Philip Kotler

Peter F. Drucker told us more than 40 years ago, “The purpose of a company is to create a customer . . . The only profit center is the customer.” Jack Welch, former chief executive officer of General Electric, drove the same point home to his employees: “Nobody can guarantee your job. Only customers can guarantee your job.” In the Internet age, when customers have so much more information and are daily exchanging opinions with each other, companies are finally waking up to the idea that they have a new boss: the customer. A perceptive Ford executive at one time said, “If we're not customer driven, our cars won't be either.”

If Peter Drucker were here today, he would amend his observation. He would say, “The best companies don't create customers. They create fans.” He would say that it is less important to report better profits this year than to check on whether you improved your share of the customer's mind and heart this year.

We must do a better job of understanding who the customer is. The old thinking was that customers would hear about us and, we hope, choose our products. The new thinking is that we, the company, choose our customers. We even may refuse to do business with certain customers. Our business is not to please everyone casually but to please our target customers deeply.

So the first job is to define our target customers. This definition will affect everything: the designing of our product and its features, the choice of our distribution outlets, the crafting of our messages, the choice of our media, and the setting of our prices.

To define our customer, we must take a broader view of the buying process. The purchase of anything is the result of several roles being played. Consider the purchase of a new family automobile. The initiator might have been a family friend who mentioned an impressive new car. The teenage son might have been an influencer of the type of car to consider. The decider might be the wife. The buyer might be the husband.

The marketer's job is to identify these roles and use the limited marketing resources to reach the most influential people involved in the final decision. Marketers and salespeople need skills in mapping the perceptions, preferences, and values of the different players in the decision-making process.

Many companies have adopted customer relationship management, meaning that they collect loads of information about transactions and encounters with their customers. Most pharmaceutical firms, for example, have deep information on individual physicians and their values and preferences. Increasingly, however, we are recognizing that this information is not enough. It doesn't capture the quality of the customer experience. Simply managing data about customers is no substitute for ensuring that the customers are satisfied with their experience of the company. An old Chinese proverb says, “If you cannot smile, do not open a shop.”

So in the end, we must master our knowledge of who the target customers are, who and what influences them, and how to create highly satisfying customer experiences. Recognize that today's customers are increasingly buying on value, not on relationship. Your success ultimately depends on what you have contributed to the success of your customers.

Raghu Krishnamoorthy

In early July 2014, tucked away in the labor section of Bloomberg Businessweek, was an article by Josh Eidelson titled “Uber: The Company Cities Love to Hate.” Uber is a relatively new and direct competitor to the well-established, taxi-based transportation model in cities around the world. It has been a major disrupter to the stronghold of the age-old taxi, with its cattle car–like interiors, overpriced rides, extra charges for credit card payments, and so on. No-brainer, if you ask me to choose between an Uber car and a taxi. You use your Uber app to call a clean, timely, professional-looking driver and car, pay through the app, and with no tip expected and predictable charges, you feel comfortable, safe, and assured of the service. Of course, the traditional taxi drivers are outraged, and some cities have even banned Uber because it is threatening the well-oiled machine of mediocrity.

But ask the customers, and they will swear by Uber. They love the convenience, quality, hassle-free, predictable nature of the service that Uber provides. So why shouldn't they use Uber?

The Bloomberg Businessweek article reported a $17 billion valuation for Uber. If, as Peter Drucker says, “the purpose of a business is to create a customer,” Uber has hit the mark squarely. It has actually created fans, not just customers.

Uber, Airbnb, Cree, Rent the Runway, Amazon.com, Google, and Facebook are all new age examples of how customer-first thinking has become the business model, not a part of it. So much so, they are having a tremendous impact on the concept of business . . . period.

If Drucker were alive today, he perhaps would have had a sense of déjà vu! When Drucker first emphasized that the customer was the center of business strategy, he was ahead of his time in some ways. In an era dominated by the fact that creating shareholder value was considered the purpose of a business model, he was almost prophetic in insisting on customers being placed at the epicenter of an organizational purpose. Now, that philosophy seems obvious. Organizations, big and small, old and new, global and local, have to think of their businesses as in service to the customers and build their value proposition around it. Everything else, including shareholder value, is a consequence and a derivative of that fundamental truth. Bottom line, Drucker is astoundingly more relevant today than ever. He was a Millennial in his thinking before we knew of the Millennials.

Here is the interesting thing. Drucker's perspectives were so far-reaching that he did not just stop with his spotlight on the customer; he went on to warn that the notion of the customer is not a static one—and that organizations need to be prepared for customers becoming more diverse, with their needs, wants, and aspirations continuously evolving over time. In this shape-shifting world of customers, he argued, a company's success therefore depends on its contribution to its customers' success. Keeping a close pulse on this dynamic world of customers will be key to a company's survival—otherwise it runs the risk of becoming irrelevant, and therefore, redundant.

General Electric (GE) is a 130-plus-year-old company. As the only company still on the original Dow Jones index, it has stayed relevant primarily because it has successfully morphed and kept itself young and fresh over its long history. Thomas Edison, the founder of GE, not only invented the lightbulb (and a multitude of other things) but also literally invented invention. No organization survives because of its products alone but stays alive because it invents and innovates constantly its organizational processes to surround the products. In some ways, the greatest innovations of the twenty-first century are not going to be about products or technology but about how we organize ourselves to deliver value to the customers. At GE, reimagining and reinventing ourselves to stay contemporary to our customers' needs is a part of the DNA. In other words, GE has always pursued Drucker's caution of “planned abandonment” to evolve.

Drucker's emphasis that “planning is not masterminding the future” but “in the face of uncertainties, planning defines the particular place you want to be and how you intend to get there” becomes a guidepost for organizational strategy and direction. The concept and the relevance of the customer that Drucker emphasized has become a lot more pronounced in today's world, making his statement timeless and oracle-like. What has changed is how we get there based on shifts that have happened in this century. These shifts, such as the ones in technology disruption, the migration from the information to the social era, demographic shifts (primarily the Millennials versus the baby boomers) leading to psychographic differences, and so on, are well documented and now part of the popular management theory today. What is not as well known is how organizations are migrating to meet this brave new world. And no, not organizations such as Uber or Airbnb, not even Google and Facebook, because these are products of the new era anyway but organizations such as GE and others that have the ability to rise irrespective of the contexts they live in.

At GE, Chairman Jeff Immelt is driving an initiative called simplification, a way of bringing about a small company mind-set in a big company body. Being in more than 170 countries in a range of businesses from lightbulbs to jet engines, understanding the needs of target customers, and figuring out how to respond quickly is the name of the game.

There are four key elements of simplification:

1. Lean management: This directly takes the start-up toolkit and brings it into an organization like GE. The mind-set change required is that we need to be agile, nimble, and willing to experiment and learn to grow. It is a way of testing what Drucker questions, “do we . . . or can we produce sufficiently outstanding results to justify putting resources in this area,” and if we don't, can we change directions (called pivoting)? Lean management calls for customers to be at the center of every decision—and have them be not just a recipient of our products and services but also a participant in the process. Lean management also has the urging to be intense, austere, and focused.
2. Commercial and customer intensity: This part of simplification addresses the “getting to yes” for the customer. How do we organize ourselves to make sure that we deliver when, where, and how the customer wants products and services? Furthermore, how do we anticipate, analyze, and offer solutions to our customers so that we deeply please the target customer base? This means the organizational model is far more front-end oriented, and everyone and every process aligns to make the front-end interface to the customer be an outstanding experience. Moments of truth with the customer are translated into organizational measures of success. Data on products and services become gold mines of insight so that the commercial teams offer solutions ahead of the need, not as a reaction to the customer need. Commercial capabilities, organizational models, and measures of success, as well as data capabilities, are being retooled at GE to ride this change.
3. A services focus: Increasingly, in a complex world, people look at products as a means to an end—and knowing the “end” and figuring out the value proposition around that is critical for success. For instance, you are not buying jet engines to power the airplane anymore; you are buying fuel efficiency. You are not buying a lightbulb but rather durability. You are going to the hospital to prevent diseases from happening, not just to cure what you already have. Value, therefore, has to be translated from the mind-set of the product to the mind-set of the customer. What does the customer want to solve for? Adding the variety of service innovation to surround the product innovation is what is going to be an increased differentiator. iTunes is the differentiator to the iPod, apps are the differentiator to the smartphone, and likewise offering live data feeds on an airplane's path and using them to proactively prevent untoward accidents and incidents could be incredibly valuable.
4. Technology: Perhaps the biggest lever that is available these days is the phenomenal world of technology. Cloud-based technology, the industrial Internet, the Internet of things, additive manufacturing, industrial automation, and other innovations have made available a range of tools to companies to make products and services faster, smarter, and cheaper. GE has invested heavily in these areas and is able to deliver unique value to the customers. For instance, the light emitting diode (LED) bulb that you can shut off and on remotely through your smart device is a simple example of the marriage of technology with traditional hardware, creating interesting permutations and combinations that would otherwise not be possible.

In a corporation, the ultimate truth—the ultimate measure—is determined by the customer. Drucker was a pioneer in propounding the focus on the customer. Today we are seeing the benefit of that. Organizations form to rise to the challenge of an unmet need. As Drucker prophesized, the ultimate beneficiary is the customer. Drucker went on to promise that those organizations that rise to the challenge will have the capability to be responsive to customer feedback, look within constantly, drive innovation, and embrace change.

At GE, we encapsulate this constant flow of change in a telling phrase: Together, we all rise! Because we have no doubts—when we solve for the customer, he or she rises, and when he or she does, so do we.

Luke Owings

When Peter F. Drucker asked the question “Who is our customer?” he focused on the primary customer, and it's quite likely that this highly visible group inspired you as a young person to join your company. However, in many jobs, your main interface is actually not with primary customers but with customers who play a supporting role. By thinking of the supporting customers whom you do work with, you can fuel both the organization and your own connection to the mission.

At the Fullbridge Program, I maintained a network of independent contractors to coach our month-long business boot camps. Each year, we'd hire dozens of highly skilled businesspeople to use our materials and mentor business neophytes at the start of their careers. By standardizing tasks and styles (the handbook approach, if you will), we achieved an outcome that was both consistent and repeatable. However, this top-down approach created inflexibility and only marginal improvement from delivery to delivery.

Recognizing that the independent contractors attracted to Fullbridge were both transitioning in their careers and interested in creating more value, we modified our approach to these engagements. By being clear on what had to be done—and removing all unessential tasks—we encouraged them to cultivate their own approaches and we focused our management on their professional development. Consequently, our products better served our primary customers, and our independent contractors more effectively shaped pedagogy and curriculum to delivery and marketing.

The supporting customers of the future are groups like these independent contractors living so-called mosaic careers. As networking tools proliferate, the market of short-term engagements is exploding. Companies adept at tapping these growing pools will harness their volatility into a strong source of innovation. Only by recognizing the needs and motivations of collaborators will you create a system that propels forward the mission (and primary customers) that inspired you in the first place.