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Customer Experience Innovation

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FOR CUSTOMER EXPERIENCE PROFESSIONALS
Customer Experience Innovation Demystified

June 27, 2013

Published in: Marketing
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Customer Experience Innovation

  1. 1. Customer Experience Innovation Demystified by Kerry Bodine, June 27, 2013 Forrester Research, Inc., 60 Acorn Park Drive, Cambridge, MA 02140 USA Tel: +1 617.613.6000 | Fax: +1 617.613.5000 | www.forrester.com For: Customer Experience Professionals Key Takeaways Companies Thirst For Customer Experience Innovation But Don’t Know How To Get It Companies are throwing time, money, and resources at customer experience innovation. But most simply copy their competition or pray that the shiny technology du jour will put them ahead. The result is scattershot experiences that provide no lasting value to either the customer or the business. Customer Experience Innovation Differs From Typical Improvement Processes Customer experience improvements enhance interactions that already meet customer needs and drive immediate business value. In contrast, customer experience innovations solve for unmet customer needs, create new types of interactions and/or significantly change the qualities of interactions, as well as drive long-term differentiation. Successful Innovations Encompass Customer Needs, Business Model, And Brand New customer touchpoints and interactions that don’t solve a real customer problem are just innovations for innovation’s sake. Once customer needs are uncovered, potential innovations must be vetted within the context of the business model and brand to ensure business relevance and longevity.
  2. 2. For Customer Experience Professionals Customer Experience Innovation Demystified Frame Innovations With Customer Needs, Business Model, And Brand by Kerry Bodine with John Dalton, Amelia Sizemore, and Molly Murphy Why Read This Report “Innovation” has become a buzzword in the customer experience field. Everyone talks about it, but no one knows quite what it is or how to attain it. In fact, most firms that believe that they’re innovating are actually thwarting differentiation and wasting massive amounts of time and money in the process. This report provides a framework that will help customer experience professionals create true innovations: new experiences that drive differentiation and long-term value. Table Of Contents The Customer Experience Innovation Bandwagon Rolls Into Town The Hype Doesn’t Match Reality Timidity And Blind Faith Hamper Efforts Customer Experience Innovation: You’re Doing It Wrong And The Pressure Is Rising Customer Experience Innovation Done Right Reframe Innovation Opportunities Ground Innovations In The Ecosystem Infuse Innovations With The Brand recommendations Amp Up Idea Generation To Support Innovation Efforts WHAT IT MEANS Lust For Innovation Will Force Organizational Shakeups Supplemental Material Notes & Resources Forrester interviewed 22 companies, universities, and individuals including 3M, Bruce Nussbaum, frog design, GE Healthcare, Hasso Plattner Institute for Design at Stanford University, and Intuit. Related Research Documents The Path To Customer Experience Maturity June 25, 2013 Customer Experience In The Post-PC Era April 12, 2013 The Customer Experience Ecosystem February 28, 2013 Executive Q&A: Customer Experience Design June 22, 2012 © 2013, 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. To purchase reprints of this document, please email clientsupport@forrester.com. For additional information, go to www.forrester.com. 2 9 11 17 19 20 June 27, 2013
  3. 3. For Customer Experience Professionals Customer Experience Innovation Demystified 2 The customer experience innovation bandwagon ROlls into town Forrester recently asked a panel of 100 customer experience professionals about their approaches to customer experience innovation. Our research finds that firms: ■ Seek differentiation through customer experience. Forty-seven percent of respondents say that their executive team’s strategy for customer experience is market differentiation. And an ambitious 13% will settle for nothing less than having the best customer experience across every industry (see Figure 1). ■ Believe innovation will get them there. Sixty-nine percent of our respondents report that their companies have dedicated personnel for customer experience innovation. Sixty-four percent allocated time to innovation activities. Fifty-five percent have dedicated innovation budgets (see Figure 2). ■ Trust that their efforts are paying off. A whopping 73% of interviewees plan to launch innovative customer experiences in the upcoming year. Two-thirds claim to have already delivered such experiences in the past year. Figure 1 Companies’ Overall Strategy For Customer Experience “How would you describe your executive team’s strategy for customer experience?” To dierentiate ourselves from all rms across any industry 13% To distinguish ourselves from other leaders in our industry To be equivalent with leaders in our industry 12% To stay in the mainstream in our industry To stay slightly behind the mainstream in our industry 9% Our executive team doesn’t have explicit goals related to customer experience 2% 12% Don’t know 5% Base: 100 customer experience professionals at B2C and B2B companies Source: Q4 2012 Global Customer Experience Peer Research Panel Online Survey 47% 94182 Source: Forrester Research, Inc. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  4. 4. For Customer Experience Professionals Customer Experience Innovation Demystified 3 Figure 2 Companies’ Customer Experience Innovation Activities “Does your organization have the following customer experience innovation resources and/or capabilities?” Yes No Don’t know We have dedicated personnel for customer experience innovation We have dedicated time for customer experience innovation We have dedicated budget for customer experience innovation 69% 29% 32% 64% 4% 55% 39% 6% We have dedicated physical space for 67% customer experience innovation We launched one or more innovative customer 28% 5% 66% experiences during the past 12 months 33% 1% We plan to launch one or more innovative customer experiences in the next 12 months 73% 19% 8% 38% 11% 36% 38% 26% We have worked with an outside innovation consultancy during the past 12 months We plan to work with an outside innovation consultancy in the next 12 months A majority of rms believe they’re innovating already. Base: 100 customer experience professionals at B2C and B2B companies Source: Q4 2012 Global Customer Experience Peer Research Panel Online Survey 2% 51% 94182 Source: Forrester Research, Inc. The Hype Doesn’t Match Reality Despite their ambition, a closer look at our respondents’ activities reveals that haphazard processes consume their energies. Panelists acknowledge that their firms: ■ Remain focused on incremental fixes. Seventy-two percent of our respondents say that their companies’ approach to customer experience centers on making incremental improvements — not radical innovations (see Figure 3). ■ Mismanage the basics. Innovations that are incompatible with customer needs are unlikely to gain traction.1 Even so, fewer than a third of our panelists said that their companies conduct observational research with customers, and a paltry 15% said that they follow a defined customer experience design process (see Figure 4 and see Figure 5). A mere 14% are confident that they have a customer experience strategy, while a sobering 40% are rudderless (see Figure 6). © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  5. 5. For Customer Experience Professionals Customer Experience Innovation Demystified 4 ■ Fail to make the business case. Without evidence of how customer experience improvements affect revenues, cut costs, or improve customer loyalty, customer experience efforts risk losing credibility.2 Yet only 29% of our panelists said that their organizations consistently model the influence of customer experience metrics on business outcomes (see Figure 7). Figure 3 Companies’ Focus On Customer Experience “Please select the options that describe your company’s approach to customer experience.” Not focused on customer experience Focused on making incremental improvements to the customer experience Focused on creating radical customer experience innovations Focused on changing our business model to align with customer experience innovations Don’t know 1% 20% 17% 1% Eight percent are focused on both of these activities. Base: 100 customer experience professionals at B2C and B2B companies (multiple responses accepted) Source: Q4 2012 Global Customer Experience Peer Research Panel Online Survey 80% 94182 Source: Forrester Research, Inc. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  6. 6. For Customer Experience Professionals Customer Experience Innovation Demystified 5 Figure 4 Adoption Levels For Customer Understanding Principles “To what extent does your company do the following practices related to customer understanding?” We don’t do this at all We do this sporadically or inconsistently We do this consistently 38% 60% 2% 12% 62% 26% 23% 42% 31% 26% 46% 27% 19% 45% 33% Analyze customer insight across organizational boundaries Document customer insights to make it easy 21% 47% 31% for employees to understand (e.g., personas) Share what we know about customers with 19% 62% 19% Gather customers’ feedback about their interactions with our company Gather input from employees about their interactions with customers Conduct observational research studies with customers Map customers’ interactions with our company from the customers’ perspective employees at all levels of the company Customer understanding is practiced inconsistently — or not at all — at most rms. Base: 100 customer experience professionals at B2C and B2B companies (percentages may not total 100 because “don’t know” responses were not included) Source: Q4 2012 Global Customer Experience Peer Research Panel Online Survey 94182 Source: Forrester Research, Inc. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  7. 7. For Customer Experience Professionals Customer Experience Innovation Demystified 6 Figure 5 Adoption Levels For Customer Experience Design Practices “To what extent does your company do the following practices related to design?” We don’t do this at all We do this sporadically or inconsistently We do this consistently Follow a dened customer experience design process for all new or revised experiences Use customer research as input to customer experience design projects Engage customers, partners, and employees throughout the experience design process (not just for testing) Use prototyping and frequent iteration in the experience design (and redesign) process Proactively adjust the design of the customer experience when we change things that aect it (e.g., a policy, business process, product, or technology system) 27% 53% 15% 12% 51% 35% 14% 63% 23% 21% 54% 16% 19% 57% 20% Customer experience design is an immature discipline at most rms. Base: 100 customer experience professionals at B2C and B2B companies (percentages may not total 100 because “don’t know” responses were not included) Source: Q4 2012 Global Customer Experience Peer Research Panel Online Survey 94182 Source: Forrester Research, Inc. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  8. 8. For Customer Experience Professionals Customer Experience Innovation Demystified 7 Figure 6 Adoption Levels For Customer Experience Strategy Practices “How much do you agree or disagree with the following statements about your rm’s customer experience strategy?” (On a scale of 1 [completely disagree] to 5 [completely agree]) 1 2 3 4 5 Our company has a dened customer experience strategy 19% 27% 14% Our customer experience strategy ows from our overall company strategy Our customer experience strategy aligns with our brand attributes Our customer experience strategy aligns with our understanding of what customers need 12% 28% 25% 23% 16% 11% 25% 12% 27% 17% 21% 23% 9% 33% 15% 21% 22% Only a minority approach customer experience strategically. Base: 100 customer experience professionals at B2C and B2B companies Source: Q4 2012 Global Customer Experience Peer Research Panel Online Survey 94182 Source: Forrester Research, Inc. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  9. 9. For Customer Experience Professionals Customer Experience Innovation Demystified 8 Figure 7 Adoption Levels For Measurement Practices “To what extent does your company do the following practices related to measurement?” We don’t do this at all We do this sporadically or inconsistently We do this consistently 6% 40% 53% 13% 45% 40% 18% 46% 34% 20% 47% 29% Model the inuence of customer experience 20% 47% 29% 20% 47% 29% Measure how customers perceive their interactions with our company Track what happens during customer interactions (e.g., call transfers, web page views) Use a consistent framework for measuring customer experience quality across channels Compare customer experience metrics across organizational boundaries metrics on our business outcomes Share customer experience metrics and models with all employees Most rms aren’t consistently measuring the quality of business impact of customer interactions. Base: 100 customer experience professionals at B2C and B2B companies (percentages may not total 100 because of rounding) Source: Q4 2012 Global Customer Experience Peer Research Panel Online Survey 94182 Source: Forrester Research, Inc. Timidity And Blind Faith Hamper Efforts Though firms crave differentiation, the truth is that even companies with dedicated time and budget for innovation: ■ 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 (see Figure 8). ■ Pray that technology can save them. Sixty-two percent of our panelists report that technology advancements drive their firms’ innovation activities. ■ Discount customer understanding. Relative to their zeal for competitive analysis and new technology, a modest 53% say that conducting ethnographic research and developing customer empathy dominate their approach. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  10. 10. For Customer Experience Professionals Customer Experience Innovation Demystified 9 Figure 8 How Do Companies Drive Customer Experience Innovations? “How much do you agree or disagree with the following statements about your company’s overall customer experience innovation eorts?” (On a scale of 1 [completely disagree] to 5 [completely agree]) 1 2 3 We drive our customer experience innovations by watching what other companies in our industry are doing We drive our customer experience innovations by watching what other companies in other industries are doing We drive our customer experience innovations through technology advancements We drive our customer experience innovations through ethnographic research and deep customer empathy 4 5 17% 47% 11% 2% 2% 47% 25% 28% 53% 9% 15% 11% 9% 4% 23% 11% 32% Base: 53 customer experience professionals at B2C and B2B companies that have dedicated time and budget for customer experience innovation (percentages may not total 100 because of rounding) Source: Q4 2012 Global Customer Experience Peer Research Panel Online Survey 36% 17% 94182 Source: Forrester Research, Inc. Customer experience innovation: You’re doing it wrong Let’s face it: The market is confused. Everyone wants to innovate, but only a minority has mastered customer experience basics. Worse still, our respondents pursue their innovations from a weak position, engaging in activities that: ■ Scuttle dreams of differentiation. The scores in Forrester’s annual Customer Experience Index have plateaued — there’s been no major migration toward “good” or “excellent” scores over the past six years (see Figure 9). Even in the three industries with brands that received “excellent” scores in 2013 — retailers, hotels, and banks — there are no runaway winners and only a few points separate the top handful of companies.3 The dominant trend is not differentiation, but parity. ■ Waste time and money. Companies that blindly add shiny new features or trendy technologies to their mix of customer experiences put the cart before the horse. Consider the auto insurance company that invested in a new mobile app and 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 failed “innovation.” © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  11. 11. For Customer Experience Professionals Customer Experience Innovation Demystified 10 ■ Jeopardize the customer experience discipline. Scattershot innovation initiatives can’t go on forever without some kind of verifiable value. Customer experience professionals that over-promise — but can’t deliver the goods or model the business impact of innovation investments — cannot expect to receive continued resources. Figure 9 Distribution Of Customer Experience Index Scores, 2007 To 2013 Excellent (score: 85+) Good (score: 75 to 84) OK (score: 65 to 74) Poor (score: 55 to 64) Very poor (score: 55) 2013 2012 2011 2010 2008 2007 8% 3% 6% 10% 11% 0% 31% 34% 29% 26% 25% 25% 36% 31% 35% 30% 26% 40% 17% 23% 18% 21% 24% 23% 8% 10% 11% 13% 14% 12% In 2013, nine companies tiptoed over the line from “good” to “excellent” with two- to seven-point increases. Base: 154 large North American brands scored in Forrester’s Customer Experience Index, 2013; 160 large North American brands scored in Forrester’s Customer Experience Index, 2012; 153 large North American brands scored in Forrester’s Customer Experience Index, 2011; 133 large North American brands scored in Forrester’s Customer Experience Index, 2010; 113 large North American brands scored in Forrester’s Customer Experience Index, 2008; and 112 large North American brands scored in Forrester’s Customer Experience Index, 2007 Source: North American Technographics® Customer Experience Online Survey, Q3 2007, Q4 2008, Q4 2009 (US), Q4 2010 (US), Q4 2011 (US), and Q4 2012 (US) 94182 Source: Forrester Research, Inc. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  12. 12. For Customer Experience Professionals Customer Experience Innovation Demystified 11 And The Pressure Is Rising And yet, firms are right to rally around innovating the experiences they deliver because: ■ Customers’ expectations are skyrocketing. People innately want variety and novelty.4 And now, digital tools give people unprecedented access to what they want, whenever they want it, leading consumers to believe that their needs can and should be met at all times.5 In 2012, the average US smartphone user had downloaded more than 40 apps that performed specialized functions.6 Among them: Google Now, an app that provides information about flights, nearby attractions, sports scores, weather, appointments, and traffic throughout the day — “before you even ask.”7 ■ The field of competition is widening. The competitive barriers of the past — manufacturing strength, distribution power, and access to information — have been commoditized.8 This shift has enabled upstarts to gain market share in every conceivable business category. Newcomers like thermostat manufacturer Nest Labs and eyewear manufacturer Warby Parker now compete head-to-head with established industry giants like Honeywell International and LensCrafters. And online financial services provider Simple Finance Technology offers consumers a wholly new banking relationship. The common thread among these companies is a laser-sharp focus on customer experience. ■ Any competitive advantage is short-lived. As development cycle times get shorter and shorter, the luster associated with any given experience innovation — and therefore the brand that introduced it — fades fast.9 USAA had a brief leg up on its competition when it launched its mobile check deposit app in 2009.10 But the feature has since been copied by a slew of companies including Bank of America, Wells Fargo, Chase, Charles Schwab, and State Farm — turning mobile check deposit into table stakes for any financial services provider. customer experience Innovation Done Right In order to change their approach to customer experience innovation, 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 differs from typical improvement processes (see Figure 10). As a process, it 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: 1. Reframe innovation opportunities. Start with an outside-in approach that frames your business challenges within the context of understanding customers’ unmet needs. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  13. 13. For Customer Experience Professionals Customer Experience Innovation Demystified 12 2. Ground innovations in the ecosystem. To sustain new types of interactions and ward off copycats, connect innovations to the mechanics of your customer experience ecosystem.11 3. Infuse innovations with the brand. Qualities that reflect key brand attributes must permeate new customer interactions in order to make the innovation authentic. Figure 10 What Is Customer Experience Innovation? CX improvement CX innovation Enhances interactions that already meet customer needs Makes existing interactions incrementally more useful, easy, and enjoyable Drives immediate business value Scope Impact on experience Business objective Solves for unmet customer needs Creates new types of interactions and/or signicantly changes the qualities of interactions Drives long-term dierentiation 94182 Source: Forrester Research, Inc. Reframe Innovation Opportunities To shed scattershot innovation efforts, customer experience professionals must examine their business challenges and associated opportunities in a different way — from the outside in. This first and vital step in the innovation process requires immersion in customers’ lives to discover their unmet needs — and removal of the guardrails that typically constrain brainstorming and problem solving. To achieve this, customer experience professionals need to: ■ Adopt explorative research techniques to develop empathy. Surveys and focus groups won’t uncover the insights required to guide true innovation efforts — they’re too constrained in the questions they ask and the answers they elicit.12 To uncover new opportunities that resonate with innate customer needs, more comprehensive methods are required. For example, researchers at Intuit solicited captioned photographs from a target group of customers to see how they were saving money. One photo stood out — a picture of an empty cupboard with the note: “I’m buying less food.” That single photo enabled the team to connect to customers’ real problems — and prompted Intuit to focus its strategy on putting more money in people’s pockets. ■ Take themselves out of customer journey maps to broaden horizons. Most companies use journey maps to illustrate the problematic interactions that customers have with them today. This model inherently forces teams into a find-and-fix mindset — and does little to stimulate “what if . . . ?” thinking. To identify new opportunities, Philips Healthcare mapped out a typical day in the life of a radiologist, regardless of whether those activities involved Philips. This approach enabled the team to identify a key pain point in radiologists’ daily work — an inability © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  14. 14. For Customer Experience Professionals Customer Experience Innovation Demystified 13 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.13 ■ Define a smarter problem than they started with. Holiday Inn executives knew that they had a food problem: The hotel’s restaurants didn’t have the atmosphere customers were looking for, and the food itself was mediocre and overpriced. They also thought their competition for breakfast was other hotels. Examination of consumer needs and behaviors, corporate financials, and cultural trends led to an epiphany: Denny’s and McDonald’s were the real competition. Says Craig LaRosa, principal, brand experience at Continuum, “Holiday Inn thought it was in the heads and beds business and needed to start thinking about being in the fast casual-dining business.” That insight catalyzed the development of a more social restaurant and bar experience that seamlessly integrated with new entertainment activities in the hotel lobby. Ground Innovations In The Ecosystem Customer experience professionals need to determine if new types of interactions have the potential to create lasting value for the organization. This means analyzing innovation ideas within the context of the core business mechanics. To add structure to this process, customer experience professionals must: ■ Connect new touchpoints to the broader ecosystem. Innovations that involve only a single touchpoint or channel put companies at high risk for copycats. To ward off imitators, customer experience professionals should map out how the people, processes, policies, and technologies that surround new touchpoints must also change to support new scenarios. For example, Citibank hired the same architects responsible for the Apple store to design its bank of the future. Not surprisingly, it wound up with a bank that looks like an Apple store. Citibank neglected the fact that Apple’s hiring, training, and in-store technology — its ecosystem — are the lifeblood of its unique in-store experience. ■ Define new business models to discover new interactions. New customer journeys are often the expression of innovative business models. 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. 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 (see Figure 11).14 This visualization can help teams see how core business activities can fuel new interactions — and support them in the long run. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  15. 15. For Customer Experience Professionals Customer Experience Innovation Demystified 14 Figure 11 The Business Model Canvas Helps Companies Visualize Business Mechanics Source: Business Model Generation website 94182 Source: Forrester Research, Inc. Infuse Innovations With The Brand The brand is a company’s genetic material — a powerful code that enables the organization to express itself appropriately in an infinite number of customer interactions. To wield this power for innovation initiatives, customer experience professionals must: © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  16. 16. For Customer Experience Professionals Customer Experience Innovation Demystified 15 ■ Transfer brand qualities to new customer interactions. Ikea’s cartoon furniture assembly instructions, Mini Cooper’s retro-inspired dashboard, and the cheerful chirp of a Zappos.com customer service rep — the qualities of these customer experiences create strong associations with their brands. And the more a new interaction looks, feels, smells, sounds, and tastes like a specific brand, the harder it will be for competitors to copy. That’s why Continuum Innovation created mood boards when developing a new restaurant concept for Bertuccis called 2ovens. Carefully chosen photos depicted the desired 2ovens vibe, helped align internal Bertuccis stakeholders, and guided the design of touchpoints as diverse as the dining space, menu, and website (see Figure 12). ■ Make brand a source of innovation inspiration. Brand should never be an afterthought when it comes to customer experience innovation. In fact, it can be an effective driver. After all, it was JetBlue Airways’ mission to “bring humanity back to travel” that inspired the airline to create in-flight innovations like extra leg room, seatback TVs, and snacks that people actually want to eat. To tap the brand’s potential, CX teams should create visual models that articulate their brand’s distinctiveness as well as customer needs (see Figure 13).15 They can then use these models to ideate products, services, and entire customer journeys that resonate with each core aspect of the brand. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  17. 17. For Customer Experience Professionals Customer Experience Innovation Demystified 16 Figure 12 Continuum Innovation Created Mood Boards For The Bertuccis 2ovens Restaurant Source: Continuum; Bertuccis 94182 Source: Forrester Research, Inc. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  18. 18. For Customer Experience Professionals Customer Experience Innovation Demystified 17 Figure 13 Zilver Innovation’s Visual Brand Diagram For Dutch Kitchen Appliance Brand Etna The outer ring describes rational and emotional customer needs: daily order and routine, plus ritual and meaning. The inner ring describes rational and emotional attributes of the brand: a sober no-nonsense attitude, plus enthusiasm and passion. The innermost wedges combine brand attributes and customer needs and form the input for innovation exploration. Photos show Etna customers and products in their home contexts. Source: Zilver Innovation; Etna 94182 Source: Forrester Research, Inc. Recommendations amp up idea generation to support innovation efforts Ideas aren’t cheap — and effective ideation is actually quite challenging. Companies need structured methods for increasing the total pool — and the variety — of ideas. To generate more ideas more quickly, customer experience professionals should: ■ Temporarily ditch reality. To get to solutions that qualify as true leaps forward, innovation teams need the freedom to generate possibilities without the burden of real-world business constraints. As Frederick Leichter, chief customer experience officer at Fidelity Investments, explains, “It’s easier to make a profound idea reasonable than to make a reasonable idea © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  19. 19. For Customer Experience Professionals Customer Experience Innovation Demystified 18 profound. We start with stuff that’s out there, wild, and aggressive and figure out if it has merit. Smart people will figure out how to get great ideas implemented.”16 ■ Include adjacent perspectives. At legendary innovator 3M, it’s standard operating procedure to bring together experts from across business units — like engineers from the pet and automotive groups — to riff off each other’s ideas. Customer experience professionals should follow suit by including product managers, developers, finance managers, and human resources staff on innovation teams. Employees from different disciplines will approach each problem with a unique perspective, spark new ideas, and help others make connections they couldn’t otherwise see. ■ Examine the needs of extreme users. Customer experience professionals have been trained to understand and solve for the needs of key customer segments. But during ideation, examining the needs of edge-case customers can be more enlightening. For example, a bank might consider a person who stores money under his mattress or a teenager who’s opening her first account. The needs of these extreme users are similar to those in the mainstream, just amplified. This amplification makes it easier for innovation teams to spot novel ways of solving common problems. ■ Co-create with customers and partners. Ideas can come from anyone. When Stockholm-headquartered design firm Doberman began a government-funded initiative to help urban families engage with nearby parks and wilderness areas, the design team members gave participants small blocks of wood. Then they asked them to head to the great outdoors and keep diaries of how they’d use these “devices.” Participants reported wanting to ask their blocks questions like how long a rain shower would last, whether pond ice was a safe thickness for skating, and whether a particular wild mushroom was safe to eat. These ideas spurred new mobile app functionality. ■ Play! People are more creative when they’re playing.17 To create a playful atmosphere for ideation, customer experience professionals should develop visual, nonlinear, and participatory group exercises — anything that gets employees out of their day-to-day work mode. For example, the ThinkCube innovation kit, often utilized by Cynergy in its digital strategy work, provides a set of cards that contain random concepts like “Frisbee,” “cryogenics,” and “cuneiform script.”18 Team members randomly draw cards and then combine them to trigger new ideas. Books such as Innovation Games: Creating Breakthrough Products Through Collaborative Play and Gamestorming: A Playbook for Innovators, Rulebreakers, and Changemakers provide dozens of additional playful innovation exercises.19 © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  20. 20. For Customer Experience Professionals Customer Experience Innovation Demystified 19 What I t Means Lust for innovation Will force organizationAL shakeups The need for innovation will soon force companies to change the way they do business. In the coming years, we’ll experience a future where: ■ Customer experience design agencies will be gobbled up. According to Roger Martin, dean of the Rotman School of Management at the University of Toronto, “Designers may not be able to prove that something ‘is’ or ‘must be,’ but they nevertheless reason that it ‘may be.’ This style of thinking is critical to the creative process.” It’s also critical to innovation. As the business world wakes up to the value of design, many companies find it easier to buy design resources than to develop them. 2013 has already seen two big acquisitions in this space: Facebook acquired customer experience design firm Hot Studio, and management consulting firm Accenture acquired service design firm Fjord. ■ Millennials will gain top innovation positions at traditional companies. When working on incremental customer experience improvements, it’s dangerous to believe that your customers are just like you.20 But it’s actually an effective strategy for getting innovations off the ground. Warby Parker co-founder Andrew Hunt started his business “after repeatedly losing my glasses and being forced to pay astronomical prices for uninspired frames.”21 Similarly, retired Apple engineer Tony Fadell started Nest Labs because he couldn’t find a thermostat that was worthy of his beautiful Bay Area home and finely-tuned aesthetic. As middle-aged executives seek to develop new experiences that are relevant for younger consumers, they’ll need to rely on insiders who know what makes this generation tick — and Millennials will quickly rise from low-paid entry-level positions to top strategic advisors. ■ Customers will expect to be part of the innovation process. Innovation is no longer an activity that can — or should — be confined within your company’s four walls. Customer communities like Communispace, ideation websites like mystarbucksidea.com, and crowd-funding sites like Kickstarter enable consumers to contribute their time, brain power, and hard-earned money to innovation initiatives that they believe in. As consumers become more empowered by these platforms, their view on participation will shift from being a nice-to-have to standard operating procedure. Ongoing participatory interactions will in turn create a new step in the standard customer journey — one that customer experience professionals will need to manage, improve, and (yes) innovate.22 © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013 section. section. section. section. section.
  21. 21. For Customer Experience Professionals Customer Experience Innovation Demystified 20 Supplemental Material Forrester fielded its Q4 2012 Global Customer Experience Peer Research Panel Online Survey to 100 CX professionals from our ongoing Marketing Strategy Research Panel. The panel consists of volunteers who join on the basis of interest and familiarity with specific marketing and strategy topics. For quality assurance, panelists are required to provide contact information and answer basic questions about their firms’ revenue and budgets. Forrester fielded the survey from October 2012 to December 2012. Respondent incentives included a copy of a report resulting from this data. Exact sample sizes are provided in this report on a question-by-question basis. Panels are not guaranteed to be representative of the population. Unless otherwise noted, statistical data is intended to be used for descriptive and not inferential purposes. Forrester fielded its Q4 2011 Global Customer Experience Peer Research Panel Online Survey to 86 CX professionals from our ongoing Marketing Strategy Research Panel. The panel consists of volunteers who join on the basis of interest and familiarity with specific marketing and strategy topics. For quality assurance, panelists are required to provide contact information and answer basic questions about their firms’ revenue and budgets. Forrester fielded the survey from November 2011 to January 2012. Respondent incentives included a copy of a report resulting from this data. Exact sample sizes are provided in this report on a question-by-question basis. Panels are not guaranteed to be representative of the population. Unless otherwise noted, statistical data is intended to be used for descriptive and not inferential purposes. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  22. 22. For Customer Experience Professionals Customer Experience Innovation Demystified 21 Organizations And Individuals Interviewed For This Report 3M Andrew Reise Consulting BlueCross BlueShield of Illinois Bruce Nussbaum Continuum Innovation Cynergy Systems ExperiaHealth Fit Associates frog design GE Healthcare Hasso Plattner Institute for Design at Stanford University Intuit Invoyent Kaiser Permanente Nest Labs Orange Parallel Design Labs Philips Portigal Consulting Rotman School of Management Storyline Tesco Endnotes 1 Among those factors that boost the likelihood of an innovation’s adoption, compatability with cultural values, past experiences, and needs of potential users are crucial. Source: Everett Rogers, Diffusion of Innovations, Free Press, 2003. 2 For guidance in building an effective business case for customer experience efforts, see the March 26, 2012, “The Business Impact Of Customer Experience, 2012” report. 3 In the retail category, only four points separate the top 10 brands. In the hotel category, Choice Hotels International and Hampton Inn/Suites trail top-scoring Courtyard by Marriott by a mere four points and five points, respectively. And in the bank category, customer experience darling USAA beats out SunTrust Banks and TD Bank by just seven points and eight points, respectively. 4 “The fact that people like variety is no secret. New research from Duke University’s Fuqua School of Business points to the extent to which we may even be hardwired to desire it . . . They found that the monkeys, when given a token to ‘spend’ on their favorite foods or a buffet, chose the buffet. This correlates with earlier research done on human subjects, such as one experiment finding that participants ate 43 percent more MMs when there were 10 colors in the bowl as opposed to seven.” Source: Stacy Blackman, “Duke Research: Monkeys, Like Humans, Want Variety,” CBS Interactive, April 1, 2010 (http://www.cbsnews. com/8301-505125_162-31042083/duke-research-monkeys-like-humans-want-variety/). Humans’ need for novelty exists “to help us adapt to, learn about, and create the new things that matter, while dismissing the rest as distractions.” Source: Winifred Gallagher, New: Understanding Our Need for Novelty and Change, Brilliance Audio, 2012. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  23. 23. For Customer Experience Professionals Customer Experience Innovation Demystified 22 5 “What has changed is consumers’ ability to get what they want. This has led them to expect that their needs can and should be met — more often and more completely than ever before in human history.” Source: James McQuivey, Digital Disruption: Unleashing the Next Wave of Innovation, Amazon Publishing, 2013 (http://www.forrester.com/marketing/books/digital-disruption.html). 6 Source: Paul Sawers, “Nielsen: US smartphones have an average of 41 apps installed, up from 32 last year,” The Next Web, May 16, 2012 (http://thenextweb.com/insider/2012/05/16/nielsen-us-smartphones-have-an-average- of-41-apps-installed-up-from-32-last-year/). 7 Source: Google (http://www.google.com/landing/now/). 8 Now every company — and even enterprising individuals with smartphones — can tap into global factories and supply chains. Digital distribution alleviates the need to establish cumbersome distribution networks. And after huge IT investments, companies are realizing that the cloud provides all of the computing resources they need. See the February 26, 2013, “Why Customer Experience? Why Now?” report. 9 “Total manufacturing output in the United States is increasing (by 15 percent in the last decade) . . . In effect, the huge productivity increases made possible by modern management and technology have created more productive capacity than firms know what to do with.” Source: Eric Ries, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Successful Businesses, Crown Publishing Group, 2011 (http://theleanstartup.com/). In the past few years, Agile processes have not only gained increasing adoption levels but also rapidly joined the mainstream of development approaches. See the January 20, 2010, “Agile Development: Mainstream Adoption Has Changed Agility” report. “Organizations are continuing to scale agile beyond single teams and single projects. This year we saw a 15% jump in the number of respondents who work where there are at least 5 agile teams, and a 9% increase in those working with up to 5 agile projects. In addition, agile momentum is up; those who plan to implement agile development in future projects has increased from 59% last year to 83% this year.” Source: “7th Annual State of Agile Development Survey,” VersionOne, 2013 (http://www.versionone.com/pdf/7th-Annual-State-of- Agile-Development-Survey.pdf). 10 Source: Susan Stellin, “Bank Will Allow Customers to Deposit Checks by iPhone,” The New York Times, August 9, 2009 (http://www.nytimes.com/2009/08/10/technology/10check.html?_r=0). 11 The customer experience ecosystem is the complex set of relationships among a company’s employees, partners, and customers that determines the quality of all customer interactions. See the February 28, 2013, “The Customer Experience Ecosystem” report. 12 Multiple-choice surveys require that you know the range of possible answers before you ask the question. Both surveys and focus groups assume that respondents know what they will do or plan to do and whether they like/dislike or want/don’t want something. While those are all important things to know, most people aren’t fully aware of, don’t remember, or are not able to predict their own behaviors in situations that they haven’t been in before. Source: Vidya Drego, “Why Surveys Aren’t The Best Tool For Designing Experiences,” Vidya Drego’s Blog, May 17, 2011 (http://blogs.forrester.com/vidya_drego/11-05-17-why_ surveys_arent_the_best_tool_for_designing_experiences). © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  24. 24. For Customer Experience Professionals Customer Experience Innovation Demystified 23 13 As Werner Satter, general manager of ambient experience at Philips Healthcare, says, “We look at the issues that people are facing. It’s not that we have a tech or a solution, and we’re trying to find a need for it.” And Philips doesn’t just look for hotspots in which it can intervene itself. If certain insights are relevant for the hospital or a partner agency, design researchers pass their insights on to those organizations. 14 The business model canvas helps companies identify the relationships among key partners, resources, activities, value proposition, customer segments, customer relationships, channels, cost structure, and revenue structure. An interactive version of this tool is available on Strategyzer’s website. Source: Strategyzer (https://strategyzer.com/). 15 Source: Eric Roscam Abbing, Brand Driven Innovation: Strategies for Development and Design, AVA Publishing, 2010 (http://www.branddriveninnovation.com/). 16 Source: Harley Manning and Kerry Bodine, Outside In: The Power of Putting Customers at the Center of Your Business, New Harvest, 2012 (http://outsidein.forrester.com). 17 Source: Stuart Brown and Christopher Vaughan, Play: How it Shapes the Brain, Opens the Imagination, and Invigorates the Soul, Avery Trade, 2010. “We think playfulness helps us get to better creative solutions, helps us do our jobs better, and helps us feel better when we do them,” said Tim Brown, CEO of innovation firm Ideo. Source: “Tim Brown: Tales of creativity and play,” TED Conferences, November 2008 (http://www.ted.com/talks/tim_brown_on_ creativity_and_play.html). 18 Source: Amazon.com (http://www.amazon.com/ThinkCube-A-Professional-Innovation-Tool/ dp/097920500X). 19 Source: Luke Hohmann, Innovation Games: Creating Breakthrough Products Through Collaborative Play, Addison-Wesley Professional, 2006; Dave Gray, Sunni Brown, and James Macanufo, Gamestorming: A Playbook for Innovators, Rulebreakers, and Changemakers, O’Reilly Media, 2010. 20 “People who make a product think and talk about it fundamentally differently than people who don’t. While both groups may use the same product, their context — understanding, language, expectations, and so on — is completely different.” Source: Steve Portigal, Interviewing Users: How to Uncover Compelling Insights, Rosenfeld Media, 2013. 21 Source: Genevieve Bahrenburg, “In Focus: Warby Parker Eyewear,” Vogue, February 22, 2010 (http://www. vogue.com/vogue-daily/article/vd-in-focus-warby-parker-eyewear/#1). 22 Forrester currently defines the steps in a standard customer journey as: discover, evaluate, buy, access, use, get support, reengage, and leave. © 2013, Forrester Research, Inc. Reproduction Prohibited June 27, 2013
  25. 25. « About Forrester Global marketing and strategy leaders turn to Forrester to help them make the tough decisions necessary to capitalize on shifts in marketing, technology, and consumer behavior. We ensure your success by providing: n Data-driven insight to understand the impact of changing consumer behavior. n Forward-looking research and analysis to guide your decisions. n Objective advice on tools and technologies to connect you with customers. n Best practices for marketing and cross-channel strategy. for more information To find out how Forrester Research can help you be successful every day, please contact the office nearest you, or visit us at www.forrester.com. For a complete list of worldwide locations, visit www.forrester.com/about. Client support For information on hard-copy or electronic reprints, please contact Client Support at +1 866.367.7378, +1 617.613.5730, or clientsupport@forrester.com. We offer quantity discounts and special pricing for academic and nonprofit institutions. Forrester Focuses On Customer Experience Professionals To improve the perceived quality of customer interactions with your company, you must leverage emerging digital technologies and lead enterprisewide customer experience transformations. Forrester helps you create forward-thinking strategies to justify decisions and optimize your individual, team, and corporate performance. Carl Erickson, client persona representing Customer Experience Professionals Forrester Research, Inc. (Nasdaq: FORR) is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 13 key roles at major companies providing proprietary research, customer insight, consulting, events, and peer-to-peer executive programs. For more than 29 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit www.forrester.com. 94182

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