Patterns & Insights
Innovation: Who Exactly Is Your Customer?
First in our business model innovation series is a closer look at one of the five key areas worthy of consideration when evaluating your business model – examining who exactly is “the customer.” There are often many hidden clues to opportunities to optimize your value proposition or modify your business model all together in order to expand your addressable market that you could be ignoring.
A good starting place is to evaluate what the attributes of your current customer base are – or what you as a leadership team think they are. Attributes of your current customers that can be revealing in this exercise might include industry, geography, size (revenues or profits), the key decision making criteria they employ, or the number of employees they typically have just to name a few. I like to start this exercise by challenging the leadership team to privately write down what they believe are the three most important attributes of their current customers. I synthesize the lists provided and then share with the team as a group.
Generally, one of two things can happen in this exercise – the leadership team weighs in and they are closely aligned on what the attributes are – yielding a list of 3-5 in total when duplication is removed or alternatively, there are a lot of different versions of the top three attributes, yielding a long list with little duplication.
When the list is concise and there is general agreement on the key client attributes, the next step is to explore what if one attribute changed significantly – would their value proposition and offer still be valid? If not, what would need to change? If the list is broad and varied, a next step is to prioritize the list as a group to get a better view of the collective interpretation of the top three attributes and then if available to map that to the actual customer data to see if there is a match.
For example, one of my clients created a very actionable plan for a new business model which significantly increased the addressable market opportunity for their company as a result of this type of exploration. The leadership team was initially pretty aligned on the fact that the ideal customer, among other attributes, was a “large enterprise client.” By delving into an exploration of what might have to change if their target customer segment was “small enterprises,” a number of opportunities and ideas surfaced. Ultimately, the team validated that the need for their product existed whether the customer was large or small and generally, the business value to the client was the same. What surfaced, however, was that the complexity of the product offering would be a barrier for smaller companies with less sophisticated IT staffs to implement and support the solution. This discovery led to a very focused effort subsequently to delve into ways they could reduce the complexity of the product to make it enticing to smaller customers. The result was a major shift in their business model and packaging to address the broader market which they have reported a year later is yielding very successful results in terms of their growth goals!
What do you know about your customers today? What attributes of your current customers may be common to a different vertical industry, geography, or even customer size? If you changed one thing about your target customers, what would have to change in how you delivered or packaged or priced your offer?