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The road to business success is rough. The business literature is crammed with descriptions of processes that would challenge the top executives while leading their companies to success. Commoditization, innovation, globalization, disruption, and others—we've heard it all. Simultaneously opportunities and threats, these processes can blur the leaders' visibility, making it hard to set and/or manage the right direction for their companies.

So what is to be done? How can leaders and their organizations see clearer through this foggy business environment? How can leaders find a solid ground amid this informational storm? The answer is relatively simple: deeper customer insight.

Achieve higher knowledge

The first step in getting closer to the customer is to go beyond his needs and understand the mechanics of his problem-solving behavior.

Although its necessity has become more obvious in recent years, the quest for a higher degree of customer knowledge is not new. The past decade, for instance, has been characterized by advances materialized in concepts like " customer experience" and "customer status." Both concepts identify that in addition to the obvious customer's need, which can be addressed with a particular product or service, there are other complementary needs, which are also of high importance to the customer.

The sum of these needs form a system or cluster of needs, which is usually referred to as "customer experience" or "customer status." For ease of understanding, just think about the experience of buying a pair of jeans and that, in many cases, additional needs like accessible parking and friendly personnel seriously influence the entire shopping experience.

Unfortunately, despite these valuable breakthroughs in the understanding of the customer, its value beyond the sales and marketing departments was never really clear. But, recently, we have managed to move forward and cross these boundaries by identifying the mechanics of the customer's problem-solving behavior, which revealed a direct relationship between that behavior and the foundation for a healthy vendor strategy.

We discovered that the customer's life is characterized by a continuous quest to address issues. Each customer, based on his knowledge at a particular time, possesses a hierarchy of issues.

It starts with the very important ones, which due to their uniqueness cannot be addressed by existent solutions in the marketplace, but which can be simplified through "disaggregation." This process of disaggregation continues until the resulting issues can be addressed by solutions existent in the marketplace. At this level, the issues can be also referred to as needs, in the traditional sense, because the customer is deliberately seeking to address them.

As an exemplar of this disaggregation, think about a young person's "cool wardrobe" issue, and notice the subordinated issues that may include "cool jeans" and "cool sneakers." (Although a subjective term, we use the term "cool" here because it almost invariably refers to a premium product, or a product that commands a premium price.)

We also observed that as the customer accumulates more knowledge related to an issue over time, he will downgrade that issue within the issues hierarchy, replacing it with another issue that presents a higher grade of uniqueness. As an issue evolves along the hierarchy, so does the associated solution that addresses the issue. This process represents the commoditization of that particular solution.

A few centuries ago, ownership of a pair of pants was for the most part limited to the noble class. The "pants" issue was a status issue, and it was positioned high within many individuals' issues hierarchy. Today this issue is very common, and therefore positioned low in the issues hierarchy. Other status issues, like the "cool jeans" issue for some individuals, have recreated its initial high position of centuries past.

Make knowledge relevant

After getting a grasp on the mechanics of the customer's problem-solving behavior, it is important to make this knowledge relevant to practice. Therefore, we have identified three basic aspects of the process of setting and managing a company's direction that can benefit greatly from deeper customer insight:

1. Choosing the right strategy

Using the model described in the previous section, we can now make the connection between the customer and the vendor's strategy. On the one hand, the unique character of the issues positioned high within the customer's issues hierarchy is that they require the vendor to adopt a consultative approach. On the other hand, the common character of those issues that are positioned lower is that they require convenience, speed, and price. Therefore, depending on the position of the issue associated with the vendor's offering, the company must choose one of the two dominant approaches, consultative or transactional.

For example, when it comes to jeans, in most cases we are talking about a simple transactional approach. But there are also cases of companies that through constant innovation, style, and quality have managed to address a slightly higher-level issue, which we've been referring to as "cool jeans." One such company known for the coolness of its products is Diesel.

2. Solving the 'approach-or-offering dilemma'

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ABOUT THE AUTHOR

Cristian Mitreanu is the founder and lead researcher of RedefiningStrategy.com (www.RedefiningStrategy.com). Contact him by email at cmitreanu@redefiningstrategy.com.