The last hundred years have seen endless discussion of the purpose of a business, as professional managers have taken over from 19th century owner-entrepreneurs, such as Rockefeller and Carnegie, and corporations have explored shareholder capitalism. , then shareholder capitalism, and now customer capitalism. The fact that in different contexts business leaders often say different things to different audiences can make it difficult to see what a company’s real purpose is, and even to raise the question: has the company she have a clear objective at all?
While many companies talk about having a “true North”, some of the more well-known companies don’t always act consistently. The widespread practice of publishing mission statements can help a company clarify its direction or show that it is on the wrong track. Customer first is a key ingredient.
The role of customer first
The most successful companies today tend to be consistently customer-focused. As Apple CEO Tim Cook has repeatedly said, “Share price, revenue and profit are a result of doing things right on the innovation side, on the creativity side, in focusing on the right products, treating customers like jewelry and focusing on the user experience.. And that’s where we put our energies. And we have faith that if we do them well, then the other stuff, [like the stock price]will follow.” Apple’s mission statement reflects the fact that the entire company has always been concerned with putting the customer first.
The current mission statements of the top 30 companies in the Dow Jones Industrial Index are shown below. Encouragingly, 18 of the 30 companies put the customer first in their mission statements. Of these 18 companies, 11 are performing better in terms of five-year total return than the average S&P 500 company.
They are among the best performing companies in the entire stock market, as shown in Figure 4 below.
Businesses without customer centricity tend to perform below average
Twelve of the companies in the Dow Industrial Index do not put customers first, and all but two of the twelve have five-year total returns below the average for S&P 500 companies, even though they include some of the companies the most famous in the world. world. (The two exceptions, which are above average, are Chevron, which benefits from abnormally high oil prices, and Amgen: both companies are only slightly above the average S&P 500 company.)
Are companies implementing their mission statement?
The fact that 8 of 19 companies that have mission statements committing to customer first perform below the S&P 500 average, suggests that simply declaring a mission is not enough on its own: companies must actually implement the mission,
For example, one of the companies with the lowest five-year total return (Verizon) for example has a strong commitment in its mission statement to customer first, but anecdotal evidence suggests that the mission statement n It’s not yet fully implemented in practice, as explained in this insightful article by Columbia University business strategy professor Rita McGrath, which explains the realities of customers when dealing with Verizon. Verizon talks about customer engagement but doesn’t always deliver.
Customer first is not just a financial divide
The big divide between companies that commit to putting the customer first and those that don’t is both financial and moral. Companies that engage and implement customer first not only tend to do much better financially. They also do the right thing. By being others-oriented, rather than simply seeking benefit for themselves, they generate benefits for others and society as well as for themselves. Earning money is the result, not the goal of their work. Teachers, nurses and doctors instinctively understand this distinction. Now we also see some big companies “getting it”.
And also read:
The triumph of customer capitalism
Why shareholder value is still dominant