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This is an MIT Sloan Management Review article. Today's managers acknowledge the importance of customer focus. Yet the costly customer efforts they usually implement rarely bring the promised gains. The reason? A superficial understanding of what customer focus really means. True customer focus involves comprehensive organizational change. As Baxter Healthcare, LexisNexis, IBM, and BP are learning, the kind of customer focus that creates an advantage competitors have great difficulty copying calls for companywide transformation. The author's in-depth research over many years shows how 10 breakthroughs in thinking, remarkably consistent across industries, improve growth and profitability more effectively than customer relationship management software, loyalty programs, or satisfaction surveys. She describes how, for example, the manager of Baxter Healthcare Corp. Germany got employees thinking of themselves as doing postoperative "home-recovery enhancement" instead of merely providing postoperative nutritional products to hospitals--and how that ultimately led to Baxter becoming indispensable to customers. When deep customer focus gets rooted in employee behavior, people at all levels become innovators.

This is an MIT Sloan Management Review article. Companies such as LEGO, British Petroleum, Baxter, Virgin, and Unilever are reversing the law of diminishing returns by redefining what business they are in and then practicing a powerful kind of customer focus. The author defines customer focus as obtaining value for customers (even if you sometimes help them buy from your competitors) and from customers (who voluntarily continue to patronize your company because of that value). To achieve a high level of customer focus, LEGO, for example, must see itself as being in the "edutainment" business, not the construction toy business. Focusing on what customers want in the edutainment market space, LEGO can find numerous growth opportunities. Traditionally, businesses have concentrated on getting more market share and moving more products and services at the maximum margins. But that approach is too easy for competitors to emulate, and cost advantages eventually diminish. The author delves into the six vital components for a successful strategy based on customer focus: giving power to the customer, getting customers to choose a particular business over its competitors, articulating new market spaces, delivering an integrated experience, taking advantage of abundant and reusable resources such knowledge and information, and creating reinforcing interactions.

For Jim Carr, marketing manager, Europe, for DuPont's Carpet Fibre Division, there was no alternative: to maintain its European preeminence, the company would have to create a whole new way of dealing with customers. One of the issues that would have to be resolved was who, in fact, was the customer: the mills that purchased the fiber and manufactured it into carpets or the commercial and residential end users? For Carr, the mills were a vital link in the overall industry chain, but unless somebody took the lead in truly meeting the needs of the end user, the entire chain would be weakened. And the problems were formidable--most notably the fact that customers detested having to buy carpets. DuPont would take the lead in designing services applicable throughout the distribution channel, from the mills to wholesalers, retailers, and end users, to enhance the customer's entire carpet buying experience.

Now that DuPont had successfully designed and delivered the kinds of services that would enhance the customer's carpet buying experience, Jim Carr, marketing manager, Europe, for DuPont's Fibre Division, had a new challenge: how to reassess the links within the entire carpet distribution channel? The relationships within this chain, like those in many other industry chains, had been largely adversarial; each member out to strengthen its part of the whole, even if this meant endangering the integrity of the whole. DuPont would now take the lead in ensuring that end users' needs were being met by all in the channel, no matter how far removed. And DuPont, although the farthest removed, also had the most to lose if things went wrong; the company annually invested hundreds of millions of Swiss Francs in fiber R&D, but unless these efforts were shared by others in the chain, they would fall flat. Carr thus launched a system of customer alliances for total gain. Who would these customers be? What were the selection criteria? How would they make them cost effective? How would they change people's attitudes and behaviors? were top on Carr's agenda.

In the spring of 1987, Mauritz Sahlin, CEO of SKF, the world's largest bearing company, decided to transform the company to improve profitability and return on assets. Production had already been rationalized and was fully automated, leaving little room for savings. Neither could R&D expenditures be cut, given the company's reputation for technological prowess and quality standards. The only viable long-term solution was to change the strategic orientation of SKF from the production line to the market, which would now be segmented into the before market and aftermarket. The plan required a complex reorganization of the company with far-reaching consequences throughout the organization, but there was no other option. Intended to be the springboard to a new SKF market culture, SKF Bearing Services was created, and Goran Malm was asked to be its CEO. A 1995 and 1997 ECCH award winner.

Shortly after accepting the offer to become CEO of the newly created SKF Bearings Services in 1987, Goran Malm, long a proponent of market-driven change at SKF, defined his mission: trouble-free operations. Rather than simply make and sell bearings, which SKF, the world's largest bearing company, had excelled at, SKF Bearing Services was to offer customers solutions. Quickly selecting his key team members, Malm set about instituting a market-driven approach throughout his division, which was responsible for handling the vehicle and industrial aftermarket. Push through distributors and pull through advertising and the creation of maintenance support centers, which he called service factories, were key to implementing the change process.

Supplements the (A) case.

SKF, the world's largest bearing manufacturer, decided in 1987 to change its focus significantly. Although the Swedish company was still No. 1 in the field, its profitability and return on assets had been going flat since 1985. To remain the industry leader, the company had to give customers what they wanted, not simply what the firm manufactured. Goran Malm was appointed to implement the change process within SKF.

Demonstrates the dangers in assuming that a product successful in one market will do well in another, poor global marketing implementation, poor marketing strategy and implementation in general where research was used to back decisions on how to proceed, the need for an integrated marketing strategy to launch a new brand, and overreliance on an advertising push to diffuse a new brand. A 1992 ECCH award winner.