See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/267372922

The Concept of Customer -Orientation and Its Implication for Competence

Development

Article · October 2011

CITATIONS READS

12 333

1 author:

Malin Brännback
Åbo Akademi University
168 PUBLICATIONS   1,272 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Non-Profit Growth View project

Entrepreneurial alertness and intention of disabled people: Investigating the role of perceived Health View project

All content following this page was uploaded by Malin Brännback on 18 August 2015.

The user has requested enhancement of the downloaded file.

 The Concept of Customer
-Orientation and Its Implication
for Competence Development

Malin Brännback

INNOMARKET
Turku School of Economics and Business Administration
Department of Marketing
INNOMARKET Technical Reports No. 1
May 1999
ISBN 951-738-966-3
ISSN 1456-7598
 Abstract
In this article we discuss the importance of customer-orientation for
corporate success. Customer-orientation is not merely managerial jargon,
although a quick glance through annual reports would lead one to such a
conclusion. There is some substantial meaning in the concept. Customer-
orientation is not the exclusive right of the marketing department. In fact,
we argue that customer-orientation is the core of business success, the
meaning of which has to be disseminated throughout the organisation, the
meaning of which has to be understood and internalised by everyone. We
argue that integrated customer-orientation is the basis for corporate
competence development, and thus competence development and
management of core competencies becomes important for both internal and
external business processes. Customer-orientation is therefore effective
knowledge management.

Keywords: Customer-orientation, marketing, customer integration,

knowledge, core competencies
Introduction
As early as 1954 Drucker stated that the only reasons for business to be in business
was to innovate and satisfy customers at a profit (Drucker, 1954). In 1967 Kotler
launched the new marketing concept, which stated that corporate profit came out of
satisfying customer needs through integrated marketing activities. Profit did not come
out of sales volume alone, which was the old marketing concept. Towards the end of
the 1970s Grönroos presented the service marketing concept (Grönroos, 1979), which
held some distinct differences from the traditional product marketing concept. During
the 1980s a group of Scandinavian marketing researchers realised that the service-
marketing concept was valid and relevant for business-to-business marketing, in
particular when studying buyer and seller relationships. What today is called
relationship marketing as understood and defined by the Nordic School of Thought is
fundamentally different from the traditional 4P marketing paradigm (Grönroos, 1989,
1994, 1996, 1997, Gummesson, 1987, Storbacka, et al, 1994, Holmlund, 1996). This
rationale emerged as a new paradigm within marketing.

This brief description of developments in marketing (and certainly in many respects

greatly over-simplified, for more details, see, Grönroos, 1989, 1994, 1996, 1997,
Gummesson, 1987 Waterschoot and Van den Bulte, 1992, Webster, 1992, Storbacka,
et al, 1994, Holmlund, 1996, Brännback, 1997a,b) serves the purpose of paving the
road into our issue of concern, i.e. customer-orientation. Common to these
‘milestones’ has been a criticism towards the existing mindset failing to embrace the
essence of customer-orientation, i.e. of identifying customer needs (current and
future) and satisfying those needs.

Since the topic of this paper sets out to explore the concept of customer-orientation
and provide reasons for why it is important for organisations to grasp the deep
understanding of customer-orientation. We will argue that customer-orientation is
more than merely a marketing concept – it is among other things a concept of critical
importance for human resource management in organisations in terms of competence
development. We may also turn the argument around and state that customer-
orientation is a dual concept in that it encompasses both internal and external
customers. This argument is essential for understanding customer-orientation in the
context of competence development as well as its implications for marketing.

The structure of the paper is the following: in section two we will present the
evolution of the concept of customer-orientation from a theoretical point of view as
well as a practical one. In the third section we will show how customer-orientation,
when understood in terms of both internal and external customers really is about
customer integration and how this integration process becomes the basis for
competence development or knowledge- based systems management. Finally, we will
in the fourth section discuss what the implications of customer-orientation are on
developing individual skills and capabilities. The paper takes the discussion in general
terms, but this is done on purpose as the issue of customer-orientation is not context
specific, it applies to any industry, aiming for competitive success. Hence the
statement made four decades ago by Drucker is still valid, and even more so in todays
competitive environment (Moore, 1995, Tapscott, 1995, Moore, 1996, Shapiro and
Varian, 1999, Hagel III and Singer, 1999a,b). In fact, Drucker’s statement contained
two issues; customer focus and innovation. We will in this paper concentrate on the
first of these issues, although both form the foundation of corporate success.

2. The Concept of Customer-Orientation

In this section we will review the marketing concept, how it has moved from
embracing a production-oriented view to become customer-oriented. It is possible to
plot the evolution on a time scale as in Fig. 1. However, the borders between a
“production-oriented era” and a customer-oriented era are not very clear as has been
pointed out by a number of authors (Day 1998, Dalgic, 1998), in reality they tend to
float over each other.

1954 1967 Late 1980s

Kotler
Drucker

Relationship
Marketing; The
The “Old” The “New” Nordic School
Marketing Marketing cf. Gummesson,
Concept Concept Grönroos

1960 1970 1980 1990 2000

The Electronic
Marketing Concept

1960 1969 1979 1989 1992 July 1998

McCarthy “Are you Grönroos The Mosaic 37 Million
receiving this” The Service Web Hosts
The 4 P’s The Internet Marketing 10 Million
Concept .com hosts

The Production- The Customer-

Towards The Customer-Oriented Era
Oriented Era Oriented Era

Figure 1: From production-oriented to customer-oriented views

For instance, McCarthy (1960) spoke of a marketing concept as a new philosophy

contrasting the old production-oriented philosophy as early as 1960, but this was on a
conceptual basis, it is not the same as the acceptance of a concept in practice. The new
philosophy was labelled marketing-oriented (McCarthy, 1960). Felton (1959) called
the marketing concept a “corporate state of mind”. In McCarthy’s marketing concept
the objective was for the firms to focus all its efforts on satisfying its customers, at a
profit. The marketing concept held three basic elements: (i) a customer orientation,
(ii) an integrated company effort, and (iii) a profit-goal rather than just a sales-goal. In
order to implement the marketing concept it most likely would require changes in
managerial attitudes as well as in methods and procedures, and organisational
structures. McCarthy argued that changes would be necessary in all of these areas. It
is my conviction that it has taken almost four decades for managers to understand that
customer-orientation is not some departmental activity but a philosophy, which has to
be disseminated through-out the company and it has to become part of the corporate
culture. McCarthy introduced the marketing-mix as a tool for achieving the
marketing-oriented philosophy in practice and this was to become the dominating
paradigm of the field to this day.
Kotler (1967) followed the same line of thought and launched what he called the new
marketing concept. Kotler acknowledged that in reality marketing may officially
stand at the end of the assembly lines, and there for he stated, in 1967 (p.3) “..but
unofficially its influence must be felt on the drawing boards.” According to Kotler,
the “old” marketing concept was a sales concept paying very little, if any, attention to
satisfying customer needs. Moreover, the fact that this required the co-ordination of
several activities, which at that time tended to reside in departments of their own
within organisations (advertising, marketing research, personal selling, etc.), was not
quite realised either. In other words Kotler pointed at what McCarthy some years
earlier had called a lack of unified focus (McCarthy, 1960).

The “new” marketing concept reversed the logic of the old one to some extent. In the
old concept the company started from its own existing products and thought of ways
to increase sales. In the new concept the company starts with the customer (existing
and potential) and works its way back into the company asking what products - or
better yet – what solutions are necessary for satisfying the needs of those customers.
Thirty years later in the context of Internet business, Sterne (1996, 1998) speaks of the
need for organisations to put on their “customer glasses” and try to imagine what the
customer sees and perceives.

The two concepts have been depicted in Fig. 2. together with a third concept, the
electronic marketing concept, which refers to the quite different rules of the game in
Internet business (Rayport and Sviokla, 1994, Moore, 1995, Tapscott, 1995 Moore,
1996, Hoffman and Novak, 1996, Sterne, 1996, 1998, Brännback, 1997a,b,
Brännback and Puhakainen, 1998, Hagel ans Singer, 1999a,b, Shapiro and Varian,
1999). The electronic marketing concept goes beyond the needs and starts from the
ever changing expectations and profits are seen a measure of customer perceived
value (Brännback and Puhakainen, 1998). The difficulty here is to find a way of
measuring customer perceived value, which as we know, can be determined in a
myriad of ways (Rayport and Sviokla, 1994, Storbacka, et al, 1994, Grönroos, 1996,
Holmlund, 1997).

However, before the days of electronic marketing the field was introduced with first
the service marketing concept and later with the relationship marketing concept. The
latter originated from the former and was first used for studying buyer-seller
relationships within industrial markets. These two concepts can be seen as additional
steps towards the refinement of marketing-orientation and customer-orientation. It is
indeed strange that the essence of customer-orientation seems to have been hard for
business practice to take in although it is a necessary condition as pointed out by
Nestlé’s CEO (Day, 1998, p. 1).

The service marketing concept (Grönroos, 1979, 1989, 1996, Zeithaml and Bitner,
1996) was a result of criticism of the traditional marketing-mix paradigm, but also
from realising that services are inherently different from products. Services cannot be
stored, they are produced and consumed simultaneously, they are generally intangible,
and they are heterogeneous. The last characteristic refers to the fact that the quality of
the service will be dependent on employee satisfaction (Alajoutsjärvi, 1996) and that
there is rarely a guarantee that there is a match between what has been promoted and
the actual outcome (Zeithaml and Bitner, 1996).
 Selling and Profits through
Products Promotion sales volume

The”old” marketing concept, the selling concept (1967)

Customer Integrated Profits through

needs marketing customer satisfaction

The “new” marketing concept (1967)

Customer Interactive Profits through

expectations marketing customer perceived value

The electronic marketing concept (1997)

Figure 2: Three different marketing concepts

The relationship marketing concept grew out of a primary interest in the buyer-seller
relationship where customer perceived value was seen as a result of interaction
between personnel and customers (Alajoutsjärvi, 1996), but where a group of
researchers realised that the service marketing concept was applicable in industrial
marketing context for studying business relationships (Grönroos, 1996). Furthermore,
the relationship marketing concept distanced itself from the traditional marketing-mix
paradigm (Grönroos, 1994, 1996), arguing that the traditional marketing-mix directed
critical attention away from the most essential – the customer. It is my conviction that
Day (1998, p. 2) hits the bull’s eye with the following argument:
“Even firms with first-class technologies and business systems have only the
necessary conditions for success; unless they have superior skills in
understanding, satisfying and retaining customers they will not realize their full
potential.”[italics added by author]

If we look at business practice we can again make the same conclusion as Day (1998,
p. 1) “it is in vogue to become market-driven”. This is well documented in basically
all annual reports and employees will readily state that their organisation is customer-
oriented. Yet, organisations fail to put the customer up front, they fail to realise that
each time they are confronted with a customer it is the moment of truth. Most
organisations fail to realise that customer-orientation is the concern of everyone in the
organisation, be it the CEO, a line manager, a lathe operator, a switchboard operator
or people on the marketing department.

One of the greatest paradoxes in business practice is that those who hold the positions
as, e.g. market researchers or marketing managers, that is, full-time marketers, seem
to be those who meet the least with customers. Similarly, those who work in
production or R&D, i.e. persons who by their job-label are far away from the front-
desk, have found themselves interacting with end-customers quite often and
sometimes on a daily basis. Since these people are not trained to interact with
customers it is done au naturelle, which sometimes works and sometimes does not.
Because customer care, which is another expression for customer-orientation, is so
critical companies have to train their whole personnel in these matters. Moreover, if
we take the arguments from service marketing and relationship marketing where the
quality of the performance (service or customer relationship) is dependent on how
satisfied employees are we begin to see that this is no ‘feel good’ exercise but a
necessary condition for business success.

Before we look at some practical examples we will, in the next section, present a
conceptual model for customer integration, where knowledge is seen as a key element
in this integration process. Additionally it is argued that customer integration is about
interaction between external customers (traditional customers) and internal customers
(employees). This feature has its roots in service marketing and has hence been
common knowledge within marketers. However, it appears as if the view of
employees as internal customers elsewhere is a fairly novel realisation (see, for
example, the literature on knowledge management and intellectual capital). Our
argument is that it is this understanding of customer integration, which ties
competence development tightly to the concept of customer-orientation.

3. A conceptual model of Customer Integration as

Competence Development
McCarthy (1960) argued that a marketing-orientation is a holistic view of business
activities. Sanchez and Heene (1997) argued similarly in their efforts of positioning
the ideas of competence-based competition almost four decades later. McCarthy
continued to argue that the business activities of different corporate functions, when
co-ordinated, have to make sense. Making sense meant, according to McCarthy, that
the company was able to satisfy customer needs. McCarthy called this a unified focus,
which allowed for sharing of experience rather than departmental fence building.
What McCarthy spoke about already in 1960 is fundamental for today’s
organisational learning processes (both in the ontological and the epistemological
dimensions), knowledge sharing, and teamwork (Senge, 1990, Lipnack and Stamps,
1994, 1997, Andreu and Ciborra, 1996, Sveiby, 1996, Shapiro and Varian, 1999).
Learning and knowledge sharing are basic requirements enabling the development of
a customer-oriented state of mind, where the greatest challenge lie in individuals’ and
organisations’ ability to learn, relearn, and above all unlearn (Senge, 1990, Drucker,
1992), in other words the organisation’s ability to develop its competencies.

The issue of learning takes our discussion into a subject area, which has been of
primary interest to mankind since the dawn of civilisation, and which has recently
become a source of organisational wealth (Zeleny, 1989, Glazer, 1991, Drucker,
1992, 1995, Davis and Botkin, 1994, Jonsehr, 1994, Nonaka and Takeuchi, 1995,
Sveiby, 1996 Stewart, 1997) and therefore attracted managerial attention, i.e.
knowledge. In contemporary business literature the earliest works go back to 1960s
with Penrose’s (1959) and Machlup’s (1962, 1982) studies. Hence in the subsequent
sections we will deal with the concept of knowledge and the concept of customer
integration.

3.1. The Concept of Knowledge

When asking ordinary people what knowledge is, we quite often get an intuitive
answer: 'it is something one learns over the years', 'it is facts and data, information
together with experience, judgement, values, and beliefs’. Sveiby (1996, p. 380),
defines knowledge as and activity "knowledge is an activity which would be better
described as a process of knowing". Maturana and Varela (1987, p. 26) take the
discussion further by arguing that there is an inseparability between action and
experience providing us with a feature of knowing as: "every act of knowing brings
forth a world." (Maturana and Varela, 1987, p. 26, see also Sveiby, 1996); in short,
knowledge is doing (Zeleny, 1989).

There is, in the above definitions a notion of action, which is especially relevant for
business practice regardless of the type of knowledge involved. Zeleny (1989), for
examples, defines knowledge as "purposeful coordination of action" and argues that
knowledge is dynamic, which means that it is not possible to take snapshots, or
capture knowledge. A person claiming to have captured knowledge is most probably
referring to data and information, which can be seen as mere symbolic description of
action. In fact, Zeleny’s definition of knowledge corresponds with Drucker’s (1954)
understanding of a manager’s role, i.e. to set objectives, organise, motivate and
communicate, measure, and develop people. The order of importance may in fact
have changed in forty years so that successful companies of today invest largely into
developing people, motivating and improving communications (through massive
information technology implementations. This is not to say that the other three chores
have become unimportant. On the contrary they are as important as before, however,
the other three have become the focus of managerial attention to a much greater
extent, a development which is expected to continue (Drucker, 1992, 1995).

Maturana and Varela (1987) make an even stronger statement in arguing that knowing
is effective action, "an action that will enable a living being to continue its existence in
a definite environment as it brings forth its world" (pp. 29-30). Translated into current
business reality this would acquire the following meaning: knowledge is effective
action that will enable a company to continue its existence in a definite business
environment as it shapes its business future. The notion 'definite business
environment' is problematic in the present global business context, as market
boundaries are becoming increasingly indefinite (Baruch, 1995, Zeleny, 1989).

Nonaka and Takeuchi (1995) provide an extensive review over how knowledge has
been treated in management, economics, and business strategy. They argue that most
theories and frameworks have agreed that knowledge is an important source of
business action. However, they point out that only utilisation of knowledge seems to
have attracted attention and that creation of new knowledge has not been discussed.
 Epistemological
dimension

Explicit

Tacit
knowledge Ontological
Individual Group Organisational Inter-organisational dimension
Knowledge level

Figure 3: Dimensions of knowledge creation (Nonaka and Takeutchi, 1995)

Edmondson and Moingeon (1996) and Argyris (1994, 1996) argue that the process of
knowledge creation is a learning process. Nonaka and Takeuchi use the term
knowledge spiral, which encapsulates the notion of learning, where explicit
knowledge is converted in to tacit knowledge, which in turn is re-converted into
explicit knowledge. In business context this is about change leading to adjustments
and readjustments, or unlearning, learning, and relearning. However, these ideas
address only the epistemological dimension of knowledge creation, i.e. how explicit
knowledge is converted into tacit knowledge, and tacit knowledge again into explicit.
Equally important, in particular for business practice is the ontological dimension,
which addresses the issue of how individual knowledge, becomes collective
knowledge and how knowledge diffuses in a group over to an entire organisation and
further between organisations (Fig. 3). The ontological dimension and understanding
the diffusion mechanism has significant relevance in the context of networking and
virtual organisations. However, it is also important in the context of customer
integration, where individual knowledge and inter-organisational knowledge creation
processes are important to understand (cf. Lipnack and Stamps, 1994, 1997, Moore,
1995, Moore 1996).

3.2. The Concept of Customer Integration

Zeleny (1989) argues that the ability to co-ordinate action is a test of possessing
knowledge, which to our minds is the same as possessing managerial ability. This
becomes clearer if we specify further the term management in the context of current
business realities. We do so by using the terms strategic market management (Aaker,
1989, 1995) or market-driven strategy (Day, 1990, 1998). These concepts we use
interchangeably. The reason for using strategic market management (SMM) as
opposed to mere strategic management is the deliberate wish underline the importance
of the customer in addition to explicitly stressing the dynamic and the proactive
nature of strategic market management (Aaker, 1995). The fact that that strategic
market management is dynamic indicates that we are dealing with a tale of the
unfinished. Proactivity implies that companies are able to and should actively aim at
achieving a position where they can set the direction and the pace of developments of
the served market, in a sense adopting the Schumpeterian idea of framebreaking
competition (Schumpeter, 1934, Moore, 1995, Moore, 1996).

The ability to co-ordinate action is preceded with an ability to take decisions. In

correspondance with earlier arguments and later convictions concerning manager’s
ability to take decisions (Ackoff, 1977, March, 1988a,b, Keeney, 1992, Brännback,
1996), this is dependent on the relevant information and knowledge available to the
decision-maker(s). Taken from this one is easily lead to believe that the only
possessors of knowledge are managers, and this has probably been the case in many
organisations. However, in a customer-oriented perspective the situation is not that
simple. Instead, there appear to be other possessors of knowledge. Therefore, we ask:
Who are the possessors of knowledge in the customer-oriented business context?

In attempting to answer this question we begin with one of the essential statements
from service marketing and relationship marketing. As already mentioned, one of the
main propositions was that service quality is directly dependent on employee
satisfaction. Thus, service quality is a result of an interactive marketing process,
where the employee and the customer interact. These two categories of people are
both possessors of knowledge. The customer knows what he or she wants and the
employee knows how to provide a solution to the needs of the customer. Similarly we
can argue that a customer possesses an ability to co-ordinate business action, either
directly or indirectly. We know what happens with companies who try to supply
something for which there is no demand! In line with Drucker’s now classic quote
(see, introduction) we may thus claim that customers are the only valid source and
purpose of the business because of their needs and desires (Drucker, 1954, Zeleny,
1989). This is, according to Zeleny (1989), customer integration and the most
important characteristic of any knowledge-based management system.

Therefore, the essence of knowledge creation is customer integration where

companies creates tools that will enable them to monitor changes in market needs and
expectations more effectively than their competitors.

3.3. Knowledge and Customer Integration in Summary: a conceptual

model
Knowledge as co-ordination of action and as customer integration has been
summarised in Fig. 4. In explaining the model we will start from the bottom, i.e. with
the knowledge base. Thus, we find that the knowledge base contains explicit
knowledge, tacit knowledge, and organisational values. Explicit knowledge refer to
the skills and knowledge both on an individual and group level, which has been
acquired through formal training, which can be acquired from textbooks, courses,
manuals etc. Tacit knowledge, can be described as accumulated experience, which
can be acquired through hands-on training, careful observation and so on. Tacit
knowledge is quite often intuitive and heuristic. Cultural knowledge, for example,
some basics can be read in books but in order to truly learn a particular culture of a
country it requires a lengthy stay in that particular country. Hence values, norms,
traditions, and beliefs are forms of tacit knowledge. A classic example of passing on
tacit knowledge from one person to the other is the master and the apprentice, which
was for long the way of teaching a craft.

Competitive Competitive Competitive

Advantage Advantage Advantage
Market A Market B Market N

Core product/ External Customer

service Orientation

Action Core Skills Internal Customer

Orientation
Platform

CORE COMPETENCIES
Explicit
knowledge
Knowledge
Base Organizational Tacit
Values Knowledge

Figure 4: Knowledge as basis for customer-integration (Brännback and Jelassi, 1999)

Organisational values contain a blend of explicit and tacit knowledge, but also
fundamental values and beliefs collectively shared throughout the organisation. True
organisational values have been internalised by all members of the organisation and
have thus moved beyond espoused values which are declarations often found in
mission statements, CEO’s statement, etc. Organisational values are the foundation of
a firm’s ability to exploit its core competencies (Barney, 1997). Internalised
organisational values are visible in every way a company operates. If there is a gap
between espoused values and the fundamental values this will be noticed since there
will be a great difference between what is declared and actually done (Zeleny, 1996).
For example, a company declares in their annual reports, on their World Wide Web
site or at any number of public occasions that “our organisation is customer-oriented”,
it raises certain expectations among existing and potential customers. It is important
that every member of the organisation understands what is meant by customer-
orientation, what it means in terms of actions, service, claims handling, order
processing, delivery, etc. Hence begin to see that the knowledge base contain
elements, which enable individuals, groups, and organisational action. This takes us
up one level in the framework to the action platform.

The knowledge base as such has no value. Specialised knowledge has to lead to some
specialised action (Drucker, 1992). Similarly identifying a firm’s core competencies
is not enough or a source of competitive advantage, it is what the firm does with its
core competencies, which makes the difference. Core competencies are path-
dependent, i.e. they are dependent on how i.e. the way in which critical skills and
knowledge are co-ordinated within the entire firm. The path-dependency is the source
of the unique characteristics of the firm’s core competence. Additionally, path-
dependency carries the notion that core competencies are developed over time, the
result of an accumulated learning process The nature of the path-dependency will also
be an indication of how well the core competencies are exploited by the entire
organisation (Barney, 1997). Finally, the idea of path dependency and the issue of co-
ordination indicate that we are concerned with various sequences of actions, or acts.
These acts in turn form episodes, which in turn build up to sequences, which
ultimately are the building blocks of relationships. This is precisely the rationale of
relationship marketing as understood by the Nordic School of Thought earlier
mentioned. In fact, relationship quality (Grönroos, 1996) or customer perceived
quality (Holmlund, 1997) are dependent on how well these elements are managed.
Thus, the concept of core competencies, when understood like this, link the concept of
quality in a natural way to customer-oriented business performance.

However, neither knowledge nor skills are eternal. They have to be constantly
renewed - at least every five years or run the risk of becoming obliterated (Drucker,
1992). The ability to learn and relearn will grow in importance in the future and it will
certainly be a source of competitive success (Tapscott, 1996). For many hundred
years skills lasted a lifetime. A craftsman would during his apprenticeship learn the
set of skills he would ever need to know. In today’s organisations this is no longer the
case. Organisations in order to stay competitive, possess an ability to constantly
innovate have to invest in constant training of their personnel and build on the
intellectual capital. There are many factors that have contributed to this development.
First and foremost it is the rapid changes in information technology and globalisation
of the entire business environment, which has made a whole range of professions
obsolete, changed the nature of the most every profession, and created a demand for
totally new professions (Drucker, 1992, 1995). How many has a clear idea of what an
infomediary is or does (see, Hagel and Singer, 1999a,b)? Similarily, the children
growing up today may not know what a lathe operator is as much as we can only
make guesses about the psychology, demand structure, attitudes towards learning, and
culture of the N-Gen, those being between 2 and 22 (Tapscott et al, 1996).
Information technology and globalisation have also led to shrinking product life-
cycles, because of continuous technological innovations and the emergence of
disruptive technologies (Christensen, 1997) (of which the Internet is an excellent
example), but much more because the economic and social conditions to which they
contribute are also becoming obsolete (Moore, 1996).

Thus, the action platform facilitates a set of core skills. The knowledge base and the
action platform together generate the core competencies of an organisation. The
tangible outcome of core skills is a range of products and/or services sold on the
served market. Core skills may even be sold directly, for example, professional
services. The fundamental aim is for the company to create a competitive advantage
on the served market. The purposeful co-ordination of action is measured through
tangible market outcomes and eventually expressed in terms of an achieved
competitive advantage. The sustainability of such advantage is the metric of how well
a firm can construct, deconstruct, and reconstruct knowledge. It is also a measure of
the effectiveness of an organization's knowledge processing ability, and it is a
measure of a firm’s ability to create and maintain customer relationships.

Interestingly enough the rationale depicted in Fig. 4 covers not only on the
epistemological dimension but also the ontological dimension. So far we have been
concerned with organisations and in fact with large organisations. Some differencies
we will find when studying small firms with only a few persons employed, sometimes
less than ten. A start-up company with, let us say ten persons employed including the
CEO (who is often times also the owner) it is not possible to speak of core
competencies, much in the same sense as it is not possible to speak of having long-
term customer relationships. However, the firm may have some customers, which
may become long-term, and the firm has a set of skill and competencies, which they
may be able to develop into core competencies in the future. Thus, core competencies
can be roughly said to take at least five years to develop. In fact Prahalad and Hamel
(1990), argue that generating core competencies, which may yield global competitive
success may take up to 25 years as it did for Honda. In terms of an individual we
argue that a university diploma alone has little value, although it is formal proof of a
lengthy learning process and that the owner has completed a number of courses and in
principle thus should possess knowledge. This accumulated knowledge should
provide a set of skills, which in turn may lead to the person being able to take some
action. For these skills an employer or a customer may be prepared to pay for (for
example, a salary, a product price).

4. Discussion
In their attempt to become customer-oriented many companies have declared this, but
failed to do much more than so. It is true that customer-orientation and ‘total customer
care’ will provide superior value to customers and that this is certainly a key success
factor in global competition. But, customer-orientation on the level of artefacts will
yield nothing, at worst it will have a negative effect. Customer-orientation has to
become a fundamental organisational value and in such we are dealing with a learning
process. Looking at business today we find that many firms, indeed, are learning to
perceive customers differently than they used to. Customers are no longer mere
objects, rather they are seen as subjects. This mind shift is also visible in the change
of used terminology. Rarely the term labour is used, instead we speak of human
resources and intellectual capital, and in doing so the focus of all business activity on
knowledge (Penrose, 1959, Machlup, 1962, 1982, Drucker, 1992, Jonsher, 1994,
Sveiby, 1996, Stewart, 1996). Thus if we recall the managerial chores expressed by
Drucker in 1954 it becomes quite clear that developing people (both employees and
customers), motivating people as well as enhancing communication has grown in
importance. The idea that ‘developing people’ means both customers and employees
is an inherent argument in relationship marketing, where customer satisfaction is
dependent on employee satisfaction, but also from the fact that the value constellation
has changed. it is no longer enough for firms to be concerned about their immediate
customers. It is vital to understand the expectations and desires of the customer’s
customers. In other words, in what way can our customers become better suppliers?
This realisation corresponds with Moore’s (1996) argument for the necessity to
understand and manage the business ecosystem or the Big Picture. If we restrict
ourselves to using Porter’s 5-force model we are only concerned with the extended
enterprise and have accepted the industry boundaries as given, including the basic
terms of engagement and business definitions. Our task is hence mere replication, not
ground-breaking, or using the Schumpeterian term frame-breaking innovation leading
to new rules of competition (Schumpeter, 1934, Hansén and Wakonen, 1997). With a
customer-oriented and a knowledge-based focus the company is continuously forced
to think “..beyond company, industry, and other boundaries in order to find unmet
needs, unused ideas.”(Moore, 1996, p. 49). If companies are to achieve growth in the
future, this is the only line of action, and this is certainly the recipe of innovativeness.
Hagel and Singer (1999b) argue that innovativeness and customer-orientation are
conflicting in goals. This is due to the fact that innovativeness and customer
relationship building have very different economic, cultural, and competitive
imperatives. Therefore, pursuing excellence in both will therefore not be possible.
Hagel and Singer argue that innovativeness requires an employee centric perspective,
whereas customer-orientation is emphasising the customer. Our model suggests that
these need not be in conflict as we see both categories as customers and the driving
force is competence development and knowledge-based strategic management. In
fact, the understanding that innovativeness and being customer-oriented are
conflicting in goals may in fact be one explanation to why it has taken industry
several decades to implement customer-orientation in practice.

The product-orientation, or production-orientation, will look at business opportunities

from what is feasible and conceivable in terms of present resources and organisational
structures, and it will fall over itself to ensure the maintenance of these structures.
Change will occur when the production unit requests newer facilities and
technologies, not when the market potential might do so. Numerous are also the
examples when new product development process have resulted in a novelty, which
has not become a commercial success (Hansén and Wakonen, 1997). Customer-
orientation means constant challenging of status quo (Argyris, 1994) because unless
so is done it will not be possible to find unmet needs and unused ideas. This in turn is
the very basic feature of learning, i.e. to challenge, question, and make inquiries
(Kelly, 1955, Popper, 1959, Argyris et al, 1985).

In this paper the concept of customer-orientation has been reviewed. Although the
concept as such is not new it has taken far too long for companies to implement the
ideas in practice. It is only the rapid diffusion of information systems technology and
globalisation of business, which seems to have forced theory into practice. Along with
these developments in business we have also seen the change in what are the critical
sources of competitive success. It used to be land, labour, and raw materials.
However, today it is knowledge, which has to be constantly maintained and upgraded
in order for companies to ensure competitiveness on the served market. This implies
that the knowledge base of a company is at large determined by customer desires, and
expectations and by discovering unmet needs and unused ideas. For that we have
proposed a conceptual model, which links customer-orientation with the competence
development of firms.

References
1. Aaker, D. A.: Managing Assets and Skills: The Key To a Sustainable Competitive
Advantage, California Management Review, Vol. 31, No. 2, pp. 91-106, 1989
2. Aaker, D. A.: Strategic Market Management, John Wiley & Sons, New York,
1995
3. Ackoff, R. L.: Optimization + Objectivity = Opt out, European Journal of
Operational Research, Vol. 1, pp. 1-7, 1977
4. Alajoutsijärvi, K.: Rautainen pari, Kymmenen ja Valmetin suhde, lähiverkosto ja
makrovoimat 1948-90, Doctoral Dissertation, in Finnish, University of Jyväskylä,
1996
5. Andreu, R., Ciborra, C.: Organisational learning and core capabilities
development: the role of IT, Journal of Strategic Information Systems, Vol. 5, pp.
111-127, 1996
6. Argyris, C.: Good Communication That Blocks Learning, Harvard Business
Review, Jul.-Aug., pp. 77-85, 1994
7. Argyris, C.: Towards a Comprehensive Theory of Management, in Moingeon, B.,
Edmondson, A. (Eds.), Organizational Learning and Competitive Advantage,
Sage Publications, London, pp. 1-15, 1996
8. Argyris, C., Putnam, R., Smith McLain, D.: Action Science, Jossey-Bass
Publishers, San Francisco, 1985
9. Barney, J., B.: Gaining and Sustaining Competitive Advantage, Addison-Wesley
Publishing Company, Reading Mass., 1997
10. Baruch, Y.: Business Globalization - The Human Resource Management Aspect,
Human Systems Management, Vol. 14, No. 1, pp. 313-326, 1995
11. Brännback, M., “Is Internet Changing the Dominant Logic of Marketing?”
European Management Journal, Vol. 15. No. 6., pp. 698-707, 1997a
12. Brännback, M., The Knowledge-Based Marketing Concept – A Basis For Global
Business, Human Systems Management, Vol. 16, no. 4, pp. 293-299, 1997b
13. Brännback, M.: Strategic Decisions and Decision Support Systems, Åbo Academy
press, Åbo, 1996
14. Brännback, Malin and Jelassi, Tawfik: Knowledge-Based Strategic Market
Management – A Conceptual framework and a European Example, Journal of
Decision Systems, Vol 7., No. 1-2, 1999
15. Brännback, M., Puhakainen, J.: “Web marketing: Has the distinction between
products and services become obsolete?”, Journal of Market-Focused
Management, Vol. 3, No.1 pp. 47-58, 1998
16. Christensen, C. M.: The Innovator’s Dilemma, When new technologies cause
great firms to fail, Harvard Business School Press, Boston Mass, 1997
17. Dalgic, T.: Dissemination of Market orientation in Europe, International
marketing Review, Vol. 15, No. 1, pp. 45-60, 1998
18. Davis, S., Botkin, J.: The Coming of Knowledge-Based Business, Harvard
Business Review, Sept.-Oct., 165-170, 1994
19. Day, G. S.: Market Driven Strategy, Free press New York, 1990
20. Day, G. S.: What Does It Mean to be Market-Driven, Business Strategy Review,
Vol. 9, No. 1, pp. 1-14, 1998
21. Drucker, P. F.: The Practice of Management, Harper &Brothers, New York, 1954
22. Drucker, P. F.: Managing in a Time of Great Change, Truman Talley Books, New
York, 1995
23. Drucker, P. F.: The New Society of Organizations, Harvard Business Review,
Sept.-Oct., pp. 95-104, 1992
24. Edmondson, A., Moingeon, B.: When to Learn How and When to Learn Why:
Appropriate Organizational Learning Processes as a Source of Competitive
Advantage, in Moingeon, B., Edmondson, A. (Eds.), Organizational Learning and
Competitive Advantage, Sage Publications, London, pp. 17-37, 1996
25. Felton, A.: Making the Marketing Concept Work, Harvard Business Review, Vol.
37, July/August, 1959
26. Glazer, R.: Marketing in an information-intensive environment: Strategic
implications of knowledge as an asset, Journal of Marketing, Vol. 55, October,
1991, pp. 1-19
27. Grönroos, C.: Marknadsföring av Tjänster. En studie av
marknadsföringsfunktionen i tjänsteföretag (Marketing of Services: A Study of
the Marketing Function in Service Firms) Doctoral Dissertation, Svenska
Handelshögskolan, 1979
28. Grönroos, C.: Defining Marketing: A Market-Oriented Approach, European
Journal of marketing, Vol. 23, No. 1, pp. 52-60, 1989
29. Grönroos, C.: Quo Vadis, Marketing? Toward a Relationship Marketing
Paradigm, Journal of Marketing Management, No. 10, pp. 347-360, 1994
30. Grönroos, C.: Relationship marketing: Strategic and Tactical Implications,
Management Decisions, Vol. 34, No. 3, pp. 5-14, 1996
31. Grönroos, C.: Relationship Marketing: Interaction Dialogue, and value, Working
Paper No. 344, Swedish School of Economics and Business Administration, 1997
32. Gummesson, E.: The New marketing – Developing Long-term Interactive
Relationships, Long-Range Planning, Vol. 20, No. 4, pp. 10-20, 1987
33. Hansén, S., Wakonen, J.: Innovation, a winning solution?, international journal of
Technology Management, Vol. 13, No. 4, pp. 345-358, 1997
34. Hagel III, J., Singer, M.: Net Worth, Shaping Markets When Customers Make the
Rules, Harvard Business School Press, Boston, Massachusettes, 1999a
35. Hagel III, J., Singer, M.: Unbundling the Corporation, Harvard Business Review,
march-April, pp. 133-141, 1999b
36. Hoffman, Donna. L. and Novak, Thomas. P.(1996), “Marketing in hypermedia
computer-mediated environment: Conceptual foundations”, Journal of Marketing,
July, pp. 50-68
37. Holmlund M.: Perceived Quality in Business Relationships, Doctoral Dissertation,
Swedish School of Economics and Business Administration, Helsinki, 1997
38. Jonsher, C.: An Economic Study of the Information Technology Revolution, in
Information Technology and the Corporation of the 1990s, T. J. Allen and M. S.
Scott Morton (Eds.), Oxford University Press, New York, pp. 5-42, 1994
39. Keeney, R. L.: Value-Focused Thinking, Harvard University Press, Cambridge
Massachusettes, 1992
40. Kelly, G. A.: The Psychology of Personal Constructs, W. W. Norton & Company
Inc., New York, 1955
41. Kotler, P.: Marketing Management Analysis, Planning, and Control, 9th ed.
Prentice Hall Inc., Englewood Cliffs, NJ, 1967
42. Lipnack, J., Stamps, J.: The Age of the Network, Organising Principles for the 21st
Cebtury, Omneo, Essex junction VT, 1994
43. Lipnack, J., Stamps, J.: Virtual Teams, Reaching across space, time, and
organizations with technology, John Wiley & Sons, New York, 1997
44. Machlup, F.: The production and Distribution of Knowledge in the United States,
Princeton University Press, Princeton NJ, 1962
45. Machlup, F.: Knowledge: Its Creation, Distribution, and Economic Significance,
Vol. II The Branches of Learning, Princeton University Press, Princeton NJ, 1982
46. March, J. G. The Technology of Foolishness, In Decisions and Organizations,
March, J. G. (Ed.), Basil Blackwell Ltd., Oxford, pp. 253-265, 1988a
47. March, J. G.: Bounded Rationality, Ambiguity, and the Engineering of Choice, in
Decision making, descriptive, normative, and prescriptice interactions, Bell, D. E.,
Raiffa, H., Tversky, A. (Eds.), Cambridge University Press, 1988b
48. Maturana, H. R., Varela, F. J.: The tree of Knowledge, Shambhala Publications,
Inc., Boston, 1987
49. McCarthy, E. J.: Basic Marketing, A managerial approach, Richard D. irwin,
Homewood Ill., 1960
50. Moore, G. A.: Inside the Tornado, Capstone, Oxford, 1995
51. Moore, J. F.: The Death of Competition: leadership and Strategy in the Age of
Business Ecosystem, Harper Business, New York, 1996
52. Nonaka, I., Takeuchi, H.: The Knowledge-Creating Company, Oxford University
Press, New York, 1995
53. Nonaka, I.: The Knowledge-Creating Company, Harvard Business Review,
November-December, pp. 96-104, 1991
54. Penrose, E. T.: The Theory of the Growth of the Firm, Basil Blackwell, New
York, 1959
55. Popper, K.: The Logic of Scientific Discovery, Harper&Row, New York, 1959
56. Prahalad, C. K., Hamel, G.: The Core Competence of the Corporation, Harvard
Business Review, May-June, pp. 79-91, 1990
57. Rayport, Jeffrey F. and Sviokla, John J. (1994), “Managing in the Marketspace”,
Harvard Business Review, November-December, pp. 141-150
58. Sanchez, R., Heene, A.: Reinventing Strategic Management: New Theory and
practice for Competence-Based Competition, European Management Journal Vol.
15, No. 3, June, pp. 303-317, 1997
59. Schumpeter, J. A.: The Theory of Economic Development, A Galaxy book, New
York, 1961
60. Senge, P. M.: The Fifth Discipline, Currency Doubleday, New York, 1990
61. Shapiro, C., Varian, H. R.: Information Rules, A strategic guide to the network
economy, Harvard Business school press Boston, Mass. 1999
62. Sterne, J.: Customer Service on the Internet. Wiley Computer Publishing, 1996
63. Sterne, J.: World Wide Web Marketing 2nd ed., New York, John Wiley & Sons,
1998
64. Stewart, T. A: Intellectual Capital, the new wealth of organisations, Doubleday
Currency, New York, 1997
65. Storbacka, K., Strandvik, T., Grönroos, C.: Managing Customer relationship for
profit: The Dynamics of relationship Quality, International Journal of Service
Industry Management, Vol. 5, No. 5, pp. 21-38, 1994
66. Sveiby, K-E.: Transfer of Knowledge and the Information Processing Profession,
European Management Journal, Vol. 14, No. 4, pp. 379-388, 1996
67. Tapscott, D.: The Digital Economy, Promises and perils in the age of networked
Intelligence, McGraw-Hill, New York, 1996
68. Tapscott, D., Lowy, A. Ticoll, D.: Blueprint of the Digital Economy, creating
wealth in the era of e-business, McGraw-Hill, New York, 1998
69. Van Waterschoot, W.: Van den Bulte, C.: The 4 P Classification of the Marketing
Mix Revisited, Journal of Marketing, Vol. 56, October, pp. 83-93, 1992
70. Webster, F. E.: The Changing Role of Marketing in the Corporation, Journal of
Marketing, Vol 56 October, pp. 1-17, 1992
71. Zeithaml, V. A. and Bitner, M. J.: Service Marketing, New York, McGraw-Hill
Companies Inc, 1996
72. Zeleny, M.: Knowledge as a New Form of Capital, Part 1. Division and
Reintegration of Knowledge, Human Systems Management, Vol. 8, pp. 45-58,
1989
73. Zeleny, M.: Knowledge as coordination of action, Human Systems Management,
Vol. 15, No. 4. pp. 211-213, 1996
 INNOMARKET
Turku School of Economics and Business Administration
Rehtorinpellonkatu 3
FIN-20500 Turku
Finland

http://www.tukkk.fi/markkinointi/innomarket/

Turku School of Economics and Business Administration

• Department of Marketing

View publication stats