Numerous studies conducted over the past two decades have shown the tremendous value creation potential of increasing an enterprise’s customer-centricity and focus on customer experience or CX. Studies by Accenture, Bain, McKinsey, HBS and my own empirical research shows that businesses which implement best practices in CX engineering grow their sales and profit trajectories significantly faster than their industry peers while also outperforming standard stock market indexes like S&P 500.
Customer-centric companies that are CX leaders have been shown not only to earn much higher Net Promoter Scores and Customer Satisfaction ratings, but also to do a better job at reducing operating costs, mitigating key risks, commanding sustainable price premiums and engendering more engaged workforces when compared to CX laggards, metrics all linked to earning supra-normal rates of return. Findings from cross-sector, industry- and firm specific studies also point to a myriad of best-practices.
For example, research shows that CX leaders who deliver customer value propositions (CVPs) which transcend mere functional value to also incorporate emotional, life-changing and social impact CXs as elements of value into their CVPs produce even more supra-normal performance results vs. those who do not. Case studies of 21st century competition sharply underscore and support these findings, with many examples of companies leveraging CX engineering capabilities to win marketplace advantage.
Take Apple vs. Sony in digital entertainment, vs. Nokia in smart phones, vs. Kodak in photography or Circuit City in electronics retailing. Any competitive analysis of Apple vs. these industry leaders at the launch of the iPod and Apple Store (2001) or iPhone (2007), would not have predicted the demise of these incumbents. Other companies who also wielded CX engineering to overturn markets since 2000 include Salesforce, Alibaba, AWS, Jio, Stripe, Capitec, WhatsApp, Spotify—this list is nigh endless.
And yet, while these findings and examples may now seem intuitively obvious to many, it is important to remember that the history of CX engineering as being seen as the heart of corporate value creation and the key to competitive advantage is a relatively recent phenomenon. In the early 1990’s, the most popular strategy frameworks largely ignored customer experience and depicted customers as one of several powerful competitive forces capable of bargaining away a company’s rate of return on capital.
Similarly, countervailing popular customer-driven frameworks for strategy that were starting to emerge during this same time period urged companies and leaders to stay close to customers, listen to their inputs and do what they say —an operating philosophy rejected by many leaders and business teams as unrealistic, especially in scientific, engineering, and tech intensive industries where customers may not understand what is possible and habitually make requests that are neither actionable or profitable.
Only recently has the value revolution in business brought about a reconciliation of these divergent perspectives and increased the imperative for leaders and business teams to radically increase their customer-centricity and focus on CX. This is due to pervasive interest in learning about the operating models of customer-centric companies; new tools, technologies and methods for advancing customer intimacy; and customer-centricity as a requirement for surviving in “new-game” competitive landscapes.
One obvious reason for renewed interest in building CX engineering capability enterprise-wide is the stunning rise in the market capitalization value of a handful of private-sector companies like Alphabet, Amazon, Apple, Google and Microsoft, and soon to be others, which are valued at over $1 trillion and whose leaders over the past decade have clearly embraced an outside-in, customer-centric operating philosophy to drive their businesses to these record heights, and some cases, to turn them around.
In the words of one well-known speaker at our Stanford classes, Steve Jobs explained Apple’s shift from an inside-out to outside-in mindset, “I’ve learned you’ve got to start with the customer experience and think backwards to the technology, not the reverse. I’ve made that mistake so many times in my career, I’ve got the scar tissue to prove it.” Or, as Jeff Bezos, leader of another $1T company, “We’re customer obsessed, not competitor obsessed, we start with the customer and we work backwards.”
This mindset contrasts to the much more prevalently employed internally driven, inside-out, techno-centric approach that is used by many business teams in technology intensive industry sectors, which attempts to convince and sell their targeted customer communities that the existing products, services and capabilities of their enterprise are exactly what customers need—a mindset that while out-of-step with that used by the world’s most valuable companies still far dominates today’s corporate landscape.
Firms with this mindset see CVP as a marketing, selling, positioning exercise. In contrast, customer-centric enterprises view CVP as a total business system driver for integrating all functional agendas around providing a chosen CX lineup through its technical, management, cost and other solutions, as well as the architecture for communicating why it is superior to rival alternatives. No asset, resource or capability is sourced or designed, nor investment decisions made without it linking back to the CVP.
A second reason for the increased adoption of customer-centric mindsets is that new toolsets have shown the pathway for technology intensive enterprises to creatively infer customer’s needs in new ways by leveraging advances in Day-In-The-Life-Of-Customers (DITLOC) methods, which I and my colleagues pioneered at Stanford. This is the source of breakthrough insights generated by tasking multifunctional teams to directly or vicariously “live the lives of their targeted customer stakeholders”.
“Spend-a-day-in-the-lives-of-your-customers” is a metaphor meant to convey what tech giants Hewlett and Packard historically urged their engineers to do—sit at the “bench” next to customers to observe their workflows and challenges so they could devise innovative solutions that far transcended what customers could imagine on their own and even help customer stakeholders to address problems that they themselves weren’t aware of and that they weren’t even seeking answers from suppliers to fix.
Using DITLOC insights to close customer intimacy gaps differs from typical Voice of Customer (VOC) research in that it leverages multifunctional creative inferences from team members in engineering, IT, cyber, DevOps, contracts, operations, supply chain and logistics, HR, finance, legal, etc., to create a force multiplier in innovation that easily surpasses solution ideas that would be derived if this process were relegated to one functional agenda like business development, engineering, marketing or sales.
Any assessment of enterprise CX engineering capability would show this customer-centric mindset is firmly embedded inside only a handful of companies today, perhaps 15% of all businesses globally. And even corporations that have embraced this operating model still have strong pockets where some of their units or functional agendas slip into a customer compelled mindset of simply asking customers what they want or remain firmly transfixed on their internally-driven objectives, incentives and KPIs.
But the future will continue to drive an even much more urgent need for companies to institutionalize a customer centric mindset and model that starts with novel DITLOC insights and thinks backwards to identify and jettison any outdated orthodoxies and dominant logic that are holdovers from successful past ways of doing business. The reason for this prediction is simple, survival. Across all sectors and especially tech-intensive industries, enterprises increasingly face new-game competitive landscapes.
These are market spaces in which the model for corporate value creation is radically changing due to a confluence of powerful forces such as unprecedented speed and pace of technological change and scientific advances; shifts in social, political and ecological environments; emergence of ecosystems as the basis for competition; new forms of digital customer engagement; next-gen Gen-Y, Z, Alpha customers with new value hierarchies, encroachment by non traditional industry outsiders, and so on.
These shifts challenge the “old-game” legacy CXs, CVPs and business models required to succeed. While the forces creating these new-game landscapes vary across technology intensive sectors such as aero-defense, banking and insurance, high tech, pharm/biopharm, telecoms, etc., there are drivers common to all. What constitutes best-practice process and methods in applications of
CX engineering for enterprises aspiring to deliver winning CVPs is now being radically transformed by the digital era. Companies across all sectors are leveraging a veritable tsunami of new digital technologies—e.g., AI, analytics, big data, blockchain, cloud, cryptocurrency, IoT, machine learning, mobility, robotics, etc.— along with digital business models to transform all 3 stages of the traditional value delivery execution sequence of choosing, providing and communicating a winning CVP lineup. These radically alter the trajectory of companies to improve their customer centricity, operational excellence and performance.
Leaders and teams that aspire to achieve market leadership in these dynamic market spaces must think and act like pathfinders to their very core—operating as elite individuals and cross-business and functional teams capable of redefining and reinventing both the industry and their portfolio of offerings to win in these rapidly evolving landscapes where innovative next practices are now constantly being pioneered, tweaked via experiments, continuously refined and deployed as the newest best-practices.
The future generation of customer-centric enterprises will be those that can create an agile, always-on value delivery system or VDS for always-connected customers, one capable of listening to customer signals from all interactions, touchpoints and channels to derive keen insights about their unmet need states and occasions and translate these into solutions that deliver hyper-personalized CXs via user-relevant products, services and messaging working in close collaboration with ecosystem partners.
Companies compete on the basis of strategic capabilities and those that invest to create the mindsets, methodologies, protocols and best-and-next practice disciplines of CX engineering will win, grow and dominate in the future like no others. Those that fail to overcome the internal sources of inertia that prevent them from seeing and accessing opportunities in these new-game landscapes will become disruptees instead of disruptors in an era where the life-cycle of industry leaders is greatly shortened.
In sum, this program in CX engineering is designed for enterprise leaders and multifunctional teams operating in new game competitive landscapes where the old-game model for value creation is rapidly changing due to shifts in technology, regulation, scientific advances, socio-political trends, etc., forcing a reimagining of their legacy CVP lineup using a best-practices, outside-in customer-centric approach. Companies with this profile span all industry and geographies, especially technology intense sectors.
Typical roles of program participants include business unit leaders (e.g., GMs, heads of strategy for new product service development, geo-expansion, etc.) and multifunctional teams supporting them in Engineering, Finance, IT/Digital, HR, Legal, Marketing, Operations, Partnerships, Supply chain, Sales, etc. Intact teams working on specific growth initiatives also often attend as do shared services groups in brand, compliance, HR, IT, operations, risk management, etc., that deliver value to internal partners.
The methodology used for program planning is based upon a best-practices, outside-in, customer-centric approach to choosing and delivering winning customer value propositions (CVP) that was first developed at Stanford and continuously honed through client engagements across diverse industry sectors and geographies spanning 40 countries. It is based on the practical reality that all businesses offer some CVP to win customer preferences, whether they recognize it or not or use this terminology.
All businesses offer up a proposition that in effect says, ‘If customers choose us vs. rivals, here are the CXs they’ll get in return and price they must pay.’ Customers compare the value this CVP to that of alternatives and also evaluate whether the business has a Value Delivery System (VDS) that can credibly deliver on the promised CVP. Since customers choose the CVP and VDS they perceive as superior, the practical reality is all businesses must choose the CVP and VDS they want to stand for.
Even though all business teams offer up some CVP lineup of promised CXs and execute some VDS, it is surprising how few leaders and business teams consciously, explicitly and deliberately choose and commit to a CVP that is clearly understood, echoed and reflected across all functional agendas. Yet, even when this is done, few of these leaders and business teams adopt a best practices, outside-in, customer-centric approach to executing the core processes that underlie these disciplined choices.
By best practices, we refer to commercial processes, methods, toolsets, protocols, disciplines and actions used by leaders and business teams that have been proven to be effective in increasing customer acquisition and retention rates and delivering supranormal profitable value to customers and shareholders—outcomes all leaders and teams and their management are keen to achieve. Since most leaders and teams fall short hewing to these best practices, there are opportunities to improve.
By outside-in, we mean that winning new opportunities in today’s new-game competitive landscapes where the model for value creation is rapidly changing requires that leaders and teams must deeply understand how their world and that of the customers they seek to serve is being shaped by a multiple powerful outside convergent forces. Yet, the recent demise of many industry frontrunners shows that not all teams possess the new-game business acumen to recognize and respond to inflection points.
By customer-centric, we refer to the mindset relevant to all great technology companies instilled by their leaders, namely that of requiring their multifunctional business teams across the enterprise to become their customers by deeply understanding their unmet need states and occasions now and into a fast-changing future and transform themselves to deliver the value customers will value before they recognize it on their own. Invariably, there are opportunities for any company to lift its game here.
The starting point for program planning is an assessment of the organization’s as-is processes for choosing and delivering winning CVPs, the artifacts and outcomes produced by these processes, and the metrics and closely watched numbers used to evaluate their success. While the documents and interviews required to conduct this assessment will invariably differ from one client company to the next, this data forms the as-is baseline to identify the to-be processes to focus on in the program.
The methodology used in program development starts by sharing with program sponsors in the client company the baseline assessment of their as-is processes for choosing and delivering winning CVPs and confirming the to-be set of processes that will be the major focus of the program. This will lead to a dialogue with program sponsors on their priorities and goals for the program and any key success metrics by which the program will be judged by them or senior levels they report to in the enterprise.
These discussions in turn will dictate to what extent the program outline, content and curriculum must be adjusted to achieve these objectives. One of the most crucial steps in program development is deciding upon which executives from which multifunctional agendas should attend the program and why and setting the expectations for the amount of time these jobholders will devote to the execution of post-session assignments, including the pilot projects to be launched in the implementation phase.
Discussions with program sponsors on the types of pilot projects that would be the best carriers of learning to the rest of the enterprise must be held at this stage since the focus of the pilot projects will also help to shape any adjustments in the program’s content and curriculum. Also, the key is to determine whether the pilot projects will be executed by intact teams with multifunctional roles or by individual jobholders working with other functional groups in the enterprise who are not attending the program.
Other issues that must be addressed at the program development stage since they will influence the curriculum and content include whether some or all among the attendees are intended to be trained as internal coaches to spearhead value transformation efforts once the program concludes; whether there are any constraints imposed on the pilot projects in terms of engaging directly with customers vs. using subject matter experts or data already collected to inform on customer community needs.
A final set of program development issues concerning boundaries for program attendance should also be set at this stage. One concerns whether senior management or other reviewers of the pilot project work who will not be attending the entire program should be candidates for shorter sessions. Major disruption to the pilot projects can occur if senior level reviewers are not integrated into, educated and briefed on the team’s CX engineering process and its resulting artifacts and new/updated processes.
Too often, senior management reviewers attend pilot project outbriefs without much knowledge of the process or its outputs. This creates an alignment problem because reviewers are most often senior, well-respected executives in the enterprise with distinguished careers and direct communication avenues to the topmost echelons of corporate stakeholders and even the customer groups studied in the pilot. Developing an approach to mitigate this risk is another key aspect of program development.
The methodology used in the implementation phase is CX engineering, the managerial discipline of choosing and delivering winning customer value propositions (CVPs) by “spending a Day-In-The-Life-Of-Customers (DITLOC) in a target market. The first 6 program modules trains participants on the best-next practice concepts, tools, processes and methods of this discipline and selects a pilot project to which they can be applied, whereas modules 7 through 11 is where execution of the pilots occurs.
Each pilot project team will be given a set of templates that guides them through the processes taught in modules 7 to 11, including 1.) Mapping the Customer Community and Stakeholders; 2.) Shooting DITLOC Videos 1, 2, 3 and Documenting Insights from DITLOC Video 1: As-Is, Now and into the Future; DITLOC Video 2: To-Be, Working with Client Company; DITLOC Video 3: Working with one or more of the Best Competing Alternatives; and 3.) CVP Experience Scenarios and VDS Discriminators.
The templates have detailed instructions that accompany them to help participants in executing and reporting out on all of the to-be completed steps outlined above and participants will also be given a high-level example of a completed set of templates using a disguised case study from my practice. At this stage of the program, participant workload increases depending upon the scope of the pilot, and time is devoted before and after implementation modules 7 to 11 to set up and review pilot team work.
Participants will also be provided free access to 30 lessons of eLearning Modules so that they can go back and review the core concepts taught if needed and take a deeper dive on any of them. In the event that participants are working on their pilot project with others in the organization who did not attend the training, these individuals can easily be brought up to speed. Each module is 5 minutes in length featuring actors and cameo videos by me, professionally produced by UBM Studios in the UK.
The methodology used in the program review phase leverages three distinct categories of indicators for assessing program impact. These include 1.) Self-assessments by participants of their newfound knowledge and skillsets; 2.) Feedback and commentary by customer stakeholders who participated in the pilots and their views on whether the approach used by pilot teams was different than interactions with others; and 3.) Measurable business impacts that can be linked to the training and pilot projects.
Self-assessments by participants at the end of the program will link back to content from module 5 and ask participants to what extent they have learned mindsets, methods and tools that improved their strategy and cultural change skills, technical expertise in specific value delivery areas; and their personal customer-centric leadership skills. Other assessments will be self-reports on to what extent the program contributed to improved customer intimacy, cross-functional-business collaboration, etc.
Customers who participated in the pilot projects will be given an opportunity to assess to what extent the program altered how the client company interacted with them in areas like exploring breakthrough solutions for them, etc. and how this approach contrasts to that of other companies they work with as suppliers. A not infrequent outcome is customers playing back that they enjoyed the interactions and that other companies don’t approach them in this way, resulting in higher NPS and C-SAT scores, etc.
Finally, there will be a post-program review at the end of module 12 and also at a selected time period following that, say 6 months or 1 year, to collect data on any hard measurable business impacts that can be linked back to the program. As the client testimonials showcased in this program outline attest, typical outcomes can include increased revenues derived from those customers participating in the program pilot projects, improved contract win rates and executional excellence metrics, among others.
This service is primarily available to the following industry sectors:
The industry started when entrepreneurs rushed in to expand and compete in the new airplane market after the Wright brothers’ flight in 1903. The industry’s pioneers had names that all became famous—e.g., Boeing, McDonnell, Douglas, Hughes, Martin, Rockwell—and the customer experience these companies delivered was based on the personal reputations of these leaders and their track records. The industry struggled and evolved through wars, recessions, design failures and consolidations.
With the advent of the Cold War, the “aircraft industry” in the US started expanding into a much broader defense industry dominated by missiles and ground-to-air defense systems. These defense systems required sophisticated electronics and by 1959, 16 companies dominated the missiles business, with 6 of the top 8 being aircraft manufacturers. The others were 6 electronics companies, an automotive company and rubber company. Similar transitions took place in Europe and beyond.
The competition was intense as success meant survival and the customer experience (CX) battleground was based upon superior design which led to superior performance and cost. This drove industry players to bid very aggressively. An “all sins are forgiven” mindset was adopted by customers —as long as products ultimately worked, other lapses were overlooked. This dominant logic pervaded the industry causing excessive risk-taking which, even when exposed, had few if any consequences.
The result was most programs ran behind schedule with huge cost overruns and some huge failures that undermined funding sponsor confidence, including missions like Apollo 1 and 13, Challenger and the failed attempt to rescue Iranian hostages in 1980, to mention a few. Nevertheless, the competitive environment continued to force aggressive proposals exacerbated by the inherent technological risk, program execution risk and fear of losing dominance to USSR, China, Europe and emerging players.
The interrelated nature of modern aerospace-defense systems brought together many previously separated stakeholders who, along with political bodies like the US Congress, were rapidly growing averse to the ongoing program executional escapes and failures of the industry. Budgetary demands for social spending were rising and this further threatened troubled programs that had a military DoD or Intelligence community IC focus that was mainly on winning an end-game in a far-off distant future.
This resulted in emergence of a new, more comprehensive review of stakeholder requirements and approach to delivering customer value, one committed to preventing a “jerking victory out of the jaws of defeat” philosophy that had dominated the industry for decades This new-game model rewarded day-to-day executional excellence while meeting expanded stakeholder needs for acquirers, funders, developers, users, war fighters, sustainers, policymakers, etc.—all with different CX hierarchies.
The budget pressures after the pandemic expenses and resulting impact on the global economy will reinforce this trend. Correctly marshalling the requirements and insights of these larger stakeholder communities to form alliances on multiple fronts to keep programs sold in an environment with many competing alternatives and political agendas will be a key CX capability, as will program executional excellence. Programs behind schedule with cost overruns will be cancellation or deferral targets.
The current landscape is being shaped by new security threats across the globe. These include proliferation of WMDs, Iran’s developing nuclear capability, Korea’s long-range missiles and nuclear arsenal, and regional instability in Asia and MENA. Adversaries are using new cyber warfare tools to launch cyber-attacks vs. DoD, IC, electrical grids, banks, national and civic infrastructures. Humanitarian missions driven by forces like climate change and new pathogens are also surging.
Global recession, budgetary cuts, and sequestration are requiring customers to do more with less. Commercial advances in cloud computing and new operating models are infiltrating the national-security market space, as witnessed by huge contract awards in cloud computing by Amazon for CIA and Microsoft for DoD The emergence of the mobile business cloud, which will untether customer’s workforces and distribute information faster to decision makers regardless of locale is also taking off.
Interacting with these forces are continuing advances in a wide range of technologies including massively scalable high-performance cloud architectures and new visualization tools that pave the way for big-data analytics to identify and process petabytes of data to isolate key trends and empower decision-makers with real-time information—further boosted by a plethora of new sensors coming on board that are creating a tsunami of data that’s ready to be mined for actionable intelligence.
Other game-changing advances in AI, ML, advanced analytics, hypersonics requiring rapid detection and response, and a host of C4ISR technologies are enabling contractors to deliver agility empowerment CXs to sector customers who at the same time are trying to make mission agility an enterprise-wide priority. Unfortunately, adversaries also have access to these technologies and are investing in them heavily and in some cases are more advanced than the US and its allies.
The DoD and IC can no longer rely on Cold War-type technical leads. One example is in space security, i.e., protecting vulnerability of space platforms to jamming and other forms of compromise. Significant issues exist around the survivability of space assets if attacked that require investment and the pace that adversaries are moving in cyberspace and the electromagnetic spectrum requires faster deployment of solutions to the field, making operational agility one of the key CX themes of the future.
The US Air Force’s future operating concept affirms operational agility is the central guiding principle for how it will conduct its missions up to 2035 and the operating concepts for the IC and all other DoD branches echo this imperative. Sector customers want to achieve net-speed in operations, near-real-time decision making, lower costs and speed to market. They are experimenting with new business models and pricing for delivery of services and working with agile Silicon Valley-type companies.
They want to work with contractors that can implement new emerging technologies quickly and in innovative, effective ways to bridge the gap between new commercial technologies and unique DoD and IC needs. This means executional excellence will be a key CX that contractors must come to stand for, especially in an era of technically levelled competitions where technical discriminators are harder to find. These trends create a transformational challenge for many sector contractors.
Predictably, more companies in the sector will transition to campaigns as initiatives for housing their CX engineering efforts to capture emerging opportunities. A campaign is an integrated cross-capture set of actions orchestrated to position the enterprise to win a disproportionate share of future contract awards in a market space and customer set. This will entail shifting from the old-game model where IRAD and other investments were mainly capture-specific and reactive to customer-issued RFPs.
In the past, when industry customers issued draft RFPs, they were often close to the final RFP. But customers have been diverging from this historical pattern and becoming less predictable—influenced by new-game trends. Customers are finding environments other than RFPs to express their needs and competitors are investing in capabilities before RFPs come out, putting them in an app-store environment for customers to try out and provide input. This trend will predictably increase.
Transitioning to campaigns to win business in the future will enable greater strategic focus on market spaces such as space security, cyber resilience and others that will drive future industry growth. It will require players to take much deeper dives on the common unmet needs, solutions, and investments required to win in these spaces. In turn, this will allow new business capture teams to leverage proactive campaign-level investments to accelerate solution delivery for specific capture opportunities.
For many this will necessitate building new capabilities in CX engineering. While all companies have a capture process and template, many don’t have one for campaigns, reflecting a closely-held dominant logic assumption of the old-game model that “new business comes to us when customer RFPs come out.” And even for many of the current industry players that do implement campaign strategies, they are mostly focused on orchestrating customer communications efforts to sell their existing capabilities.
This mindset of campaigns as a communications exercise is a direct result of capture teams being housed within a set of un-integrated product-centric and functional silos that mirror the customers they serve, with niche capabilities embedded within each and limited cross-capture team collaboration. This makes it hard to “connect the dots” and identify needed investments in new capabilities to address mission problems that have commonalities across customers, markets, and business silos.
Winning emerging markets of the future will require enterprises to shape themselves to be adept at building new capabilities across their portfolios along with forging selective partnerships with agile Silicon-Valley type companies to support customers’ missions and their desire to increase the pool of innovation that they can tap to support their ongoing transformation efforts. All the above holds not just for emerging domestic markets like space or cyber security, but for global growth too.
Capturing global growth in aerospace-defense expenditures in emerging regions such as Middle East, Asia-Pacific and elsewhere will also rely on the ability to “connect the dots” for a less sophisticated acquisition customer community and deliver cross-enterprise value that capitalizes upon linkages bridging product-centric silos. Global customers often have needs that span solution silos and value using proven solutions because there often isn’t enough funding to drive new development.
Electronics and Technology
The term ‘Electronics and Technology’ industry is a very broadly encompassing one. One way to think envision the history of the industry from a customer experience or CX perspective is the concept of a ‘stack’, i.e. a compilation of products and services that combine to deliver the enabling technology for a particular application to work. Key stack elements include transistor and silicon components, servers and storage, interconnect devices, software, professional services and lastly customer applications.
Each of these stack elements has a history in terms of the customer experiences (CXs) delivered by players at each level of the stack and a set of current and future CX challenges and opportunities that industry players must be capable of deftly navigating to achieve customer relevance in what is one of the most rapidly changing and dynamic industry sectors on the planet. Sector history shows that the model for customer value creation continuously and rapidly shifts from old-game to new-game models.
This is illustrated through industry milestones like the invention of the transistor; the first computer and computer programming language; the first personal computer; user interface developments like the mouse and windows; invention and proliferation of the internet; staggering advances in the power and speed of semiconductor components and their manufacture, communications breakthroughs in mobile devices and generations of wireless technology; and explosion of apps for enterprises and individuals.
This resulted in an endlessly advancing CX battleground for industry players to empower enterprises, individuals and groups to harness the power of stack elements to achieve desired end-state goals for their businesses, communities and personal lives. While pioneers like IBM sought to control much of the stack to deliver a CX of superior reliability to downtime conscious enterprises it served like banks, over time many of the core stack elements became specialized in firms like Intel, Cisco, Microsoft etc.
The pace of innovation in CX advances by players across the stack spectrum has been staggering, best captured by Moore’s Law of doubling chip densities every 2 years that persisted 60 years. This pace of CX innovation was matched by the pace of CX commoditization, with many of the industry’s breakthroughs exploited by others, such as Apple vs. Xerox Park on user interfaces that led to the Mouse and Macs and a host of inventions from National Labs that were commercialized elsewhere.
In the last two decades of 21st century competition, a new generation of industry leaders has rapidly emerged: Alphabet, Amazon, Apple, ARM, Microsoft and others with senior leadership that embraces customer-centricity as an operating philosophy driving all functional agendas, one that stands in stark contrast to many legacy players whose approach to customer value creation was oft more inside-out, product and technology-centric. These new leaders are the most valuable companies on the planet.
The current state of the Industry is best characterized as disruptive. Once-industry giants like IBM, Cisco, HPE, Intel, Oracle are massively challenged by the likes of Amazon, ARM, Google, Nvidia, Salesforce and a host of disruptive startups. Such is the impact of AWS that in many ways the role of the CIO has changed from control of the IT environment to being under enormous pressure to deliver compute power to enable ever increasingly rapid deployment of apps that deliver business impact.
This new generation of industry leaders ushered in an era of new mindsets in thinking about best and emerging next practices in choosing and delivering winning customer value propositions (CVPs), one that challenged the industry’s dominant logic. The old-game models of legacy incumbents focused on delivering CXs that linked their offerings to the end-state goals of enterprises—e.g. price performance, cost savings, productivity gains, etc.—or individual users’ ability to produce more valuable outputs etc.
Apple became the world’s most valuable company by leveraging its core competency platform that was developed in desktop computing of giving end-users a surprisingly easy journey to accessing the application power of the machine to better accomplish their personal and professional goals to other devices—an iPod, iPhone, iPad, Apple Watch, Car Play, etc.—as well as to other assets in its value delivery operating model like the iTunes website, Apple stores, Apple Pay, etc., to infinity and beyond.
This focus on streamlining customer’s journey to their end-state goals—whether they be harnessing power of the Cloud, doing web searches, gaining customer insight from CRM software, etc.—figure large in the CVPs brought to market by Alphabet, Amazon, Microsoft, Salesforce and others. This has served as a carrier of learning to incumbents and startups alike: Giving customers a journey reduced in time, cost, complexity and risk and even fun and rewarding at all stages is now de riguere standard.
The industry’s most recent innovations are also journey related, i.e., getting enterprises out of the business of buying and managing IT tech stacks on their own and instead delivering them as a utility that is wrapped in an As-a-Service model. But as these CX-driven shifts in the industry continue to evolve, they bring with them new challenges and CX frontline battlegrounds, especially in the areas of cybersecurity, cybercrime and addressing customer concerns over fraud and personal data security.
Covid-19 created a cyber pandemic of data breaches growing in intensity and frequency. The targets included tech industry leaders Amazon, Apple, Facebook, Microsoft and PayPal as well as high-profile firms like Amex, Capital One, etc. Researchers cited a 667% increase in email attacks and 35% surge in fraudulent transactions since the crisis began, many aimed at customers of institutions experiencing data breaches. Helping brands keep customer’s information secure is now a crucial CX battleground.
What does the future hold for many of the key players competing in each of the industry’s technology stack layers? Will it be increasing domination by the likes of customer-centric challengers like Amazon and Apple and a steady decline for Older-Tech? Can companies with rich histories in innovation shed deeply rooted assumptions and orthodoxies that are legacy holders of past successful ways of doing business and reinvent themselves to compete in a rapidly evolving new-game competitive landscape.
Managing their legacy portfolios while innovating to a newer set of CX expectations has challenged many industry giants. Intel’s dominance has been challenged in their core processor segment by AMD and more broadly by firms like Nvidia and even looming competitive offerings from Amazon, Apple and others who strive to control their own tech stacks. For IBM, HPE and Cisco and other industry incumbents, these are challenging waters to navigate and likely further consolidation is imminent.
This is especially the case if these and other legacy players’ ‘share of the CIO’s wallet’ continues to diminish. It can also be expected that the legacy IT departments and CIO’s who oversee them will likely be replaced by a new technically savvy customer-centric CIOs possibly armed with a new title such as Customer Experience or CX Technology Officer, or CXTO. Their role will be to implement the agile always-on IT engine for always-connected customers that every company is racing to achieve.
As first popularized by Mayur Gupta, a CX and Growth officer at Spotify and most recently in a senior leadership role at Freshly and Gannet, the vision of an always-on value delivery system or VDS for always-connected customers is one that begins by first listening to CX signals across all relevant channels such as their digital interactions and clickstreams, call center conversations, eCommerce transactions, information from IoT sources, and point of sales, marketing and CRM data and tools etc.
It then translates these diverse signals into insights about customer unmet need states and occasions now and into the future and converts this into new product and service solutions to experiment with and new messaging content that can be delivered in a multi-channel world with elements of the CVP and how it is delivered hyper-personalized by customer segment and even individual customers. This model is akin to CRM on steroids, giving a single view of customers the entire enterprise can act upon
Yet this model is still very much at an early stage in achieving this bold visionary future end-state. HBR and Salesforce among others estimate that less than 10% of company’s globally have installed all of the capabilities to execute on the always-on model. Will players like Amazon be the catalysts for helping companies achieve this goal or will legacy players rise to this challenge? Or will a new wave of innovation emerge from start-ups that leverages the power of IT to this bold, ambitious agenda?
The term ‘game-changer’ has now become an overused part of modern strategic management jargon. Over-used because it is often ascribed to any innovation which contains or leads to significant change in an industry or an enterprise’s fortune. Genuine game changers, however, involve more than large incremental alterations. These come from profound shifts in basic assumptions about customer value creation, the sources of inertia blocking breakthroughs, how to overcome them and measure success.
If there is an industry sector on the planet that’s the poster child for this theme, it is global healthcare. This includes Pharma-BioPharma enterprises and the diverse healthcare providers and regulators in the value delivery chain who are responsible for providing and overseeing the delivery of products and services that support the physical and mental wellness of humankind. Yet it’s important to remember that even just a century ago the industry that just staved off the pandemic was still in the Dark Ages.
There was a shortage of data and reliable science to help healthcare providers to analyze and treat conditions of ill health. Hospital-based operations such as heart bypass or bone marrow transplants which are standard today in terms of procedures, skills, and supporting technology compare starkly to the primitive, invasive guesswork and protocols of the last century. Many illnesses can be contained or cured now by taking prescribed pharmaceuticals without visiting a hospital or an operating theatre.
The real game-changer in the later stages of the healthcare industry’s Dark Ages was the accidental discovery of penicillin by Scottish researcher Alexander Fleming in the late 1920s. Almost overnight this became the standard treatment for infections, many of which historically were the equivalent of death sentences, and penicillin became the basis of modern antibiotics. This paved the way for the emergence of the global pharmaceutical industry with its laser focus on prevalent disease categories.
For over a quarter century, the customer value creation model relied on development of broad-based “blockbuster” recipes such as Zantac in ulcer therapy, Lipitor for high cholesterol, Humira for chronic inflammation, etc.—the list goes on. The CVP architecture of these blockbuster drugs was based on their superior efficacy and safety, which had to be supported through rigorous scientific research and clinical trials that proved drug efficacy and minimal side effects across diverse demographic groups.
It also required an “industry referee” which would provide regulatory oversight and permission before a drug could be licensed for sale. In the US, the Food and Drug Administration (FDA) was established in the early 20th century to perform this oversight role. By the 1950s and ‘60s. however, the FDA had laid down a required set of “phases” for new drug development which the emerging pharmaceutical corporations would have to comply with before a license to produce and sell drugs could be granted.
This evolving regulatory and permission-granting role of the FDA and its equivalents across the world ushered in an economic and financial model for aspiring Pharm contestants that persisted into the 21st century. The various phases of R&D and pre-approval clinical trials were estimated to last 10 years or more with costs of $1B or more. The “prize” given to successful companies which passed all clinical trial phases was the granting of an exclusive patent to produce and sell the drug for up to 20 years.
At the dawn of the millennium, the industry was dominated by a group of Pharm enterprises in the US and Europe, each with huge economic scale and global market access often achieved by M&As and JVs, and each facing a host of new-game challenges. While all executed the blockbuster prescription model for delivering profitable customer value, leaving firms in countries like Israel and India to focus on generic, off-patent markets when their IP expired, this old-game model was running out of steam.
Although R&D spending on new potential blockbusters had increased by 250%, the number of NME’s or “new molecular entities” that make up a new drug had fallen by 50% in the same period, a dramatic drop in Pharma drug innovation productivity. At the same time, the BioPharma market which uses living systems and molecular engineering to develop and produce biologic therapies that address a host of diseases afflicting smaller patient populations was taking off and showing explosive growth.
BioPharma is the market of the future, a hot space of innovative new drug concepts that is pushing the boundaries in therapies like allogenic, autologous, T-cell etc. as development labs use robotics and AI to do analytical tests looking for an indication of a molecule concept. All the legacy Pharma players have BioPharma divisions, but face a new rivals due to a veritable torrent of entry of new startups working on new-game vaccines, monoclonal antibodies, genetic and cellular therapies, etc.
Manufacturing of biologics has surpassed $300B and already represents a third of all industry activity. A growing global population of geriatrics, persistent chronic diseases, and an abundant therapy pipeline should keep the BioPharma large molecule market growing at twice the rate of small-molecule drugs in Pharma. Over 50% of all R&D funding is now going toward BioPharma drug development, with 8k+ new products in the pipeline for which the success rate is over twice that of small-molecule products.
As the era of blockbuster drugs ends and “small ball”—the pursuit of targeted treatments for smaller patient populations—dominates the industry, legacy Pharma players must adapt their value delivery systems from R&D lab development and scale-up to large-scale production to launch to win in a new- game landscape replete with new challenges in choosing, providing, and communicating a winning CVP in biologics. And all the while deal with $215B in revenue lost to patent expirations the last 5 years.
One big change in the Pharm-BioPharm value delivery system is competing as an ecosystem, which 7 of the 10 world’s most valuable companies also do. Players are outsourcing manufacturing to CMOs to focus more on drug development and marketing and offload challenges in dealing with the myriad of complex end-to-end operational risks in producing biologics for which lost batches are very costly. And they are also forging R&D partnerships with CROs and CDMOs to tap a wider pool of innovation.
Any review of the industry’s current outlook would be remiss in not mentioning the stunning success of Pharm BioPharm sector in heroically dealing with a host of new viruses that are emerging globally, Covid-19 in particular. It adopted new technologies and approaches with incredible agility, shattering old-game orthodoxies about drug development by developing a vaccine in 48 hours and accelerating its complex large-molecule large-scale manufacturing, foretelling a future of unrivaled CX innovation.
As in so many other global industries, the combined impact of smart informatics plus new technology diagnostics will fundamentally alter the capability of the healthcare industry to deliver breakthrough CXs. The era of smart healthcare is arriving and the only question is where it will go from here? There are 4 game-changing dynamics that are shaping the future of CX innovation and they each begin with the letter P, the first being the shift in healthcare from delivering ‘Curative’ value to ‘Preventive’ value.
The most important way to reduce the cost of healthcare is to prevent individuals contracting illness and if they do fall ill, preventing them from entering a hospital and treating them at home. Driving this future shift are advances in genomic science, which enable greater capability to ‘see the future’ for the health of specific individuals and identify interventions with the best chance to put them on a healthier progressive path, while telemedicine now enables these paths to be delivered in homes vs. hospitals.
Firms like 23 & Me are already comparing a person’s DNA codes with similar groups of people to gain Preventive and Predictive insights. In turn, this leads to the other two CX elements of value that will be the future of the industry, Precision and Personalized therapies customized for individuals. This is enabled by gaining “smart” insights from developing and mining massively large scale healthcare data bases such as solutions by IBM Watson Health, Google and a host of health SW analytics startups.
In sum, the forthcoming game-changing elements of value shaping the future of healthcare will be led by those players who build the capabilities to move from curative when a person contracts a condition to Preventive and Predictive, and from mass application of standard common treatments to Precision and Personalized therapies. But the CX battleground won’t stop there as more and more companies realize they must integrate social mission CXs into their CVPs to appeal to next-generation customers.
A major CX issue here is sustainability footprint of the new manufacturing facilities being built across China, India and the rest of Asia Pacific, and the health and welfare of the employees that staff these plants. Many companies have replaced or are planning to replace traditional multi-use facilities (e.g., fixed-in-place stainless-steel fermenters, tanks, downstream equipment, and associated piping, etc.) with single-use (SU) systems to improve flexibility and cost. But this comes at a cost to the planet.
SU process technologies can have negative environmental impacts because they involve the use and disposal of consumable materials and a future CX battleground will be who can demonstrate leading- edge best and next practices in sustainability. Companies must also demonstrate that their network of CMOs and CDMOs protects worker safety in handling dangerous high potency active pharmaceutical ingredients (or HPAPIs), where high-profile accidents have killed workers in plants in China and India.
Banking and Financial Services
Customer experience (CX) is a proven driver of bank performance. One study of US banks found the half with higher CSAT scores delivered 55% better returns 2009-19. Banks with CX declines averaged 12% in deposit share losses vs. bank CX leaders, which had higher NPSs, deposit shares and client intent to add new products. Downturns are when positions shift. From 2007-12, a list of most valuable US banks reversed, with new leaders 34% more valuable. By 2019, the difference had barely moved.
Yet much of the industry’s historical DNA is not client-centric. Industry dominant logic up until recently can be characterized as an internal process driven, inside-out mindset that is sales target obsessed and product-centric. That mindset still characterizes many banks globally. J.D. Power’s study of over 84k retail banking customers of over 200 of the largest banks in the US regarding their CX with their bank affirmed this conclusion, noting banks had improved operating efficiency at the expense of CX.
The last two decades of 21st century competition ushered in a set of powerful forces that have made CX focus an imperative for traditional banks globally. Digital technologies like artificial intelligence (AI), Big Data, analytics, machine learning, IoT, cloud, mobility, etc., along with digital business models are transforming all stages of delivering winning customer value propositions (CVPs) across all lines of business in banking, creating a new-game landscape where the model for value creation is changing.
Another force are the bank rivals who are wielding these technologies to deliver profitable value. Over 40K disruptor Fintechs prowl the sector, peeling off profitable parts of banking’s value chain, many started by bank clients frustrated with the services offered to them and whose executives had unique tech skills. Fintechs with all-digital business models create value by specialization and unbundling of bank services, avoiding capital investments, regulation, and other constraints banks must deal with.
There are 60+ Fintech startups from Stripe to Chime to Plaid which have garnered valuations of over $1B in recent years. Anyone reading the startup backgrounds of these and countless other Fintechs such as Klarna, Lenddo and SoFi is struck by their customer-centric DNA and innovativeness. While Fintechs changed how financial services are structured, provisioned and consumed, they don’t yet have the resources or scale to threaten the banking industry as a whole. But Big Tech entrants do.
Players like Apple, Amazon, Facebook, Google, Jio and others are invading financial services. They are masters of CX engineering with the size and capability to attract and serve massive loyal user bases and are already at the forefront of technologies banks are now developing. Big Tech is steadily moving higher up in the funnel of customer decision-making trying to take control of the journey and disintermediate legacy player’s banking platforms to seize competitive advantage in the new-game.
The post-pandemic era will favor agile business models that are truly digital and reliably deliver great digital-led CXs that will continue to grow in popularity. Companies that can rapidly innovate in their digital CX delivery models will establish a strong advantage and gain market share upon a return to normal conditions. Traditional banks that rapidly reimagine CX lineups and channels to meet these shifts in CX engineering will reap big rewards; those that fail to transform will face daunting challenges.
Once Big Tech players like Amazon know more about clients than a bank, that may be a CX bridge too far for banks to overcome. Banks will need to compete with Big Tech on functional CXs, while also offering emotional CXs integrating human touch with digital as a relationship driver or taking a stand on social issues. It’s vital traditional banks leverage their databases to create unique offers so clients don’t trade off a bank’s 1-stop shop CVP to get something special from Big- Fin-Tech niche specialists.
A bank used to be a place to visit, but it won’t be for next-generation customers. By 2022, 58M US millennials will be digital banking users. More than 75% of the total millennial population and 66% of Americans aged 18-29 don’t own a credit card, as new players enter try to lock-in these users with virtual payments solutions. Apple Pay has 380M+ users. WeChat Pay’s Chinese user base is 800M+, and 150M people in 30 countries use Google Pay every month, all growing at tremendous pace.
Tech companies and consumer brands like Target or Uber seek to become gatekeepers for financial products. Their future vision is that customers will access financial services from one central hub they already use and they control, then exploit their troves of data and massive customer bases to quickly expand their payments and wealth management businesses. For SMBs, hubs could be QuickBooks or Gmail. Speed matters for traditional banks for reasons beyond just these new player’s capabilities.
Covid intensified impatience by digital savvy users with subpar digital CXs. Researchers report that a record 27% of large bank customers plan to switch their primary bank the next 2 years and 75% were Gen Z or Millennials, the future of most financial institutions. Future success will depend on a bank’s ability to focus on digital CXs and journey episodes that matter most to clients and rapidly build capability to deliver surprisingly easy and personalized Apple- and Amazon style customer journeys.
Moves by Big Tech could become more threatening if legislation were passed to make the data layer open and accessible, eroding the advantage of data-rich banks and opening competition to whoever can build the best products on top of openly accessible data. Doing that is no trivial feat, which is why some analysts predict when Apple, Amazon, Facebook, Google and brands from Shopify to Target launch their finance stacks, banks’ ability to deliver winning CXs will be stress tested like never before.
Telecoms has undergone perpetual morphing for over 150 years. This history reveals the industry is mature in age but not in its customer experience (CX) mindset. The industry’s ceaseless stream of technology advances that spur new communication forms and methods has always had an enduring CX concept at its very center. “Telecommunications” is a fusion of Greek and Latin meaning a sharing of messages across a far distance, which has been the industry’s constant purpose since it began.
It is the interpretation of these concepts that connects the CX evolution of the industry’s past, present and future. For example, what is being shared and in what form? What words, visuals, photos, audio, videos, of what length? Shared with whom and how many and where? Next door, street, city, country or planet? One way or via interactive? By what set of technologies? Governed by what regulations? Those questions apply to today’s mobile digital world just as they did in the twilight of telephony.
But the mindset by which industry players historically answered these questions can be described as internally driven, regulatory-ruled and techno-centric. This mindset starts with the latest technologies and what CXs they can deliver, while being compliant vs. thinking imaginatively about CXs customers would value and shaping their enterprises to deliver them. Worse, users often complained telecoms were managed like governments with bureaucratic procedures and non-customer oriented cultures.
Contrast this with the mindset employed by WhatsApp, perhaps the industry’s GOAT or greatest of all time disruptor that drained hundreds of billions of dollars in revenue from telecom coffers. WhatsApp was created by a Ukrainian refugee who missed his mother and didn’t have the money to call her, so he and 17 others created $19B in value when 3 years later in 2014 the company he founded was sold to Facebook. Skype, Lync and a host of other Over The-Top (OTT) players now prowl that landscape.
Recently telecom players worldwide have been facing an increasingly disruptive landscape that is being reshaped by powerful new game forces, including the rapid pace of technological change, sweeping privacy regulations, changes in customer value hierarchies and new entrants from outside the industry. These are transforming how telecom deliver profitable value to customers. Alone, the restrictive impact of COVID-19 caused a significant migration of business to being conducted online.
Telecoms began moving to a new frontier. Rebranding and reinvention initiatives were launched that went beyond mere messaging to acquiring tech companies and establishing innovation units. Their aim was to offer a new CX lineup characterized by simplicity and intuitive ease of use to help users of all types attain their desired goals, in part by leveraging new technologies like contextual intelligence to improve the signal to noise ratio and achieve new forms of relevance in today’s attention economy.
Today’s telecoms bear little resemblance to earlier versions based on telephonic voice-based systems and revenues. Even to equate telecoms as being mainly about telephony is mistaken, despite the industry’s label. They are global lifestyle enablers, accelerating convergence of fixed line telephony, mobile phones and operating services, all forms of entertainment and internet provision to consumers while becoming business process enablers for enterprises. ”Mobile connectivity” is the new slogan.
The new-game that is emerging goes well beyond cheap mobile services to bring together telecoms and multimedia services in bundled packages tailored to different end-customers segments. Major telecoms globally are jockeying to be viewed as a trusted partner that brings its customers new digital technologies and services that will transform their lives, businesses and society in ways they can’t imagine. But this new-game poses some very vexing challenges especially for conventional telcos.
One is how to compete with ‘free’ and avoid being sidelined as the industry and technology rapidly evolve, becoming mere “dumb pipes” others can profitably leverage to their advantage. Disruptors like Xavier Niel rocked Italy with unbeatable offers as he did in France. Mukesh Ambani’s Reliance Jio offered free Sim cards to lure India customers and became its #1 mobile services provider in 4 years and #2 globally with 405M subscribers, 2X+ that of AT&T and Verizon subscribers combined.
More players are leveraging “next practices” in CX to access segments using convergence-type plays with firms from other industries to bring new products and services relevant to users. Vodafone’s India campaign targeted the diabetes epidemic that plagues older Indians by helping them stay abreast of their blood sugar levels when mobile, even letting them know if they can eat dessert without danger to their health. This play leveraged IoT technology from medical devices and online physician networks.
Another stunning example of how the industry’s CX mindset has evolved is from banks globally being telecoms by telecoms. Ambani’s Jio is taking a page from Kenya-based Safaricom’s playbook, which handles $18B in transactions annually, an amount equal to 43% of Kenya’s economic output and used by a staggering 70% of the country’s adult population with sports betting one of the largest new contributors to traffic. Jio’s platform is now being used to launch a host of new banking services.
Safaricom partnered with an African bank to create M-Shwari, a mobile-only banking service where customers can open and access interest-earning accounts and apply for 30-day loans without ever stepping into a branch or filing paperwork. The bank went from conception to 3M customers in 10 months, a feat that most banks would struggle to replicate, and now has over 31M customers. What happens in Kenya won’t stay in Kenya, with telecoms now morphing into banks across other regions.
As the telecom industry continues its evolution as a global consumer lifestyle and business process enabler, some key tests in the future include: What are the next convergent-type opportunities which will attract new-game telecom solutions? Will traditional telcos become the leading pathfinders in the race to discover the next CX breakthroughs, or will they instead be just background infrastructure suppliers? What are the new competencies and knowledge arenas required to win in the new game?
Some trends of the recent past will escalate, with providers leveraging CX best practices from other industries like integrating social mission CXs in their CVPs to appeal to the Gen Y, Z and Alphas who have a strong preference to support socially responsible brands. Many telecoms are taking up causes like gender equality, sustainability and others. Some players are also sponsoring communities where customers can collaborate among themselves and with telecoms to vet unmet needs and solutions.
The industry’s approach to customer segmentation—e.g., Youth, Family, Mass Market, Mass Prepay, etc.—must also be reimagined in the future using new-game technologies to identify customers who want distinctly different CVPs that represent untapped future growth opportunities. Most of the iconic startup examples in the industry like WhatsApp were pathfinders who discovered untapped segments by “becoming the customers” who populated these spaces and creating solutions for their problems.
One future CX battleground will be fought by those players leveraging new-game digital technologies and the data it generates to gain an imaginative understanding of user’s unique lifestyle profile and interests and then delivering hyper-personalized solution enhancements and messaging to them. Players globally are experimenting with a host of future-facing technologies to create an always-on value delivery system and model for always connected-customers, both enterprises and consumers.
Those players who can be first-movers in turning their prodigious databases on users into competitive advantage will thrive since it drives hyper-personalization of everything. Fast conversion of data into unique insights before others is key. Another future CX challenge will be how to maintain customer relevance in new-game competitive landscapes, which is becoming much more important than the old-game mantra of simply striving to being different than competitors. This will be harder in the future.
AI virtual assistants like Alexa and a slew of others coming onto the market are widely predicted to win over consumer’s trust and loyalty better than any brand or any technology ever before launched. Industry players must determine how they can become more relevant to their subscriber bases as an interface than solutions like Alexa so they can be the Apple-like nodal player or Alexa-like interface controlling access to markets of the future like Smart-Home and the myriad others created by 5G?