How to overcome your CX transformation anxieties
McKinsey's Ralph Breuer explains how three key building blocks can help companies address their CX inertia and improve their customer experience to create competitive advantage.
Leading a customer experience (CX) transformation can generate a lot of anxiety. Many leaders hesitate to even start because they are overwhelmed by the numerous challenges of driving change across virtually every silo in the organisation. But this hesitation creates real risks for the business.
The recent shifts in consumer behaviours and expectations brought about by COVID-19 are forcing companies to change how they connect with and serve customers. History clearly shows the value of investing in customer experience during a downturn. In the last economic recession, businesses that prioritised customer experience realised three times the shareholder returns compared to businesses that did not. Those that do not adjust to the next normal will quickly be left behind.
The good news is that there is now a proven formula for executing customer experience transformations. It comprises three core building blocks: a clearly defined aspiration, an agile transformation approach, and a thoughtful deployment of new capabilities, particularly advanced analytics. By combining all three building blocks, companies can create a competitive advantage in their industry.
Block one: Build aspiration and purpose
The first step in a successful customer experience transformation is to align on a crisp definition of the type of experience you want to deliver. When companies set out to define their customer-experience aspiration, they often fall into one or both of two traps: either the aspiration is generic and does not align tightly to the company’s purpose, or it’s unclear how the aspiration will create value that can be measured and tracked. Falling into either of these two traps leads to CX-transformation programmes that lack clarity and coherence.
A good CX aspiration delivers on company purpose and brand promise. In alignment with their company missions, Nike seeks to deliver inspirational experiences, Starbucks looks to provide experiences that nurture, and BMW seeks to offer the ultimate driving experience. Companies then need to translate their aspirations into expected business value by defining the specific changes in customer behaviour they expect to see. This focus on customer behaviour completely changes the conversation in the C-suite. Leaders start talking about customers, not about financials. They prioritise the experiences that will lead to the expected customer behaviour even as customer needs evolve over time.
Once they have prioritised the experiences with the greatest potential impact on customer behaviour, CX leaders identify the internal processes and technology capabilities they need to substantially reimagine them. They then consolidate the prioritised experiences and the development of the required capabilities to create a road map that identifies critical activities quarter-by-quarter.
Block two: Transform the business
While executives often successfully develop comprehensive CX-transformation road maps, many fall into the trap of implementing business-as-usual programmes to execute the needed change. The most common mistake is parcelling out various elements of the program to different functions. That leads to communication challenges, ownership issues, and accountability problems that sink even the most straightforward transformation aspirations.
Customer-experience initiatives at the companies that most successfully undertake them, look and feel completely different. These companies create agile, cross-functional teams that have true ownership of their projects, deep technology expertise, and a culture of design thinking and continuous improvement.
In the current environment, these teams have seamlessly transitioned to collaboration platforms to drive continuous cross-functional innovation. For companies truly committed to a CX culture, these aren’t superficial ornamentations. They reflect a significant investment in recruiting and nurturing agile teams with deep expertise in experience design, developing cutting-edge omnichannel platforms and technology, and reimagining the experiences, products, and services that best deliver on the brand promise.
To define customer personas and understand customer needs, the cross-functional agile teams leverage design thinking and advanced analytics toolkits to carry out rapid-fire quantitative and ethnographic research. They conduct cocreation workshops to develop innovative concepts and prototypes that address pain points. They use advanced analytics to identify and prioritise meaningful performance metrics. For example. reducing wait time to quantify the actual financial impact of changes in customer behaviour as reflected, perhaps, in increased contract renewals, and to track progress. Once they have developed new products and services, these agile teams make sure they are scaled across the business, integrated into the technology platform, and continuously tested and refined across segments and geographies.
Block three: Enable the transformation
Leaders who have successfully implemented new experiences for their customers sustain the changes by building new capabilities. There are four that we find are most critical for success:
- Customer-centric mindsets – From the C-suite to the front lines, employees must feel confident that they have the necessary skills and tools to deliver the best possible experience for customers. Leading companies develop academies that combine digital courses, live workshops, and ongoing nudges to support the development of new capabilities. Each learning journey is tailored to a specific role within the organisation.
- Integrated technology stack – In order to deliver exceptional omnichannel customer experiences, companies need a technology stack that spans the business. It often takes the form of a digital platform (built around microservices and APIs to quickly and flexibly offer a variety of services to customers), an omnichannel contact centre platform (with call recognition, chat, video chat, and email management), and a single system that integrates the platforms with each other.
- Agile operating model and governance structure – Innovation teams are only effective if they have the autonomy to make decisions. This means establishing agile decision-making processes and assigning formal decision rights to leaders on the team. These new processes and decision rights often require some internal negotiations but yield extraordinary results.
- Performance-management system – Leading organisations are now using predictive analytics, machine learning, and big data to overcome the well-known limitations of customer feedback, which often provides an incomplete and inaccurate view of actual customer experiences. At minimum, companies need management systems with sophisticated feedback loops that teach employees which behaviours yield the best results and guide innovation teams on where to focus their efforts. The best tools allow companies to accurately predict the current satisfaction and future spend of each of its customers based on their experiences.
Bringing it all together
Customer experience is a competitive advantage in the new normal. The greatest sustained impact comes from bringing together the three building blocks of CX transformation. Only by committing to these can companies expect to emerge from the pandemic with a sustainable advantage over their competitors.
Over the course of 2021, we will no doubt see further changes in customer behaviour and understand which of those we saw over the pandemic are staying for the long-term. To take advantage of that insight, organisations should start work on assembling their CX building blocks.