Outside In: The Power Of Putting Customers At The Center Of Your Business

Customer experience is, quite simply, how your customers perceive their interactions with your company. In Forrester’s soon-to-publish book, Outside In, Harley Manning and I show that customer experience is a fundamental business driver and — in an age when customers have access to vast amounts of data about your company and its competitors — it’s also the only sustainable source of competitive advantage.

In most industries, customer experience is the greatest untapped source of decreased costs. Fidelity Investments recently spent a modest $20,000 to fix a problem that made it difficult for customers to log into their accounts through the company’s automated phone system. This single fix saves Fidelity $4 million a year by averting calls to customer service. And it’s just one of more than 160 projects that came through Fidelity’s experience improvement system in 2011. Together those projects account for more than $24 million in annual savings.

Customer experience also drives increased revenue. Several years ago, B2B technology reseller and service provider CDW added a question to the customer survey it fields: “What additional things would you like to talk to your sales team about?” The company funneled the answers to this new question to the appropriate account managers. The account managers, in turn, closed the loop by getting back to the customers with a simple message: You told us that you have a need, we’d like to offer you something that could meet that need. And guess what? Customers took the CDW sales reps up on it. This seemingly simple innovation drove more than $200 million in incremental revenue in just one year.

Despite its economic power, customer experience remains the most misunderstood element of corporate strategy today. Many companies talk about the importance of customer experience. But to achieve the full potential of customer experience as a business strategy, you have to change the way you run your business. You must manage your business from the outside in — bringing the perspective of your customers to every decision you make — and you must do it in a systematic and repeatable way.

That takes discipline — six of them, actually.

Companies that want to produce a high-quality customer experience need to routinely perform a set of sound, standard practices that fall under six high-level disciplines: strategy, customer understanding, design, measurement, governance, and culture.

  • Strategy. First you need to describe the attributes of the intended customer experience and ensure that your vision is consistent with your corporate strategy and brand.
  • Customer understanding. Your strategy needs to be informed by a shared understanding of who your customers are, how they perceive the interactions they’re having with your company today, and what they want and need from your company in the future.
  • Design. Once you understand your customers’ needs, you can use those insights as part of a human-centered design process that includes iterative idea generation, prototyping, and testing to define new interactions or improve existing ones.
  • Measurement. After you design (or redesign) customer interactions, you need to determine whether or not they’re having the effects you intended. That means you need to quantify customer experience quality in a consistent manner across the enterprise and deliver actionable insights to employees and partners.
  • Governance. Customer insights and metrics are most valuable when you use them to identify and fix customer problems. To ensure that your company acts on these inputs consistently, you need to proactively manage and oversee customer experience improvement initiatives.
  • Culture. To make sure that employees actually adopt all of the above disciplines, you need to create a system of shared values and behaviors that focus employees on delivering a great customer experience.

Customer experience leads to profits — but not because it makes your customers feel warm and fuzzy, and not when it’s just a slogan. Customer experience leads to profits . . . if you treat it as a business discipline.

Comments

Congratulations!

Wonderful news, Kerry. I hope the book is a smash success!

Thanks!

Thanks, Henry! I hope all is well with you. See you soon at Church and 25th...

Customer Experience as a

Customer Experience as a competitive advantage... I totally agree!
Looking forward to reading this book.

Thanks!

Thanks, Janet. August 28th will sneak up on us quickly, I'm sure! Would love to get your feedback on the book after you read it.

Looking forward

Looking forward to reading this book and more so to influencing business process designs based on OI - customer first!

Business Process + CX

hi Daphne,
There's a huge overlap between business process improvements and the customer experience ecosystem framework that we discuss in the book. If you'd like more info on the ecosystem framework, you might find these posts helpful:
http://forr.com/m6pGCb
http://forr.com/l9KfW1

Let me know if you have any questions!

Strong Customer Data Foundation

I'm a big believer in the Outside In approach and an advocate of that approach at my company. I really liked the examples you provided in your blog and shared them with my colleagues. I'm looking forward to reading the book. However, I suggest considering a 7th discipline or a foundational layer that's needed for the 6 disciplines to work. Many companies we work with have come up against a major impediment to their transformation -- their customer data was a mess. Because of incomplete, inconsistent and duplicate customer data in the systems across their company, these companies couldn't identify their top 500 customers. They didn't have a complete picture of all the products and services those customers purchased across divisions and regions. I think the disciplines you outlined are right on the money, but without a strong customer data foundation, which can be acheived with master data management and data quality, I believe it would be difficult to execute on an Outside In transformation.

Interesting suggestion!

hi Jakki,
Certainly there is a lot of data that comes in through the customer understanding and measurement disciplines and needs to be managed. I’ll bring up the topics of master data management and data quality with the rest of the team as we look to evolve the maturity framework. Thanks!

Outside-In - the Resurrection?

Hi Kerry, well done - we need more substantial books and references on outside-in. I've been working for a few years now under the remote mentoring of folks like Steve Towers of the BP Group who has also written on this topic. Although I have 35+ years of experience in IT I'm an outside-inner thanks mainly to having worked for customer centric organizations including EDS (Perot period).

Outside-In is not new of course and the pendulum swings back to the customer from infrastructure management whenever the economy tightens or tanks. I've been working with Stephen Mann, Glenn O'Donnell, Doug Washburn and Evelyn on this and will be keynoting at the IOE Forum in Paris on outside-in thinking, its origins, and its place today when applied to the challenges of a service provider such as an IT organization.

Much of the foundation for outside-in was laid down by luminaries such as Drucker, Richard Normann, and of course Ted Levitt. I urge readers to check out two $2 files at audible.com: "What business are you in? (Levitt)", and "Four things a service business must do to succeed (Frei)". These were written years ago. The economic perfect storm seems to have resurrected outside-in!

In my major book the Universal Service ManagemenT body of Knowledge (USMBOK), I described how outside-in thinking must be applied to help service management initiatives focus on and manage the $Es and 2 vital service equations, nicknamed the magic number '42'. The 4Es include (customer) expectation, encounter, experience and emotional genie. The 2 equations being value and expectation.

Coincidentally, I'll be publishing my own 'how to' follow up book right after yours, likely mid September - "Outside-In Service Management", to explain how we have used the concepts and methods over recent years to help flip IT organizations from process improvement, maturity level, and infrastructure biased programs (all inside-out), to customer centric.

So good luck to you and Harley, hope we get the chance to exchange views and our own experiences!

Ian

A New Breed of Business Leaders

Hi Kerry, thanks for the great insights you and your colleagues at Forrester have been posting on the value, process and context of customer experience which has helped me shape my understanding and guide clients.

Around the topic of 'Culture' I would like to add that understanding the customer and business priorities through the lens of customer experience require a 'new breed' of innovators who understand the 'convergence' of customer experience, business / digital strategy and technology. More on this is available on my blog http://nitivaish.com/?p=242.

Thanks again.

Niti