Customer Experience Innovation

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.

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.
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June 27, 2013

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

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.
2%
51%
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).

■ 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.
(multiple responses accepted)
80%

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.
(percentages may not total 100 because “don’t know” responses were not included)

Figure 5 Adoption Levels For Customer Experience Design Practices
“To what extent does your company do the following practices related to design?”
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.
(percentages may not total 100 because “don’t know” responses were not included)

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.

Figure 7 Adoption Levels For Measurement Practices
“To what extent does your company do the following practices related to measurement?”
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.
(percentages may not total 100 because of rounding)
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.

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)
36% 17%
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.”

■ 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;
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)

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.

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
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

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.

Figure 11 The Business Model Canvas Helps Companies Visualize Business Mechanics
Source: Business Model Generation website
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:

■ 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.

Figure 12 Continuum Innovation Created Mood Boards For The Bertuccis 2ovens Restaurant
Source: Continuum; Bertuccis

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
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

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

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
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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.

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.

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).

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.

«
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