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It's not just all about the customer

Feet standing on a smiley face

Many people talk about business strategy as if it is all just about satisfying customer needs.

It's not.

Satisfying customer needs is an important - vital, even - part of it. But just satisfying customer needs alone is not enough. It also matters who satisfies them and how they do it.

I propose that there are three levels of thinking in this area.

1. It's all about satisfying customer needs.

This is the most basic level of thinking - as described above. What I would describe as a "marketing-oriented" or "outside-in" view of strategy.

(This is not intended as a criticism of marketing or marketers! It's an important perspective. But only part of the puzzle.)

It works from the assumption that all we need to do is to work out what customers want and need, and then work out how to give it to them.

It's an important piece of the puzzle - but there is much more to thinking about an organisation strategically.

2. It's all about matching the organisation's capabilities to customer needs.

A more "inside-out" approach would first consider the organisations capabilities and resources, and then look for customers who want what that can provide.

But at this level it is much more likely that people take a more blended and balanced view of both the outside-in and inside-out approaches, asking questions like "What is that customers want and need that this organisation is uniquely well placed to deliver?"

After all, it probably doesn't matter what customers want if there are already a handful of competitors better able to deliver it than you are. They will simply beat you out of the market.

I may know exactly what customers want from a search engine. I may even know what frustrates them about Google. But that doesn't mean I can beat Google in delivering it. Despite all its resources, even Microsoft's Bing struggles to find space in Google's shadow. And just as people thought Microsoft/Bing's partnership with ChatGPT might give it the upper hand, Google countered with Bard.

Even then, as markets become more complex, we need to think even deeper than that.

3. It's about facilitating the creation of value within an ecosystem.

It's not just the organisation and its customers. You also have to consider suppliers (and supply chains), distributors, competitors (or co-opetitors), substitutes and all other players and stakeholders in the ecosystem. 

As new business models emerge, these ecosystems

become more complex. The distinctions between customers, suppliers and distributors become blurred. The relationships between them shift from a linear value chain to more of a network of value.

Few organisations have the power to act alone and unilaterally to satisfy customers' needs. They are dependent on the ecosystems within which they operate.

And therefore, managing an organisation's role within the ecosystem becomes more important - defining its boundaries, optimising its interactions with all players, etc. The organisation plays a role in matching and transforming value between a variety of players in a variety of ways.

For example, VHS did not defeat Betamax because it had a better understanding of customers wants and needs, but because it had a better understanding of how to play in the ecosystem which ultimately delivered it - with better content licensing, marketing and partnerships, amongst other things.

Similarly, a large part of the battle between Apple and Android is fought, not over the devices themselves, but over the strength and diversity of the ecosystems which support them.

On the other hand, rivals Airbus and Boeing co-operate on the development of new air traffic management systems and have worked together on initiatives to improve airline safety and efficiency.

Which level of thinking is required may vary from one context to the next. For example, the first level may be more than adequate for a small retail outlet or a family restaurant. But as organisations and the industries in which they operate become more complex, that level of thinking is unlikely to be enough.

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