Growth is going to be hard won over the next few years and will require businesses to pay more than lip-service to "customer-centricity". Listen to your insights team, says Jane Frost, who also advises those same teams to start talking the language of business.
We have long been obsessed with growth. Achieving it. Measuring it. Telling people about it. Rightly or wrongly, it’s the thread that runs through boardroom discussions and corporate strategies around the world and is our most-used benchmark for commercial success.
But times are changing, and corporate strategies built around year-on-year profit increases are not fit for purpose in our post-pandemic world. A world that wants to place value on complex issues like sustainability or, more widely, elusive concepts like ‘purpose’. As businesses brace themselves for a future of tightening budgets and shrinking margins, the greatest determiner of growth will be whether they can effectively leverage their largest untapped asset – customer insight.
A watershed year
Even prior to the extraordinary events of the past year, and the Brexit vote before it, growth had become harder and harder to achieve for market leading businesses. In the five years prior to 2017, the top 700 global businesses saw profits contract by 25% and, with data showing the incremental returns on innovation slowing, companies were realising they could no longer rely on small variations to products and services to deliver profit increases.
As a result, business growth in 2021 is still primarily driven through mergers and acquisitions – an obsession with buying and selling ‘things’. But if you still insist on valuing your company in terms of physical and financial assets alone, then you have learnt very little from the past 12 months.
Our high streets should provide enough warning to ignore your customer at your peril. The most notable casualties of this year had fallen behind and failed to adapt, innovate and keep up with their shoppers. Millennial women everywhere mourned the potential loss of Topshop, but in the same breath would tell you they started walking past its doors to Zara for a Saturday-night top some time ago.
At the other end of the spectrum, Tesco has welcomed more customers through its doors. Shifts in consumer behaviour are incremental when your shopper base includes 90% of the population each year, but what happens when they change overnight? When they cancel their morning routines and commutes? Or become anxious about certain environments? Scale is no longer enough, and you need to get to know your customer all over again.
That’s where insight teams come in, and at Tesco the function was catapulted to the centre of corporate strategy overnight. The team was providing daily and sometimes hourly insights to the leadership team, enabling the business to take quick decisions.
This year has proven that close customer relationships are business-critical and demonstrated the competitive advantage available to those businesses that can harness them with actionable insight. There is also an even greater opportunity coming down the track to provide consistent metrics for consumer perceptions of issues like sustainability and purpose. Insight is best placed to provide those answers, but we risk not being able to capitalise on these shifts and the progress that has been made this year because we are still falling short in communicating its value and the potential for it to drive growth.
Of course, those conversations are much harder to have the further you sit from your CFO and finance department. Prior to the pandemic, research showed that only 24% of insight teams felt they had a close working relationship with their finance colleagues. Most worryingly, only 28% felt finance colleagues respected the contribution that insight teams make to evidence-based decision-making.
So how do we build on the ground what we have gained this year? It’s time to reframe the conversation and start speaking in language CEOs and CFOs understand.
There’s an unfortunate misconception that technical language will lend credibility to your argument and demonstrate intelligence. In fact, jargon is transient and means very little – it’s also incredibly presumptuous to walk into to a room and expect people to talk on your terms. Why should a board room be any different? Financial and human capital are cornerstones of business strategies and their measures and terminologies are long established and accepted as a result. We must talk in the language of the C-Suite – margins, returns and bottom lines – and tell a story that draws on reference points and imagery that will resonate with our audience.
Businesses are facing some of the greatest obstacles to progress in history and growth is going to become that much more elusive. There are always exceptions and pockets of success in even the toughest economic environments, but they are found by those attuned to changing social patterns and stitched into consumer behaviour.
Many have good intentions, and I have lost track of the number of CEOs I’ve heard talk about this being the ‘year of customer centricity’. But putting your customers at the heart of your strategy shouldn’t be a radical concept, nor a way to reassure the market and shareholders that you understand how people are behaving and changing in this time of flux. It is the foundation on which everything else should be built, the largest untapped asset businesses have at their disposal and the key to unlocking competitive advantage. Growth will follow.