PwC Research Reveals “Customer Value” Void in Supply Chains

Changes in customer behavior are set to disrupt businesses in all industries over the next five years. Yet, most company operations are not designed to deliver what customers value – now or three years from now.

This is one of the key findings of a new PwC survey of 1,262 operations decision-makers around the world, launched last week.

The report – Reimagining operations: Insights from PwC’s 2015 Global Operations Survey – finds that while 61percent of operations executives expect changes in customer behavior to become a disruptive factor in the coming years, only 25 percent are extremely confident that their operations are designed to provide customer value and a distinctive experience. And 63 percent say that understanding what customers value is a challenge for their own company operations.

“Knowing what customers value is a real and persistent challenge for operations executives. Without this understanding, we often see operations stretched too thin,” says Mark Strom, Principal and Global Operations Leader, PwC. “When one team tries to innovate, they come in direct conflict with an operational assignment to cut costs – or they create some new complexity that’s harder to manage. Negotiating trade-offs can slow everyone down.”

To be successful now and in the future, companies need to design their operations around their customers. “That way, operations teams can make appropriate tradeoffs and more timely decisions when inevitable changes come,” adds Strom.

Companies plan to do more than just improve existing processes, say researchers. More than half the executives polled in the survey said improving existing processes to drive their companies' operations isn't enough. Sixty-one percent cited increasing cross-functional collaboration as having the greatest potential to help them reach their strategic goals.

“C-suites have been thinking of operations more broadly than the traditional view of sourcing, manufacturing, and supply chain, or in the services sectors, front, middle and back office,” says Brad Householder, Principal and Supply Chain Leader, PwC. “Across industries, the majority of our survey respondents now manage these functions as part of operations too: customer insights, marketing, sales, service and support, and new product and service development.”

But it takes more than a broader view of operations from the C-suite to sync up strategy across the company. Only about a third of companies prioritize a few cross-functional capabilities at the company level. Most of the others work in silos, with each function making its own decisions on which capabilities matter most.

A key finding of the report is that companies increasingly recognize that to stay resilient in the face of change, they need to focus on a few closely linked capabilities. By 2018 43 percent of companies PwC surveyed say they plan to take this path. If successful, they will significantly alter the competitive field and challenge even the most dominant market players.

Researchers tested this idea by looking at the more strategic companies in our survey, which is about 15 percent of their survey pool. A few things set them far apart from their peers. First, they’re far more likely than everyone else to focus on building a few differentiating capabilities to drive a competitive advantage (51 percent vs. 29 percent). They’re also more confident they’ll achieve a broad set of performance objectives and revenue and cost targets. This in turn helped companies drive strategy, provide a distinctive customer experience, and adapt to change.

“With so much disruption ahead, companies need to concentrate their efforts on a small but coherent set of capabilities,” says Strategy& Principal Rodger Howell. “By doing this, they can align operations with strategy across the company, and they’ll be ready to respond as customer needs change.”

Tomorrow: More on PwC Methodology

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