Operationalizing the Customer Experience — Challenges and Opportunities

The advent of new platforms and channels with which customers now interact with companies — the web, mobile, social media, etc. — has brought with it great opportunities to establish a new kind of relationship with customers. But these new channels have also contributed to the growing complexity of business operations.

No company intentionally sets out to provide an unexceptional and sometimes frustrating customer experience. But this is often the result when poorly designed IT systems, ill-conceived processes, and a demoralized and disengaged workforce conspire to make it overly difficult for customers to do business with a company.

Many companies have decided that focusing on the customer experience is now a competitive business advantage in a world where commoditization of products and services has become commonplace and increased consumer transparency and competition has eroded other sources of differentiation (such as a unique product/service offering). Competing on price alone will only end in a race to the bottom.

While that strategic focus appears to be embedded in corporate boardrooms across the globe, the difficulty is in translating the strategy into real business operations. How can you both improve and operationalize the customer experience? What are the key challenges? How can those key challenges be overcome?

This report is based on a survey conducted with 114 process, customer experience and business professionals in June 2014 in an attempt to answer those questions. Additionally, telephone and in person interviews were conducted with several survey respondents and industry experts. Specific recommendations for action have been made at the end of this report.

Key Findings:

• Customer experience improvement is one of the top priorities at the vast majority (70%) of companies with 24% of survey respondents reporting that it is the highest priority of their company
• Formal customer experience departments are relatively new to many companies: 25.8% of survey respondents reported having a Customer Experience department that’s less than 2 years old, over 30% report not having a department at all
• Business and customer experience professionals perceive the top 3 stumbling blocks to customer experience improvement to be departmental silos, “lip service” from top management, and resistance to change
• Engaged and empowered staff and top management commitment were seen as the two major ingredients contributing to the ability to operationalize exceptional customer experiences
• Improving processes and IT systems were seen as critical to not just supporting the customer experience but also providing staff with the tools to serve customers better

Customer Experience as the New Strategic Imperative

Improving the customer experience is something to which all companies — whether in a B2B or B2C environment — are starting to pay attention. Customer experience goes beyond the traditional notion of “service” as a one-off transaction between a company and its customers. This isn’t just about making your frontline staff smile at customers when they arrive in the store.

Instead, customer experience is the more all-encompassing idea that the collection of experiences — the accumulation of different touch points and interactions — that a customer has with a brand contributes to the customer’s satisfaction, loyalty and desire to continue doing business. It is as much about engaging with customers on an emotional level as it is about delivering flawlessly across all channels.

Fully 70% of survey respondents (see Chart 1, below) indicated that customer experience improvement was either the highest priority of the company (24%) or one of the top priorities of their company (46%). The remaining 30% of respondents indicated that their company was paying attention to the customer experience but not backing it up with resources and investment.

There are hard business reasons to focus on improving the customer experience: there is a body of research and evidence which demonstrates a direct correlation between improved customer satisfaction and more revenue.

“In a sector like Retail food, those organizations with higher customer satisfaction have on average better market share and revenue growth,” says Jo Causon, Chief Executive of the Institute for Customer Service. “Across a wide range of sectors we have been able to identify some key measures — recommendation, loyalty, trust, repeat purchase — which show that where customer satisfaction levels are higher, customers are more likely to stay with an organization, they’re more likely to purchase more products from an organization and are more likely to recommend an organization.”

But many of these drivers around customer loyalty and repeat purchases have been known for decades. So why is customer experience coming to the fore as a widespread strategy at this particular juncture?

There are several technological and economic shifts that are driving the increased focus on the customer experience.

Firstly, technology has driven widespread changes in the way that customers interact with companies. This has resulted in shifting expectations as well as increased complexity of business operations. That same technology has also created an environment of radical transparency where good and bad experiences with companies can be amplified and shared globally.

Secondly, over the past couple of decades the twin forces of globalization and the commoditization of products and services have resulted in a market environment in which it is increasingly difficult to differentiate a brand. Global competition puts downward pressure on margins and prices while commoditization (the process whereby a product or service becomes, to put it simply, “much of a muchness” rather than considered distinct and unique) means that any previous competitive advantage from a unique feature is getting harder to maintain.

This means that for many companies there are two ways to compete: on price and on customer experience. Focusing solely on price quickly deteriorates in a race to the bottom and will attract the types of customers who switch from one brand to another in search of the best deal. That’s why many companies are starting to understand that customer experience is where the real competitive advantage is to attract, retain and grow loyal customers.

Some companies have gone down the route of setting up “customer experience” departments designed to focus on gathering Voice of the Customer feedback and align the customer experience with the brand values.

However, survey feedback indicates that for the majority of companies these departments are still at a relatively immature stage within organizations: nearly 35% of survey respondents reporting that their company did not have a customer experience department and over 25% indicating that their department was less than two years old (see Chart 2, above).

Regardless of whether companies have decided to formally invest in a customer experience department or are embedding the responsibility within an existing department such as marketing, process improvement, or sales, the challenge will remain the same: how do you make a strategy for enhancing the customer experience an operational reality within a business?

The next two sections will focus on some of the key challenges as well as the success factors identified by survey respondents.

From Blue Sky to Modern Complexity: The Challenge of Making “Exceptional” a Reality

Anyone who has tried to translate their ideas for improved customer experience into reality will recognize the challenges of executing that strategy. Big ideas and good intentions quickly bump up against the very real constraints of resources, budgets, and organizational politics.

“A lot of companies think improving the customer experience is easy. They think it’s as simple as doing the same thing with the same people or buying a tool. But it’s much, much harder than that,” says Seth Marrs, Vice President of Operations at medical device manufacturer Carl Zeiss.

The top challenges identified in the survey include departmental silos, lack of real executive management commitment and resistance to change. Many other factors were also at work (see Chart 3, below).

Here are the top stumbling blocks to operationalizing the customer experience identified by survey respondents:

Stumbling Block #1: Business Silos

Most companies are organized into functional units such as finance, marketing, sales, etc. These functional groupings serve to optimize reporting lines, connect teams of people who need to collaborate often, and/or share ideas on similar job duties. But departmental silos can also serve as a major stumbling block when it comes to the customer experience. 60.4% of survey respondents identified it as one of their top 3 key stumbling blocks to operationalizing the customer experience.

The hand offs between departmental silos can cause miscommunication and processes are more likely to be “broken” at the points between departmental silos. Both of these problems result in the all-too-familiar customer experience of being told different things by different people or passed from one department to the next.

“We need to start putting our customer at the center of our processes,” says Derinda Ehrlich, Vice President of Business Transformation at Avnet. “This is in comparison to putting our customer in the squeeze zone where they get volleyed back and forth between departments and processes and systems. We no longer want to hear — ‘that’s not my department’.”

Jo Causon, Chief Executive of the UK’s Institute of Customer Service agrees explaining that customer service is something that the entire organization needs to commit to.

“Customer service can no longer be thought of as a stand-alone function or department,” she explains. “Those organizations that are doing this well are integrating their customer experience across all of their functional areas. They are thinking, therefore, about what it means in terms of IT infrastructures, reporting lines, business functions, and rewards and recognition. It requires a fundamental shift to be able to deliver a seamless experience.”

Gray Hollins, Senior Consultant at customer experience consultancy SingleStone, thinks that it’s not inherently silos that are to blame for causing problems. Instead, he says, companies need to think about how they manage the connections between silos.

“I’ve partnered with organizations that are vertically organized and inherently that means that they’re in silos,” he says. “But they operate quite well by communicating across those silos and having technologies to help support that communication and information sharing.

Charles Farina, Business Process Improvement Manager at Essroc Cement, agrees that departmental silos are a fact of life and instead we must focus on improving “how work gets done across those silos.”

Getting the business start to “thinking across” business silos involves a multi-pronged approach that includes changes to processes, communication lines, IT systems, and even the metrics by which individuals within those business units are measured. All must be considered because just focusing on one factor, such as processes or technology, but not others, such as realigning employee performance measures will doom the initiative to failure as one constraint may be removed but others persist.

Additionally, it is worth cautioning here that implementing a technology should not be seen as a silver bullet — many organizations have invested heavily in technology that fails to deliver expected gains. Instead, strategies, people and processes need to be looked at first — and perhaps in that order — to set any initiative up for successful operation.

Stumbling Block #2: Management Pay Lip Service/Not really bought in

“Leaders always talk about how important customer service is but never truly back up the statements with the resources and backing necessary to support true customer improvement,” laments one survey respondent.

Clearly, without the support of senior leadership, it will be difficult to get not only the resources and investments required to make changes but also to get the organizational buy in from other employees. This factor came second to “Departmental Silos” in terms of overall numbers of survey respondents (45.1%), it was the factor most cited as the “primary” stumbling block with over a quarter of all survey respondents saying it was the number one stumbling block, a clear indication of the importance of senior leadership backing for any customer experience strategy.

“If the executive leadership team doesn’t have a maniacal focus on the customer then it’s very difficult for the organization to do that ground up approach,” observes Avnet’s Derinda Ehrlich. “In any strategy — if the senior executives aren’t aligned with it, you’re going to have a very tough time getting anything done.”

One of the ways that process professionals can gain that commitment is by clearly demonstrating the impact that improving their processes and the customer experience will have on the bottom line.

“A senior leader has to understand that if they improve their process and customer experience performance that this is going to impact their bottom line in the favourable sense. If they make that connection, they will act accordingly,” observes Essroc’s Charles Farina.

Seth Marrs agrees saying that a senior leader who believes in something will bring “bring power, engagement and investment.” But, he adds, to get that commitment from leadership you really need to connect the dots between how improving the customer experience will help the company increase revenues.

“If a new model came out today that said ‘don’t take care of your customer and you’re still going to make a lot of money’ then companies wouldn’t take care of their customers,” he explains. “It’s all about growth and trying to satisfy your shareholders.”

Stumbling Block #3: Resistance to change

Organizations have an inherent bias towards the status quo. People get comfortable with patterns of work and it takes time to change old habits. Equally, where people don’t understand why something needs to change or believe that the proposed change is for the better it can appear that they are resisting change. 37.4% of survey respondents cited resistance to change as one of the top three stumbling blocks to customer experience improvements.

“When you get into big corporate hierarchies, it’s hard to get things done,” observes Seth Marrs from Carl Zeiss. “Everyone wants to have a say in their own little fiefdom that they don’t want to have disrupted. The ship moves very slowly, so a lot of people give up.”

As with any organizational change that will impact on the way that people do their jobs or the systems they use to get work done, a formal approach to change management must be a critical component of the plan in order to achieve sustainable success. Most people are not inherently resistant to change — just to that which they don’t understand or agree with.

Stumbling Block #4: Fragmented Customer Data

“We have multiple systems, across multiple sites with multiple customers so one view doesn’t exist for how a customer goes through our business,” explains one survey respondent. “Added to this we do not make use of consumer data that exists in the world to understand our customers and or to predict what they may or may not need.”

Many organizations, whether because of mergers and acquisitions or organic growth over time, are beset by complicated legacy IT systems. These fragmented systems mean that data for an individual customer is difficult to access with 34.1% of survey respondents citing “fragmented customer data” as one of their top three challenges.

“How many times have you been on the phone where you’ve been told — ‘our computer systems won’t let us do that’. As a customer I don’t want to be concerned about the infrastructure that you have to serve me. I only have one answer that I want to hear, which is ‘yes — and how can I help you?’” says Derinda Ehrlich.

But Seth Marrs says that technically, changing IT systems involves both investment and a commitment to laying the right foundations in which many companies might be reluctant.

“It takes an entirely different infrastructure to be able to look at a whole customer,” he says. “I want to see a 360 degree view of the customer. Everyone wants that. But it’s highly complex because our systems are not set up to be customer centric.”

Stumbling Block #5: Lack of Resources/Budget

While it would be nice to have an unlimited budget and all the resources you need to throw at any challenge you wish, the unfortunate reality is that all businesses must operate within existing constraints.

“The companies that need customers badly are often those who are under strict cost control because they’re losing market share or they’re in a tougher market environment,” observes Seth Marrs. “So they want the customer but don’t have the funding to be able to invest.”

“It’s a true indicator of how committed a business is to the customer: if they invest in the lean times then you know they are truly customer centric but if they only talk invest then you know it’s not being taken seriously,” he adds. As discussed earlier, gaining the buy-in and commitment of senior leadership is clearly an important part of obtaining the resources and budget necessary to make the essential changes. But, in situations where even then budgets and resources are tight it can be useful to focus on small improvements and demonstrate success before committing more resources and money to the changes.

“Starting small helps validate your strategy and then you can shape your investment from there. Sometimes you realize that you don’t need to make a big investment in technology because with certain tweaks in how people are organized or how your process works, you might be able to realize the returns you seek,” comments Gray Hollins from SingleStone.

Stumbling Block #6: Poor Process Design

Processes are the means through which work gets done so it’s not surprising that poor process design was cited as one of the major stumbling blocks to creating an exceptional customer experience with 25.3% of survey respondents citing it. “Poor processes cause breakdowns and fallout across fulfilment channels,” explains one survey respondent.

For all but the simplest types of businesses, there are many complex tasks and steps that need to happen behind the scenes in order to execute flawlessly for the customer. These tasks and processes are carried out by different people and by different parts of the organization often using different IT systems. All of these different steps and systems represent a risk that something will go wrong, thus detracting from the customer’s experience.

“At the end of the day, customers don’t pay us for giving them a process. They pay us for giving them value,” says Derinda Ehrlich of Avnet. “A process is a means to an end and it needs to be as invisible as possible.”

Other Stumbling Blocks

Several other key stumbling blocks were cited as inhibiting companies from operationalizing their customer experience improvements including inconsistent or poor quality data (12.1%), legacy technology issues (15.4%), Process complexity (17.6%) and the complexity of managing the customer experience across multiple-channels (e.g. the web, mobile, contact center, in store, etc.).

What does it take to make strategy a reality?

Committed company leadership emerged as the top primary factor in making customer experience improvements a reality, while engaged and empowered employees was selected as one of the top three factors by the majority of survey respondents (see Chart 4, below).

Factor #1: Visible commitment from senior executives:

As discussed in the previous section, lack of real leadership commitment to customer experience improvement is perceived to be one of the biggest stumbling blocks. Unsurprisingly, the reverse is also true. 35.5% of survey respondents see committed company leadership as the primary success factor for improving the customer experience, with 64.5% selecting it as one of their top three.

“If I have the Vice President of Sales or the Vice President of Marketing or the President of the company saying that the customer experience is important then people are going to listen. I’ve just got to get them doing and saying the right things,” comments Essroc’s Charles Farina. “What are the managerial behaviours that staff see in place? What are the words our managers are saying? What are the actions they’re taking?”

Factor #2: Engaged and empowered employees:

Over 70% of survey respondents (73.4%) indicated that engaged and empowered employees was one of the top three factors in contributing to a positive customer experience.

“I honestly believe that there’s a virtuous circle whereby empowered and engaged employees bring empowered and engaged customers. These customers in turn bring business which then allows the company to put more focus on being more employee and customer centric,” says Avnet’s Derinda Ehrlich.

When frontline workers are engaged and empowered, reasoning says, they will be not only willing but also able to help customers. Even for those employees without direct interaction with the customer, there is an argument that customers still “feel” the behind the scenes passion that workers have for their jobs.

For instance, several telephone interviewees cited Amazon as an example of a company with high customer satisfaction where computer systems anticipate customer requirements and deliver what customers are looking for — without any human interaction at all. While this is supposition, it is hard to imagine that the engineers who created the system were completely disengaged and uninterested in the work that they were doing — a passion for excellence comes through in the company’s products and services.

Harnessing the creativity and engagement of all employees is becoming all the more important in the digital age. As Ehrlich observes, changing demographics means that younger populations are used to interacting with digital systems and don’t have the same concept of customer service being driven by a human. ““I do see a future where customers may never talk to an employee. They may never virtually know that there’s an employee behind the scenes,” she says. “But that doesn’t inhibit the power of engaged and empowered employees making decisions to better serve the customer.”

So what does it take to create engaged and empowered employees?

Many telephone interviewees felt that engaged and empowered employees and senior executive commitment and focus are tightly intertwined.

“Engaged employees start with senior management. They’re the ones that set the standards and say what’s important,” explains Charles Farina from Essroc.

Leadership sets the overall tone and focus for the organization, but an engaged employee can quickly become disillusioned and frustrated if they end up constantly having to fight IT systems and processes in order to get their work done. For frontline staff, this is an even more important point. Not only will poor IT systems and processes mean that performing frontline work is frustrating, but it also means that staff will have more irate customers to deal with when those systems and processes result in poor quality results — a vicious circle when it comes to creating passionate employees that really believe in your company.

“There’s a direct correlation between employee engagement and customer satisfaction,” observes Jo Causon from the Institute for Customer Service. “That’s not surprising because when employees are engaged they tend to feel empowered. They’re more likely to go the extra mile, they’re more likely to want to serve and do what is right for the organization.”

Consultant Gray Hollins believes that the same thing that makes exceptional customer experience — simplicity and effectiveness — is related to good processes, which are in turn are related to empowered employees.

“What makes a delightful customer experience is simplicity: a customer not having to jump from one department to another department to get their question answered,” he explains. “It’s simple processes that are clear from complexity and unnecessary hand offs. That’s linked to empowered employees. All of these factors are tightly intertwined. ”

Sami Nuwar, Customer Experience and Operational Excellence Manager at Verizon agrees: “I truly believe that the road to customer experience is paved through the employee experience. A happy employee is a productive employee and a productive employee is one that serves your customers.”

It’s not just about empowering employees through good processes and IT systems, though, there’s also a mind set required where all employees — even those who never have any direct impact on the customer — can connect the dots between the work they do and the final experience for customers.

“We live in a much more connected world these days and that means that all parts of an organization need to be integrated and see the customer experience as a whole, rather than as a set of one-off transactions,” comments Jo Causon.. “If I worked in finance, for instance, I need not just to view what I’m doing as the processing of an invoice but instead think about the connection to the customer. How does this invoice impact on the delivery of the customer experience?”

However, it appears that many companies have a fair distance to go in embedding that focus throughout the organization. 42.9% of survey respondents said that they disagreed or strongly disagreed with the statement that “all employees (whether they work on the frontline or not) understand how their role fits in to delivering to clients” at their organization outweighing the 32.7% who said they agreed or strongly agreed (see Chart 5, previous page).

Factor #3: Gathering Continual Customer Feedback

Companies have for decades been gathering customer feedback and monitoring performance against a wide variety of metrics. Common metrics include Increased Sales, Net Promoter Score, Customer Retention Rates and others (see Chart 7, opposite, for commonly employed metrics).

“Exceptional companies really understand their customers and use this insight to shape their strategy and operations,” explains the UK Customer Service Institute’s Jo Causon.

It appears that many companies feel that they are doing reasonably well in terms of gathering and acting upon the Voice of the Customer feedback. Over 50% of survey respondents indicated that their company was doing a good job of acting upon Voice of the Customer feedback, while 37.6% of respondents indicated that they had effective ways of collecting the feedback (see Chart 6, previous page).

Where companies appear to find it more difficult is in using that data to make decisions, increase sales and identify new opportunities. 44.1% of survey respondents disagreed with the statement that they were using data effectively in this way versus only 21.5% who agreed. Information remains trapped in information systems or ineffectively communicated within organizations.

“We’ve been on SAP for 14 years and there’s a lot of data captured in SAP that we’re not making use of. It’s either been too hard to get, or you didn’t know how to get it or you just didn’t know it was there,“ says Essroc’s Charles Farina. “Now we’re trying to get customer information out of SAP and make it visible and useable to our sales people so that they can make informed decisions.”

One of the additional challenges is in the interpretation of the data.

“Gathering Voice of the Customer is easy. The difficulty comes in communicating internally the meaning of the feedback,” says Verizon’s Sami Nuwar. “Most companies don’t have one single mechanism to gather the feedback. They’re getting feedback from different customers and different responder types — decision makers, influencers, segments — there are relationships, touchpoints, win/loss. It’s connecting all of those dots into something meaningful that can be difficult for companies to do continuously.”

Recommendations

While there is no magic bullet to transforming the customer experience and making your strategy a reality overnight, there are some specific things that process professionals can consider doing in order to improve the outcomes generated by their customer experience program.

#1: Establish a strong partnership between Customer Experience teams and Process Improvement teams

As discussed throughout this report, so much of the customer experience is driven by a company’s processes. Put simply, those companies with well designed and simple processes are easy and effective to do business with. Poorly designed processes, in contrast, not only frustrate customers but can also lead to frustrated and disengaged staff — thus doubly impacting on the experience of customers.

This is where a partnership between customer experience teams and those responsible for process improvement within organization can achieve powerful results.

“If you just have a customer experience program without a continuous improvement, it’s just empty promises. You’re doing a lot of measuring, but nobody is listening and nobody is doing anything about it,” observes Verizon’s Sami Nuwar. “At the same time, if you have a continuous improvement program without a customer experience program, then you risk making a lot of aimless improvements. You don’t really know if your improvement is having a real impact on business performance.”

Customer Experience professionals may find the analytical expertise in identifying process problems and implementing changes that is typically inherent in a continuous improvement program useful for making practical changes to business operating models and processes. Process improvement specialists, on the other hand, may benefit from the deep insight into what customers want and need that customer experience professionals bring to the table.

There are already indications that many companies are starting to go down this route with 69% of survey respondents reporting that process improvement teams work on initiatives that directly impact the customer experience (see Chart 8).

Equally, the majority of customer experience initiatives (see Chart 9, next page) are reportedly led by either process improvement team (26%) or the customer experience team (18%).

#2: Focus on getting the basics right

The expression, you need to walk before you can run holds particularly true when it comes to customer experience. There will always be gaps between where a company is and where it would like to be in all aspects of its performance. With regards customer experience specifically, it can be easy to point to a market leader and try to emulate them. However, if the gap between your organization’s own performance and its aspiration is too wide, it is likely to result in frustration or even outright failure.

“The basics still work — before you get too elegant and start trying to turn yourself into Amazon!” says Avnet’s Derinda Ehrlich.

The building blocks of well-designed processes, functioning and simple IT systems, and good quality data will serve to enhance the success of more sophisticated loyalty and retention schemes, omni channel customer experiences, and other marketing initiatives. While getting the basics right may not seem particularly innovative they are essential to laying the foundations that will set a customer experience program up for success.

#3: Establish a culture — not just tactics

Customer experience improvement isn’t just about specific tactics: improving a process, tweaking an IT system, monitoring metrics, etc. Instead, it requires a fundamental change in the way that all employees think about their role and how they deliver value to customers.

Changing employee mind set takes a combination of time, leadership, consistent messaging and behaviours as well as performance measurement schemes throughout the organization that are aligned to encourage appropriate employee behaviours.

“If I, as an individual, don’t understand how what I’m doing contributes to the overall goal, then that’s a problem,” observes Derinda Ehrlich. “It takes a lot of people pulling the rope to move the rock but everybody needs to know what rope they’re pulling.”

Conclusion

There is no single solution or tactic that process professionals can adopt that will lead to the successful operationalization of an exceptional customer experience. Instead, the translation of a customer experience strategy into reality is won through a combination of designing experiences from the customer’s perspective and aligning people (and their performance and job structures), process and technology to embed that experience into the business operations.

Customer experience touches all parts of the business and requires an investment of time and resources from many different functions (IT, marketing, sales, customer service, etc.). That’s why real and visible executive commitment is essential to the success of any strategic program. That commitment may be gained by connecting the dots between improved customer experience and improved revenue if it is lacking.

Engaged and empowered employees were perceived to be the number one success factor to delivering effective customer experiences. The individual efforts of all staff have an impact, even when they are not frontline employees. The same things that set employees up for success to be effective at doing their jobs and serving customers — i.e. well designed processes, systems and access to data — are those that also contribute to excellence in execution in delivering to customers.

Change to any of these systems, processes or employee mindsets, does not come easily to any sort of organization. This is especially true within large and mature companies as the increased complexity coupled with long established ways of operating can take time to change. Achieving excellent customer experience is as much about implementing tactical changes as it is about changing the culture of an organization. Both must be part of a business’ long term strategy and commitment to transform the customer experience.