Customer-Centric Is More Than Customer Focus

Amazon, Alibaba make customers' satisfaction, not profit, their objective

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Jul 19, 2017
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The origin of today’s article was a YouTube video about an interview Jeff Bezos did with Charlie Rose almost 17 years ago – just a few years after Amazon (AMZN, Financial) was founded and when Amazon's market value was evaporating during the internet bubble meltdown.

It was incredible to watch and hear what Bezos said back then, which reminded me of Jack Ma from Alibaba (BABA, Financial). Most notably, Bezos said the following:

  1. We want to be the earth’s most customer-centric company. Start with the customers and work backward.
  2. We have a precise definition for customer-centric – it means listen, invent and personalize.
  3. First you have to listen because companies who don’t listen to customers fail. Second, you have to invent for your customers because companies that only listen to customers fail. It’s not the customers’ job to invent for themselves. It’s Amazon’s job to invent for customers. And third it’s personalize. Take the customers and put them in the center of the universe.

Customer-centric then becomes Amazon’s mission basically, and Bezos wakes up every day not thinking about how to make money but how Amazon can be more customer-centric.

Now if you watch Ma and Alibaba, you’ll find Alibaba follows the exact philosophy. Ma also woke up every day not thinking about how to make money but how to best serve Alibaba’s customers. Everything Alibaba has built so far has been aimed at solving customers’ problems and making their worlds better. They invented Alipay because the lack of trust and a convenient payment system was making online transactions hard to execute. They invented Sesame Credit because there wasn’t a credit score system in China to help trustworthy small business owners get a line of credit and the capital they need to expand.

Both Bezos and Ma have spoken extensively about how their failures in Ma’s case, rejections  are life’s best teachers. Ma was even rejected by KFC (24 people applied and 23 were accepted, Jack being the one rejection) and by Harvard (10 times). They view failures as experiments and only through experiments can you find out the truth.

As we all know, Amazon has been a disruptive force in the U.S. Many businesses are being Amazoned, to use a new word that was invented to show the power of Amazon. But most of them will inevitably fail because they are focusing on the wrong thing – how to make more money (or lose less money in some cases) and how to appease Wall Street. Target (TGT, Financial), for instance, has been losing many customers because they can’t find the stuff they want in stock anymore as Target tries to stock more high-profit inventories and reduce less-profit inventories. Most fashion retailers focus on building the businesses instead of what their customers need and want. Those efforts are doomed from the beginning.

There’s a big difference between customer focus and customer-centric. Amazon and Alibaba are customer-centric whereas some other successful and less Amazonable retailers are just very customer focused. Ross Stores (ROST, Financial), TJX Companies (TJX, Financial), O’Reilly Automotive (ORLY, Financial) and Home Depot (HD, Financial) are all examples of companies with great customer focus, but they are not necessarily customer-centric. Apple (AAPL, Financial) used to be customer-centric but now is just customer focused. Why? Steve Jobs invented for customers, and Tim Cook doesn’t; when he does, it’s rarely original but more emulative.

This customer-centric business model is a relatively new phenomenon as mass personalization was almost impossible before online personal data reached scale, which took quite a while after the internet was invented. And technological advancement makes it easier to invent on customers’ behalf. In this sense, the moat of Alphabet (GOOG, Financial), Amazon, Facebook (FB, Financial) and Alibaba might be wider than we have thought if we had only applied a traditional way of thinking.