I’m trying to get at is creating new value. Not just delivering what you said you were going to do but just pushing for finding new products, new services, going beyond what you’re delivering today and looking for something new. Again this is more of a distinguishing characteristic of top performing companies is they’re constantly looking to do something new. So I put that under the Create umbrella. And then number five is Delight. And this is probably the most controversial of the five habits. There’s a fair segment of the consulting and the academic community that would argue well Delight is a bad idea. You can’t sustain it and so on and so forth. I disagree with that. If you intend to be an industry leader, you really have to be thinking how to deliver more than what your customers are expecting, but do it in a way that’s rational. And that’s the part. People get hung up on well Delight means every time somebody calls the call center you got to wow them. That’s not a sustainable way of doing it. Most customers in fact would say “I’m delighted if I don’t have to call the call center because you didn’t give me a reason. Nothing failed that I needed to call. And if I do call I just want to get my problem solved quickly and easily.” But there are many opportunities through experiences to create little moments of delight. And these sort of memorable moments to me, this is the currency of the day for top companies. How do you create reasons for customers to remember what the heck you provided to them? And if all you do is go into work every day saying I’m going to do only exactly what I promised to do and nothing more and if somebody complains I’ll fix it, you’re going to get run over eventually by somebody else in your industry or a related industry that’s coming in that’s willing to be more aggressive. So I think Delight to me is kind of a litmus test for companies that really want to be leaders as opposed to just survive.
Joe: When you talk about customer centric, and this is one of my things, it’s really means the customer is the center. It means that you have to kind of surround them. Doesn’t it? You can’t sit there and look at them as like an opposing force or any other side of the chain, you have to be somewhat part of that whole process, right?
Bob: Yeah. The term itself is probably its own worst enemy. And probably not a week goes by when somebody doesn’t say it’s a bad idea because just look at the term. It says the customer’s at the center. And this is the leap that people make if they’re trying to argue against the whole idea. It’s like well if the customer is at the center that means no matter what they ask you to do you should just do it. They’re at the center. What part of being at the center don’t you get? They’re in charge. They’re running your business. This is insanity. But this is the sort of taking things to an illogical conclusion and say if you’re going to be customer-centric or customer-focused, then you just throw away all your other priorities. You don’t care about your employees. You don’t care about your profit. You don’t care about your stakeholders. You only care about customers. That’s why when I talk about Customer Centricity I usually don’t use it as a standalone term because it sort of leaves it open. It’s like well customer centricity to do what? I prefer the term customer-centric business management because it links this focus on customers. How are you going to deliver and create value for them to the business? So it’s a path to being successful in your business. It doesn’t mean you advocate every decision to whatever your customers ask you to do. It doesn’t mean that you go out and say, “Look we just don’t have any idea how we run our business, so would you mind telling us?” We’re all about you. No business runs that way. But these are the kinds of arguments I get about Customer Centricity. “It’s stupid because it means you just do whatever your customers want.” And if you look at Amazon.com or any company where they use that term or something similar to it, they don’t run their business that way. They’re constantly looking for a way to deliver value for customers, for the employees, and for stakeholders. They’re not into this kind of who comes first sort of pointless debate.
Joe: And I think you’re very correct in that. I always use the term to kind of explain that is, you have to play in the customer’s playground. And if we’re all in the same sandbox and using my product or service that you understand how it’s being used, you’re participating with your customers’ use of it, then you can be customer centric. And you’re there; you’re part of the process somewhat. And I think so many of us want to give a product to the customer and that’s where, even the Amazons do so much better with the Kindle let’s say, is that they go out there and they participate in the use of the Kindle. It’s just not a product, it’s a service.
Bob: Yup. Good point.
Joe: And I think one of the things that I was surprised about is that you took somewhat of a shot at service dominant logic in the book. And I think the only reason you did was for the fact that they used like all or everything if I remember correctly.
Bob: Yeah. This is part of my frustration Joe is that a new idea comes along, whether it’s CRM or Service Dominant Logic, there’s all kinds of them, even customer experience management. And people get confused about it and they start to expand the scope of it to a point where it literally means everything. Customer experience for example, it like well it means every perception that the customer has with your company, product, service, experience, anything, it’s like “Okay, well then it’s everything.” That’s fine. That’s basically another name for Customer Centricity in my book if that’s the way you look at it. With Service Dominant Logic I think the flaw of people that push that idea to that extreme is to say-. It pushes it past the point of common sense. And I’ve used this to argue with some of my friends to say, “All right well I get value out of a shovel that’s in my garage and I’m not using the shovel, I did not co-develop the shovel, I may never use the shovel. The reality is I hate digging in the dirt. I have a shovel in my garage, why is that valuable to me? Because I might need it someday.” So where is the service? So the answers I get back range from “Well you might use it someday,” or “You’re satisfying an emotional service,” or something like that. It’s like come on. I can give lots of examples where a product is a product or like an insurance policy has nothing to do with an experience. It’s you’re buying a contract to do something in the future if you happen to need it. And it adds value to me as a customer but it’s not a service. Maybe the buying of the insurance policy is a service. When I use it if I ever use it someday; that’s a service. So I’m just trying to make the point to not extend these very good ideas. I think Service Dominant Logic is an incredibly valuable and important trend. But if you’re going to say it means absolutely everything well back it up with common sense. I don’t think it meets that test.
Joe: Well I think that’s very correct. I’m a kind of a Lean guy and I associate with a lot of Lean people. It’s like if you’re not Lean, you’re not successful. Well that’s not true. I think you’re successful when you can call something your own. You don’t need to call it anything. I think you take on certain things and use them as part of your methodology and your beliefs. It certainly guides you in a lot of ways you’re doing it but there’s a lot of paths to success.
Bob: That’s right. In fact I’ve made some presentations where I literally put up twenty different acronyms. These were off the top of my head. I didn’t have to go do any research to find it because they’re ones I’ve either read about through CustomerThink or other channels or I’ve researched them or whatever. And the point I make is very simple; there’s a lot of ways to be successful in business. In some cases you don’t need to be customer-centric in any meaningful way. If you have a dominant market position or you have a widget that people just got to have and you could be like
The Soup Nazi on Seinfeld and treat your customers like dirt and they may stick with you until they find an alternative. There’s lots of ways to business success. And in fact I’ve wrote some contrary examples in my book. I’m trying to practice what I preach as well Joe and say, “Look I’m not going to tell business executives that the only way they can ever make a buck is to love their customer every day and night. I mean there’s lots of ways to make a buck and you still have to run a good efficient business, you have to manage your costs and your supply chain. There’s lots of ways to make money that people would not generally say is putting customers at the center as the core idea. Increasingly having customers as a guiding light; instead of being customer-centric I think a better analogy is think of customers as your North Star. Where are you going to take your business? You’re going to just go wherever you feel like it as an innovator or are you going to let your customer needs and desires and wants inspire you and guide you in a certain direction. I think that’s a more productive way of thinking about it rather than letting customers run your business.
Joe: When I look at these customer-centric habits do I have to get them all right? Do I really need to be able to listen, think, empower, and create, and delight? Do I need to get them all right? Can I be off on one? How do I look at myself as a company? Do I need to be working on all these things?
Bob: The short answer is, if you want to be an industry leader then yes. I don’t have any real doubt about that. The top performing companies in my researches, we’re talking about five to ten percent. So it’s the elite companies do all five and they do them well. I can cite some industries like maybe telecom or the cable industry that they certainly don’t delight and they’re not all that innovative and yet they make money. Large banks are maybe in the same category where they’re not terribly innovative, their industry satisfaction scores are not that great and yet they’re quite profitable. But I don’t advocate that somebody read my book and just go off and sort of mindlessly try to sharpen all five skills at the same time because unless you do you’re not going to be successful. That’s just stupid. Think of it like playing golf. I play golf on and off over the years and on my good days I’m a pretty good golfer. Right now I’m terrible. So I’m working on some basic things. How to take the club away, how to get the club on plain, making good contact, not over-swinging on my back-swing. There’s a few things that my instructor has asked me to focus on. If I keep progressing and getting better, six months from now I’ll be working on something different. I’ll be working on more advanced sort of skills. So what I’m trying to do with my book is – and this is why I close each chapter with five points, five questions as food for thought – is to think about where are some of the strengths and weaknesses in your operation. After you’ve digested some of that and you look at your competitive position, you can put together a plan that might say for example “Well you know we do a pretty good job at listening but it’s only with surveys and we’re not using some of these other sources like social media or behavioral data.” Or, “We got that stuff but we don’t actually analyze it and put it together in any meaningful way. We don’t act on it.” Or, “We do a great job of understanding what our customers care about but then we don’t actually do anything with it because our employees are not empowered to take action and they don’t actually have any information. They wish to solve that problem.” Or, “We’re stuck in an industry, in a glide path of just doing what we’ve been doing in the last ten years, and we’re getting some competition from upstarts.” Maybe if you’re a large bank you look at some of the new players that are offering a better experience, lower cost and so on and you say “We have to figure out how to reinvent ourselves or sooner or later we’re going to be facing a much bigger and very dangerous competitor.” So there’s some thinking that has to go through rather than just saying let’s just sharpen all five saws at the same time. I’m not advocating that.
Joe: One of the things I got from the book though is that you believe that all these are interrelated though.
Bob: Well they’re interrelated to different degrees. So let me give you an example. You can sort of make a case that there’s a linear path or relationship that listening is an input to making decisions and decisions can help you decide how to empower and what new things you should create and how you should delight. There’s some logic to that but there’s some cross relationships too. Let’s say take for example, if you’re going to create new value for customers then the understanding about what drives customer loyalty should lead you to make better decisions about what value to create. So they’re not immediately adjacent but this idea of market research as part of listen and creating new value or even delight are interrelated. If you want to delight customers how you empower employees is one strategy to do that.
There is a back channel or an inverse relationship there as well that delighted customers create an environment that’s more effective for employees. They enjoy it more; it’s more enjoyable for employees. So I don’t want to get too statistical about it. I didn’t do a lot of in depth stats on exactly how they relate but I’ve presented some cases in the book that show that it’s not always an either or. The classic one I think is employees and customers. Is it the customer experience or is it employee engagement? And the reality is you can’t move your business forward without doing both pretty well. And to get in these mindless arguments about which one comes first is a distraction because you can’t constantly focus on employees and ignore customers or vice versa. There is some synergy there and I’ve found research examples which are in the book about that. So there is an interrelationship. It’s not steps one through five. They’re five habits that each separately add value. But when they work together is when the magic occurs.
Joe: What have you learnt so far since your book’s been out that maybe is going to spur you on to your next book?
Bob: I’m thinking around a few ideas. I’ll tell you the thing that I think companies really struggle with. It’s the glue that holds the habits together. I didn’t go into it in a lot of depth in the book and part of the reason why is that it’s very industry specific and it’s company specific. But the issue is the reward system. How do you measure and reward people? This is important because this is how you create a habit. There’s a feedback loop of doing a behavior, getting some positive feedback. I don’t mean just money or a promotion. But it could be a pat on the back, the notice on the bulletin board or whatever. But there’s a reward system inside of any company that values certain behaviors. When you reward those behaviors you tend to get them repeated and after you repeat them often enough, they become habitual. They become a habit. Getting the reward system right to where you are picking a few of truly key performance indicators that encourage individual performance and team performance so that you don’t end up with these silos competing with each other, is very tricky stuff. There’s plenty of examples of companies that mess up. The VA would probably be the classic one right now with all the problems that they’re having. And if you look at what’s at the core of it, it’s managers who are focused on making certain metrics to the point where they’re actually putting lives at risk. So companies that don’t get their reward system right can risk motivating the wrong behaviors. But those that figure it out and that constantly tinker with it are the ones that succeed. And this is the area I think that as I look at more research and more writing I’m going to work on in the future because without this you really can’t turn things into habits.
Joe: I think that’s spot on because especially as hierarchy structures break down and there’s not this lone salesman out there that gets the commission anymore and that it’s becoming group sales. And the definition between sales and marketing is mingling and it’s getting very difficult. These basic structures that used to be there are not there.
Bob: If you think about the core idea behind this customer-centric term, it’s that there is a customer. It’s not a marketing customer, a sales customer, and a customer service customer, and a ‘my product broke’ customer. Companies tend to manage it like there’s five or ten or fifteen different customers because they have all their organizations built in silos, their systems are in silos, their measurements are in silos. And it creates a bad experience for customers because they know they’re only one customer. They’re not five or ten. Having the right management support, treating the organization as one organization is a start. So we’re like for marketing and sales, and especially B2B is a good example, where some of the more progressive B2B companies are breaking down the silos between marketing and sales or inside sales and saying, “Look we have one mission here. We’re trying to grow our revenue and we’re trying to do it as cost effectively as we can.” That’s what we’re all here to do. Now we have specialties; marketing does some things early in the buying cycle, sales later. But let’s not get confused. As a company we’re trying to build these relationships with customers or we’re going to grow our revenue. So how are you going to support that? Well the organization structure can support that. How you pay people can certainly help. Having shared measurements. How about revenue or some surrogate for that? Why not pay marketing and sales on some measurement, not all of them, but some that they share so that there’s a reason for people to work together beyond the boss’s told them. They have a vested interest in it because they have revenue measure. They have a customer satisfaction measure that they share. Something like that. So without some shared metrics and rewards you’re going to get people acting as individuals.
Joe: Yeah I think that’s a great topic for your next book. But right now I think that Hooked on Customers was a great book. Where can I find the book and where can I learn more about you?
Bob: Well you can go to my website. It’s hookedoncustomers.com. So that’s my personal website; it’s the home for the book and there’s a free chapter for download there. It’s a good case study of how a company – the company was Sprint which is the telecom firm – used all five habits over a five year period to turn themselves around. So I think that’s probably the best way for people to see how they all can work together. And then CustomerThink.com of course. As you know Joe, you’re one of valuable authors on the site, and we’ve got just a tremendous amount of content there on all facets of customer-centric business. So I write there as well as my personal website.
Joe: Well it was a pleasure having you Bob. I would like to thank you. This podcast will be available on the Business901 iTunes store and the Business901 blog site. So thanks everyone.
Bob: Thanks Joe. I appreciate it.
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