The Customer Network Strategy Generator

Develop new strategic ideas for creating value through customer networks

I’m in the middle of reading The Digital Transformation Playbook by David L. Rogers (review forthcoming). I really appreciate his structured approach to digital strategy and that he provides so many tools. If you’ve been following me for long, you know that I can’t resist a good strategy tool, so I wanted to share with you my favorite one, so far, from the book.

The tool is called the “Customer Network Strategy Generator.”

To understand its role requires a little more background from the book. Rogers identifies five domains of strategy that are being transformed by the digital revolution: customers, competition, data, innovation, and value. The Digital Transformation Playbook then walks through each of these domains in detail, identifying what is changing and how leaders should think strategically about that domain.

For the customer domain, Rogers makes the point that “Today, customers’ behavior — how they find, access, use, share, and influence the products, services, and brands in their lives — is radically different than in the era in which modern business practices arose.” He calls that new behavior “the customer network model” where customers are as likely to connect with and influence each other as they are to be influenced by the firm. He says that companies need to shift from a mass market/broadcast model to one that taps into five customer network behaviors: access, engage, customize, connect, and collaborate. Companies need to think strategically about how they participate with customers in those behaviors.

He then dives into each of those core behaviors to identify specific strategies and potential tactics that firms can consider in redefining how they operate in this digital age.

This is what the Customer Network Strategy Generator looks like:

Customer Network Strategy Generator (slightly enhanced)

Some strategy tools are analysis focused. They collect and present information to help drive clarity for decision making (e.g. the BCG Growth Share Matrix). Some provide a framework for developing and representing strategic hypotheses (e.g. the Business Model Canvas). Still others can help identify resource and capability mismatches that can lead to strategic failures (e.g. the Diamond and Square Framework).

The Customer Network Strategy Generator, on the other hand, is more like a pilot’s pre-flight checklist, walking a strategist through the steps necessary to develop winning customer-facing strategies in the new digital age.

You walk through the tool from top to bottom:

1. First identify your objectives in developing the strategy. Start with overarching business objectives (e.g. accelerate growth), and then define the objectives specific to the customer domain (e.g. attract new customers or improve retention or increase revenue per customer).
2. Next, identify a small number of customer segments you want to focus on. For each, what is your specific objective for that segment, what is your value proposition to that segment, and what are the known barriers to accomplishing your objective. For example, you may have high churn amongst millennial customers, so you see opportunity for improvement. Your objective for this segment would be to reduce churn. Your value proposition may be that you provide an easy-to-use and affordable solution, but millennials may be impulse buyers in your product category and not brand loyal.
3. Third, given what you understand about the segment and your objective, which one or two of the customer network behaviors are worth considering. What is your high-level strategy for tapping into those behaviors. For example, you may focus on the Access behavior, striving to find ways to make it easier for millennials to buy your product everywhere they go.
4. Next, you want to identify specific implementable concepts you can experiment with within that strategy. You can look inside your own company for ideas from other products or divisions, or untapped capabilities. You can look outside your company or industry for approaches that have worked for others. You can pull together a team with the right internal and external perspective to brainstorm, using divergent thinking to come up with many possible concepts. You can then evaluate the different concepts in terms of your ability to pursue them and their likelihood to achieve your desired objectives. Finally, the team can converge on the small set of best concepts to pursue.
5. The final step is to deeply understand the potential impact of the concepts being pursued. Benchmark against competitors — is this concept merely an opportunity to catch up with the rest of the industry, or will it be a radically different approach from peers? How is it likely to impact the customer objectives, direct objectives, and higher-order objectives you identified early in this process. What’s your confidence level that those impacts are actually achievable?

By following this process, you will have the best chance of identifying concepts that are worth pursuing because they can have a meaningful impact on the things that matter to your business. At the end of this process, you will have most of the information you need to confidently invest in a small number of experiments to begin positioning your firm to successfully compete in the new digital age.

One of the things that I particularly like about this tool is that it is both very specific to a certain type of strategy project (and therefore easy to understand in terms of specific tangible activities) but also generally applicable to almost any strategic decision. The specific details will change for different types of strategies, but the overall flow (objectives>a customer-centric perspective>a well-defined broad strategy>specific potential tactics>realistically evaluating those potential actions) provides a good model to consider whenever starting any strategy project.

Let me know if you’d like to discuss how this process might apply to the strategic decisions you are facing today.