Not All Customers Define Value the Same Way

You run a U.S. company, and you have worked to make your processes lean. You are doing a good job of creating value for your customers.

Now you set up additional operations in another country with the exact same lean processes. Will they work just as well?

Not necessarily.

Why not? Because value is defined by the customer, and when you start serving a new market or a new set of customers, the definition of value may be different.

That’s a valuable lesson, and one that clearly comes across in a recent article in Forbes. The article – co-authored by three people, the most well-known of whom is writer and Harvard Business School Professor Clayton M. Christensen – is titled “Innovation vs. Poverty.” Its main point is that smart companies can create wealth in emerging markets – if they focus on understanding the needs of customers in those markets and create new solutions for those needs rather than try to apply solutions from elsewhere.

One example the authors describe (of a company making mistakes) is Citibank, which has two branches in Zambia emphasizing corporate banking services.

It has reasoned that corporate customers do not need dozens of branches, and therefore it can save on branch operating expenses. The bank also realizes that several multinational customers value one particular job that Citibank helps to get done: simplify financial systems by keeping funds in one global bank, no matter what countries the customer operates in.

Yet there are many functions offered by Citibank, which, while valued by corporate customers elsewhere, have less relevance to Zambians' job requirements. Zambian companies often do not value long-term investment and lending services, and if they do seek loans, they often go abroad to avoid local interest rates that can exceed 20%.

Many Zambian businesses transact in cash, so they benefit little from Citibank's sophisticated reporting systems. Cash transactions could be handled through local Citibank branches, but Citi's emphasis on the corporate market--and its conclusion from developed countries that branches are of limited value--severely limits this offering.

In contrast, Zambia's Finance Bank has grown rapidly in recent years with an entirely different business model. The firm has 33 branches in Zambia, drawing long lines of customers depositing or withdrawing as little as $5 at a time. The bank recognizes that its customers often rely on unreliable public transportation and that it can win their business by being close to them. It allows wholesalers of consumer goods such as beer or soda to pay their suppliers through its branches, rather than having to transact large sums in cash with a delivery-truck driver in a busy public market. This service gains the bank a foothold at some of Zambia's largest corporate customers.

I’m an advocate primarily of lean, but from a communications perspective, I give a lot of credit to the developers of Six Sigma for coming up with the phrase Voice of the Customer. You have to hear it clearly, no matter what improvement methodology you pursue.

Has your company ever succeeded (or failed) to properly serve a new set of customers? Share your experience below.