How Satisfying Customer Demand Can Lead To Trouble

Is the customer always right? This article discusses a seminal work which argues that sometimes serving customers can lead to failure

Recent corporate rhetoric has emphasized how “satisfying the customer” is of core importance to corporate missions. C. M. Christensen and J. L. Bower’s essay “Customer Power, Strategic Investment, and the Failure of Leading Firms” shows how this emphasis, if taken too literally, can lead to derisive consequences (in certain situations) for a firm. Christensen and Bower ask the question “why and under what circumstances financially string, customer-sensitive, technologically deep and rationally managed organizations may fail to adopt critical new technologies or enter important markets = failure to innovate which have led to the decline of once great firms” (198). In other words, why goes a good company that try’s to serve its customer and does a good job at doing this nevertheless sometimes fail (and in what circumstances will this happen)?

This essay nicely constructs a case for customer demand being potentially short sighted, and, therefore, the blind satisfying of customer demand to potentially cause firms to ignore important new innovations until too late. The irony is that this occurs in large, well managed, and competitive firms, not in badly managed ones which let their competitiveness slip. Fundamentally, this article shows yet again that there is no way around vision, no way to avoid taking risks, no way to guarantee a firm How to construct great arguments long term success. “Satisfying the customer” may seem like a cover-all strategy to success, but it is not. Some of the theoretical underpinnings of this paper helps construct the validity of the statement 1) “patterns of resource allocation heavily influence the types of innovation at which leading firms will succeed or fail.” When this thesis is bolted onto the thesis that 2) customer demand can tend to determine the allocation of resource allocations, one can see the theory behind the thesis emerging. One can add that 3) the current customers in an industry demand what works best in the present (or near future) and will not tend to demand in the short run inferior products even if the technology had potential. Lastly, we get that 4) once behind in a new technology, even a strong firm has a hard time catching up to (i.e. gaining market share from) upstarts with technological superiority and a head start. In conclusion, we get 5) a potentially breakthrough technology that is initially inferior for major customers of a firm to the status quo, and whose future potential is not clear/in doubt, may be ignored by the major incumbent firms who are focusing on satisfying their core customers, and this oversight may have serious adverse consequences to the companies long term success.

 

Is the customer always right? This article discusses a seminal work which argues that sometimes serving customers can lead to failure Recent corporate rhetoric has emphasized how “satisfying the customer” is of core importance to corporate missions. C. M. Christensen and J. L. Bower’s essay “Customer Power, Strategic Investment, and the Failure of Leading Firms”…

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