Goodbye Industries, Hello Domains: Top-Performing Companies Focus on Customer Outcomes

by Peter Weill and Stephanie L. Woerner

A domain-oriented company helps serve a customer’s end-to-end need by focusing on customer outcomes rather than only on the sales of products and services. In our global survey, the domain-oriented companies were top performers, achieving more than a 15 percentage point premium on revenue growth and net margin, compared to their industry average. However, taking a domain orientation requires a big mindset change in a company. In this paper, we describe what it takes to become a domain-oriented company and the performance premiums. We also illustrate a domain orientation with examples from Kaiser Permanente, Schneider Electric, Shopify, and Cemex.

Most executives view themselves as though operating in an industry like banking, retail, or manufacturing but their customers often think differently, focusing on journeys like buying a house (not just getting a mortgage), managing corporate energy efficiency (not just installing an HVAC system) or achieving wellness (not just going to the doctor). We propose that customer expectations and digital technologies are driving the breakdown of industry boundaries, which, in turn, enable companies to offer customers solutions that cross those boundaries, creating more value for both the customer and the company. These comprehensive offerings are designed to fulfill customers’ end-to-end needs in areas such as mobility, energy efficiency, wellness, and lifelong learning—areas we call domains.¹

In our global study, the companies we identified as domain-oriented were top performers, with a big premium on revenue growth and net margin. However, taking a domain orientation requires a big mindset change in the leadership and then the whole company. In this paper, we explore what it takes to become a domain-oriented company with examples from Kaiser Permanente, Schneider Electric, Shopify, and Cemex.

The Evolution of Companies’ Customer Focus

A domain-oriented company focuses on customer outcomes rather than on the sales of products and services.

We identified three ways companies focus on customer needs: inside-in, inside-out, and outside-in. Companies with an inside-in focus optimize internal capabilities to provide specific solutions to customers. They are product-centric and include traditional manufacturers, banks, and retailers. Companies with an inside-out focus analyze customers’ journeys and identify some parts of the journey where they can provide solutions. They are customer-centric, producing solutions they can fulfill themselves, such as a bank selling home mortgages and insurance and offering savings tools for homebuyers as part of the homeownership journey. Companies with an outside-in focus aspire to fulfill customers’ end-to-end needs. They identify a customer domain and then organize themselves and partner to service the entire domain outcome—such as searching for, acquiring, and living in a home, or running a small business. A domain-
oriented company has an outside-in focus – a more ambitious and for the successful, higher-performing strategy.

The Shift to Customer Outcomes and Curation

A domain-oriented company focuses on customer outcomes rather than on the sales of products and services. For example, the US-based health system Kaiser Permanente, with over 12 million members, provides value-based care, paying its healthcare providers based on patient health outcomes including quality, equity, and cost of care. The company’s value dashboard has four dimensions—membership, utilization, quality, and affordability—that track customer outcomes and that teams across four levels of Kaiser Permanente review regularly, including in a quarterly review by the executive team and the board. Kaiser Permanente is moving from providing health care to enabling member wellness.

Because fulfilling end-to-end customer needs requires combining multiple offerings that a typical company can’t provide on its own, a domain-
oriented company digitally curates products and services from different companies in different industries. For example, a company aspiring to serve a wellness domain would combine offerings from industries such as healthcare, insurance, retail, manufacturing, and technology. For example, as part of changing its orientation from a healthcare industry to a domain for wellness, Kaiser Permanente partnered with Samsung to offer cardiac rehabilitation at home with strong results including an increase in rehab participation for cardiac event patients from 50 percent to 80 percent, accompanied with a 27 percent drop in mortality rate.²

The Performance Premiums of Domain-Oriented Companies

To support a customer, whether consumer or company, on their domain journey, companies must help the customer achieve their outcome, not just sell them products. This involves understanding the customer’s goals and how they assess and track success. In addition, to support customer end-to-end journeys, companies typically need to partner outside their core industries. To better understand how many companies are domain-oriented and how they perform, we classified the 721 companies in our survey on two dimensions: (1) the percentage of revenues from customer outcomes, and (2) the percentage of revenues from outside a company’s core industry (see Figure 1).³

Figure 1. Domain-oriented companies meet customer needs by focusing on both customer outcomes and curated complementary products – and perform better

We identified four types of companies (listed in order of increasing performance):

• Product-oriented (66 percent of companies), focused on achieving product excellence.

• Outcome-oriented (10 percent of companies), focused on helping customers accomplish outcomes.

• Marketplace-oriented (11 percent of companies), focused on creating a marketplace of offerings as a one-stop shop, typically including their own products.

• Domain-oriented (13 percent of companies), focused on understanding the entire customer need, delivering on a chosen domain outcome promise, and curating offers with partners.

Domain-oriented companies were top performers with revenue growth and net profit margins of 20.2 and 16.7 percentage points above their core industry averages. In contrast, the revenue growth and net profit margins of product-oriented companies were 7.8 percentage points and 4.7 percentage points below their core industry averages. Extending a company’s core offerings in innovative ways with an outcome orientation, a marketplace orientation, or both helps financial performance.

For example, Schneider Electric SE is a €34 billion revenue company providing energy and automation digital solutions for efficiency and sustainability. Over the last decade, Schneider Electric has transformed itself from a seller of energy-related products to a digital leader in providing energy efficiency services helping customers understand, track and reduce their energy consumption – their outcome measure.

To implement this strategy, Schneider created EcoStruxure^TM, an IoT-enabled plug-and-play customer engagement system delivering energy efficiency as a service for use in customer sites such as buildings, factories, hospitals and data centers. The EcoStruxture system translates data into actionable intelligence by collecting structured (from sensors) and unstructured (from logs completed by maintenance people) data from the set of Schneider Electric products at a customer site and analyzing the data. This produces a set of real-time instructions that the system sends back to the customer site. EcoStruxure and other capabilities have enabled Schneider Electric to move from selling products to selling more services focused on customer outcomes. These services can make a big difference in helping customers achieve their goals; for example, companies using Schneider Electric’s energy efficiency services report a thirty percent reduction in energy consumption.⁴

The Domains

Focusing on the customer domain requires your company to stop thinking of itself as operating in its core industry and instead understand its customer domains. Companies have been operating in industries for many decades but domains are a relatively new idea and there is no playbook. To try and understand the key customer domains we have done a series of studies. We’re sure that the customer domains presented in this article are not the complete and final answer but they will make a good start for jumpstarting conversations about strategy in your companies.

To identify the key customer domains, we applied two criteria. First, we considered what customers ultimately care about as they solve specific problems or negotiate transactions in their life or business (the end-to-end need); and second, we selected a measurable outcome that was associated with the end-to-end customer need. Using this rubric, we identified fourteen domains. We then collected survey data, asking each company to identify the three top domains it served. (See Figure 2.)⁵

The top five customer domains by participation were: running a business, daily needs, security, energy efficiency and sustainability, and shopping. Interestingly, the most popular domains amongst the companies weren’t necessarily the ones with the highest innovation. Of the fourteen domains, the top five in terms of innovation—measured as a percentage of revenues from new products and services introduced in the last three years—were mobility, home, wellness, lifelong learning, and luxury. As you scan those domains, we suggest you ask two questions. Which domains does your company currently operate in now (Figure 2)? And where is your company now (see Figure 1) in terms of meeting customer outcomes and partnering outside your industry? Answering these two questions will help you answer the most important question – where should you be heading and how will you get there?

What It Takes to Become Domain-Oriented

Some companies are born domain-oriented, like Shopify. Its vision is to support the entire customer need of running an e-commerce business, including building a brand, creating an online presence, setting up a store, selling, marketing, and managing finances. To deliver, Shopify helps customers achieve outcomes such as growth and global expansion by partnering with developers, designers, marketers, warehousers, payment companies, and others. That Shopify has captured 10 percent of the US e-commerce market share in just a few years is testimony to the success of taking a domain orientation.⁶

But for most companies, becoming domain-oriented will be a journey, often from being product-oriented. And many companies will typically operate in more than one domain. Global building materials company Cemex, for instance, has a very successful product-oriented offering with Cemex Go, their digital platform that is a single point of contact for customers buying cement products. Cemex also runs successful outcome-oriented businesses like Arkik, a company that offers solutions for managing concrete plants and interactions with builders; and marketplace-oriented businesses, like Construrama, Cemex’s construction and building materials chain for small companies. Cemex is also becoming domain-oriented with Regenera, which provides recycling solutions for building material waste.⁷

That Shopify has captured 10 percent of the US e-commerce market share in just a few years is testimony to the success of taking a domain orientation.⁶

Fernando Gonzalez, CEO of Cemex, in a recent interview with us, explained Cemex’s journey. “We are in an industry that is not at the forefront of the use of digital technologies – construction materials. But we believe that using digital technologies creates the strongest opportunity to transform business models and business itself because of the way you are able to serve customers. The basis of our digital journey continues to be developing a superior customer experience”.

The mindset change to focus more on domains involves dealing with a lot of complexity, especially around customer outcomes and partnering. Gonzalez explained “I think the first challenge is imagination. At the highest level possible, you have to use imagination and understanding to identify what you can create for your company through the application of these digital technologies. I think the other challenge is knowledge or the lack of it. I like this definition of complexity. What is complexity? Complexity is a lack of knowledge. When you know how to do something, it’s not that complex.”

The mindset change needed to become a domain-oriented company is enabled by both specific management mechanisms and strong technology capabilities.  We found statistically that domain-oriented companies had leading capabilities in four areas, two management mechanisms and two technology capabilities.

Management Mechanisms

• A coach-and-communicate management style.

Domain-oriented companies typically operate in real-time and don’t have the time or need for employees to go up and down the hierarchy for approvals and guidance. Instead, senior executives set the vision and guardrails and then empower teams to make it happen.

• Effective use of dashboards.

Dashboards make data transparent so that employees throughout the company can monitor performance, including customer outcomes, and can assess when to course-correct.

Technology Capabilities

• A robust and flexible API service layer to support platform reuse.

A domain-oriented company connects in real time to the customer’s choice of channel and to the myriad of internal systems and partners that provide identity management, credit assessment, onboarding, customer data (often via the CRM), and back-office operations (often via the ERP) to process the transactions.

• Technologies for sharing information with partners

(e.g., blockchain, APIs). Enabling a domain orientation typically requires sharing pre-agreed information with partners in real-time so they can help make the customer journey seamless.

Interestingly, AI was not yet a statistically significant enabler for either axis in Figure 1. However, with the rapid development of generative AI tools, AI will be important for enabling both helping customers achieve their outcomes and partnering across industries. For example, Cemex has major AI initiatives in both of these areas.

Becoming a Domain-Oriented Company

Whether your company moves to become domain-oriented is a risk versus return decision. Helping customers achieve their outcomes requires a better understanding of customers’ needs, motivations, and goals, and is a value-adding step beyond selling products and services; thus, domain-oriented companies take on more risk. Seamlessly partnering with other companies outside of your core industry while being accountable when customer interactions involving those partners go awry also increases risk. But the returns for domain-oriented companies are stellar. Are you ready to become a domain-oriented company? If so, here are 3 action items.

1. 1. Articulate your vision for your customer. Is it inside-in, inside-out or outside-in? How will you implement this vision so it goes beyond intention and into action?
   2. Think customer outcomes and beyond your industry. Identify where your company is and wants to be on Figure 1 and which domain(s) to target (Figure 2) and measure your progress in real time. Some good metrics to track are the dimensions of Figure 1, revenues from outcomes and revenues from outside your core industry. For example, domain-oriented companies achieved 68 percent of revenues from customer outcomes and 70 percent of revenues outside their core industry whereas product-oriented companies achieved 15 percent and 18 percent on those metrics respectively.
   3. Develop new capabilities – including APIs, AI, and partnering – and new revenue models.

Taking a domain orientation is a huge opportunity for your company to be creative. Unlike industries which are well understood, documented and regulated, domains are relatively new. Defining a domain that will best suit your customers is a chance to leverage the knowledge and expertise of all your employees and domains, for now, will likely be defined differently by different companies. This is an exciting opportunity to rethink the customer experience leading to innovation, leapfrog competitors and potentially achieve top performance.

About the Authors

Peter Weill, PhD, is an MIT senior research scientist and chairman of the Center for Information Systems Research (CISR) at the MIT Sloan School of Management, which studies and works with companies on how to transform for success in the digital era. MIT CISR has approximately 75 company members globally who use, debate, support and participate in the research. Peter’s work centers on the role, value, and governance of digitization in enterprises and their ecosystems and has coauthored 10 books. Ziff Davis recognised Peter as #24 of “The Top 100 Most Influential People in IT” and the highest ranked academic.

Stephanie L. Woerner, PhD, is a Principal Research Scientist at the MIT Sloan School of Management and Director of MIT CISR. She is a renowned researcher and speaker, and coauthor of Future Ready: The Four Pathways to Capturing Digital Value and What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise, both published by Harvard Business Review Press. Stephanie studies how companies use technology and data to create more effective business models as well as how they manage the associated organisational change and governance and strategy implications. Stephanie’s research has appeared in MIT Sloan Management Review, Harvard Business Review, CNBC, Forbes, Chief Executive, and CIO.

References

1. P. Weill, S.L. Woerner, and A. Diaz Baquero, “Hello Domains, Goodbye Industries,” MIT CISR Research Briefing, Vol. XXI, No. 1, January 2021, https://cisr.mit.edu/publication/2021_0101_HelloDomains_WeillWoernerDiaz and P. Weill and S.L. Woerner, “Top-Performing Companies Focus on Customer Domains,” MIT CISR Research Briefing, Vol. XXIII, No. 9, September 2023, https://cisr.mit.edu/publication/2023_0901_DomainOriented_WeillWoerner.

2. https://permanente.org/medical-excellence/value-based-care/ and Stephanie L. Woerner, Peter Weill, and Ina M. Sebastian, Future Ready: The Four Pathways to Capturing Digital Value (Boston, MA: Harvard Business Review Press, 2022).

3. MIT CISR 2022 Future Ready Survey (N=721).

4. Schneider Electric SE, “2020 Annual Report,” March 23, 2021, from the Schneider Electric website, https://www.se.com/ww/en/assets/564/document/235840/schneider-annual-report-2020-full-report.pdf.

5. In “Hello Domains, Goodbye Industries” we described ten domains based on our and others’ research at the time, but we anticipated that domains’ definition would evolve and that additional domain-oriented opportunities would arise. Our efforts to systematize our classification of domains, informed by interviews with companies as we presented the research, led us to revise our list from the previous ten to the present fourteen domains, and we continue to refine and add to them based on feedback.

6. Shopify, Q1 2023 Financial Results webcast presentation, “Leading the Future of Commerce,” May 4, 2023, https://s27.q4cdn.com/572064924/files/doc_presentations/2023/Investor-Overview-Deck-Q1-2023.pdf.

7. Cemex Go, Arkik, and Construrama are described in Woerner, Weill, and Sebastian, Future Ready: The Four Pathways to Capturing Digital Value. Regenera is described at “Regenera—Committed to Circularity,” Cemex S.A.B. de C.V., https://www.cemex.com/products-solutions/regenera.

8. Domain oriented companies were statistically significantly (at p<0.05) more effective at these 4 capabilities.

9. P. Weill and S.L. Woerner, “Dashboarding Pays Off,” MIT CISR Research Briefing, Vol. XXII, No. 1, January 2022, https://cisr.mit.edu/publication/2022_0101_Dashboarding_WeillWoerner.