Designing experiences
Depending on the Business Strategy, value (= equity) is derived from a focus on one of four Primary Business Models. For instance, brand value is firmly related to a product-centric business, while an excellent customer service experience will be most critical to a resource-centric model.
17.1 - DESIGN THINKING
Experience Design has been at the forefront of business for a couple of years. However, few realize that customer experiences have to be tailored to the business model. For instance, in the case of a product-centric business model, the focus should be on building brand experiences (Coca-Cola), while in the case of a Resource Centricity it is mostly about user experiences (convenience).
We’ve identified four conceivable experiences:
- BRAND EXPERIENCE ─ Related to Marketing and core to Product Centricity
- CUSTOMER EXPERIENCE ─ Related to Sales and core to Customer Centricity
- USER EXPERIENCE ─ Related to Delivery and core to Resource Centricity
- SHARED EXPERIENCE ─ Related to Success and core to Network Centricity
17.2 - CUSTOMER EXPERIENCE
Customer Experience (CX), in our view, isn’t the all-encompassing experience some say it is. We believe it is a main driver in case of a customer-centric business model, in which a group of comparable customers – for which the business can fulfill similar needs – means more to the business than others and, therefore, customers need to experience this.
"Courage. Kindness. Friendship. Character. These are the qualities that define us as human beings, and propel us, on occasion, to greatness."
Digital transformation
We’ve looked at business models and how firms can either respond effectively to disruption or be the disruptor (break-through innovator).
And how ‘trying to be the best’ leads to machismo and tribalism, sabotaging cross-functional solutions and diminishing customer experiences.
Considering all this, what are the odds that digitalization by itself transforms a business?
18.1 - DIGITAL IS NO HOLY GRAIL
A business does not transform simply because it adopts fancy digital technology, like artificial intelligence, big data analytics, micro-services, or some other bag of tricks. These are change-initiatives, intended to increase productivity and profitability.
Regardless, Digital Transformation should be understood as Digital Business Transformation, provided the intention is to transform the way the business operates based on a vision of the future (Netflix video streaming vs. Blockbuster video stores).
The biggest challenge is not to raise the level of digitalization, but to transform the mindset of the people inside the company. To get them involved, engaged, and committed to delivering significant value to increase customer loyalty.
18.2 - WHY 70% OF DIGITAL TRANSFORMATION FAILS
70% of Digital Transformation (DT) initiatives fail, according to a recent McKinsey study. Indicating a humongous amount of money and time wasted (900 billion out of 1.3 trillion USD over 2017), let alone the opportunity costs.
18.3 - THE TRUTH ABOUT CUSTOMER LOYALTY
What keeps consumers loyal to their favorite brands appears to be all but digital, according to recent reserach by KPMG:
- Product Quality – 74%
- Value for Money – 66%
- Product Consistency – 65%
- Customer Service – 56%
- Easy Shopping Experience – 55%
- Product Assortment – 55%
- Pricing – 54%
You may have noticed that few of these aspects are tied to digitalization. In a sense, it is business-as-usual: you’ll still need to offer great quality, at the right price, during each sales cycle, supported by great customer service, to retain more customers.
However, as more information became available to the average consumer, we did notice a significant shift in buying behavior from rational to emotional triggers. Also, companies that pioneered by offering more convenient digital shopping experiences did give rise to higher customer expectations and as such, forced other companies to follow their lead.
18.4 - HOW EXPERIENCES DRIVE GROWTH
Successful businesses realize that an overall customer experience is more important to their ROI than focusing only on specific channels. Adobe commissioned Forrester Consulting to conduct an online survey with 1,269 marketing, advertising, customer experience (CX), digital, and analytics business leaders.
According to the research, experience-driven businesses:
- report 1.7x higher customer retention, repeat purchase rates, and average order values.
- are 1.6x more effective in turning loyal customers into advocates.
- have 1.5x happier employees with greater satisfaction at the individual, team, and department level.
- report 1.4x revenue growth, an average growth rate of 15% compared to 11% among other companies.
However, these numbers look very similar to research by Kotter & Heskett, conducted between 1977 and 1988 (published in 2011), in which they examined the effect of ‘cross-functional collaboration’ and ‘a less adversarial culture’ on company performance. We’ve addressed these numbers in the Performance Boost section, next to corresponding research by Towers Watson (2011) and Gallup (2008).
Another thing to consider is that research suggests that 97% of customer experience initiatives fail to produce results, while others confirm that CX programs seldom produce tangible results ─ contradicting Forrester’s research (Adobe benefits directly from an emphasis on CX).
"Transformation isn’t sweet and bright. It’s a dark and murky, painful pushing. An unraveling of the untruths you’ve carried in your body. A practice in facing your own created demons. A complete uprooting, before becoming."
Summary
19.1 - SUMMARY
We know from research that avid employee and customer engagement has a definite positive effect on the bottom line. Effects that were attained long before (1977-1988) we were accustomed to concepts like customer experience or design thinking.
We’ve seen digital gurus contribute similar positive effects exclusively to digital initiatives. However, as digital is fast becoming the new normal, experts are now convinced that it is high-touch, rather than high-tech, that will (continue) to make the difference.
Indeed, customers have developed new buying rituals, driven by social, mobile, and digital technology, which has provided them with access to previously unattainable information, both biased and non-biased. However, KPMG research confirms that customers still want the same thing as they did 100 years ago: quality, value for money, consistency, and service. And because of the saturation of rational triggers, the shift towards emotional triggers emphasizes the need to raise customer compassion.
Furthermore, product development has to remain aligned with actual customer demand and customer expectations while offering experiences that are appreciated, differentiating, and defendable, using methods like Design Thinking, Agile/LEAN, Six Sigma, and Experience Design. Customer feedback is most critical, hence the need to build strong Alliances of Trust™.
What has shifted, and quite dramatically (taken from a business viewpoint), is the emphasis on retaining more customers ─ as opposed to acquiring new customers ─ driven by a shift from as-a-product to as-a-service business models. As such, we’ve found the adoption of Customer Success Agents, pro-actively onboarding customers, most striking.
Meanwhile, globalization and digitalization forced some industries to restructure; at first, by taking away the middleman, followed by transforming marketplaces into marketspaces. Companies will need to adapt to these changes while some may even be able to create new business models, offering yet unknown opportunities for creating, delivering, and capturing value.
We live in exciting times. Although the future may seem daunting, it still has to be written ─ leaving each and everyone with the opportunity to create the future they desire. The key question here is: What is your vision of the future?
"No one knows the cost of a defective product - don't tell me you do. You know the cost of replacing it, but not the cost of a dissatisfied customer."
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