"Innovation" has become a buzzword in the customer experience field.
In a recent Forrester survey of 100 customer experience professionals, nearly half of respondents said that their executive team's strategy for customer experience is market differentiation. And an ambitious 13% said that they'll settle for nothing less than having the best customer experience across every industry — in other words, these companies want to be the next Apple, Disney, or Zappos.
They also believe that innovation will help them achieve these lofty goals — and they're investing accordingly. Sixty-nine percent of these respondents report that their companies have dedicated personnel for customer experience innovation. Sixty-four percent have allocated time to innovation activities. And 55% have dedicated innovation budgets.
Are their investments paying off? A whopping 73% of interviewees say they plan to launch innovative customer experiences in the upcoming year — and two-thirds believe that they already have.
These numbers sound promising — but they just don't add up.
If this much innovation work is really happening, then why don't we see customer experiences that are actually innovative gushing forth from nearly every organization? Why haven't we seen more and more companies earning excellent scores in Forrester's Customer Experience Index? In 2013, only 8% of the companies in this annual benchmarking survey received a top grade from their customers — and that's a pathetically low number in comparison to the amount of professed innovation in the industry.
Here's the problem: Everyone talks about customer experience innovation, but no one knows quite what it is or how to attain it. In fact, when we ask customer experience professionals how they're driving their innovation efforts, we find several misguided approaches that actually thwart differentiation and waste massive amounts of time and money in the process.
Many companies simply try to keep up with the Joneses. Fifty-eight percent of our respondents said that their firms drive customer experience innovations by watching what their direct competitors are doing. A full 72% look to copy companies in other industries. For example, Citibank wanted to copy the Apple store so badly that it actually hired the same architects responsible for the Apple store concept to design its bank of the future. Not surprisingly, it wound up with a bank that looks like an Apple store. Imitation may be the highest form of flattery — but it's not innovation. In fact, it's the very definition of parity.
Other companies pray that technology can save them. Sixty-two percent of our panelists report that technology advancements drive their firms' innovation activities. But technology for technology's sake can end in disaster. Consider the multinational auto insurance company that invested in a new mobile app and expensive back-end integration to connect customers in an emergency with a call center agent. While it looked good on paper, the plan failed to account for the fact that drivers didn't download the app in anticipation of getting into a car crash — and had more pressing things on their minds than browsing an app store once an accident occurred. Result? Another so-called innovation that failed to produce business results.
In order to change approaches like these, companies must first have a clear understanding of what it is they're aiming for. Forrester defines customer experience innovation as: The creation of new customer experiences that drive differentiation and long-term value.
Customer experience innovation requires a structured approach that goes beyond traditional find-and-fix methods and helps firms identify and create experiences that really matter. To put their innovation efforts on the right track, customer experience professionals must do three things.
- Reframe innovation opportunities. Companies need to start their innovation initiatives with an outside-in approach that frames their business challenges within the context of customers' unmet needs. To identify new opportunities, for example, Philips Healthcare mapped out a typical day in the life of a radiologist, a key purchase influencer, regardless of whether those activities involved Philips. This approach enabled the team to identify a key pain point in radiologists' daily work — an inability to compare one patient's scan with those of others — that Philips already had the data for and capability to solve but hadn't considered productizing.
- Ground innovations in the business model. To sustain new types of interactions and ward off copycats, companies need to connect innovations to the mechanics of their underlying business model. Mobile operator giffgaff's customers discover, evaluate, buy, and get support online and in social forums — the direct result of a cost structure that includes only a handful of employees. And Zipcar's car-sharing business model drove a need for keycard (and then mobile phone) vehicle entry — new types of interactions that traditional rental companies never envisioned. Customer experience professionals should explicitly map out the mechanics of possible new business models — like resources, activities, and revenue structure — using a tool like the business model canvas. This visualization can help teams see how core business activities can fuel new types of customer interactions — and support them in the long run.
- Infuse innovations with the brand. Ikea Systems' cartoon furniture assembly instructions, Mini Cooper's retro-inspired dashboard, and the cheerful chirp of a Zappos customer service rep — the qualities of these customer experiences create strong associations with their brands. And the more a new customer interaction looks, feels, smells, sounds, and tastes like a specific brand, the harder it will be for competitors to copy. That's why design and innovation consultancy Continuum created mood boards when developing a new restaurant concept for Bertucci's called 2ovens. A collage of carefully chosen photos depicted the desired 2ovens vibe; helped align internal Bertucci's stakeholders; guided the design of touchpoints as diverse as the dining space, menu, and website; and even shaped the company's hiring policies.
Customer experience innovation happens at the intersection of consumer needs, business model, and brand. Companies that neglect one or more pieces of this innovation puzzle will be forever relegated to customer experience mediocrity, on par with throngs of other companies desperate to fix their experience issues and retain customers. But by following the steps above, firms can increase the likelihood that their customer experience innovation initiatives will drive differentiation and long-term value.