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Harley Manning, Kerry Bodine: Outside in; The Power of Putting Customers at the Center of your Business

You Need Your Customers More Than They Need You

The six disciplines of customer experience: strategy, customer understanding, design, measurement, governance and culture. This book is about customer experience, something that is fundamental to the success of every business.

Of course, you love your customers — if not for them, you couldn’t pay your mortgage. But loving your customers won’t help you succeed unless you do something about it.

People call customer service when they have a problem. So, equating customer service with customer experience is like saying that a safety net is a trapeze act.

Usability is just one piece of the customer experience puzzle — and not even the most important piece. If those are some of the things that customer experience is not — what, then, is it? It’s what products and services your company offers, how you manage your business and what your brand stands for.

Who are your customers? They’re both the people who have purchased your goods or services and those who intend to buy your goods or services.

Customer experience is how your customers perceive their interactions with your company. Customers perceive their experiences at three different levels:

  • meets needs,
  • easy and
  • enjoyable.

Recent market shifts have brought us into a new era, one Forrester calls the age of the customer — a time when focus on the customer matters more than any other strategic imperative. Competitive barriers of the past — manufacturing strength, distribution power, information mastery — can’t save companies today.

Outside In aims to fix the problem by revealing the new imperative: creating and nurturing a system of interdependent, self-reinforcing practices that align employees, partners, processes, policies and technology around customers.

Customer Experience Means Billions to Business

Customer experience leads to profits. But not because it makes your customers feel warm and fuzzy and not when it’s just a slogan. Customer experience leads to profits … if you treat it as a business discipline.

You have got to learn how to build business cases for customer experience projects. If you show up with a business plan that has all cost and no benefit you will lose out every time to projects that show ROI. I always put customer experience first, then brand, then cash because it is a logical sequence.

The simplest way to prove savings is to do what Sprint did: Find customer experience problems, fix them and measure the actual results.

Customer experience correlates to loyalty. And that means that companies with higher CXi scores have more customers who will buy from them again, who won’t take their business elsewhere and who will recommend them to a friend.

Three of the most common loyalty metrics used in business today:

  • purchase intent,
  • churn and
  • word of mouth.

What would happen if a company with below – average customer experience for its industry improved to the point where it delivered an above-average customer experience for its industry. We modeled three types of revenue benefit from this improvement: incremental purchases from current customers, retained revenue as a result of lower churn and new sales driven by word of mouth.

If you’re a CEO, you can do what Dan Hesse did — find and fix the problems that are sapping your business. If you’re in charge of customer experience like Parrish Arturi you can put programs in place that increase customer loyalty and bring you more revenue just by doing the right thing for your customers. And if you work in marketing or sales or IT — or just about anywhere in your company — you can be the one to start your organization down the path to providing a better customer experience.

The Customer Experience Ecosystem

A customer experience ecosystem is the complex set of relationships among a company’s employees, partners, and customers that determines the quality of all customer interactions.

If you want to fix your customer experience problems, you need to identify their root causes and then create a new equilibrium for your customer experience ecosystem.

“The customer was falling through the cracks,” John explains. “It’s because we were compliance driven. When people saw the customer falling through the cracks, there was no hand reaching down to stop them from falling.”[1]

Just like a natural ecosystem, your customer experience ecosystem consists of living beings. These are the customers, employees, and partner companies who interact with each other, either directly or indirectly, along a customer journey. The ecosystem also includes nonliving components, like the policies, processes and technologies that lay down rails for how people interact. Ecosystem maps systematically uncover the customer experience ecosystem’s hidden dynamics.

The simplest and perhaps most common technique for digging into any given customer experience problem is to pick a single instance of customer pain and then look for its root cause with the “5 Whys” method: Just start with a problem and work back to the problem’s root cause by repeatedly asking “why”.

Begin by mapping the ecosystem that supports a single but very important customer journey.

  • First, pick an important target customer and think of a problematic journey for that customer.
  • Next, write down the series of actions that the customer takes as part of that problematic journey – ranging from eight to eleven steps.
  • Next, write down all the people and groups that your customer interacts with at each step, like a call center agent or someone in the billing department.

The “line of visibility” is what your customers can see – it is essentially everything above it. Everything you’re about to put below the line is completely invisible to your customer, despite the fact that what they don’t know is often the thing that hurts them.

Every year, FedEx conducts research to determine what moments matter most to customers as they move along the corridor — moments like receiving a delivery.

When they find problems, they launch projects to fix them. Those projects get reviewed by the customer experience steering committee, so you had better believe that the problems get resolved.

If you want to make major improvements to the customer experience offered by your company, you must start by understanding your customer experience ecosystem.

If you want to win more customers, keep them longer and maximize the resulting profits, you’ll need to master the six disciplines of a mature customer experience organization.

From Bumper Sticker to Business Discipline

To achieve the full potential of customer experience as a business strategy, you have to change the way you run your business. You must manage from the perspective of your customers and you must do it in a systematic, repeatable and disciplined way.

You might easily decide that ecosystem mapping, combined with a find-and-fix approach, is all you’ll ever need to maximize your potential. But that’s not true.

Companies that want to produce a high-quality customer experience also need to routinely perform a set of sound, standard practices. These practices fall under six high-level disciplines:

  • strategy,
  • customer understanding,
  • design,
  • measurement,
  • governance and
  • culture.

Megan Burns, Forrester’s lead analyst on customer experience maturity, uncovered the six disciplines by reviewing Forrester’s customer experience research going back to 1998.

  • The strategy discipline is your game plan. It’s a set of practices for crafting a customer experience strategy, aligning it with the company’s overall strategy and brand attributes and then sharing that strategy with employees to guide decision making and prioritization across the organization.
  • The customer understanding discipline is a set of practices that creates a consistent shared understanding of who customers are, what they want and need and how they perceive the interactions they’re having with your company today.
  • The practices in the design discipline help organizations envision and then implement customer interactions that meet or exceed customer needs.
  • The measurement discipline is a set of practices that lets organizations quantify customer experience quality in a consistent manner across the enterprise and deliver actionable insights to employees and partners. This is how you put customer experience metrics on par with traditional business metrics such as sales and profitability.
  • The customer experience governance discipline is a set of practices that helps organizations manage customer experience in a proactive and disciplined way. If your customer experience strategy is your game plan, then the governance discipline supplies your referees and your rule book. It does this through a mix of assigning responsibilities and changing business processes.
  • The culture discipline consists of practices that create a system of shared values and behaviors that focus employees on delivering a great customer experience. You might think of it as the way you shape what your employees do when you’re not in the room. Practices in the culture discipline fall into three categories: hiring, socialization and rewards.

The culture discipline is perhaps the most powerful of all the disciplines because it embeds practices from the other five disciplines into employee DNA.

This is the age of the customer. You’re not going to succeed through manufacturing strength, distribution power, or information mastery — those have all been commoditized.

Strategy

Great customer experiences don’t happen by accident. They’re the result of countless deliberate decisions made by every single person in your customer experience ecosystem on a daily basis.

Your customer experience strategy must match your corporate strategy. Your customer experience strategy must align with your brand attributes.

Eric Nicolas – director of global brand management for Holiday Inn. Eric teamed up with design and innovation consultancies Continuum and Ziba to develop a customer experience strategy.

The strategy, dubbed the Social Hub, basically says: “We give our guests flexible options so they don’t have to leave the hotel to get what they want. They can find it at Holiday Inn.”[2] The core of the Social Hub concept encapsulates Holiday Inn’s four key brand attributes — familiar, inclusive, purposeful and social — and translates them into guiding principles about what an entirely new lobby experience should feel like.

Beatriz Lara Bartolomé, chief innovation officer at BBVA, one bank that’s not content with the status quo. “What we want to do is develop a system that represents the ideal future solution for customers — and then find a way to make that system work for the bank.”[3]

Customer Understanding

Thinking you know what customers want is risky. Knowing what they want leads to customer experience improvements that matter.

Surveys can help you gather customer feedback about specific interactions and gauge how customers feel about their experiences in aggregate.

But the guys from E.ON will also tell you that surveys have built – in limitations as to the types of insights they can uncover. If you want to know why people did (or didn’t do) something, or about the nuances of how they did something, then multiple – choice survey questions are difficult to craft. They only work if you know the answers beforehand. And when it comes to customer experience, the likelihood that you’ll know what your customers want or need before you ask them is close to nil.

That’s why companies looking to get a complete picture of what their customers really need, want and aspire to — and those that want to discover opportunities for meeting those needs in differentiated ways — must supplement surveys with qualitative research methods. There are three key methods you need to know about: mining unsolicited customer feedback, conducting ethnographic research and gathering input from employees.

If you want to find out what your customers actually do, what motivates them and what opportunities exist to better meet their needs, you need to conduct some form of ethnographic research. Ethnography, which has roots in the field of anthropology, is simply about observing your customers’ behavior in a natural setting.

You’ve got to take your customer data and turn it into a compelling picture or story — something that will make it easy for your colleagues to understand and share. Two tools are especially effective for this purpose: personas and journey maps.

Personas are fictional characters that embody your target customers’ key behaviors, attributes, motivations, and goals. Unlike market segmentations, which typically remain nameless and faceless, personas come to life with first and last names, photographs and vivid narratives that describe day-in-the-life scenarios.

Journey maps are documents that visually illustrate a particular persona’s activities over time. Many journey maps plot the entire course of a customer’s relationship with a company — all of the steps that customers take as they discover, evaluate, buy, use and get support for a product or service — and all of the touchpoints that they interact with along the way. Others zoom in to just one particular part of the journey.

Many companies and interactive agencies have gotten so caught up in the persona and journey map hype that they skip the research phase and go straight to crafting these documents based on what they think they know about customers.

Your end goal isn’t the personas and journey maps themselves. Your end goal is deep customer insights, which just happen to be encapsulated in these particular formats.

Customer insights are worthless when they’re locked in your head or squirreled away in a database.

Customer insights ultimately drive your customer experience strategy. They should form the cornerstone of your metrics and governance programs. They need to be tightly woven into the fabric of your culture.

Design

Design isn’t just about picking the right shade of blue for the company logo. It’s a problem-solving process that incorporates the needs of customers, employees and business stakeholders. And it’s a way of working that creates and refines real-world solutions.

Design is the most important business discipline that you’ve probably never heard of. But how, exactly, does design work?

A human-centered design process accomplishes exactly the same thing.

  • As the human-centered part of the name implies, a typical design process starts with research to understand customer needs and motivations.
  • Analysis is next. This is when teams create artifacts like personas, journey maps and other visual models to synthesize the research data.
  • The next phase is ideation, which is just a fancy word for coming up with ideas.
  • Formats – At this point, prototypes go out in front of real customers and employees for feedback. Not just once — multiple times.
  • Finally, the team documents the features of the resulting product or service and the intended interactions.

Designers often describe this end-to-end process as a double diamond.

The process converges to the midpoint as teams synthesize the research findings and reframe the project focus. The process diverges again as teams brainstorm a broad range of possible solutions and start to prototype.

The most effective design processes include people from across the entire customer experience ecosystem — customers, employees, and external partners — to help synthesize research data, ideate possible solutions, create prototypes, and provide feedback. Designers call this cocreation.

Once you design new customer interactions, how can you tell whether or not they’re having the affects you intended? That’s where the measurement discipline comes in.

Measurement

A customer experience measurement framework strings together cause, effect, and business outcomes into a coherent story for your company. It’s a tool that helps you decide what to measure, how to measure it, and what your findings mean to your business.

You need a two-tier system here. The first tier will give you the big picture, a broad view of your overall customer experience. The second tier will capture perceptions of discrete, end-to-end customer journeys.

Three types of metrics you need to do just that: perception metrics, descriptive metrics and outcome metrics.

To measure customer experience is to measure customer perceptions — which only exist in the minds of your customers.

Virtually every organization that measures customer experience collects perception metrics primarily through surveys. That’s because surveys let you put numbers on what you’re measuring, a main goal for any measurement system.

Descriptive metrics consist of operational data about your customers’ interactions.

Outcome metrics tell you what customers intend to do — or actually did — after interacting with your company. These metrics let you connect a customer perception like being satisfied with a shopping trip, to a business result like getting another purchase from the same customer. Outcome metrics come in two varieties: self-reported data about a customer’s intended behavior and historical data about a customer’s actual behavior.

The other outcome metric consists of data about actual customer behavior. Its advantage is that actual behavior equals reality, whereas intended behavior — which is based on what people think they might do — is one step removed from reality.

All effective measurement programs model the relationships between customer experience quality, the factors that drive it, and business results.

To evolve that framework over time, think about what you’re measuring in the context of the customer experience pyramid from chapter 1: meets needs, easy and enjoyable. Meeting needs is bedrock. It will make or break your business results.

Measurement informs decisions.

Governance

That’s what the governance discipline is all about: intentional management and oversight.

You need to use your insights and metrics to identify customer experience improvement opportunities and, as you put new programs into place, keep tabs on the progress of those initiatives.

It’s important to talk about customer feedback and the financial impact of customer problems. But talk is cheap. That’s why your next step is actually committing to a continuous pipeline of initiatives that will fix customers’ top issues.

Once you’ve got a queue filled with customer experience improvement initiatives, it’s time to think about how you’re actually going to drive them to completion.

Barclaycard’s Level 0 program isn’t focused solely on finding and fixing customer issues as they arise. Level 0 owners are also in charge of developing processes and systems that prevent new customer issues from arising in the first place.

Your customer experience strategy should enable you to green-light the right initiatives quickly and veto the wrong ones without endless hours of debate.

For proposals that do align with your customer experience strategy, the next step is to assess the proposal’s impact on customers. Because of the complexity of the customer experience ecosystem and the ripple effects that any new project or decision can have, this second evaluation step typically requires more time and discussion than the first.

Once you’ve green-lighted the right initiatives, you need to make sure they’re implemented according to plan.

The customer experience governance discipline is designed to help you do exactly the same thing: adhere to practices that will consistently deliver a great customer experience.

To help reinforce the rationale behind your governance practices, and make sure that employees actually adopt them, you’ll need to develop a customer-centric culture.

Culture

Culture has the single biggest potential to drive customer experience transformations.

Customer-centric values are the building blocks for reprogramming your corporate DNA. And behaviors are how you turn all of the practices from the other five disciplines — strategy, customer understanding, design, measurement and governance — into habits that your company just can’t kick.

Stories have been the primary vehicle for transmitting culture and community values for thousands of years. They’ll be a key building block in reshaping your corporate culture, too.

Rituals are activities that you integrate into employees’ regular routines to reinforce what it takes to deliver a great experience.

To keep employees focused on what’s important, you need to back up your hiring and socialization practices with the right types of incentives. These include informal rewards that recognize personal achievement and formal rewards that compensate employees based on customer-centric metrics.

Formal rewards are meant to reinforce customer-centric behavior, not be an end in themselves.

The Natural Path to Customer Experience Maturity

Radu Ciocan is the head of customer service operations for Deutsche Telekom in Europe.

A big part of Radu’s job involves transforming the company’s call centers to run more effectively. In 2004, his marching orders were to bring T-Mobile’s call centers in line with the overall Deutsche Telekom aspiration of becoming the “Most Highly Regarded Service Company.”

Radu estimates that over the last two years, call center costs in Europe have gone down by 10 to 15 percent as a result of removing the root causes of dissatisfaction. That adds up to tens of millions of euros saved for a company the size of Deutsche Telekom.

Based on our research over more than a decade, we have seen that organizations that pursue customer experience as a business strategy follow similar paths of evolution. The path passes through three phases: Improve, Transform and Sustain.

  • In this first phase, organizations focus on finding and fixing customer experience problems. Done right, the Improve phase is a great starting point because it produces steady, incremental advances to the experience over time. This progression creates economic benefits like cost savings and increased customer loyalty. In this phase, companies focus on adopting the six disciplines of customer experience. Their goal is to stamp out the root causes of customer experience problems by changing the way they operate.
  • Transformation phase is necessary — but not sufficient — for differentiating from your competitors. When you routinely perform the practices in the six disciplines, you’ll consistently deliver the customer experience that you want to deliver. Maintaining the practices will require the same level of effort as maintaining any sound business practices — not trivial, but significantly less than what you’ll go through adopting them in the first place.
  • The obvious benefits of the Sustain phase will help you retain support for customer experience efforts regardless of how business conditions change.

You need a realistic assessment of your current adoption level for each of the customer experience.

To gauge how consistently your organization performs each practice on a continuum from not at all to all of the time, you’ll need to determine whether each practice is Missing, Ad Hoc, Repeatable or Systematic.

Ultimately you want the entire company to perform the same practices, the same way, every time. But when you first grade your adoption level you should do it business unit by business unit or function by function — and when you get your results, expect to find that different parts of your organization will be at different levels of maturity.

Customer experience strategy sets the overall direction for everything else you do. If you’re at the missing or ad hoc levels for the four practices in the strategy discipline, you’re rudderless — you’re wasting effort everywhere else. Similarly, the customer understanding discipline informs the strategy discipline by telling you what your customers really want and will respond to.

Transforming your company from the outside in by adopting the six customer experience disciplines is a major undertaking. It will take years to follow the path from wherever you are today to the Sustain phase.

Kevin Peters of Office Depot put it eloquently when we spoke to him. From the beginning, he told his people: This is a journey, not a project. It has a beginning but it doesn’t have an end. [4]

The Rise of the Chief Customer Officer

A chief customer officer, or CCO, is in charge of customer experience for more than a single channel, such as a website or call center, and more than a single department, such as sales or marketing. A chief customer officer is an executive tasked with leading customer experience efforts across an entire company or division.

A chief customer officer is a catalyst, one that most organizations need if they’re ever going to implement customer experience practices at a company – wide level. Without a CCO, most firms will never see disciplines like customer experience strategy, governance and measurement take hold.

The company needed to centralize all post-sales customer contact. That way the company could consolidate its customer data into a coherent source of insight, and assign responsibilities for dealing with customer experience problems and opportunities as they arose.

He oversees all nine thousand customer-facing employees. We classify this approach to the CCO position as an “operational” reporting structure. However, there is another model that’s more common and can be equally effective: CCO as matrix manager and orchestrator. These senior leaders create change by influencing business decisions, as opposed to directly controlling them.

Despite the fact that most people identify customer experience with consumer-oriented businesses, more than half of the CCOs we found work at business-to-business companies.

There are two reasons for the large number of chief customer officers at business-to-business companies. First, B2B firms have a lot fewer customer than B2C companies. Losing even a single customer, especially a large client, can be very painful. Secondly, a B2B company’s success often depends on the success of their customer’s customers.

Here’s the bottom line: Chief customer officers are popping up at almost every type of company, and they’re starting to gain serious traction in some industries.

Three important questions you need to answer before appointing CCO:

  • Is there a clear business purpose for having a CCO?
  • Is the culture ready to accept a CCO?
  • Is the business willing to create a CCO job position with the power to create change?

The number of chief customer officers will continue to grow, and that the growth rate will accelerate. Some of this growth will result from people doing what we just advised you not to do and appointing a CCO just because it’s fashionable.

The smart firms will realize that appointing a CCO — with the right preconditions for success — will be like pouring jet fuel into their car’s gas tank in the race for competitive advantage.

The growth curve in the number of CCOs will look like a hockey stick with a bad dent in it.

The Customer Experience Race Is On

Jon Picoult runs Watermark Consulting, a management consulting firm. He wanted to answer some questions about CX. For each of the first five years that Forrester published its Customer Experience Index, he compared the total return of a portfolio that held the top ten publicly traded companies in the CX to the total return of a portfolio that held the bottom ten publicly traded companies in the CX.

The results of Jon’s analysis were striking. Over the course of the five-year period, the customer experience leaders spanked the laggards in stock performance. The leader portfolio had a cumulative total return of +22.5 percent, compared to a -1.3 percent decline for the S&P 500 market index. The laggard portfolio trailed even farther behind, posting a decline of -46.3 percent for the five-year period.

“For five years running now, we see that companies that bring great customer experiences to the marketplace are being rewarded — by consumers and investors alike.”[5]

Just as you can’t afford to ignore other aspects of your business while focusing on customer experience, you can’t afford to ignore customer experience while focusing on other aspects of your business.

Today the industry feels a new sense of urgency around customer experience. Digital disruption makes it easy for customers to find the lowest price from among a wide range of companies online, and then switch providers in minutes — which they do. The situation has gotten so bad that one in five U.S. auto-and home- insurance buyers could change insurers during 2012.

But under the SaaS model, there are no up-front costs — customers pay as they go under a subscription-based pricing arrangement. This lets buyers test out a solution without making a huge commitment. If the customers like the product, they can add more users at a predictable cost. This situation naturally forces SaaS vendors to pay more attention to customer experience, keeping customers happy as a way of protecting their subscription-based revenue stream.

Oracle bought RightNow, and SAP has become much more flexible in their licensing-fee structure, making it easier for customers to do business with them by tailoring commercial terms to their needs.

The buy-as-you-go business models will force SaaS vendors to focus on experience, and the continued success of SaaS vendors will force traditional vendors to try to catch up.

Many of today’s customer experience practices have their origins in the science of human-computer interaction.

But there’s another opportunity that’s easy to overlook as firms rush to embrace the next big thing: reinventing the human-to-human experience.

Firms that adopt the customer understanding practices and the design practices we’ve described will see customers’ end-to-end journeys clearly, then create a consistent, continuous experience at every touchpoint along the way. That’s a clear opportunity for companies that take a disciplined approach to customer experience; it’s impossible for companies that don’t.

Multichannel orchestration around customer journeys will allow companies to do more than just synchronize channels. Firms will also create new types of experiences that cross channels.

For those of you who choose the path of customer experience, we’d like to leave you with some of our very best advice on how to start the transformation — not just within your organization but within yourself, as well.

  • First, internalize the fact that you need your customers more than they need you.
  • Second, examine the reason why your company exists in the first place.
  • Third, spend time learning what it feels like to be your customer.
  • Fourth, talk to your customers. Make it a part of your everyday life.
  • Fifth, talk to your frontline employees. Customer-facing employees — like people in sales or service — talk to your customers every day.
  • Sixth, try mapping a customer experience ecosystem for one of your company’s most important customer journeys.
  • Seventh, try connecting the dots by building a simple business case for a customer experience improvement project.

[1] In the book on page 41

[2] In the book on page 81

[3] In the book on page 83

[4] In the book on page 182

[5] In the book on page 206

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