Image by Midjourney prompt by the author.

Your greatest cost cutter is the customer

The customer can be your most important asset when figuring out what to stop doing.

If 70% of startups fail because they are solving problems that don’t exist (1). And if incumbent companies are anywhere remotely close to this number themselves. Then companies are doing a lot of things that provide little to zero value.

Illustration by the author

This is likely not controversial at all :) But when we think about the customer we often think about using them to help us offer additional service, driving innovation, exploring new income streams or value propositions. It’s all about what we should start doing.

While the customer is excellent at all that, it’s also an amazing resource to tap into when figuring out what to stop doing.

Illustration by the author.

“If we can fully understand a customer’s entire experience and work backward from there , we can often discover unexpected opportunities, minimize busywork, and give our customers what they want faster than we could before.” — Matt Lemay, Agile for everybody (2)

Making a process which produces zero value more efficient, still produces zero value. So why are we even doing it in the first place?

Without the customer much of what we do makes a ton of sense. All I’m saying is that from a customer perspective much of what we are doing makes no sense.

And if we listened more to our customers about what we could stop doing we could possibly unlock the greatest cost cutting exercise there ever was.

Let me share a few examples from my own experience:

Company A figured out that customer’s don’t show up as “demographics” but they show up in different situations where they need and value different things. Looking at the customer through the lens of only three different significant situations it was clear that the company was spending most of its resources on the first situation, where the research was clear: the customer didn’t want or need them there. They were already satisfied by their needs being served by other third parties and they didn’t even trust the company to deliver any value inside this situation.

Company B were investing most of their resources on activating their customers, but internal research indicated that most of their interactions with customers where when customers came to them (not the other way around), and so they were pouring most of their resources where they went to waste, while not investing in where they could get far higher returns (or finding a better balance).

In both these examples, and so many more, I’ve looked at organizations pouring money down bottom less well’s that clearly isn’t offering any value to the customer.

At worst they are increasing the pain and suffering of the customer:

1. A point specifically made to me by a specialist in content marketing in the pharmaceutical industry just yesterday.
2. And made by Amazon CEO Andy Jassy referencing when many cash strapped companies during then pandemic started developing new practices for exploiting their customers instead of helping them (3).

And if there is zero value to the customer, we won’t motivate them or influence them to do anything which leads to zero value back to the business.

A company produces the outcomes it needs by offering the customer something they value helping them achieve what they need through the behavior they want. Schematic by the author.

But where to cut might only be obvious from a customer perspective. From a internal operations (or “excellence”) perspective where to cut might not be obvious at all.

From an internal process perspective we look at the cost of making outputs. That is a factory floor model (4) where we are assuming, but not always understanding if those outputs lead to better outcomes.

My point being that while companies seem to have a clear understanding of how customers can influence their thinking when innovating on new income streams or value propositions (what to start doing), the customer is not used to the same extent or depth when finding out what to stop doing.

Which is a missed opportunity from my experience and research where I’ve seen how the customer can be the most efficient and effective way to do cost cutting.

Sources:

(1). Remko Vermeulen, paraphrasing: 70% of startups fail because they are solving problems that don’t exist

(2). Matt Le May, Agile for Everybody, https://www.oreilly.com/library/view/agile-for-everybody/9781492033509/

(3). Andy Jassy CEO Amazon, “Customer Obsession” Leadership Principle Explained by Amazon CEO Andy Jassy, https://www.youtube.com/watch?v=ADUfddD6Ivs

(4). Helge Tennø, The factory floor model, https://everythingnewisdangerous.medium.com/the-factory-floor-model-d220fce08346