Stop Thinking Like a CEO (and Think Like a Customer Instead)

No matter how large a company grows, it's important to never loose sight of the customer.

By Fred Reichheld

min read


This article originally appeared on LinkedIn. Walmart Founder Sam Walton famously said, “There is only one boss—the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” The best CEOs always think this way. In fact, some of the most successful companies of our time rose to prominence by seizing on an unmet customer need and delivering it with world-class service. But for every service superstar I know in business, I can think of another formerly promising company that lost sight of the customer. These once-innovative firms typically start out as rebels in their industries, bucking the status quo with a new idea or disruptive technology. They grow by running their companies on behalf of the customers, realizing that employees and investors could prosper only once customers are delighted. Then something truly dangerous happens: The customer obsession wanes. Whether intentionally or not, most CEOs distance themselves from frontline employees as their companies add layers of management and bureaucracy. The customer becomes an abstract concept on a spreadsheet—a statistical average. Smart executives know that there’s no such thing as an “average” customer. Chasing the average customer really means trying to serve the broadest potential market. In the end, everyone’s underserved because investments lack focus and impact. For some companies, this is a death spiral. But some CEOs manage to turn things around. The most radical transformations happen when CEOs throw away the business school maxims and reconnect with their customers. Just look at Australian telco Telstra, whose name incited mostly groans and commiseration seven or eight years ago. Complaining about the company’s poor service, slow Internet speeds and institutional arrogance became a national pastime. When David Thodey took over as CEO in 2009, he declared on the first day of his tenure that his time as CEO would be about serving customers. He did so by using Net Promoter® feedback to empower employees and put customers first. This included eliminating some late fees that amounted to “bad profits” and removing barriers that prevented employees from connecting with customers (for instance, sharing their names). By the time he retired earlier this year, Telstra had restored revenue and profit growth and became one of the most respected companies in Australia. The LEGO Group, the maker of those beloved toy bricks, offers another great example. The company nearly went bankrupt a decade ago after it expanded too far beyond its primary brick products to theme parks, clothing and television shows. And worse, sales of its brick sets were declining. Led by CEO Jørgen Vig Knudstorp, the LEGO Group made it the company’s mission to get inside the minds of its most important customers: kids. That meant collecting a consistent stream of feedback to find out why certain LEGO sets failed to wow young consumers, allowing the company to adjust its approach and make critical improvements earlier in the process—for example, tweaking a model that customers noted was stubbornly askew. David and Jørgen didn’t restore their companies by cloistering themselves in an executive suite, relying on models and spreadsheets to guide their decisions. They got out in the field and brought the voice of the customer inside their companies at every level, from the boardroom to the front line. Companies have never had so much access to so much customer data. It’s easier than ever to paint a picture of individual customers simply by tracking their purchasing behavior and understanding their demographics. While these systems can become powerful tools in helping companies build loyalty, there’s a more basic question that every company must confront: Do your customers love doing business with you? The best approach is to ask customers on a scale of zero to 10 how likely they would be to recommend your products or services. This is what the LEGO Group, Telstra and many other companies do every day to be loyalty leaders. By closing the loop with their customers and taking action on the reasons why customers love doing business with them or not, these organizations remain committed to delighting customers. If you don’t keep your teams focused on thinking like a customer, prioritizing actions and decisions to ensure that more customers love doing business with you, it won’t be too long until your customers get ready to fire you. Net Promoter^®, Net Promoter System^®, Net Promoter Score^® and NPS^® are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.

This article originally appeared on LinkedIn.

Walmart Founder Sam Walton famously said, “There is only one boss—the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”

The best CEOs always think this way. In fact, some of the most successful companies of our time rose to prominence by seizing on an unmet customer need and delivering it with world-class service.

But for every service superstar I know in business, I can think of another formerly promising company that lost sight of the customer. These once-innovative firms typically start out as rebels in their industries, bucking the status quo with a new idea or disruptive technology. They grow by running their companies on behalf of the customers, realizing that employees and investors could prosper only once customers are delighted.

Then something truly dangerous happens: The customer obsession wanes. Whether intentionally or not, most CEOs distance themselves from frontline employees as their companies add layers of management and bureaucracy. The customer becomes an abstract concept on a spreadsheet—a statistical average.

Smart executives know that there’s no such thing as an “average” customer. Chasing the average customer really means trying to serve the broadest potential market. In the end, everyone’s underserved because investments lack focus and impact. For some companies, this is a death spiral.

But some CEOs manage to turn things around. The most radical transformations happen when CEOs throw away the business school maxims and reconnect with their customers.

Just look at Australian telco Telstra, whose name incited mostly groans and commiseration seven or eight years ago. Complaining about the company’s poor service, slow Internet speeds and institutional arrogance became a national pastime.

When David Thodey took over as CEO in 2009, he declared on the first day of his tenure that his time as CEO would be about serving customers. He did so by using Net Promoter® feedback to empower employees and put customers first. This included eliminating some late fees that amounted to “bad profits” and removing barriers that prevented employees from connecting with customers (for instance, sharing their names). By the time he retired earlier this year, Telstra had restored revenue and profit growth and became one of the most respected companies in Australia.

The LEGO Group, the maker of those beloved toy bricks, offers another great example. The company nearly went bankrupt a decade ago after it expanded too far beyond its primary brick products to theme parks, clothing and television shows. And worse, sales of its brick sets were declining.

Led by CEO Jørgen Vig Knudstorp, the LEGO Group made it the company’s mission to get inside the minds of its most important customers: kids. That meant collecting a consistent stream of feedback to find out why certain LEGO sets failed to wow young consumers, allowing the company to adjust its approach and make critical improvements earlier in the process—for example, tweaking a model that customers noted was stubbornly askew.

David and Jørgen didn’t restore their companies by cloistering themselves in an executive suite, relying on models and spreadsheets to guide their decisions. They got out in the field and brought the voice of the customer inside their companies at every level, from the boardroom to the front line.

Companies have never had so much access to so much customer data. It’s easier than ever to paint a picture of individual customers simply by tracking their purchasing behavior and understanding their demographics. While these systems can become powerful tools in helping companies build loyalty, there’s a more basic question that every company must confront: Do your customers love doing business with you?

The best approach is to ask customers on a scale of zero to 10 how likely they would be to recommend your products or services. This is what the LEGO Group, Telstra and many other companies do every day to be loyalty leaders. By closing the loop with their customers and taking action on the reasons why customers love doing business with them or not, these organizations remain committed to delighting customers.

If you don’t keep your teams focused on thinking like a customer, prioritizing actions and decisions to ensure that more customers love doing business with you, it won’t be too long until your customers get ready to fire you.

Net Promoter^®, Net Promoter System^®, Net Promoter Score^® and NPS^® are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.