Knowledge Center: Publication
Marketing, Sales and Strategy Officers
Winning the battle for customer experience leadership12/2/2015 John Abele
At a glance
Rising customer expectations and the proliferation of customer interactions across many parts of the organization have companies searching for leaders who can deliver an excellent customer experience.
This chief customer executive must not only develop an effective strategy but also build support among leaders across the organization — a task that calls for a unique set of skills and capabilities.
Successful executives focus on three critical areas: understanding the customer relationship across all interaction points, reorienting the company around the customer’s needs and wants, and using technology to enhance customer engagement.
The steady shift in the US economy from a reliance on manufacturing to a focus on services — an evolution fueled by technological advancements, offshoring, and changing demographics, among other forces — has permanently altered how companies view customers. With more businesses focused on service, the notion of meeting or exceeding customer expectations has become the new battleground in competitive differentiation.
And customer expectations are only rising, spurred by rapidly changing technology that places an array of services (and much of the world’s information) at consumers’ fingertips. Need to buy car? Why spend hours haggling with dealers when you can conduct the entire transaction online — from research and price comparisons to purchase and financing? Have a bad experience in a restaurant? Why argue aimlessly with a manager when you can post a negative review on social media with your smartphone? Need to do your holiday shopping? Why stand in a crowded line at the mall at 4:00 a.m. on “Black Friday” when you can get it all done online on “Cyber Monday” and have it delivered to your door — oftentimes for free?
For the first time, customers wield as much power as the businesses that serve them, and increasingly customers are calling the shots about how and when they want to engage and in what formats. Leading companies such as Amazon have essentially re-created the playing field: customers now expect “one-click” functionality in all of their interactions, be it with retailers, banks, or even taxis. Today, each touchpoint or interaction — from any part of the business — is a vital piece of the customer relationship continuum. As companies seek to deliver positive interactions and an excellent experience, customers have become the tail wagging the dog, a dynamic that has left many executives scrambling.
The rewards of getting this customer shift right are huge. Businesses that best understand the needs, wants, and desires (expressed and latent) of their customers and deliver experiences that go beyond mere satisfaction are leading their industries in revenues and market share. In 2014, J.D. Power evaluated 600 brands and identified 50 customer service champions, a list that included industry leaders such as Apple, Southwest Airlines, and USAA.1 These companies have made the customer experience a core part of their business strategy and are constantly raising the bar. As Steve Cannon, president and CEO of Mercedes-Benz USA, says, “Satisfaction is vanilla. We need to delight . . . we need to provide extraordinary.” In a 2014 Gartner survey, 89% of respondents indicated that by 2016 their companies will compete primarily on the customer experiences they deliver.2
All of this has amped up the demand for strong, customer-centric leadership. Whether the title is customer experience leader, customer experience officer (CXO), chief customer officer, or a variety of other similar labels, the demand for talent to solve the customer experience challenge is at a premium. In industries ranging from retailing to insurance to technology to healthcare, the mix of skills and approaches continue to evolve, and relatively few companies are getting it right. According to Gartner, 65% of large enterprises now have a CXO-type role. Yet a 2014 report from the Temkin Group found that just 7% of companies earned an “excellent” rating from their customers for customer experience.3
The position is no doubt complicated by its scope: improving every customer interaction along the relationship continuum requires working across departments and rallying large organizations around a common vision for pleasing the customer.
To be effective, customer experience executives must have deep skills and the ability to work effectively within the company’s culture to mobilize the enterprise to get results. Since these executives may report to the CEO, the chief marketing officer, or operations and service leaders, they must be comfortable taking the lead or working collaboratively — and understand when each stance is appropriate. No matter where they fit on an org chart, our experience suggests that the best customer experience officers focus on achieving three goals. A closer look at each goal underscores the skills and capabilities required to lead in a new era of customer centricity.
Understand the entire customer relationship continuum
More and more, customers are interacting with large companies in ways that span the breadth of the company’s internal workings (across sales and marketing, customer service, and even product development, for example). Meanwhile, these internal functions typically see only their part of the interaction. The risk is that each functional team may feel confident they have a complete picture of a customer’s needs, priorities, and satisfaction levels when in reality they have no such thing. When this happens — and in our experience it happens a lot — the desire to collaborate, let alone change, is low.
Therefore, a customer experience executive’s first order of business should be to assemble a comprehensive view of all the interactions that make up the customer relationship continuum. Doing so requires gathering customer information from many sources across the company, including call centers, service reps, websites, customer surveys, social media, and transaction data. Depending on the business, it may also require understanding the impact of less obvious touch points, including delivery personnel, frontline operations, field equipment service technicians, and even third-party distributors — all of whom engage with customers and can burnish or undermine the customer experience.
In one recent case, a major hospital system and healthcare service provider we know hired its first customer experience officer. Notably, this executive didn’t have a healthcare background but came from the hospitality industry — an intentional signal from management that the hospital was now viewing individuals as customers rather than patients. To get a better sense of what hospital “customers” were experiencing, the new executive supplemented his fact-finding by spending time posing as a patient in the hospital’s various waiting rooms, and even across its various departments and shifts. With this perspective, the customer experience officer was better able to advise the company on how to improve its engagement across all touchpoints.
Executives can use a similar approach to better understand the service offerings of competitors. Exercises such as these help customer experience executives better define the current customer relationship continuum, pain points, and “moments of truth” that, when addressed effectively, can create competitive headroom.
The recently hired CXO of a large multichannel retailer spent his first several weeks mapping customer engagement and the customer’s view of various interactions — all to gauge what customers liked, what they didn’t, and how long each process step took, among other factors. He then compared these customer experiences to those of the competition, including net promoter scores (NPS) and customer sentiment data, and used this information to create a future vision of how an excellent, comprehensive experience would look and feel to customers.
Within three weeks, he presented his findings to management to educate them on the customer interactions across all the company’s touchpoints. Based on what he had learned, he ran a successful pilot, and the company is now rolling out this approach nationally, supported by new technology infrastructure. While still a work in progress, the results thus far are positive, and the company has enjoyed increases in both NPS and employee satisfaction.
As this example suggests, customer experience executives must be able to not only develop and integrate insights but also ask the right questions, build the case for investment, and generate metrics that demonstrate a true return on investment (ROI) — and often very quickly upon assuming the role. The forward-looking CXO who conducts the right analyses can help break down the territorial attitudes among departments and begin educating them about the things that truly matter to customers.
(Re)orient the business around customers
The announcement by CVS Health to stop selling tobacco products may have caught the pundits off guard, but the move was part of a deliberate effort to align the brand more closely with its customers. With the company’s focus on health and wellness, CVS executives recognized that it was better to launch smoking cessation programs that included education and improving access to medication. These efforts, combined with a greater emphasis on other offerings such as beauty products, reflected the company’s new embrace of the customer.
This sort of customer-oriented focus is smart. Given the scope and depth of customer interactions — and the myriad opportunities to delight or disappoint — customer experience must be viewed as the ultimate representation of a company’s brand. And to deliver against that brand promise better than any competitor can, companies must integrate the customer’s point of view into the company’s DNA.
Software company Sage’s EVP of customer experience, for example, worked with the company’s marketing team to define the company’s brand promise: to be the most recognized supporter of small and midsize businesses by giving them the freedom to succeed. His team then asked 17,000 customers what that meant to them, the results of which were synthesized into five core values. Armed with this clarity, the team used these values as the basis for key executive conversations, customer relationship analyses, the design of customer interactions, and the definition of customer experience metrics, and even the creation of new products and services.
Redesigning the ways in which functional groups actually engage with customers is the next crucial step. While customer experience leaders don’t have to be certified Six Sigma experts or process gurus, they must be flexible enough to work with company leaders to resolve operational inconsistencies and create changes on the process side that deliver tangible business results.
Successful companies have taken different approaches to meeting this challenge. The US healthcare insurer Cigna, for example, has a large program management and operations team that works hand in hand with the customer experience executive and business leaders. Liberty Mutual, whose CEO wants it to be a best-in-class customer experience company, has empowered the front line to make process changes that provide faster, easier, and more positive interactions for customers.
Uniting employees across the organization behind the customer mission requires strong vision but also the ability to collaborate extensively — and effectively — with leaders and managers at all levels. With the scope and authority of the customer experience leader still evolving, today’s CXOs must be savvy influencers, cultivating relationships that span functional boundaries and allow them to coordinate activities in areas they don’t directly control. One retailer’s customer experience leader explained that she amplifies her ability to influence by taking different functional leaders aside to show them how her programs can benefit their business. She also emphasized how important it is to be disciplined, comprehensive, and focused on results to ensure the new process and culture move beyond sloganeering and start to permeate the organization.
The CXO must also understand how to redesign incentives to reward the desired employee behaviors. Even departments or functions that don’t interface directly with customers may need to change. Human resources, for example, must often recruit for new organizational competencies, develop training programs that support new customer-focused priorities, and devise compensation systems that encourage and reward sustainable change. Yet incentives need not be overly complicated.
At Sprint, the chief customer officer worked with HR and the call center leader to retrain call center employees and provide incentives for high performers on just two metrics — answering promptly and first-call resolution of customer problems.
As these examples suggest, insight without action is not enough. The real test is whether or not companies can effectively rally the organization around what they learn. In part this depends upon the CXO’s ability to align the C-suite around a customer-centric vision and mind-set, but it also highlights the role of the CEO in making change happen. Even the best customer strategy will flop without an organizational culture willing to support it, and to a very large extent this starts at the top (see below, “It all starts at the top”).
Sidebar: It all starts at the top
For some companies, focusing substantively on customer service will represent a big organizational change.
Therefore, any major customer-focused initiative needs to have genuine executive sponsorship. Strong C-suite commitment is what translates a clear sense of purpose into well understood employee behaviors (think Zappos’s “WOW” philosophy or FedEx’s “Purple Promise”).
Moreover, these leaders aren’t above getting into the details and making customer service personal. For his part, Fred Smith, president and CEO of FedEx, reviews service metrics with his executive team weekly — common behavior among leading customer service organizations we’ve studied.
Similarly, Apple CEO Tim Cook and T-Mobile CEO John Legere are known to respond directly to customer e-mails about service issues. Actions such as these send clear and positive signals to the entire organization.
Harness technology to support customer engagement
Put simply, technology and customer experience are now inextricably linked: IT systems and software are critical enablers of a company’s efforts to manage and monitor most customer interactions. Therefore, CXOs must have a solid understanding of how technology can be used to bring the customer experience to life.
But they need not be tech gurus. Given how quickly technology is changing (what may be standard in three years might not have even been invented yet), it’s more important to be pragmatic, flexible, open minded, curious, and, above all, ready to apply a laser-like focus on ROI to assess how new applications and tools can best support the business.
CXOs must also think broadly to harness technology in a way that delivers a consistent and integrated customer experience across all channels. The Web, mobile, social media, and digital apps are shaping the overall impression of the company’s commitment to customers by allowing them to engage when and how they desire. Yet call centers, frontline sales reps, and Web-based self-service platforms are often still the first places customers turn for information or to resolve issues. Technology should weave all of these channels together and aggregate data on interactions and preferences to give companies a consolidated view of the customer — the holy grail of customer experience. With these insights, companies can provide better service as well as smarter, more tailored product offerings.
To be sure, companies that are seen as leaders in customer satisfaction and experience have always used technology to engage their customers in new ways in order to gain an edge. USAA was an early pioneer with its photo check deposit capability in 2009 and has continued to be an innovator. Health insurance companies such as Blue Cross and Blue Shield of Illinois offer online disease management content and fitness-monitoring apps to connect more closely with their consumers. For most companies, the digital offering serves as both a “pre- and post-transaction” resource to customers, and while a one-size-fits-all solution may have worked in the past, increased personalization is fast becoming the norm.
Customization could come from an algorithm (such as Netflix’s ability to suggest your next movie pick) or a company’s individualized online chat feature. In many companies, the customer experience leader and CIO work closely together to implement new technologies that support operational reengineering, product and service combinations, and channel integration. Through this collaboration, the customer experience executive must become a true technology partner who understands the risks and returns on technology investments and is able to make a persuasive case to the C-suite to obtain buy-in.
The stakes are high: companies that don’t take advantage of technology will quickly find themselves behind the curve and without the tools to deliver a customer experience that engenders loyalty.
Customers are calling the shots like never before. Thriving in this new environment requires companies to pursue three interrelated goals: developing a more sophisticated view of the customer relationship continuum, reorienting processes around what customers (and not the company) find important, and making the most of new technologies. Translating these aspirations into actions requires customer experience leaders who can operate flexibly and effectively and exert their influence across large organizations. Companies that attract, develop, and retain executives with these skills — and do so quickly — will have an edge that endures.
1 “J.D. Power Reports: Highest-Performing Companies Focus on Customers and Realize Rewards on the Bottom Line,” J.D. Power press release, March 3, 2014.
2 “Gartner Survey Finds Importance of Customer Experience on the Rise — Marketing Is on the Hook,” Gartner, September 29, 2014.
3 Temkin Group, Temkin Group Insight Report: 2014 Temkin Experience Ratings, by Bruce Temkin, March 2014.
About the author
John M. Abele (firstname.lastname@example.org) is a partner in Heidrick & Struggles’ Chicago office and manages the firm’s Marketing, Sales, & Strategy Officers Practice.