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Forrester Survey Reveals Rising Customer Expectations & Improving Efficiency Drive Firms’ Transformation Efforts

HP commissioned Forrester to conduct 11 in-depth interviews with CEOs, COOs, CIOs, and transformation leaders across North America, Europe, and Asia. The intent was to understand what was really going-on with respect to digital and its effects on the delivered customer experience. We weren’t looking for a statistical review of the current situation but more of qualitative appraisal of what is working and what’s not. The challenge with digital is that a lot of things are new and hence looking backwards doesn’t get you very far.

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Forrester Survey Reveals Rising Customer Expectations & Improving Efficiency Drive Firms’ Transformation Efforts

  1. 1. A Forrester Consulting Thought Leadership Paper Commissioned By HP October 2014 Rising Customer Expectations And Improving Efficiency Drive Firms’ Transformation Efforts
  2. 2. Table Of Contents Executive Summary ...........................................................................................1 Firms Are Forced To Make Significant Changes To Meet Customers’ Expectations .......................................................................................................2 CEO Leadership Breaks Down The Organizational Silos.............................2 Customer Journey Mapping Eliminates Channel Silos And Justifies New Technology Spending...............................................................................4 Significant Investment On New And Upgraded Technology Platforms And Applications Improves The Experience..................................................5 The Creation Of Digital Teams Drives Reskilling...........................................8 The Transformation Sets The Stage For Creating An Agile Execution Culture Across Business And Technology ....................................................9 Transformation Dos and Don’ts.....................................................................11 Key Transformation Innovation Recommendations ...................................11 Appendix A: Methodology ..............................................................................12 ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester’s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. © 2014, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester® , Technographics® , Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to www.forrester.com. [1-RLHU8C]
  3. 3. 1 Executive Summary Customers are changing their behavior faster than companies can evolve their business models, operational processes, and technology platforms. As a result, firms are changing their organizational structures and technology platforms to break down the silos that hinder delivering compelling customer experience. In May of 2014, HP commissioned Forrester Consulting to conduct research on digital transformation efforts across a mix of industries. The research delved into the business drivers, process changes, technology implications, and skills retraining that underpin firms’ re-engineering initiatives. Forrester conducted 11 in-depth phone and face-to-face interviews with CEOs, COOs, CIOs, and transformation leaders across North America, Europe, and Asia from June 2014 through September 2014. Even though their transformations are multiyear projects, these business leaders are already seeing dramatic increases in Net Promoter scores for customer satisfaction, the ability to compete on service not price, and more engaged employees with lower attrition. KEY FINDINGS As firms undertook their transformation journeys, Forrester’s research uncovered a number of critical success factors: › CEO leadership breaks down the organizational silos. Senior management’s buy-in is critical to creating a culture of serving the customer. › Customer journey mapping (CJM) eliminates channel silos and justifies new technology spending. Over 50% of the interviewees leveraged customer journey maps to articulate the needs/requirements of their transformation. › Significant investment in new and upgraded technology platforms and applications improves the experience. Rebuilding legacy systems as well as Internet platforms is at the center of firms’ re-engineering. › The creation of digital teams drives reskilling. Companies are making major changes to their skill and process portfolio as part of the transformation. › The transformation sets the stage for creating an Agile execution culture across business and technology. Companies’ efforts are ongoing as they develop a more adaptive sense-and-respond culture. “We needed to meet our end customers’ expectations that had been set by Internet- based ridesharing services for real-time information and self service via a mobile app.” — CEO, North American transportation company “We had to build a new broker/middleware platform that sits between our tablet apps that drivers use and our legacy systems with the data.” — VP of application development, European transportation company “The CEO’s direct reports are part of our customer experience council. He wants to see our value proposition in terms of customer journeys. Only by getting to that level of detail can you provide a differentiated experience.” — CIO, Asian bank “The CEO and CFO do not want to be asset- heavy losers where an agile, digital startup steals the customer away.” — CIO, European logistics company
  4. 4. 2 Firms Are Forced To Make Significant Changes To Meet Customers’ Expectations From June 2014 to September 2014, Forrester conducted 11 in-depth interviews with CEOs, CIOs, and digital transformation leaders from financial services, hospitality, logistics, manufacturing, retail, telecom, and transportation companies in North America, Europe, and Asia. Respondents faced a number of challenges that forced them to undertake a major redesign and renovation of their businesses. But at their core, these companies were grappling with how to meet rising customer expectations and grow the business. “We needed to meet our end customers’ expectations that had been set by the Internet- based taxi startups delivering real-time updates and self service via a mobile app. At the same time, we needed to reduce the volume of calls to our more expensive call center.” — CEO, North American transportation company To truly become customer-centric, interviewees were using tools like customer journey mapping — “a visual representation of the series of interactions between a customer and a company that occur as the customer pursues a specific goal” — to change their processes, customer loyalty systems, technology platforms, skills portfolio, and coordination with their business partners. One of the more interesting benefits to come out of the customer-centric investments was lower operational costs (see Figure 1). By breaking down the organizational silos and simplifying their processes from a customer-first perspective, firms saw greater efficiencies from the customers doing their own ordering, lower call center staffing requirements, and streamlined decision making. During the interviews, we uncovered five critical factors that were shared across the majority of respondents: 1) CEO leadership breaks down the organizational silos; 2) customer journey mapping eliminates the channel silos and justified new technology spending; 3) significant investment on new and upgraded technology platforms and applications improves the experience; 4) the creation of digital teams drives reskilling; and 5) the transformation sets the stage for creating an Agile execution culture across business and technology. “We’re moving to a very customer-centric approach — what can we do to make this as simple as possible for our customers? We want to add value to what they’re doing and to encourage them to buy groceries.” — VP of applications, North American retailer CEO Leadership Breaks Down The Organizational Silos In the majority of cases, the CEO or at least the CIO was driving the vision and the transformation efforts within firms. The research shows that senior management’s involvement was critical in two key areas: FIGURE 1 Better Customer Experience Drives Improved Operational Efficiency Source: Forrester Research, Inc. Improved operational efficiency Better customer experience
  5. 5. 3 “The CEO had the vision about being the leader in customer service. He oversaw and drove the original strategy definition and then the focus on customer experience. Now, 80% of the executive team’s conversations center on customer journeys, and we have 100 projects in progress to improve it. ” — CIO, Asian bank › Creating the business/customer vision at the center of the transformations. To ground and focus the re- engineering efforts, the CEO plays a crucial role in defining and communicating the goal of the projects. Senior leadership is also critical in holding the business accountable to make the required culture, process, and technology changes (see Table 1). Forrester found that firms’ transformations centered on becoming more customer-experience-focused and putting the client at the center of the organization. TABLE 1 North American Transportation Company Drivers of the transformation This transportation company needed to meet travelers’ needs for real-time status updates and self-service that were being set by an Internet-based taxi/limo startup. At the same time, it needed the empowered traveler to use the mobile app to offload calls from its expensive call center. Scope of the transformation The transformation involves all customer-facing systems, dispatch, and driver communications, as well as back-office processes. It’s an end-to-end commitment to streamline the customers’ experience. Changes in skills portfolio The firm had to master Agile development processes, customer experience thinking and design, API management, and a new security model based on protecting data rather than networks. Technology implications To accomplish this, the firm had to re-architect its closed back-end systems and security model to integrate its core reservation system with third-party travel sites and provide better tools for different customer segments (personas). Innovative transformation practices It started with a focus on the overall flow of information between the company and different customer segments (personas) and not on specific devices or applications. This led to a clearer understanding of how travelers use information and the best ways to improve their travel service. Benefits and outcomes Travelers feel more in control. The firm now competes with a traveler’s tool to help enterprises better manage travel. The firm also now competes with the analytics tools that it provides to help customers better manage their overall travel and not just the price of the ride to airport. Next steps The firm plans to integrate systems with even more third-party travel sites and supporting systems (hotels, airlines, etc.). It will improve travel analytics tools for corporate clients so it can better optimize overall costs (rather than compete on reduced fees). Source: Forrester Research, Inc.
  6. 6. 4 › Breaking down the organizational silos impeding great customer experience (CX). The focus on improving customer experience often uncovers the critical need to break down the business structures that impede serving the customer. CIOs are creating cross-function teams within IT as part of those transformations to make technology management more responsive and agile. In parallel, CEOs are breaking down the channel silos and other parochial organizational thinking to simplify the customer journey. “The transformation started as a discussion with me and the new CEO. Initially, it was about streamlining and simplifying IT. But very quickly the focus shifted to breaking down the organizational product silos so we could build and deliver more connected digital products and services.” — CEO, healthcare products division, European manufacturer Customer Journey Mapping Eliminates Channel Silos And Justifies New Technology Spending One of the critical tools in respondents’ digital transformation was customer journey mapping. “We invested in a new CX team. Previously, mapping the customer journey for us was just tracking the internal sales or lead generation process. When you’re mapping the customer’s actual journey, it’s about understanding everything that touches that journey. We invested in a team and gave them responsibility on customer experience.” — Executive vice president, platform services, North American business services company The interviewees were using CJM as the cornerstone of the transformation in three fundamental ways: › Creating outside-in customer perspective to make vision actionable. The use of this process tool became a critical way to illuminate the bottlenecks and frustrations of customers as they tried to execute tasks like ordering or placing a customer service request. Firms where using customer interviews captured on video to cut through the politics and deliver the bad news to senior management. › Understanding of how siloed organizations block great customer experiences. In many companies, one of the biggest CX challenges is creating a holistic view of what the customers are trying to accomplish. CJMs help the business see the entirety of the workflow and not just their narrow, channel-only perspective. › Establishing the ROI for legacy application rewrites and upgrades. One bank used the process to define the need to rewrite legacy systems. Like most companies, the back-end rationalization efforts have been caught in an endless loop with IT talking about the costs and the business complaining about the lack of business agility. To break the logjam, the bank used CJM to clearly document every instance of where the current systems were not working and create a clear value statement for redesigning the systems. This business context gave the CEO the rationale and confidence to sign off on a major legacy rewrite (see Table 2). “The CEO’s direct reports make up our customer experience council. He wants to see our value proposition in terms of customer journeys. You need that level of detail before you differentiate. We show the customer feedback with videos from the CJM exercises so the CEO hears the cold hard truth about what works and what does not. It drives a higher degree of honesty and accountability.” — CIO, Asian bank
  7. 7. 5 Significant Investment On New And Upgraded Technology Platforms And Applications Improves The Experience As the embodiment of the respondents’ processes and organizational models, transformation initiatives quickly uncovered issues and challenges in the existing technology platforms and business applications. “We had to build a new broker/middleware platform that sits between our tablet apps and our legacy systems. It does user authentication and it manages the APIs that we use to access the legacy systems.” — VP of application development, European transportation company TABLE 2 Asian Bank Company Drivers of the transformation At an Asian bank, the CEO believes that growth will come from a relentless focus on the customer service and improving it across every facet of its products, operations, marketing, and service. Scope of the transformation This strategy involves the entire organization, thereby cutting across functional and product line boundaries. Business processes that customers touch directly and that support customer-facing staff are examined and optimized. Changes in skills portfolio This outside-in focus with customers at the center has required the bank to master new skills in user-centric design, software development, and voice of the customer investigation. Technology implications The need to improve customer experience has driven the redesign of the website, mobile apps, and a grounds-up rewrite of the core banking system. In parallel, the bank has swapped out large, established vendors for smaller, more nimble players with expertise in new technologies like analytics and processes like Agile and customer journey mapping. Innovative transformation practices An outside-in focus on customers has pushed the bank to master good user-centric design, Agile development, and customer journey mapping using videos to communicate the customers’ challenges. This technique unites all stakeholders around a common good: happy customers. It also used journey maps to highlight the problems of legacy systems and the business value of rewriting the platform to focus on direct customer outcomes. Benefits and outcomes This transformation has already led to a 25% reduction in customers’ time to self serve and significant increases in the bank’s Net Promoter Score. Next steps Next steps include extending the banking platform to new developing markets with digital-first capabilities. Source: Forrester Research, Inc.
  8. 8. 6 Firms quickly realize that their systems are as fragmented and siloed as the organization and, as a result, would require an increased level of spending and management attention. The technology makeover focused on four critical areas: › Major investments to modernize back-end systems. Many of the core systems that manage transactions are 30-plus years old and need to be radically overhauled for the age of the customer. Respondents specifically called out that their efforts to improve CX had finally forced senior management to fund the complete replacement of systems like core banking and central reservations (see Table 3). › Adding new functionality to improve multichannel CX. It’s not just the main business systems that are being replaced. Fifteen-year-old web commerce platforms were also being upgraded and leveraging the cloud to address the multichannel requirements. › APIs to facilitate internal and business partner integration. Firms were also going into existing systems and applications and adding APIs to make it easier for the business and developers to share data with resellers and product development partners as well as new mobile and tablet applications. One company had to create APIs so customers could make a reservation from within the Internet travel portals. › Focus on data capture and flows, not specific hardware or applications. Three of the respondents were focused on the growing importance of capturing, managing, and analyzing data/information as a key element of their transformation. In one account, they had increased their data management budget by a factor of five in order to uncover the granular insights needed to improve execution as part of the transformation. “Initially, I challenged the team to not think in terms of devices or apps: ‘Focus on the value of information to us and our customers.’ Our mantra was ‘one view of the core information.’ Whenever something moves, the traveler needs visibility to that information and [we need to aggregate it] for the travel manager.” — CEO, North American transportation company
  9. 9. 7 TABLE 3 North American Hospitality Company Drivers of the transformation This global hospitality provider competes with a premium customer service offering. The focus of the transformation is to deliver a better experience for customers across every channel, particularly the guest experience on a mobile device Scope of the transformation The transformation is forcing a realignment of business priorities, systems, and the organization. It affects franchise partner relationships and hotel operational systems as well as the company’s core reservation and customer-facing systems. Changes in skills portfolio The biggest change is alignment and cross-functional coordination, but the company is also investing in Agile development processes and skills. Further, every staff member must be retrained to use the new digital systems. Technology implications The mobile interface has required back-end systems to be exposed through more granular, on- demand APIs. The company is also tackling the tough transition of full integration between its reservation systems and hotel operational applications. Innovative transformation practices The most important change has been the adoption of Agile techniques and alignment among business and technology teams. The team blends skills and functions and uses two-week sprints and three-month release cycles. Benefits and outcomes The big payoff is an increase in room nights booked, particularly for travelers booking on their mobile device. Senior management now understands that digital transformation is not just about building a mobile app, but also re-engineering the underlying systems and processes. Next steps The company will rebuild the reservation system for digital-first experiences and more fully adopt Agile processes throughout the organization and franchise relationships. Source: Forrester Research, Inc.
  10. 10. 8 The Creation Of Digital Teams Drives Reskilling Digital is also forcing firms to rethink their skills portfolio in both the business and IT. The retraining efforts, coupled with hiring around a different talent profile, were part of the cultural change that firms needed to make. “Since we do not have the new technology skills in-house, we are leveraging innovative, smaller vendors and not our traditional suppliers. To manage this growing portfolio, we are bolstering our vendor management.” — CIO, Asian bank Overall, companies were focusing the culture and mindset shift in four key areas: › Creating formalized cross-function teams with new skills. In addition to adding staff with an expertise in user experience design and CJM, interviewees were actively trying to break down the talent silos and creating multidisciplinary teams where marketing, sales, service, and IT worked directly together. Firms were creating these hybrid groups with titles such as “customer experience council” or “digital accelerator lab.” › Investing in Agile and development/ops processes within IT. Most of the re-engineering efforts focused on changing the IT culture. The core element of the technology management change was the adoption of an Agile development methodology that had initially been used to develop mobile apps (see Table 4). › Improving new technology and architecture proficiencies. To build new apps and update their existing platforms, interviewees were relying on an extended portfolio of technologies in areas like analytics, cloud services, and API management. In parallel, firms were implementing modern application architecture with composite apps and a service-oriented design. This left companies either retraining their employees, hiring new staff, or using third parties. › Focusing on vendor management. The growing use of a broader array of smaller, more innovative vendors, external business, technology services, and third-party open source platforms forced a number of respondents to improve their supplier oversight skills beyond a low-cost, procurement-focused strategy. “As part of the transformation, we are converting from a reactive IT department to proactive consultancy. The development team was a black hole and did not interact with the business. The move to Agile has been a key part of this openness and culture change.” — Vice president of development, North American retailer
  11. 11. 9 The Transformation Sets The Stage For Creating An Agile Execution Culture Across Business And Technology None of the respondents talked about doing a large-scale single-phase implementation like the re-engineering efforts of the past. They all saw their transformations as an ongoing effort that circled through the different elements like culture, business models, processes, technology, and skills in multiple phases. Firms planned to continue their multiyear efforts well into the future. “CEO and CFO take the transformation very seriously. They do not want to be asset-heavy losers where a digital startup steals the customer because they are more agile.” — CIO, European logistics company At a broad level, the goal was to make their organizations better able to deal with customer- and technology-driven change. Companies were attempting to create a sense-and -respond culture that can quickly adapt to market and customer changes (see Table 5). TABLE 4 European Transportation Company Drivers of the transformation A global shipping company is transforming to increase revenue and find operational savings. Changes in the global transportation market drove a re-engineering of the entire business from operations efficiency to new product development and IT. Scope of the transformation The project started with a single massive effort to connect key assets so they can be monitored, tracked, and optimized. IT, sales, and logistics teams worked side by side to accomplish this. Changes in skills portfolio The company is investing in much more advanced IT capabilities to surround connected products with predictive analytics services. This forces an upgrade in service design and sales team ability, as well as changes in IT to implement the improvements. Technology implications IT had to transition from being an expensive operations organization to a nimble innovation partner to the business. It moved its technology center to outside London to attract top development and program management talent. The company simplified its infrastructure and application portfolio to reduce IT operational costs by millions of euros. Innovative transformation practices IT was able to keep 10cents from every euro it saved to fund the reskilling of its people and its process and infrastructure upgrade. Benefits and outcomes What started as an operational cost-cutting play with smart-connected shipping containers ended up being an opportunity to grow revenue through improved service levels and visibility. Next steps The firm is investing heavily in analytics to uncover and document operational improvement and cost-cutting efficiencies. Source: Forrester Research, Inc.
  12. 12. 10 “At the core of the transformation is the thinking around the ‘scaled’ Agile framework. The framework is about applying Agile in how the business operates, not just within IT development.” — CEO, healthcare products division, European manufacturer TABLE 5 North American Business Services Company Drivers of the transformation This corporate travel and expense services company has a healthy paranoia about being replaced by a more agile startup and feels the relentless pressure coming from the world’s most mobile people — travelers. As a result, the company’s transformation centered on improving its ability to innovate and create a travel ecosystem of partners. Scope of the transformation This CEO-led investment involved the entire company, including technology, customer service, product development, sales, business development, and strategic partner investment. It involved most technology platforms, and the culture of the firm had to be technology-centric. Changes in skills portfolio The company has learned to master customer experience design as a core competency, Agile development and DevOps as a product development skill, and customer journey mapping as a communications vehicle. Technology implications The firm transformed from an on-premises software provider to a multitenant software-as-a- service provider over six years. This has required a complete overhaul of the technology platform to become a travel-and-expense cloud with over 2,000 integrations to partners’ system. Innovative transformation practices The firm created a new customer experience group to bring the voice of the customer into the development and service design process. It built customer journey maps to get people on the same page and focused on the software platform and using software to define and express the brand. Benefits and outcomes The firm improved customer satisfaction and raised its Net Promoter Score from 28 to 60 over three years. Better internal alignment around customer outcomes improved its ability to innovate. Next steps The firm plans to build out a travel-and-expense cloud as an ecosystem of partners and startups, creating more value and capability in employees’ travel days, with corporate expense managers managing and optimizing travel costs and risk. It will think about how to embed travel and expense management into communication so the traveler only has to handle the exceptions. Source: Forrester Research, Inc.
  13. 13. 11 Transformation Dos and Don’ts The interviews uncovered a range of challenges and pitfalls to avoid in terms of process mistakes, mindset changes, the scope of the change, and the technology investments (see Table 6). TABLE 6 “If You Could Do One Thing Differently About Your Transformation, What Would It Be?” Asian bank “I would have not started with process re-engineering; I would have gone directly to implementing customer journey mapping. It injected a needed customer perspective into the organization.” North American hospitality company “Make sure that the people on the team who are doing this work are not allowed to have an orientation to a predisposed solution and are empowered to develop their own software, use a cloud solution, etc. that meets the actual needs of the customer.” North American retailer “I would move more quickly to drive tighter alignment with the business and be more customer- centric. We were doing technology for the sake of doing tech better before.” North American restaurant chain “You need to understand the back-end systems and business process integration requirements upfront. We can do location-based marketing, augmented reality, Bluetooth. But it’s integrating them with the business operation that’s difficult.” North American business services company “I would start from scratch in terms of our applications and infrastructure and put our entire existing technology stack in the convalescence mode. I would then invest and build the entire product and ecosystem APIs from scratch, in parallel. I would run a complete redesign of our technology separate from the current systems.” Source: Forrester Research, Inc.
  14. 14. 11 Key Transformation Innovation Recommendations Forrester’s in-depth interviews with business and IT executives yielded several important observations/best practices: › Create a new account management role in IT to improve technology management/business alignment. One CIO created the “account manager role” to interface with the business in the same way that a salesperson would. The AM was responsible for coordinating the different projects within IT for each individual business group. They were also chartered with managing the “leads/demands” for new applications and services while at the same time bringing to bear the appropriate technical resources within IT to help the business. › Allow IT to keep part of operational savings to invest in new process and skills. In one interview, the CIO had struck a deal with the business so IT could keep 10% of the savings from reducing its operating costs. They then used the newfound budget to fund the upskilling of IT in areas like program management, CX, and Agile to better support the company’s innovation agenda. › Create cross-functional teams to break down organizational blinders. Multiple respondents have created dedicated groups together to drive the interdisciplinary thinking key to digital success. One company focused on creating a single customer experience council where all the channels got together to solve consumers’ pain points across the silos. Another created a digital innovation center with combined business, technology, product design, UX, and program management skills. › Establish a special lab where the business can see digital products/services in action. To drive buy-in from the business, one company set up a digital product/service platform innovation center. The lab built out product and services prototypes so senior managers could have a “show and tell” program that made the opportunities posed by digital products more tangible. › Leverage customer journey mapping to create a business case for replacing legacy systems. One Asian bank used the customer journey mapping process to break the year-long logjam on legacy replacement. The CJM process clearly documented where the traditional online banking system was not meeting customer needs and created a well-defined ROI for building of a whole new digital banking platform.
  15. 15. 12 Appendix A: Methodology In this study, Forrester interviewed 11 companies from the financial services, hospitality, logistics, manufacturing, retail, telecom, and transportation industries in North America, Europe, and Asia to evaluate their digital transformation efforts. Survey participants included decision-makers in CEO, CIO, VP of applications, and VP of transformation roles. Questions provided to the participants asked about the business drivers of the transformation, the role customer experience played in the changes, how respondents re-engineered business processes and technology platforms, and what they would do differently. Respondents were not offered incentives to participate. The study was commissioned in May 2014, and the interviews were completed in September 2014.

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