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The Magic Behind Customer Innovation

Customer Experience Innovation: No Genius Required

It's the year 2000. MP3 players have been on the market for a couple of years now, and you're wondering why they aren't selling very well. After all, it's clear from sales of the Sony Walkman and the Sony Discman that people want portable music players. And even the early digital music devices have some obvious advantages: MP3 players don't "eat" tapes or skip when jolted.

Could it be that the prices are too high? Maybe it's something intrinsic to the product, like the feature set or the battery life? What could it be?

You know how this story turns out. The main problem wasn't the price, features, or the battery life (although all those things matter). No, the problem was that it was hard to get music into the darn things, leaving early adoption to techno nerds and hobbyists.

Steve Jobs figured out the true nature of the problem and created a solution: the iPod plus iTunes. That pairing gave people what they really wanted: end-to-end support for a customer journey that started with finding music they liked, buying it for a reasonable price (as opposed to stealing it through file-sharing services), getting it onto a device, playing it back at reasonable fidelity, and being able to back it up for safety.

Ultimately, Jobs' realization started Apple down the path from a failing company to one that has the largest market cap of any firm on the planet. Now here's the irony: Other, less capable business executives could also have solved the MP3 "mystery" if they had treated customer experience as a business discipline and examined the problem from the outside-in perspective of the customer.

Specifically, they could have conducted observational studies of MP3 customers and prospects (especially those who'd considered the purchase and rejected it), then systematically mapped their customer journeys to identify the parts that were broken. It's science, but it's not rocket science.

What's more, our hypothetical executives could have gone on to design a customer experience ecosystem that supported a seamless version of those broken customer journeys. Sure, creating the products, services, and delivery channels that the ecosystem required would have been challenging. But if Sony or another company trying to sell MP3 players at the time had done that, one of them might be the firm with the largest market cap in the world today.

By now you might be wondering, "If this is so obvious why didn't someone else figure it out?" The answer is sad but simple. The other players were looking at the problem from the inside-out perspective they'd developed during the decades when they dominated their markets by controlling manufacturing and distribution channels. Back then operational efficiency was all the rage. You can easily imagine executives of the day thinking, "If we can just get the cost per unit low enough, these suckers will take off!"

Yeah, right.

Let's look at the same situation in a different industry. Do you remember when Travelers merged with Citi in 1998? The merger was heralded as an amazing opportunity to create synergies by selling multiple financial products to their shared customers. There was less fanfare when those imagined synergies didn't materialize and Citi spun off the property and casualty part of the business in 2002. In that case there was no Steve Jobs at the helm to figure out how to make it work.

But it could have worked. We know that because there's at least one company executing that strategy successfully today: USAA. It goes to market by customer journey with its "house circles" and "auto circles." When customers need to buy a home or car USAA helps them find one, finance the purchase, and provide insurance. From the customer's perspective it's a wonderful thing—a complete solution to a complex problem. From USAA's perspective, it's great because the company fulfilled its mission to improve the financial well-being of its members. And oh, by the way, it also won three pieces of business instead of one.

How did USAA uncover this opportunity? It has what's perhaps the most customer-centric culture of any company—one that focuses on understanding and serving customer needs. And while it employs some very bright and creative people, the organization would be the first to admit that there's no Steve Jobs lurking in their wings, handing out divine inspiration.

Three customer experience principles
Here's what all of this means for you. If you want to create a new market like Apple, or "only" have a 97 percent to 98 percent year-over-year customer retention rate (plus more revenue per customer) like USAA, you don't need to find a CEO who's an inspirational genius. (That should be a relief by the way. I hear they're in short supply.) Instead, you need to incorporate sound, repeatable customer experience practices into your business. You can do that by adopting the first three customer experience disciplines, the ones that allow you to compete through customer-centric innovation. My co-author Kerry Bodine and I describe them in detail in our new book, Outside In. Here they are in brief:

Strategy: What kind of customer experience do you want to deliver? The streamlined, economy-minded experience of a Southwest Airlines, the high-touch deluxe experience of an Emirates airlines, or something else all together? Unless you have a guiding game plan, you won't even know where to look for opportunities to innovate. The building blocks are at your fingertips, and with just a little digging you will uncover your company's corporate objectives—the foundation of your customer experience strategy.  This is where the discipline of customer understanding comes in, with practices like social media listening, ethnographic research, and customer journey mapping that help companies get into the heads of their customers.

Customer understanding: It's not enough to think you know your customers; you need to really know them. And you won't find all of the answers only in periodic surveys. Deep insight will happen if you're systematic about studying customers through qualitative research techniques, then documenting and sharing your insights through tools like personas and customer journey maps. Customer insights ultimately drive enhanced customer experience strategy. This should be the cornerstone of your metrics and governance programs. They need to be tightly woven into the core fabric of your company's culture.

Design: To create solutions that really solve customer problems, you need a repeatable problem-solving process that incorporates the needs of customers, employees, and other business stakeholders. At its heart this process involves prototyping, iterating, and testing until you can prove to the business that what you have designed will work. The right customer experience changes, implemented the right way, won't just fall into your lap. You must actively design them. Design will stretch your skills and challenge your old ways of working. At times, it will require that you make a leap of faith and put something you're not quite sure about in front of customers you value.

Will adopting these disciplines guarantee success? Of course not. But they will make it possible for your organization to achieve customer experience breakthroughs—something that probably isn't going to happen without them.