managing customer experience the next competitive frontier · customer value proposition/ segment...

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Partha Iyengar

Managing Customer Experience — The Next Competitive Frontier

Based on Interviews With

• Dr. Donald Norman, Co-Founder, Consultant

Nielsen Norman Group (U.S.)

• Dr. Eric Schaffer, CEO

Human Factors International (U.S.)

• Dr. Donald Lessard, Deputy Dean

MIT Sloan School of Management (U.S.)

• Irene Au, Head of User Experience

Google (U.S.)

• Kevin Cai, CIO

China Eastern Airlines (China)

• Willie Stegman, Program Director, Core Banking Transformation

Standard Bank (South Africa)

• Tsukasa Makino, CIO

Tokio Marine & Nichido Fire Insurance (Japan)

Definition of "Customer Experience"

The customer experience (CX) is the customer's perceptions and related feelings caused by the one-off and cumulative effect of interactions with a supplier's employees, channels, systems, or products.

Key Issues

1. Why is the focus on managing the "customer

experience" increasing?

2. What are the challenges in addressing this issue?

3. What are the approaches CIOs should use to

enhance the customer experience?

The Quality of CX Increasingly Determines Enterprise Success

• The percentage of people who discontinued their business with a company

after a negative CX climbed from 68% in 2006 to 89% in 2011.

• 86% of consumers would pay more for a better CX.

• 73% of consumers would expand their purchases with a vendor by 10% or more if a

superior CX was delivered.

• 44% of consumers would pay a premium of 5% or more for a superior CX.

• 58% of consumers would recommend companies that deliver a superior CX.

Source: Harris's "2011 Customer Experience Impact Report" and Strativity's "2010 Customer Experience Consumer Study"

The CX defines the interaction with the enterprise

Extremely likely

Extremely unlikely Neutral

Promoter Passive Detractor

NPS = Promoters - Detractors

10 9 8 7 6 5 4 3 2 1 0

Strengths Challenges

High response rates

Exec. understanding

Captures emotion

Frequency

Immediacy

B2C

Root cause lacking

Not "clearly superior"

Best question?

Causation

Anonymity

Integrity

Proxy Measure of CX: The Net Promoter Score (NPS)

Net Promoter Score (NPS) was introduced in 2003 by a Bain & Company consultant Fred Reichheld in an

influential article in the Harvard Business Review. Since that time, many Global 500 companies have

adopted this metric, both to gauge customer experience and to focus and motivate employees to deliver a

better experience. Reference: http://en.wikipedia.org/wiki/Net_Promoter

"Apple's stock price has risen 500% over the last five years and more than 4,500% since 2002, soon after Steve Jobs introduced the iPod, the first of his path-breaking trio of mobile devices that later included the iPhone and the iPad. The company posted revenue of $46.3 billion in the quarter ended 31 Dec, one of the largest quarterly hauls

ever for a technology firm." — LA Times, 29 Feb 2012.

Strong Correlation of CX Excellence and Enterprise Success

NPS used as a proxy measure of the CX quality

14

-5

18

-5

3

1

102

1

62

107

33

23

32

32

32

38

56

114

128

224

328

382

-50 0 50 100 150 200 250 300 350 400 450

Kaiser Permamente-Health Insurance

USAA-Homeowners Insurance

USAA-Banking

USAA-Auto Insurance

Costco-Department/Speciality Stroes

Safelite AutoGlass-Auto Service/repair

TripAdvisor-Travel Websites

Google-Online Search/Information

Amazon.com-Online Shopping

Apple-Computer Software

Apple-Computer Hardware

Revenue Growth ComparisonNPS Leader vs. Industry Average (%)

Industry Average

NPS Leader

CIOs See Customer Experience as Greatest Opportunity for IT Innovation

Source: Gartner CIO Survey, 2012

Ranked First Ranked Last

35%

32%

24%

18%

15%

16%

12%

6%

13%

9%

10%

11 %

Customer engagement, marketing and sales

The manufacturing and service creation process

How we learn and change as a business

The way we get ideas and make decisions

The way we extract value from customers

Distribution of Respondents

Customer experience (products, services, etc.)

Case Study: Recognition of the Problem — Standard Bank (South Africa)

• High levels of competition and regulatory pressures in

the retail banking space

• Review of operating and business model in light of

declining revenue and market share

• Conclusion: The bank had "lost touch" with customer

expectations

• Facing challenges from new competitors with simpler

products and pricing models...

• ...Which forced a strategic focus on the customer

experience

— Willie Stegman, Program Director, Core Banking Transformation, Standard Bank

Key Issues






Traditional Enterprise

Enterprise decision processes Enterprise decision processes

CX-focused Enterprise

IT Strategy

IT Processes

Applications

Architecture

Infrastructure

Organization Structure

Organization Culture/Mindset

Governance

Business Purpose

Business Strategy

Products/Services

IT Strategy

IT Processes

Applications

Architecture

Infrastructure

Organization Structure

Organization Culture/Mindset

Governance

Business Purpose

Business Strategy

Products/Services

"Truly" Putting the Customer at the Center of the Enterprise…

Customer Customer

Transformation of Organizational Structure/Value Chain

Transformation

Michael Porter’s product/service-oriented value chain

The customer-experience-focused value chain

Source: Michael Porter (1985).

Transformation Across Many Dimensions

Comparison of traditional and customer-centric organizations

Different Skills and Competencies Required

CX skill sets

Source: Ben Melbourne, ThoughtWorks.

Key Issues






Case Study: The Solution Standard Bank (South Africa)

• Drove transformation from a product-centric retail bank to a

customer-centric retail bank.

• The transition has taken a combined team of business and IT people to

assist the CEO in transforming the bank across people, process,

and infrastructure.

• The first key outcome was a (revamped customer-centric) business

and operating model that helped drive competitive differentiation.

• Took five years to come to terms with changing the business model

externally and even internally into a (customer-focused) "value

chain“ approach.

• Difficult for bankers to come to terms with this as opposed to the earlier

siloed product approach.

• The end result is a customer-centric organization with process-centric

overlays driven by customer need, with delivery that is

product-agnostic. — Willie Stegman, Program Director, Core Banking Transformation, Standard Bank

Standard Bank: Customer-centric Value Chain

Product Manufacturing

Customer Interaction

Fulfillment and Infrastructure

Customer Value Proposition/

Segment

Governance

• Customer Segments

• Marketing

Generic sales/ service forces

Specialist CVP and

product knowledge to support sales/service

Third-party sales/ service forces

Specialist

sales forces

Save

Transact

Borrow

Protect

Value Creation Simplification Effectiveness Efficiency

Growth through profitable and customer-centric value

propositions

Increase sales and service revenue by converting leads

and deepening CVP penetration

Highly efficient/ low-cost

operations

Standardized products with reusable building blocks

and configurable features

Sales fulfillment with exacting SLAs

Transaction processing and administration

Infrastructure run

Business Model Viewed Along the Value Chain

Seven Competencies for CX Success

• Organizational mindset and culture

• Aligning the organizational structure

• Adapting the governance model

• Developing customer-centric products, services,

and pricing

• Developing customer-centric research capability

• Implementing customer-centric IT design

and development

• Using new measures of business success

Approaches to CX Improvement

The CX value chain

Adopt a Maturity Model Approach

The Gartner Customer Experience Management (CEM) Maturity Model

Recommendations

Objectively assess your role and "business credibility" in

the organization.

Position IT as an effective partner in the CX journey of the

enterprise based on the appropriate "CX approach."

Actively participate in building the "seven competencies for

CX" within the enterprise.

Proactively build CX-centric capabilities within IT:

- Skills

- Methodologies

- Technologies

Build an effective partnership with the CMO.

Recommended Gartner Research

The Gartner Customer Experience Management

Maturity Model

Ed Thompson (G00217544)

Getting Better Metrics: Five Principles For

CIOs: Toolkit

Andy Rowsell-Jones and others (G00164615)

The Emerging User Experience Platform

Gene Phifer (G00211625)

Competitive Landscape: Digital Marketing

Service Providers

Richard Fouts (G00214389)

The Consumerization of Application Development

Ian Finley (G00216625) For more information, stop by Experience Gartner Research Zone.

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