“I am here NOT to sell what I produce but I am here to solve a set of customer problems that I want to own.”

This is the core of customer centric business mindset as defined by Ranjay Gurati, a Harvard Business School professor and the author of “Reorganize for Resilience”. Gurati details that by building your business around the customer, you will build a superior product that actually speaks to its users.

Any entrepreneur can build a new product or service today, but it’s your customers that truly drive innovation and success in the end. So what does it really mean to be customer centric? How does understanding your customers through data increase your competitive advantage?

The First Step to a Customer Centric Approach

Peter Fader, the author of “Customer Centricity : Focus on the Right Customers for Strategic Advantage,” describes customer centricity as an effective strategy to build your businesses around your most loyal customers. The first step of customer centricity is to identify those loyal customers. One way to identify that core group is to look at the customers with the highest lifetime value and the lowest attrition rate. For most companies, those ideal customers are only a small percentage of their customer pool. A great customer centric strategy is building and strengthening relationships with those customers that bring the highest long term value to your business.

Think About Value Not Cost

Customer centricity focuses on customer lifetime value (CLV or LTV) or the entire future profit derived from a relationship with a customer. Many companies focus on CPA (Cost per Acquisition) or top of funnel costs, but what drives results is focusing on how much value retaining or acquiring a customer brings to your company in the long-run. According to a book “Leading on the Edge of Chaos” by Emmet Murphy & Mark Murphy, a 2% increase in customer retention has the same effect as decreasing acquisition costs by 10%. By following a customer centric process, companies can gain the most value by increasing LTV through studying existing loyal customers and then leveraging that data to acquire and retain similar customers.

The Power of Data

Customer data is widely accessible today via the web, social, and 3rd party sources. Most companies use Customer Relationship Management (CRM) software like ProsperWorks to keep track of and aggregate this data. In Fader’s book, he use an example of a local beauty salon run by a lady named Natasha. Natasha uses CRM to manage and track her customer records. She keeps detailed records of her customer’s birthdays, anniversaries, families, and any additional information she can gather. What sets Natasha’s approach apart is how she uses the data to make decisions. She uses each pieces of information to craft unique promotions and sales material for each individual customer. She also is alerted and able to reach out in her CRM when she has not spoken to customers in some time or customers are overdue for appointments. Natasha demonstrates a core tenet of the customer centricity approach by leveraging CRM to organize detailed customer and crafting tailored sales and marketing approaches based on that data.

Product Centricity vs Customer Centricity

In a product centric approach, companies focus on building superior new products absent of looking outside of the company to see customer’s unmet needs or requirements. This focus requires a strong investment in engineering and design talent. The product centric approach may fuel short term cash-flow gains, but is dependent on having the necessary resources to constantly attune to product demands. Monopolistic companies often tend to focus on product centricity – a key example being the natural resources industries. As barriers to entry in certain industries decrease, formerly monopolistic companies often transition to a customer centric approach. This is especially true in the technology sector with rapid advancement and constantly declining switching costs, where companies like IBM and Apple have made the transition to customer centricity.

Customer centricity has the advantages of responding better to market fluctuations and by understanding customer needs your product offering will have a market. In today’s extremely competitive environment, companies cannot afford to be product centric and need to focus on customer centricity to drive and sustain long term profits.

A Big Leap, A Big Investment

As Gurati mentions in his book, adapting a customer centric approach requires a great investment in implementation of technology and restructuring of human resources. However, it brings greater long term gains for the company. Our favorite example of a customer centric approach is Zappos, an e-commerce giant which has taken a huge leap in their business model by making customer service the company’s #1 mission, which lead to its billion-dollar plus valuation success. How much are you willing to invest to transition to a customer centric approach and to drive increased ROI for your company?


Investing in a customer centric approach will be costly, but it is an investment in maximizing and sustaining your company’s future profits and long term value. Get started by gathering your customer data, and try to understand everything about your customers – every data point is important. Companies that are able to leverage customer data wisely to channel its strategic approach will find the most value in customer centricity. Build relationships with your strongest and most loyal customers to truly drive results. Remember, you are not selling a product, but a solution to problems your customers have.