In part one of this series we looked at how companies in three key industries — media and entertainment, banking and healthcare — are upping their game by improving their customer experience. As important as it is to their survival and success, however, the experience economy is a bit of a tight rope walk with a high degree of reputational risk if things go wrong. In part two we’ll look at the challenges companies face in excelling in the experience economy.
As a concept, the experience economy is simple enough to understand for most business leaders. However, answering fundamental questions such as what it means for their industry/organization is not as clear cut. As the experience economy dawns on them, industry players realize that measuring user experience is one of the many challenges they face. Banks, for example, use metrics such as net promoter scores and overall customer satisfaction, none of which reflect the impact of experience on revenue.
Measuring patient experience is similarly tricky in healthcare. According to athenahealth, for example, one patient survey returned a 90% satisfaction rate among patients. While this might look great on digital paper it provides very little insight into what the organization needs to focus on for improvements in quality.
Media companies have been hemorrhaging subscribers even as the likes of Netflix and Hulu add more and more subscribers. For the longest time, media companies have relied on exposure measurement as a key performance metric. Even after the rise of online as a medium, audience size continues to be the go-to metric.
Not surprisingly, the way forward is shown by digital-enabled players. Netflix, for example, replaced its five-star rating system with a simple thumbs-up/thumbs-down in order to encourage people to give feedback. This way its algorithm is able to recommend content with greater accuracy (expressed in the form of percent match). The thought behind this move is to focus on making improvements rather measuring satisfaction and improving personalization. Minor improvements over a period of time can bring bigger gains than attempting major changes based on broad opinions.
The New York Times, meanwhile, has shown how old media companies can adapt to digital. The 165-year-old media company was able to thwart its plummeting ad revenue by moving to a digital-first strategy and focusing on attracting digital subscribers based on the perceived value it brings to the readers. By launching digital subscriptions and becoming an early adopter of the virtual reality (VR) platform, the newspaper has been able to put experience at the forefront of its offerings.
Despite the fact that digital provides unprecedented insight into user behavior, the desire to explore these revelations and put them to use is still lacking. A survey by the Financial Brand, for example, found that only 37% of the banks surveyed had a formal customer experience (CX) plan, a majority of them being community banks. This trend is not limited to banks and financial institutions. We carried out a multi-industry survey in association with Forrester, and found that less than 40% of companies have aligned internal teams to put customer at the forefront of their activities, despite stating that their strategies are customer-focused.
This inconsistency between planning and execution boils down to the fact that organizations have prioritized customer-facing activities (such as CRM) over critical investments to digitize back-end processes that can truly enhance their ability to deliver consistently great experiences. This, of course, reveals broader challenges that have emerged in the digital age: operating in siloes, and the inability to upgrade legacy systems. But, crucially, it hampers organizations’ ability to a 360-degree view, or Code Halo,TM of their customers by making it harder to deploy advanced analytics across the organization.
Going forward, organizations that don’t work on fixing these anomalies will find it harder to compete against those that have. They could find that the responsibility of creating memorable experiences would unfairly fall on one or two teams (marketing and IT, for instance), instead of being a shared responsibility. This overreliance on specific functions could undermine many organization’s digital journeys. To that end, we suggest the following:
Elevate CX to a top priority, and back it with executive sponsorship. This would ensure that the responsibility of creating great experiences is shared across the organization, and not just IT and marketing.
Make operational functions a cornerstone of CX strategy. Enterprises must understand how various functions, specifically operations and supply chain, impact experience and build integrated processes to remain fully engaged with the customer.
Add innovation-oriented digital capabilities to the services mix. Adding innovation-oriented digital capabilities such as Internet of things (IoT) to the existing services mix allows businesses to create new sources of customer value.
On the face of it, attracting talent may not seem like a major issue for most organizations. But digital has highlighted the shortcomings in talent pools at an unprecedented scale by redefining the talent needed for organizations (both incumbents and newcomers) to thrive and innovate. A survey we conducted with the Economist Intelligence Unit (EIU) found that 94% respondents were moderately or severely affected by the digital skills gap in executing their digital strategy.
But what does this mean for the experience economy? Digital talent, or lack thereof, has a direct impact on innovation, collaboration and agility of the enterprise. These are traits that define new-age players, many of whom have built their business models around digital. For incumbents, this is a stark warning sign. Banks, for example, are now competing against highly capitalized fintech and big tech firms in trying to attract digital talent. Meanwhile, the healthcare industry has been grappling with talent deficits in areas such as enterprise software, programming and database administration.
A knee-jerk response to this challenge, such as going on a hiring spree, would be unwise and expensive. Digital skill sets are likely to evolve quickly. What is needed is a combination of hiring and reskilling, requiring organizations to put in place structures for continuous education and training in order to retain talent. A starting point could be a team dedicated to pulling together all of the technological and business capabilities required in the experience economy.
If it isn’t obvious already, thriving in the experience economy requires an organization-wide realignment of values and culture. And this begins at the top. Our survey with Forrester found that 94% companies that have taken a cohesive and tightly fused approach to digitization have also appointed a chief customer experience officer (CCXO) or equivalent, compared to just 59% of siloed organizations. A champion for customer experience is a catalyst that helps permeate the new digital era vision across the lower ranks of the organization and aligns the various operations around the theme of creating memorable experiences for the customers.