Customer Experience Labs: Your Strategic Weapon

When I work with clients, I always set up a “customer room,” which is another way of thinking about customer experience labs. I’ve written about this idea a few times, including in Chief Customer Officer 2.0. A customer room is a way for leaders (and other members of the organization) to really understand the customer experience. Whether this happens monthly, quarterly, or annually, it’s one of the most robust, direct ways for a company to really see what their customers go through to interact with them. It engages leaders, unifies their decision-making, and creates an accountability forum. I’ve used this technique for close to 20 years at this point, and almost always, the organization sees real change and customer-driven growth emerge from it.

And now, customer experience labs have come en vogue in the last couple of years. In one of the earliest episodes of my podcast, The CCO Human Duct Tape Show, I talked to Scott Dille of Northern Trust about human-centered design. Northern Trust has their own variation on the customer experience lab. Somewhat unsurprisingly, they call it “The Northern Lab”. It’s essentially a place where ethnographic research is combined with co-creation opportunities and design experimentation, and the end goal is a reimagination of customer experiences and needs. Visually, a slice of it looks like this:

And that’s actually a good place to start in general on the idea of customer experience labs: what are they, why do companies typically use one, and what’s the desired end state?

WHAT ARE CUSTOMER EXPERIENCE LABS?

IBM was among the first larger brands to open a customer experience lab, and at the time they noted three major goals:

• Enhanced customer insight: The goal was to better predict individual customer behavior across multiple channels.
• Customer engagement: This was about personalizing the experience and not delivering a one-size-fits-all CX to consumers in a time of increasing personalization.
• Employee engagement: Essentially, a greater involvement by employees in the processes of defining and reimagining different customer touch points.

The specific goals and metrics of a customer experience lab may vary by organization, but in general these are three of the main goals. How can a company learn more about their customers, figure out how to engage them, and — at the same time — bring their employees deeper into the fold? If you’re trying to solve for those issues, which many companies of the modern ecosystem are seemingly trying to do, then a customer experience lab might be a good bet.

INSIDE THE WENDY’S CUSTOMER EXPERIENCE LAB

Wendy’s opened their own customer experience lab, called 90 Degree Labs, in May 2015 in Columbus, OH. (Interesting sidebar: Columbus might be one of the burgeoning capitals for customer experience labs, because it’s considered “the test market of the United States” because of how various cultures intersect there.)

A look inside the Wendy’s customer experience lab outside of Columbus, OH.

When Wendy’s did their customer experience lab, they staffed it with engineers, customer experience professionals, and user experience professionals. Then they decided to coordinate three projects out of the lab:

• Their main website
• Their iOS and Android app
• The self-service kiosks they were rolling into restaurants

At the time, David Trimm — the company’s CIO — noted some of the major reasons for adopting a customer experience lab, including the idea that “bringing together the expertise we have there will create a technological source of competitive advantage for us.”

THE YIN AND YANG OF CUSTOMER EXPERIENCE LABS

Most companies are using CX labs as a place for innovation and new product design, which is what Nordstrom did by creating the Nordstrom Innovation Lab in Seattle. There’s an important element to remember, however: while having a customer experience lab is a great step and could theoretically be beneficial in driving new revenue opportunities, there needs to be a complete buy-in on and understanding of what the end goals are. In the case of Nordstrom, for example, their customer experience lab was much-praised — but then, because it didn’t contribute as much to new revenue as quickly as intended, the company ultimately shrank it and reassigned employees.

Point being: a customer experience lab is just like any other business plan. The justification needs to clearly be there, and the lab ultimately has to deliver on its promise. Just like I consistently tell CCOs they need to “earn the right” to their work, so too do customer experience labs need to earn the right to continue iterating and developing.

THE NEED FOR UNDERSTANDING END-TO-END CUSTOMER EXPERIENCE

Forrester put out a paper on customer experience labs a few years back, and one of the more interesting examples — also noted in this blog post — was a large credit card company having some struggles with their call centers. They designed a customer experience lab pointed at call center reps; the idea was to give them a better understanding of what customers usually do (and feel) before and after they call in to a rep. Most of the call center training to that point had been extremely role-specific, but now the reps were getting context for what the end-to-end customer experience looked like. Over time, their metrics (i.e. handle times, etc.) showed significant growth. That’s a good example of how a customer experience lab can work wonders for a company: specific problem, expertise-designed solution, and real business results as the outcome.

CUSTOMER EXPERIENCE LABS AND … WATER HEATERS?

At this point you may be thinking that customer experience labs are mostly rolled out by tech-savvy consumer product companies (or restaurant chains looking to maximize the experience). Not 100 percent true — these labs are rolled out by all types of companies, including one that makes water heaters. Yes: A.O. Smith, a leading water heater manufacturer, has a customer experience lab in Tennessee.The goal of their lab is to look at the quality of the water heater through the eyes of the customer. The engineers that A.O. Smith assigned to their customer experience lab has the ability to replicate 18 months of water heater performance data in about 90 days. Each heater is run through 2,500 cycles in the CX lab, and customers are brought in to discuss how they feel about the performance from purchase through repair and eventual replacement.

CUSTOMER EXPERIENCE LABS ALSO WORK FOR PACKAGING

Again, here’s another essential consumer product — packaging, which we use in some form almost every day — also using a customer experience labs approach, as detailed here. I’m actually considering doing another long-form post like this one on customer co-creation, and that’s kind of how Saica Pack structured their version of a customer experience lab. It’s based in Wigan, and there’s a 20-foot touch-sensitive wall. 10 people can work on the wall at the same time, and you can connect to remote users as well. There are also “bespoke” retail environments that are decorated, arranged, and lit exactly like a supermarket or shop — so that customers can know what their packaging options would look like in a real-world environment. Here’s a visual on the Wigan facility:

One of the Saica leaders on this project notes in the above link that the idea is to “forge strong and lasting relationships with our customers,” which is one of the goals of all successful customer experience labs.

THE SPEED ISSUE IN CUSTOMER EXPERIENCE LABS

Above, we saw how A.O. Smith runs 18 months of data in three months with the help of their customer experience lab, and that was part of the idea behind IBM’s lab too. Previously, the consulting side of IBM’s business had to be a lengthy process — there would be meetings, visits, extended briefings, and then IBM would create a proof of concept, which the client would have to approve. The entire cycle might take several quarters. Some of their customer experience lab work is aimed at hyper-scaling that process so that finance, IT, and healthcare clients can have an answer or set of deliverables within a few weeks.

This is one of the focal points of establishing a customer experience lab for many: by clustering a series of specific experts together with a priority-driven focus (almost removing them from the standard day-to-day fires that need to be put out), solutions can be a lot faster and taken to scale more quickly. This is also important in the context of “disruption,” because we often see disruption as driven entirely by new tech and fast-moving startups. That’s often the case, but it’s not always the case. A lot of times, established companies have the resources to get at that type of tech as well. What slows down bigger companies is hierarchy and all those day-to-day fires. This stifles decision-making and that’s when upstarts can exploit the weaknesses. But by having customer experience labs, companies are clustering some of their best and brightest together on customer-facing problems. As solutions emerge from the labs, that thwarts disruptive players in the same space.

USING CUSTOMER EXPERIENCE LABS TO SHIFT TO “EVENT THINKING”

Currently a big focus in many businesses is “design thinking” (see below) or “product thinking,” because we live in a very product-saturated time. There is also this idea of “event thinking.” Here’s maybe the easiest contrast: in product-based thinking, a customer would go to a bank and say, “I need a mortgage.” A mortgage is the product. The bank would respond “OK, here are the steps and the timeline.” That’s the service the bank can provide.

Now, in event-based thinking, a customer approaches the bank and says “My family is growing and we want to be in this specific area, so I need to talk about options.” The bank says, “Yes, this is a major time for you guys. Let’s see what we can do.”

Event-based thinking, then — similar to design thinking we’ll discuss below — is centered around the emotional context of the customer at the time they approach the vendor, whether you sell mortgages or water heaters. Many customer experience labs are designed around this way of thinking, because it’s easier to map customer journey from a place of emotions than simply from a place of “These are our available products.”

THE HUMANA CUSTOMER EXPERIENCE LAB

Humana has been experimenting with this concept as well. In 2014, in the middle of a budget year, they were able to get $4.4 million approved from executives for new customer experience efforts; a lab was created out of this. In early 2015, they invited 200 top-performing individuals from all departments to conduct “immersion exercises” in the customer experience lab, usually around frustrations that customers might be feeling with various processes. One of the major justifications for the $4.4M allotment had been customer dissatisfaction metrics beginning to creep up.

Humana employees participate in customer journey simulations in the customer experience lab.

Initially Humana also invited 200 executives from around the company to check out the work of the customer experience lab; the executives who visited became fascinated with some employee engagement efforts, thus fostering more buy-in around those programs.

On the customer-facing side, work in Humana’s customer experience lab led to a simplification of the IVR menu (that customers hear when calling about specific services). The work also increased overall net promoter score at Humana, reduced transfers by 21 percent, and decreased repeat calls as well.

IS DESIGN THINKING THE HALLMARK OF THIS NEW INDUSTRIAL REVOLUTION?

Some claim we’re entering the fourth Industrial Revolution now — although one that might be compressed into the life span of a beagle, as opposed to playing out over 100 years. Samsung also has a customer experience lab, and Richard Titus — their SVP of Customer Experience — has a great quote in this article on the role of “design thinking” in today’s business world. “Design thinking” is closely tied to customer/user experience, and refers to a specific series of steps around planning what a customer’s needs might be as a product is being iterated.

Titus says: “I’ve concluded it’s the same sort of thing that industrialization for mechanization was for the 20th century.”

And that might say more than anything why so many companies are now embracing the customer experience lab — it truly is an important piece of all their business models moving forward.

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