What it
takes to deliver breakthrough customer experiences
To create distinctive customer experiences,
large companies need to push the boundaries and adopt next-generation digital
thinking and practices in seven key areas.
Seven minutes.
That’s how long it takes financial-technology start-up Kabbage
to approve a small-business loan—nearly 5,000 times faster than the 20 days it
takes a typical bank. It’s no wonder that customers’ experiences with
technology companies have not only altered their behavior but also raised their
expectations about how interactions with all businesses should work. As a
survey conducted by Ipsos and LinkedIn found, some 67 percent of affluent
millennials are open to using non-financial-services brands.
Incumbents are moving fast to adapt, applying a range of
approaches to improve customer experiences. These include everything from
design thinking, which involves applying creative, nonlinear approaches to
reinvent how customers interact with businesses, to agile, which calls for
fielding prototypes quickly, gaining early customer input, and then iterating continually.
With so many players in the mix, the bar is being raised ever
higher, and the danger is that an incumbent may work hard but end up with a “me
too” customer experience that does not set it apart. Instead, a great
experience that delights customers and earns their loyalty is needed. We’ve
found that improving a customer experience from merely average to something
that wows the consumer can lead to a 30 to 50 percent increase in measures such
as likelihood to renew or to buy another product. Here are seven areas we’ve
identified where incumbents can step up to design and deliver great customer
experiences.
From measuring customer
behavior to spending time with customers to truly understand them
Most companies conduct quantitative research on customers. Such
data provide important insights, but to create distinctive customer journeys,
companies must not only understand their customers’ behavior but also develop
deep empathy. In particular, companies need to empathize with customers when
they experience difficulties and obstacles.
This means embracing new techniques for intimately understanding
customer journeys: ethnographic observation and “shop-alongs,” where
researchers watch or accompany customers in stores; customer diaries, where
customers describe, hour by hour, their activities and reactions as they
interact with products and services; codesign, where customers give feedback
about early versions of proposed offerings; and continual live testing and
design iteration with customers after launch.
Top-performing companies also develop a clear vision of the
entire customer ecosystem, understanding relevant interactions that extend
beyond the core journey the company controls. For example, the journey to
securing a mortgage includes an understanding of how potential home buyers
consider schools. Such an approach allows companies to uncover new insights
that allow them to design and deliver truly transformative customer
experiences.
Example:
Climate insurance for farmers
An insurer was developing a new product to protect livestock
farmers from the greater variability in hay yields caused by climate change. It
undertook traditional market research but also sent a product-design team to
observe the daily activities of farmers.
The team learned that farmers are pressed for time but also very
tech savvy, relying heavily on PCs and mobile devices in their daily
activities. The insurer had originally planned to market its new product
through traditional channels, but insights gleaned from an observation trip led
it to create a digital solution, which allowed farmers to gather information
and buy policies online at night and on weekends. The user interface was
streamlined and incorporated the farmer’s perspective: for example, it
quantified the number of cattle and sheep using the term “livestock units.” The
insurer also provided additional value to customers by offering historical
weather data and future forecasts on the app.
From designing the user
interface to designing the complete customer experience
Many executives believe design is about making devices and
screens look pretty. Good visuals improve any experience, but being great
requires thinking about everything—and everyone—it takes to fulfill customer
needs. True customer-experience design involves crafting each interaction
customers have with a company along the path that runs from the minute they
consider a purchase through their entire relationship with the product or
service. As Steve Jobs said, “[Design is] not just what it looks like and feels
like. Design is how it works.”
To design a compelling customer journey, companies must enlist
everyone who has an impact on any part of a customer’s journey, not just people
with the word “design” in their title—in particular, operational and IT groups
should be involved. Companies need to not merely map out customer touchpoints
but also implement changes that must occur in the background to deliver a
superior journey.
Example:
Disney’s MagicBands
After a five-year effort to root out pain points in the
experience of visitors to its theme parks, in 2013, Disney introduced
MagicBands. These brightly colored wristbands allow visitors to board rides,
pay for meals and gifts, and even unlock the doors of their hotel rooms. More
important, the bands and the technology behind them—which is stitched into
every part of the park—allow visitors to select exactly what they want to see
and do in advance. That has helped turn a day at Disney from a series of
highlight attractions interrupted by waiting in line to a magical end-to-end
experience.
From addressing issues in
the customer journey to completely rethinking the customer experience
Many companies spend a lot of time improving their current
customer journeys. This can lead to incremental cost reductions and quality
enhancements. But such an approach may also cause companies to narrow their
horizons and blind them to better overall solutions.
True reinvention requires taking a hard look at journeys from
the customer’s perspective to find the pivotal insight around which a new
journey should revolve. The focus is addressing customer needs, not improving a
process. Bringing in people who are not normally involved in the process can be
a great way to encourage fresh thinking. Assessing the best digital experiences
employed in other industries can also be useful inspiration.
Example:
Amazon Dash
Online retailers recognize that customers often forget to order
household items when they run out, resulting in lost sales. Most deal with this
problem using solutions that reside online: standing orders delivered on a
periodic basis or checklists on the company website to jog customers’ memories.
But Amazon bridged this gap by wholly transforming the order experience.
Amazon’s pivotal insight was that the moment when people want
and are most inclined to reorder is when they’re using an item and realize
they’re about to run out. So it created Amazon Dash, a small Wi-Fi-connected
device the size of a USB drive, decorated with the logo of a common household
item such as laundry detergent, plastic wrap, or coffee. Customers place these
“order buttons” around their home on appliances or cupboards and simply press
them when they realize they are running low on an item.
From working around the
regulations to rewriting the rules
At many companies, particularly those in financial services,
efforts to transform customer journeys have been constrained by the
understandable and necessary caution of internal groups responsible for
ensuring compliance with regulations. Some companies address this challenge by
being innovative about everything but the mandated steps, often leading to a
jarring or cumbersome experience for customers: “You can complete this
application online, but you then need to print everything and come to the
branch next week.”
The best companies focus on the underlying purpose of the rules,
engaging regulators and lawyers to show how technological advances can make
things better for customers while improving risk outcomes. This process also
often uncovers status quo situations where people assume there are constraining
regulations—“Things have always been done that way for a reason”—when in fact
that isn’t the case.
Example:
Digital identification and verification
Advances in optical character recognition and machine learning
have allowed technology companies to develop solutions for the verification of
government-issued identity documents, such as national identification cards and
driver’s licenses, with a high degree of reliability.
Many banks wanted to adopt digital identification and verification
to enable online opening of accounts. But internal compliance groups were wary.
One bank broke the logjam by going directly to national regulators with a pilot
demonstration showing the new, technology-based process was even more reliable
than the existing process, paving the way for regulatory acceptance. As a
bonus, the digital process automatically captures names, addresses, and dates
of birth from documents used to verify identity, so customers don’t even have
to type that information when they open a new account online.
From developing software
using agile to becoming an agile organization
Many incumbents use agile software-development practices inside
their IT departments and believe this means their organizations are agile. But
if only IT adopts agile practices—fast, iterative development—companies can’t
reap its full benefits and are still slowed by traditional decision-making and
deployment processes. Creating responsive and adaptive customer experiences
requires the entire organization to be agile. Making that change begins with
putting in place new governance standards and ways of working.
Product managers responsible for developing new offerings, for
example, need the authority to make decisions quickly and to hold staff from
functional groups accountable. This means metrics and incentives also need to
be adjusted to focus on end-to-end, rather than functional, objectives. Instead
of asking for detailed business cases, companies should fund projects the way
venture-capital firms fund start-ups: making a number of small bets at first
and providing more money if early results are promising. Small pilots can be
tried in a few locations and, if successful, be rolled out across the entire
network.
Example:
Rapid development teams that extend across the organization
One European bank set up scrum teams in its IT department. Yet
it still took up to a year to bring new customer offerings online, due to slow
decision making and delays in the deployment of new software. To shorten this
time to market, the bank created cross-functional teams accountable to
empowered product managers. Because legacy IT systems can block the move to
agile, the bank shifted to a modern IT architecture and cloud technologies,
which allowed new software developed by the scrum teams to go live on the
company website in a matter of seconds.By
making the whole organization agile, the bank dramatically reduced time to
market.
From delivering a product
to constant iteration
Many incumbents figure out what new product or service offering
they want to create for customers and then launch pilots, projects, or trials.
These typically emerge as infrequently as once a year, or perhaps every six to
nine months if sped up. Live customers are often excluded from pilots in a bid
to do thorough testing before release.
But an article of faith among the start-up community in Silicon
Valley is that a product is never done. These companies launch a minimum viable
product with the express purpose of getting customer feedback and then
iterating. Based on customer input, improved versions of the product are
released quickly and continuously. Our Digital Quotient analysis has
shown that the best-performing digital companies embrace test-and-learn
approaches that value speed over perfection. As LinkedIn founder Reid Hoffman
once said, “If you are not embarrassed by the first version of your product,
you’ve launched too late.”
The truth is that it’s impossible to know in advance how an
experience will be embraced by customers. It’s better to launch sooner with
fewer features and a simpler interface and learn what works, based on real
customer input. This approach requires not just ensuring speed in delivering a
product but also putting in place an infrastructure—customer-satisfaction
metrics, live and A/B testing capabilities, product development, and empowered
managers—to act quickly on feedback and iterate the experience.
Example:
Tablet-based account opening
When a European bank tried several times to fix its
account-opening process with large projects, it floundered. Stung by these
false starts, it instead launched a small pilot in a few locations, focused
only on student customers. Using this new approach, the bank was able to build
a new tablet-based account-opening app in just 16 weeks. It then iterated new
versions based on user feedback, improving the verification process so
applicants could open accounts immediately and letting some customers request
overdraft protection. After these tweaks, the app was scaled across new
segments and more branches.
From collaborating under
the guidance of leaders to working together spontaneously
Companies need to push their people to move beyond traditional
functional roles and work together to reinvent customer journeys. This is
typically done by creating temporary project teams or task forces. But responding
to a customer issue or improving a journey requires a culture where people from
different functions work together spontaneously. Our Digital Quotient analysis
revealed that less than 30 percent of companies say they have a highly
collaborative culture.5 Improvements
can come from having motivated, empowered frontline employees driven by clear
purpose. Technology has a role too. By moving into cloud-based, virtualized
environments, for example, companies can help teams to experiment and innovate.
Example:
Supporting collaboration for an agile program
At another European financial institution, an agile program had
been mobilized for three months, and individual teams were working hard, but no
real progress had been made in building the planned offering. Why? The company
had formed a cross-functional team that included all the key units, but its
members still reported to functional heads and were housed in six different
locations. Recognizing the initiative was stuck, the company appointed a single
executive as end-to-end leader and held five full-day in-person meetings,
allowing many people to meet their peers face-to-face for the first time.
Coaches provided live on-the-job coaching, helping team members gain new skills
via experiential learning while building cohesion and trust.
Many incumbents are working hard to reinvent their customers’
journeys. The ones that win will be those that push the boundaries and
simultaneously adopt next-generation digital thinking and practices.
Xavier
Lhuer is an
associate principal in McKinsey’s London office, where Tunde Olanrewaju is
a principal; Hyo Yeon is a principal in the New York office.
http://www.mckinsey.com/insights/organization/What_it_takes_to_deliver_breakthrough_customer_experiences?cid=other-eml-alt-mip-mck-oth-1511
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