Client Business Perspective Essay

According to what we see daily, “Customer” is one of the most problematic perspectives of the Balanced Scorecard framework. And it is not customer KPIs that cause strategists the most problems… One needs to clearly understand:

  • Who is the “customer” in customer perspectives
  • How to come up with objectives for customer perspectives
  • How to not confuse customer objectives and desired business outcomes

Let’s have a look at “Customer” perspectives and discuss the details.

Who is the customer?

Authors of the BSC concept  formulate the question of the customer perspective as:

  • To achieve my vision, how must I look to my customer?

View Customer Perspective online

But who is the customer in this case? The answer is not always obvious. The Balanced Scorecard is strategy execution framework (not a CRM), so here we are talking not only about those who pay for your products or services, but about your partners as well.

On the Customer perspective of the Balanced Scorecard you need to reflect expectations of:

  • Partners (dealer, distributor), and
  • Customers

For example, in health care industry you put here not only expectations of patients, but of physicians as well. In some cases (for example, non-profit organization), customer perspectives might also include stakeholders.

Customer expectation vs. business response

Another typical difficulty is formalizing the expectations of the customers. A company strategist starts formalizing the response that a company plans; this approach converts your strategy into a complex list of things to do.

Phil Jones in his Excitant blog illustrates this idea on the example with Strategic Balanced Scorecard in Hospices:

“It (the customer perspective) should contain “what they want.”  It should not contain what you are planning to do to deliver what they want, but should clearly state their needs from their perspectives.”

Vague objectives vs. specific ones

The idea is clear, but sometimes it is really difficult to formulate “what they want.” In “The Strategy Focused Organization” [1] authors share an example of Charlotte City Council’s Strategy Map, where one of the objectives in customer perspectives is formulated as an “Increase perception of safety.”

It is obvious that Charlotte City habitants don’t want to see a change in the perception of safety, but in the safety itself. The issue here is that one needs to find a balance between the abstract idea of safety (“Increase safety” objective) and more specific ideas of safety perception (“Increase perception of safety” objective).

It’s hard to be specific when we are talking about relationship with partners. For that very reason we often see on the customer perspectives such objectives as “Build strong relationship with partners.” This vague definition need to be decompiled into specific factors of a successful partnership.

Let’s see what a typical customer perspective looks like.

A template for customer perspective

Basing on 3 generic strategies we can formulate three generic objectives:

  • Product quality (Product leadership strategy)
  • Customer (shopping) experience (Customer intimacy strategy)
  • Price, Time (Operational excellence strategy)


View Customer Perspective online

Don’t forget that among customers you have partners as well; you can mark in customer perspective two umbrella-objectives:

  • Add and retain high-value customers. We need to support (see below how) this objective with customer value proposition details, such as product quality, shopping experience and other.
  • Achieve and retain win-win partner relations. This umbrella objective need to be supported with the specific objectives that form the value for the partners, for example reduced product price, product availability, and a partner support program.

Now, let’s discuss how to come up with specific objectives for customer perspectives.

Converting management outcomes into customer objectives

Here are some generic customer-related outcomes of business management:

  • Customer acquisition
  • Customer satisfaction
  • Customer retention
  • Customer profitability
  • Market share

Let’s compare this list to the question of the perspective:

“To achieve my vision, how must I look to my customer?”

These outcomes are not objectives yet, so we need to go ahead and build a strategy hypothesis around a question like:

What customer’s need do we have to satisfy in order to achieve this outcome?

For example:

  • Your customers might be expecting better quality, and timely service (strategic objectives) and these objectives are connected to the “customer retention” outcome.
  • Your customer might need a community to learn from each other, and that might help you to increase your market share.

Converting customer value into objectives

Another approach is based on formulating objectives via customer value propositions. It is formed by:

  • Attributes of products, such as functions, price, quality (derived from Product leadership strategy).
  • Customer relationships (derived from Customer Intimacy strategy).
  • Product brand (image and reputation) is also often mentioned among customer value propositions.

These parts of customer value proposition can be used on a strategy map directly and later be supported by specific initiatives.

Cascading exercise for product quality

Let’s do an exercise for one of the objectives from a customer perspective.

View Customer Perspective online

We can start with the question: “To achieve my vision, how must I look to my customer?” And go directly to the answer: “Provide high product quality.”

Or we could start with the desired outcome (“Customer retention”) and then ask “What customer’s need do we need to satisfy to achieve better customer retention? Which might obviously bring us to the same strategy hypothesis of “Provide high product quality.”

Or, we could have looked at customer value propositions, and selected a “Quality” aspect that we want to address.

In this or another way, we have an objective for a top level scorecard:

  • Provide a high product quality

Before continuing, we need to come up with leading and lagging measures, and with strategic initiatives:

  • Lagging: product return rate, %
  • Leading: quality control & assurance, hours (I’m using a generic one)
  • Initiative: quality management.

View Customer Perspective online

Let’s translate this objective to the Research and Development department:

  • Lagging: critical problems reported, %
  • Leading: repeat problems, % (this will actually show the quality of the quality process itself)
  • Leading: quality control & assurance, hours (I’m using a generic one)
  • Initiative: analyze quality problems, suggest an appropriate quality control plan

Finally, this might be translated to a particular engineer in this form:

  • Lagging: the number of cases when A problem appeared, #
  • Leading: repeat A-type problem, %
  • Initiative: analyze and prepare quality control measures for A-type problems

View Customer Perspective online

Doing all this I’m implying that in a real business situation top managers and R&D specialists will pass through several strategy definition steps, e.g.:

  • Discuss current business challenge (can be “Low returning customers rate”), and
  • Come up with a hypothesis that product quality is the reason, and then
  • Build another hypothesis about how quality can be addressed.

Respective strategy definition can be described in a separate strategy document.

For now, all of the discussed ideas might sound like very complex ones. We have an online training called “Building Balanced Scorecard Step by Step” where under our guidance and following our examples you can build a prototype of your own balanced scorecard. Check out the training schedule and details.

Main take-aways

  • Your “customers” are those who buy your products and your partners (sales representatives, distributors)
  • In customer perspective think about their problems, not your actions (yet)
  • To come up with an objective use one of these approaches:
    • Start with desired outcomes. Ask: what customer’s need e have to be satisfied to achieve this outcome?
    • Start with customer value propositions.
  • Be sure to align customer objectives with respective metrics and initiative.
Use Customer Perspective project discussed in this article as a starting template for your own scorecard! Access this example project online or download .BSC project file for BSC Designer PRO.
View Customer Perspective online

Other perspectives of the Balanced Scorecard

Did you find this article useful? Feel free to share your opinion and thoughts in the comments.

References

Posted in Introduction to BSC
Tags: bsc perspectives, customer perspective

Whether you recognize it or not, all successful small businesses–regardless of what they do or sell–have one thing in common: their owners know how to build and maintain relationships. The truth is that entrepreneurs too often get caught up in the details of the kinds of products or services they are selling to notice how critical it is to build relationships not just with your customers, but also with your vendors, employees and–gasp–even your competitors. "Without strong relationships, it is impossible to have success as a business owner," says Michael Denisoff, who is the founder and CEO of Denisoff Consulting Group in Redondo Beach, California.

"You need to have long-term customers and good vendor relationships that will carry you through challenging times or tight deadlines, as well as relationships with other business owners to share struggles, resources and best practices that can really give you an edge. The reality is that business relationships are just like any other relationship. They require some effort to maintain and they must be mutually beneficial. As in any relationship, you must be willing to give, share and support, not just take or receive."

That's a lesson Denisoff admits he had to relearn the hard way when, a while ago, he fell into the trap of neglecting some of his business relationships. But it wasn't that he didn't care about those relationships. It's just that he got so busy that he didn't realize how much time had gone by where he had not checked in with several of his contacts–an easy mistake for most small business owners who feel like every day is shorter than the last. What Denisoff found was that, in two cases in particular, his failure to put enough effort into nurturing his relationships caused them to wither away.

The first instance was when he called up a supplier to ask for a favor–not realizing how much time had gone by from the last time he had touched base. Denisoff says his supplier seemed distant and not very willing to help him out, which was surprising. After asking him if anything was wrong, Denisoff's supplier answered that since Denisoff hadn't been around in a while, he felt like he was being taken advantage of. In another instance, he called up a customer who he could tell was not pleased with him because, in truth, he only called her when she had a project ready to go. She felt like Denisoff did not truly value her and was using her only for her business. It's like having a friend that only comes to see you when they want to borrow money or need help moving," he says. "In time, you cut them off."

The two eye-opening experiences caused Denisoff to take two major actions in response. First, he created a contact database where he not only stored information on his clients, but also with vendors and business peers. He now uses the database to document the details of the conversations–both personal and professional–that he has with each of his contacts. "This helps with continuity and helps me to remember key facts and information about each contact," he says. "It felt mechanical at first but it proved to be an efficient method to ensure that no one fell through the cracks." Secondly, Denisoff changed around his daily routine so that he now dedicates a portion of his day to doing nothing but reaching out and maintaining his professional and personal relationships. "Thankfully, I have strong long-term customers to keep the pipeline full and a good group of vendors and business peers dedicated to helping each other succeed," he says.

The actions taken by Denisoff are great tips for any business owner to adopt as their own. Here are some additional tips from Denisoff and other business owners on how to build stronger business relationships that will last.

How to Build Better Business Relationships: Encourage Honest Feedback

"An open, honest relationship demands clear communications of how each party is performing," says Patrick Scullin of Ames Scullin O'Haire, an Atlanta-based marketing services company. "Encourage constructive criticism and be brave enough to suggest ways clients can help your firm perform better," he says. "If you know where you stand, you can stand stronger."

How to Build Better Business Relationships: Listen More Than You Talk

"We all want to extol our strengths, our virtues in hopes of impressing others and, ultimately, getting more business," says Alisa Cohn, an executive coach. "It's counter-intuitive, but being a good listener highlights your virtues much better than being a big talker. I coach a financial planner and we did a little market research on what his clients value the most in him. Yes, they value his advice and his skills in handling the money, but a lot of financial planners have that. What sets him apart is that he takes the time to listen to them and really understand where his clients are coming from. They said most often that they value his role as a sounding board, and a few even called him better than a shrink! That's the kind of behavior that leads to referrals and long-term business success."

Dig Deeper: Listening With More Than Two Ears

How to Build Better Business Relationships: Make A Routine

Devise a system to ensure that not too much time passes before you connect with your contacts, such as the formal database Denisoff created. And with the proliferation of social media tools these days such as Facebook, LinkedIn and Twitter, it's never been easier to keep in touch.

How to Build Better Business Relationships: Be Honest

"As a small business owner, it's important that people see me as expert in my field," says Amy Harcourt of Definitive Marketing. "But, when asked questions I don't know how to answer, I always say so. I remember an initial meeting with what became one of my best clients. I was meeting with the executive team and was asked about my experience in their industry (of which I had none). I could have tried to spin my response to sound like I knew their industry. Instead, I told them that I had no experience and why that might work to their advantage. I was surprised to see stern, questioning faces turn to friendly nods and smiles. They really appreciated my honesty. And that laid the foundation for a great relationship."

Dig Deeper: Can the Truth Set Your Profits Free?


How to Build Better Business Relationships: Take Notes

Keep detailed notes on everyone you meet, says Mike Scanlin, CEO of Born To Sell, a software company that makes investing tools. "When you get back to the office, enter those notes into your address book or contact system. Later, you will want to be able to enter keywords like 'sailing' or 'wireless' or 'French' and find all the people you know who match that keyword. Doing keyword mining on your own contacts will pay dividends for years."

How to Build Better Business Relationships: Give More than You Receive

Be sure to contact people when you are NOT in need of something. Take time to learn about their business since it's as important to them as your business to you. "Take a minute to understand your client's dreams and provide opportunities for them to fulfill this whenever possible," says Rohan Hall of rSiteZ.com, a company which builds social networking sites. "Whenever I have a client on the phone I try to understand what they're trying to achieve with their business. From time to time there will be an opportunity that I will actually refer them to someone that I think could help their business especially where I gain nothing from this. Clients really appreciate it when they realize that you're looking out for them."

Dig Deeper: How to Incorporate Philanthropy Into Your Business

How to Build Better Business Relationships: Be Proactive

Using your journal and knowledge of your relationships, forward articles, links and other information that might be of interest to your contacts. "When I see interesting news stories I forward them to people who I think would find them relevant," says Scanlin of Born to Sell. "I've had many recipients come up to me later and say things like, 'I can't believe you remembered that I wanted to go to Thailand.' It takes less than 30 minutes each morning to send out a handful of these. Do it every day and the care and feeding of your network will be alive and well."

How to Build Better Business Relationships: Be Real

"Do not be afraid to be vulnerable," says Amy Ludwigson of Pure Citizen, an organic clothing retailer. "Let people see who you are. It builds trust and respect. Being too professional is a bore and well you are not going to enjoy yourself."

Dig Deeper: When Do You Lie? Strategies For More Authentic, Respectful Communication

How to Build Better Business Relationships: Turn Blunders into Opportunities

Admitting mistakes and correcting missteps will take you far when it comes to building relationships, says William Gregory O, who is the co-founder of Lex Scripta, a law firm in Illinois. "Often times, people just want to know that you are sorry and that you have a plan for getting back on track," he says. When one of our service providers made a mistake, which resulted in our service being delayed for a week, the service provider responded immediately with an apology and a proposal for fixing the problem. Instead of looking for another service provider, we decided to work with this provider because we know that the provider is honest and diligent. When a mistake is more than a minor setback, do something to make it right or otherwise provide value to the wronged party."

How to Build Better Business Relationships: Make it Personal

Sometimes it is good to send an actual physical letter or card of appreciation as opposed to an e-mail. "Say 'Thank you," a lot," says Amy Blum, owner and president of Eagle Marketing. "I send notes to new clients thanking them for their business. I send e-mails of appreciation often, for no reason at all. And, I send great toffee during the holidays. Never forget who got you where you are. And never, ever think you can say thank you enough to clients, customers, colleagues and even vendors too."

Dig Deeper: How to Build Personal Relationships With Customers

How to Build Better Business Relationships: Meet Face-to-Face

Invite your contacts to an event (sporting, music, etc.) that you would both enjoy. You will naturally deepen the relationship and get to know each other better. You could also make plans to catch up at or join someone at a networking event. For some people, networking events are challenges and having at least one friendly face there can give them the confidence to network better. Plus, you will strengthen the relationship.

One thought on “Client Business Perspective Essay

Leave a Reply

Your email address will not be published. Required fields are marked *