When Does a Company Need a Chief Customer Officer?

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Organizations should consider 6 criteria when determining whether they're ready for the role of chief customer officer.

Many business leaders have asked, "Do you need a chief customer officer (CCO)?" This is the wrong question. The right question is, "When do you need a CCO?"

The question is not an issue of "if", but of "when."

A decade ago I postulated that the CCO was a catalyst, galvanizing organizations to change. Leading the way towards organizational customer centricity they could plan their own obsolescence. However, just because a recently hired CFO has implemented fiscal controls doesn't mean that he or she is no longer necessary. Tax rules, markets, instruments, and customers change, ensuring the continued need for the CFO. The same logic holds true for the CCO. Customers, competition, and market conditions change, and increasingly, customer centricity is at the core of competitive advantage, making the CCO a critical component of the C-Suite.

As the role has matured and competition has increased I am increasingly convinced that every company needs the role of the CCO in the executive ranks. If the question is "when?", then how do you know if you are ready for a CCO? The following are six key criteria to help answer the question:

Is there an appetite at the top for customer centricity?

Does top leadership have a desire to develop customer centricity? I've seen numerous chief customer officers hired because it was the "right thing to do" or "competitors are doing it, so we have to." Unfortunately, most of these CCOs failed miserably. The moment the company hits a revenue road bump the CCO is asked to leave. The average tenure of the CCO is a mere 29.4 months, the lowest of any member of the C-Suite. The most prevalent reason is that these executives are out of alignment with company strategy and don't have explicit support of the CEO. This criterion trumps all the rest.

Is there a recognized "business imperative" for the CCO?

What is your burning platform that will galvanize people to action? The CCO is going to be tasked with making huge changes in the organization, and entrenched cultures resist such change unless faced by a greater threat of upset.

In working with more than 150 CCOs during the past decade, I've identified three key reasons why CCOs are hired:

  • Chronic customer issues that need to be made to "go away": Product defects or recalls, unfulfilled customer commitments, and the like that may result in bad press, threats of lawsuits, or decreased sales are all examples of longstanding customer issues that have not been resolved despite the company's best efforts, and all are catalysts for hiring a CCO.
  • Reduce severe customer churn: Many growth companies are surprised to find that they are losing customers out the back door as fast as they are bringing new ones in the front. They typically hire a CCO to curtail this churn and stabilize long-term revenue.
  • Desire to establish competitive advantage: Yet other companies recognize that given the intense competitive landscape and demanding customer base there must be universal agreement to achieve their goals; they must do whatever it takes to become customer centric as a competitive advantage.

This kind of burning platform is imperative to drive the change within the organization. What is your business imperative?

Can strategy be driven across the highest levels to systematize change?

An army of one does not win the war, nor does it bring about customer centricity. In the past decade, many CCOs have failed because they were the only customer advocate, sometimes spending as much as 50 percent of their time justifying their existence.

One defining characteristic that sets the CCO apart from other functional executives is the ability to drive strategy at the highest levels of the company. Executives and employees cannot abdicate their shared responsibility for customers to the CCO. The successful CCO will cultivate strategic allies across every function, driving process change across the company that enhances profitability of the broadest customer segments.

Is your company mature enough to temper reactionary management in favor of a more considered, strategic process that addresses endemic issues and drives strategy at the highest levels of the company?

Is there a willingness to create, capture, and act on customer data?

When faced with its board's suggestion of doing a customer satisfaction survey, one midsize company executive resisted furiously, saying, "We're so proud of our operational efficiency, we won't invest in improvement regardless of the outcome. Why bother?"

Resources are always scarce and allocated according to priority. The way to win this priority battle is with hard customer data. You need data to move from realm of "touchy feely" to solid business decisions with quantifiable results. The organization needs to be willing to initiate customer data-collection activities (surveys, transactions, behavior), turn these data into actionable insights, and ensure people are held accountable for taking action.

Can metrics be created that tie customer activities to revenue?

Revenue, profitability, ROI-these are all hard metrics by which priority decisions are made within the C-suite. Without the ability to correlate customer-centric activities to tangible business results, the CCO will be hamstrung. Jeb Dasteel, SVP and CCO of Oracle and 2009 CCO of the Year found that highly engaged customers generated 33 percent greater revenue than similar customers who are disengaged. How can you create a clear line of sight from customer-centric activities to the hard metrics that the CEO cares about?

Does the individual culture desire to serve customers?

Even though Oracle is known to have an aggressive sales culture, the individual employees desperately want to better serve customers; they simply need to know what to do. Conversely, if some companies were to hire a CCO and attempt to effect change, they'd have to fire 95 percent of their workforce. Regardless of the level of executive support, culture can sometimes squash change. Do your front line employees truly desire to serve customers? Can they be convinced to do so?

Conclusion

Given the intense competition and increasingly educated and demanding customers, the question is not if you need a chief customer officer, but when. Many companies are starting to jump on the CCO bandwagon. To ensure success, you have to prepare your company to make the CCO a core strategic initiative, rather than merely a figurehead. Your customers will quickly reward the former and punish the latter.

EXPERT OPINION
EXPERT OPINION