ROT339

HOW TO TURN
CUSTOMER INSIGHT
INTO GROWTH
Most leaders recognize the importance of understanding their customers.
Why, then, do so many continue to overlook change signals?
by C. Barton, L. Koslow, R.Dhar, S. Chadwick, M.Reeves and F. Lang

on customer needs, many
companies spend most of their time looking inward. If you are
not convinced of this, try this experiment: In your next internal
meeting, divide a piece of paper in two. On the left side, record
each mention of an internal
performance, plans, metrics, employees or culture; on the right
side, record each discussion of an external topic, such as compe-
tition, technology, innovation, social media or customer needs
and wants. If your ‘introverted’ score is higher than your ‘extro-
verted’ score — keep reading.
Consumer-facing companies in developed economies have
experienced little to no growth since the global recession of
2008. As a result, the smartest of the bunch are now increasingly
looking outward, trying to spur growth by turning to new sources
of customer information — ‘structured’ batches of Big Data such
as online behaviour and ‘unstructured’ data such as social media
and call centre conversations.
In addition, these companies are experimenting with predic-
tive methods for anticipating customer behaviour and evolving
an internal customer insight (CI) function that can provide rel-
evant recommendations and ongoing execution support.
struggle to make CI more than just a traditional market research
operation. In this article we will look at the challenges and ben-
Rewiring Your Customer Insight Function
-
sumer behaviour. Shopping is now integrated into consumers’
daily activities, before and after traditional retail hours, and the
from those of older generations. Mobile apps are generating large
volumes of new data from sources such as online behaviour pat-
terns, social media, user reviews, geolocation data and mobile
payments. Consumer demand for information, ‘newness’ and
interactions with brands is increasing, as is the ability of brands
and retailers to anticipate the needs of individual customers. As
a result, sectors that once were predictable and stable — and that

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 Senior executives agree that customer insight (CI)
is critical to accelerating growth.
once could have survived with a more internal focus — have be-
come more volatile and uncertain. In this environment, compa-
nies must rewrite — indeed, rewire — their CI capabilities.
In a 2016 Boston Consulting Group survey, 45 CEOs,
presidents, business unit leaders and chief operating officers in
a variety of sectors said they consider ‘customer and growth ob-
jectives’ to be the top priorities for their companies, followed by
‘operational excellence’, ‘shareholder value creation’ and ‘cus-
tomer experience’. More than 75 per cent of the senior executives
overall — and 100 per cent from companies with more than US$5
billion in annual revenue — said CI was critical to accelerating
growth. When asked what capabilities their companies needed to
develop, respondents cited CI and business development as the
top two; advanced analytics was also an important focus, repre-
sented in three of the top ten categories.
Surprisingly, many organizations have a long way to go. In
fact, they have barely evolved in the years since BCG’s 2009
benchmarking study [“The Consumer’s Voice — Can Your
Company Hear It?”, available online]. In late 2015, BCG’s Cen-
tre for Customer Insight, in partnership with Cambiar and the
Yale School of Management, updated that original study to in-
clude 640 respondents from 90 cross-sector enterprises. More
than 60 per cent of the participating companies reported an-
nual revenue of at least $5 billion, and about 70 per cent operate
globally.
The patterns of maturation that we identified in 2009.
were still relevant. We found that CI groups move through four
developmental stages.
STAGE 1: TRADITIONAL MARKET RESEARCH PROVIDER. At this stage, CI
is mostly tactical and research oriented, focused on uncovering
trends of sales of existing products and services, largely in exist-
ing channels and geographic locations. The CI group works on
a project basis to produce data in response to line managers’ re-
quests. It is limited in budget, head count, and scope of influence
within the organization, and it receives limited senior executive
support. The CI function’s communications concentrate on stud-
ies or project results that target a narrow audience, such as the
managers who commissioned the research.
76 / Rotman Management Spring 2017
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STAGE 2: BUSINESS CONTRIBUTOR. For a CI function at this stage,
research tends to have a real-time focus on short-term innova-
tions such as packaging, form and flavour extensions, pricing,
and promotions. The group concentrates on translating custom-
er insights into business recommendations. Studies build on one
another to start to form bodies of work and broad perspectives.
A function at this stage typically has active support from the
most senior marketer in the company, as well as greater access to
senior and business-unit (BU) leaders; however, business leaders
generally set priorities. Significant parts of the CI budget may ex-
ist outside the function’s control, and the group’s representation
on the executive team and its exposure to the Board are limited.
STAGE 3: STRATEGIC INSIGHT PARTNER. At this stage, senior execu-
tives believe customer insights should guide most commercial
business decisions, and the CI function is a strategic partner and
trusted advisor to the line. In addition to specialized research
skills, CI team members demonstrate critical thinking, a willing-
ness to challenge ideas, economic and strategic understanding,
and judgment. An executive team member—who is not the chief
marketer—champions strategic research, and the CI team works
with line management to translate customer knowledge into key
business decisions. Together, the CI team and line managers
form the beginning of a learning organization that becomes in-
creasingly capable of anticipating customers’ needs.
STAGE 4: SOURCE OF COMPETITIVE ADVANTAGE. This stage remains
elusive for almost all companies. At this level, the CI function is
focused on new-to-the-world innovation, foresight and predic-
tive inquiry. CI is used in business decisions and core processes
beyond market decisions, including research priorities, new
product development, strategic planning, M&A and portfolio
strategy, employee engagement and company branding.
At this level, the CI team exerts the greatest control over its
budget. As one CI vice president remarked, “We’re aiming for
100 per cent budget control. We want to have visibility of the
total spend and the ability to trade off against higher value and
higher-impact uses.” A function at this stage provides feedback
on relevant trends, offering an independent perspective on high-
 The Top 10 Capability Development Areas

Respondents (%) Customer Insight Ranks at the Top of Senior Executives’ Priorities
60

44
40
12
33
7 27
27 27
11 24
7 4 22
9 4 20
20 11 4 18
9 18
4 2 7 4
11 2 4 4
4 4 2 2
11 13 11 2
11 13 4
4 4 2
9 2 9
4 4 2 4 2 2 4 4
0
Customer Business Talent Pricing Brand Big data and Strategic Performance Talent Customer
insight development development analytics development customer planning management sourcing relationship
analytics management

1st priority 2nd priority 3rd priority 4th priority 5th priority

SOURCE: 2016 BCG survey of 45 cross-sector CEOs and other top executives.
NOTE: Only the top 10 capabilities are shown. The percentages in each column may not add up to the total shown because of rounding.

FIGURE ONE

priority topics and customer populations and specializing in in-
novative methodologies. Functional leaders play executive roles,
such as head of strategy, analytics, or marketing, and they often
report directly to the CEO.
One senior marketer said that for a team to reach stage four,
the CI function must be truly embedded with business decision
makers, seen as a thought leader rather than only a project ex-
ecutor or data provider, and capable of providing world-class
strategy and guidance that is actionable.
How to Reach Stages 3 and 4
In our initial study, only 10 per cent of companies had CI func-
tions at the third and fourth stages. Despite participants’ talk of
‘vision’, ‘transformation’, ‘restructuring’, and long ‘journeys’—
and rising expectations—the pace of change has been glacial: Our
latest study found that only 20 per cent of companies are now at
stages 3 and 4.
Even when companies adopt new functions and capabilities
that incorporate Stage 3 elements — such as advanced analytics,
digital or social media monitoring — these groups seem to be
analogous to traditional market research groups: They lack execu-
tive support, report low in the company hierarchy, have limited in-
teraction with the line, are constrained by small budgets and little
budgetary control, are unmeasured in terms of return on invest-
ment, and offer narrow career paths to team members.
Companies with CI functions that do manage to reach Stage
3 or 4 often do well on externally-verifiable outcomes, such as cus-
tomer loyalty and growth rates. Generally, companies with such
functions are more likely to recognize CI’s effectiveness in busi-
ness decisions and to measure the return on these investments.
Specifically, executives we surveyed in companies with
Stage 3 functions were significantly more likely (by 15 percent-
age points) than executives in companies with less-mature CI
functions to think that these groups materially contribute to fi-
nancial performance, that they put their companies and BUs on
faster growth trajectories (by nine percentage points), and that
they enhance their companies’ competitive advantage (by 20
percentage points).
All senior executives we surveyed whose CI functions had
achieved Stage 4 agreed that CI puts companies and BUs on
faster growth trajectories, while 50 per cent said CI was ‘very
critical’ to growth. Furthermore, 50 per cent of Stage 3 and

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 67 per cent of Stage 4 companies try to measure the ROI of CI in-
vestments, and they report significantly higher satisfaction—83
to 88 per cent—with CI’s ROI.
In companies with Stage 3 or 4 functions, CI practitioners
and business line partners are much more closely aligned on
the impact, value and importance of CI. As companies progress
through the stages, practitioners and business line managers
become increasingly satisfied with their relationship. By Stage
4, the satisfaction rate is 89 per cent. About 90 per cent of the
executives in our study agreed that by Stage 3, line leaders pull
CI into business decisions more than CI pushes its way in. As
the line invites CI in, business partners’ satisfaction with CI’s
contributions to business decisions increases, jumping to 90 per
cent overall in Stage 4.
Given these results, we would advise executive teams to
explicitly re-evaluate the ROI for CI functions that are mostly
backward looking, descriptive, tactical or confined to marketing.
How to Get Started
Executive teams can take three steps to begin the process of
reaching higher levels of CI maturity:
1. CONDUCT A DIAGNOSTIC. Interview stakeholders, quantitative-
ly benchmark against peers, and observe the ‘life’ of an in-
sight through the parts of the organization and the processes
in which it is identified, amplified, gains influence, and has
impact — or is dampened and dies out.
2. ATTEND ONE OR TWO FACILITATED CREATIVE WORKSHOPS WITH
THE EXECUTIVE TEAM. Apply practical creativity techniques to
achieve shared self-awareness; identify ‘magic points’, in
which the CI function delivers on executives’ aspirations,
and ‘tragic points’, in which CI falls short of its potential.
3. CRAFT AN ACTION PLAN. Develop a strategy for changing
executives’ individual and collective action.
Companies serious about attaining the highest stages of CI ma-
turity should set a target of no more than 24 months. Longer
initiatives do not signal a sufficient commitment to change and
may get bogged down, leading to distraction and change fatigue.
Firms whose CEOs and executives are not committed to
a fundamentally different CI operating model should not un-
dertake the hard work of CI transformation. In companies with
CEOs who do support the transition, however, senior executives
should be updated with regular reports from a steering or strat-
egy committee. They should create an ‘activist’ project manage-
ment structure that ensures functional transformation through
transparency, a ‘single source of the truth’, a focus on results in-
stead of the completion of activities, accountability, accelerated
decision making, and interventions when change initiatives are
off track.
Based on our experience, companies should prioritize three
types of cross-functional initiatives and identify executive spon-
sors and day-to-day leaders for each.

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 The Stages of CI Maturity
2009: 90% of companies
2016: 80% of companies
Business
Traditional market 2 partner
1 contributor
research provider
• Tactical focus • More strategic focus
• Service provider • Business collaboration
• Marketing scope • Commercial scope
• Insufficient or • Budget input but
inconsistent budget no control
SOURCES: “The
“The Consumer’s Voice - Can Your Company Hear It?” BCG report, November 2009; BCG, Yale CCI, and Camblar, 2015 Customer Insights Benchmarking Study
FIGURE TWO
Funding the Journey. Initiatives in this category fund the
transformation and the external support it requires by closing
performance gaps. Examples include consolidating market
research suppliers; reviewing supplier pricing and terms; cut-
ting or reallocating tactical, backward-looking, descriptive,
low-ROI project spending; and attacking duplicative expenses
and teams.
Winning in the Medium Term. These initiatives, which require
more lead time, are the building blocks of the functional strat-
egy. Examples include building knowledge management sys-
tems; measuring the return on CI spending; developing learn-
ing agendas for executive teams and boards; experimenting
with data sources and methodologies; and enabling CI to use
strategic planning and budget tools.
Organizing for Growth. Initiatives of this type enable the
function to execute and sustain the transformation. Examples
include expanding roles for the most talented employees; re-
working job specifications, forming executive recruiting part-
nerships, and targeting new talent pools; developing career
paths; developing rotation programs for future leaders; estab-
lishing functional training and development programs and ty-
ing functional compensation to performance.
Developing a truly external orientation is a struggle for many
companies. Taking a hard look at the maturity of the CI func-
tion may be a good place to start. But a CI function that’s treated
simply as a provider of traditional market research can’t become
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2009: 10% of companies
2016: 20% of companies
Source of
Strategic insight 4 competitive
3 advantage
• Mostly strategic focus, • Focused on foresight
prescriptive predictive
• Trusted advisor • Partner with C-suite
• Cross-functional scope • Enterprise perspective
• Some budget control • Significant budget
and control
a strategic player on its own. The effort to tap this overlooked
source of competitive advantage must begin at the highest levels
of the organization, with executives setting the tone for the pro-
cess. By measuring, interpreting, and applying knowledge from
customer experiences — and using this information to fuel deci-
sions — companies can elevate both their CI function and their
position in the marketplace.
Fighting Organizational Introversion
How do companies end up so isolated, even from their own cus-
tomers? We have found that large, established companies tend
to rely too much on existing business models and neglect to ex-
plore new possibilities. As a result, they generate future growth
options at a much lower rate than smaller, younger companies.
We found that large, established companies are about 20 per-
centage points less exploratory than their younger peers, and
as a consequence they underperform those peers by nearly six
points in sales growth and more than two points in long-term to-
tal shareholder returns.
Fortunately, this trend is not inescapable. A minority of
large, established firms manages to balance exploration and ex-
ploitation. So, how can you avoid or reverse the tendency towards
introversion? We offer the following four tips for renewing your
external orientation.
TIP 1: CAPTURE EXTERNAL CHANGE SIGNALS. Getting the right in-
formation in the door is the crucial first step: Invest in captur-
ing granular, real-time, and implicit data on customer trends
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 Large, established companies are about 20 percentage
points less exploratory than their younger peers.

and preferences. Explore new methods, such as biometric,
observational, and neural analysis. Look beyond the obvious:
Access new and under-exploited data sources such as social me-
dia and usage data from smart products. In other words, create
not only a signal capture capability but a ‘signal advantage’ by do-
ing it better or earlier than others.
TIP 2: EXTRACT NOVEL INSIGHTS. Learn to extract patterns from
change signals. Again, look beyond the obvious to create advan-
tage by leveraging new techniques such as natural language pro-
cessing to mine unstructured data and machine learning to sepa-
rate signal from noise. Create easily usable data visualization to
facilitate the detection of patterns and the formation of insights
that are not obvious. Again, strive to do so not just sufficiently,
but better than the competition can.
metrics, nearly 80 per cent of which are related to customer
experience. Customer-centricity is further supported by well-in-
tegrated information systems, which are able to capture, explore
and share insights throughout the firm.
In closing
Overcoming introversion is no easy feat, but it is imperative for
your organization’s long-term survival. The approach discussed
herein can provide a starting point to increase your external ori-
entation — which will enable you to capture the right information
and use it more effectively.

TIP 3: USE INSIGHTS TO DRIVE KEY VALUE-ADDING PROCESSES SUCH AS

INNOVATION AND RESOURCE ALLOCATION. Customer data and insights
should be organized so that they are easily accessible to all parts
of the company and can be integrated into decision making be-
yond the sales and marketing function. For example, customer
insights can be included as a formal decision factor for strategic
planning, portfolio strategy and resource allocation, and they can
be integrated into stage-gate requirements for innovation.

TIP 4: COMMIT TO AN EXTERNAL ORIENTATION WITH STRUCTURE, SYS-

TEMS, CULTURE AND LEADERSHIP. Companies need to increase their
Christine Barton is a Senior Partner
‘surface area’ by exposing internal functions to external realities. and Managing Director in The Boston
Highly adaptive companies like Alibaba understand this intui- Consulting Group’s Dallas office. Lara
Koslow is Global Leader of BCG’s Centre
tively and set up flexible organizations to allow for the constant
for Customer Insight and part of the firm’s
matching of internal and external. As Jack Ma, the company’s global Marketing, Sales & Pricing leadership
founder and chairman, has said: “In the information era, change team. Ravi Dhar is the George Rogers Clark
is the best equilibrium.” Professor of Management and Marketing
and Director of the Centre for Customer
We can also look at Amazon as a best-practice example of
Insights at the Yale School of Management.
an external orientation. Customers are the top priority every- Simon Chadwick is the Founder and Manag-
where in the organization, starting with the CEO. As Jeff Bezos ing Partner of Cambiar. Martin Reeves is
has said: “We see our customers as invited guests to a party, and a Senior Partner and Managing Director in
BCG’s New York office and Director of
we are the hosts. It’s our job, every day, to make every important
BCG’s Henderson Institute. Frederik Lang
aspect of the customer experience a little bit better.” This cus- is a Consultant in BCG’s Copenhagen office. For more BCG content,
tomer-centric culture is reinforced through formal performance visit bcgperspectives.com.

80 / Rotman Management Spring 2017

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