Introduction into customer orientation

Peter Ferdinand Drucker has described indepth what Total customer orientation is. His theory is sometimes called market-orientation and is a bit complicated to explain. The better idea is to start with the more traditional concept how companies can be lead. The classical concept is called centralisation. The idea is, that all the decisions in a company are made in a single point which is the headquarter. The information from the subdepartments are send to the headquarter and then the next commands are send back to the subdepartments. On top of the company is the CEO. He knows everything and he decides everything. He is the boss of the company. The subdepartments have smaller subleaders which have to obey to the master CEO.

This kind of description is the classical top down organisation structure. But where is the customer? Right, there is no customer. The marketing department has no responsibility but has to execute the orders given by the CEO. Sometimes, it was argued, this kind of organisation structure is the ideal one, because it is very lean and is working great. Really? It seems, that something is wrong with top down centralisation and that is the reason why Peter Drucker and other have invented something which is working different. Customer orientation is the opposite to a centralized autarky driven organisation. Explaining what TCO (total customer orientation) is is easy if the centralized structure was understood. TCO flips the normal structure from top to the bottom. It's the opposite.

To explain the details we have to imagine first the centralized structure. In some older movies such a system was described very well. And the question is which kind of behavior would be perceived as subversive to a centralized organization? Subversive means, that somebody's behavior is wrong in such a structure. The ongoing effort of wrong behavior results into customer orientation. Let us make an example.

In a classical fastfood company, the CEO gives the order to increase the price for a Bigmac. Because the company is organized from top to bottom, this advice is equal to the law. That means, the employee on the lower layer has to change the pricetag into the new one. The dialogue would be:

CEO: reduce the price!

employee: yes, sir.

More talk is not necessary. The CEO is the boss, and the subdeparment has to obey. Now, we can slightly modify the speech interaction.

CEO: reduce the price!

employee: why?

CEO: because we have to get our costs back from the customer.

employee: My customer can't pay the higher price. I won't change the pricetag.

CEO: I gave you an order. Do it!

employee: Yes, but under protest.

The second speech interaction goes into the direction of customer orientation. Instead of obey to the higher level in the command chain, the employee is arguing with his boss about the price. According to Peter Drucker the second speech example make sense, because it will lower the strength of the normal CEO and increase the power of the customer. It is important to know, that all behaviors which are going into customer orientation are perceived as subversive actions. Subversive because they are directed against a centralized top down structure. As a result, some kind of mismatch and confusion is the result. The amount of interaction in the company is higher, the subdepartments are asking back to the CEO if they have a different opinion.

On the first look a decentralized company structure doesn't make much sense, because the amount of coordination is higher. In the second speech example, a conflict dialogue between the employee and the CEO was the result. The reason why Peter Drucker and many other are recommending this origination principle especially for knowledge intensive economies is because a decentralized organisation is equal to a company within the company. That means, each subdepartment acts by it's own, has it's own guidelines, it's own ressources and it's own goals. This fractal structure is highly chaotic but fits well to fast changing markets. Or to explain it from the other perspective. The natural form of organize a company is the traditional centralized one which is working top down. Only if this structure fails in the reality, the next more complicated idea is to introduce market oriented organisation.