The Economics of Human Experience: Experience-led Transformation

The Benefits of Experience-led Transformation

The term "?Experience?Economy?" was first used in a 1998 article by B. Joseph Pine II and James H. Gilmore describing the?experience?economy?as the next?economy?following the agrarian economy, the industrial economy, and the most recent service economy. The concept had been previously researched by many authors.

Economists have typically lumped experiences in with services, but experiences are a distinct economic offering, as different from services as services are from goods. Today we can identify and describe this fourth economic offering because consumers unquestionably desire experiences, and more and more businesses are responding by explicitly designing and promoting them. As services, like goods before them, increasingly become commoditised—think of long-distance telephone services sold solely on price—experiences have emerged as the next step in what we call the?progression of economic value. (See the exhibit “The Progression of Economic Value.”) From now on, leading-edge companies—whether they sell to consumers or businesses—will find that the next competitive battleground lies in staging experiences.

Fast forward to today - The “big four”?Amazon,?Apple,?Facebook?and?Google?all achieved initial critical mass by providing singularly satisfying, consistently outstanding experiences. These companies move far beyond optimising?experiences, they are reaching the new “X frontier” – creating a harmonious environment for?employee experience?(EX) and partner experience (PX) in their respective ecosystems. More about this: I believe we are unified by life journeys, as we are transient, multi-state in each ecosystem e.g. part employee of a firm, then a customer(s) in a bank, and the relationship with the public sector.

Because of these disruptors, expectations for general experience delivery has been raised everywhere.?Sixty-seven?percent of customers say standards for good experiences are higher than they’ve ever been; 76 percent expect companies to understand what they need and meet their expectations; and 64 percent find customer experience to be more important than price when it comes to making a purchase - this is truer post-pandemic, during the 'lost year 2020' we've seamlessly adopted extreme empathy as governments and businesses around the world innovate and transform. Clearly experience drives customer value creation.

We know it pays off for businesses, big time. Experience-driven businesses report between 1.6x – 1.9x higher YoY financial value growth because of improved retention, repeat purchase rates, average order size, and as a result, higher customer lifetime value (CLV) and equities. Customer quotient is not at all common sense these days.

In a nutshell: the rules have been reset and expectations raised. Experience is critical to success and risk of inaction intensifies– so why are so many organisations still nowhere close to transforming their approach to experience?

Transforming Experiences is well, downright downtrodden..

We’re not even talking about innovating experiences. Experience management is first and foremost, a discipline, and practice really makes perfect. I’m trying not to discern between CX and EX (there's also PX and BX - product and brand experiences, but I see them as subsets); they co-exist at the same time, in both planes/dimensions of the experiential fabric. So I'm going to use the term XM, which is the amalgamation of CX, EX, PX and BX interchangeably throughout. Two ‘common’ challenges usually cited are:

1.???XM is a systematic and daunting task that involves every single muscle of the organisational mind, body and soul. My favourite analogy – going to the gym 4hrs today/now isn’t going to yield results; 15mins consistently for a couple of weeks – results guaranteed. So in fact, it’s Consistency, not Intensity.

2.???Benefits realisation - the payback sounds good in theory, but how do we accrue accretive benefits to the program, to all the hard work??How do we measure progress? We see years back e.g. NPS being included in shareholder reports. Perhaps (today) a vanity metric, but there are many ways to correlate experiential vis a vis economic impact. The trick is to have everyone (majority) breathing, living the same set of metrics – the harmonisation of.

I digress but if 'true' North is say 0 degrees (whatever that Purpose statement may be, but it better be experience-led!), then varying +/-15 degrees on both sides; if the leader(s) in that organisation can muster that - meaning everyone/majority to swim within that 30 degree radius - that's a whole new definition of success. It's not an official metric (I call it experiential dissonance), but recent studies have shown the top experience led organisations operate within these magical 30 degrees of 'truth'. Narrow the band to 10 degrees and that distills the FANG (Facebook, Amazon, Netflix, Google) practitioners, and they're definitely world class.

Where to Start with Experience-Led Transformation

There is such a thing as experiential maturity. I’m trying not to discern between CX and EX, bcos they co-exist at the same time, in both planes/dimensions. I’d rather talk about the summation of these atomic experiences, a journey – or more precisely, a life journey. Think of it, we are both customers, employees, fathers, mothers, etc altogether at once. But that’s a topic for another day.?Knowing where your organisation is on the maturity curve will help determine where to start and prioritise deliverables/investments now vs. later. There are typically six criteria that defines an organisation’s?XM?maturity level - there are many versions of this e.g. XMI's but I've distilled commonalities:

• Vision & Strategy: to what degree does the organisation (from leadership (need not be CEO) to the 'man on the street') share a XM-centric vision and govern XM with a formal, top-down, enterprise-wide process?
• People & Culture:?to what degree does the focus on XM drive the formal and informal cultural rituals and processes; do XM dedicated teams, x-functional integration, and on-demand access to formal training exist, and is consistently adopted? Lately, the word I use is 'multi-disciplinary' roles across the organisation. There are the specialists, these folks are part of agile execution delivery 'pods', task forces and teams - but we see the dire/acute need for skills that are portable. Interestingly, up-skilling and training should be done in parallel, not an afterthought. Easier said than done.
• Design & Deliver Experiences: to what degree does the organisation translate the XM vision into detailed (service) blueprints and use it to reimagine their future(s), while managing the (current) day-to-day operations and understand the degree to which the delivery matches the designers’ intention and deliver on the specific customer/persona/segment/archetype needs? The deliverability factor must not be transient, as most demonstrated by pilots and quick-wins, rather how to industrialise - we could think of it as how we 'bottle innovation'.
• Segments & Data:?to what degree does the organisation have clear alignment on the customer segments/personas/archetype(s) -- those that are aligned to their Purpose, not broadbase - their priorities, and ingest, insights to action, multiple spectrums of data to track the holistic customer experience across online and offline channels, and have a clear data integration, live dashboard reporting, socialisation & governance process in place?
• Analytics, Measurements & Continuous Improvements:?to what degree does the organization utilise integrated data and advanced analytics to guide continuous decision making, investment prioritisation, improvement process and pinpoint ROI?
• Agile Management:?to what degree is the XM management process dynamic, real-time, based on maximising value capture and is tied to key individual incentives?

The Power of Organisational Alignment

Most organisations are at an “ad-hoc” state, characterised by having siloed functionality and lack of commitment to holistic XM training, no coherent governance process or XM aspirations, limited conceptual journey mapping that treats all customers alike, and reactionary insights meant to describe the past rather than prescribe future actions.

If your organization is at the “ad-hoc” state, aligning leadership on the vision of transforming XM and justifying the investment by creating a case for change is crucial – without leadership alignment and focus businesses prolong the vicious cycle and incur wasteful costs.

Once organisations achieve alignment, the next step prioritises the most critical use cases (i.e. prioritising XM investment, reducing churn) and identifies the things standing in the way from delivering against these use cases. Approaching XM in this way ensures that the transformation will have the greatest impact and more importantly allows for the creation of a targeted initiative pipeline to close the gap.

One of our communication service provider clients wanted to prioritise XM investments to maximise value, and quickly realised the organization achieved greater maturity for data integration and analytics.

They were drinking from the proverbial data fire hose and had the data scientists in place to analyse these disparate types of data; however, they lacked connection to the customer or the business to provide a data-driven way of prioritising opportunities. The experiment, this particular 'experiment' was solved when we iterated on an asset to quantify experiences and journeys in what we called the Journey-led Organisation. But we're missing the point - there will be hundreds of these 'experiments' or problem statements (aka experience gaps) we are solving for at any moment in time - it's always dynamic, in flux, as it should be.

Transforming Customer Experiences, an approach..

Consider a three-pronged approach in transforming XM:

1.???Lead with the Customer - come from the Outside-in:?fine tuning the segmentation to lend more insights about customers, identifying needs and motivations of highest 'value' archetypes. At time of this writing, post-pandemic, we need to seriously look at the temporal dissonance as well - using FutureBack. The alternate realities are more divergent than ever, and these are interesting times. The consumerism from just a few months back - what we expect, need, has irrevocably changed. We need to look 10, 15, 20 years beyond, to break the present forward bias.

2.???Connect to Business Impact - Experience economics:?making sure all analytics and data process is empowered and managed so that the results can tie to business impact - the economics of experience is as real, as lucid, as we want it to be. As mentioned earlier, it's more about getting (majority) everyone to talk the same language (of the customer).

3.???Data driven culture, Left-brainism: pointed the insights gained through analytics toward specific business leaders and their KPIs to drive better/more informed decisions

Points 2 and 3 are interconnected - the quantification of atomic experiences; start with a bootstrap, get the P&L impact shored and take it from there. Instead, focus on the discussions, the agreements to disagree, as each silo is broken down (on the flip side, when journeys are stitched together, across the enterprise). It's never an easy convo - hence the downtrodden bit - but one that's imperative to be had (else it's a non-event).

Tracking Progress

Big leaps in technology, data, process and governance will register on the maturity assessment itself in a year or two. For less significant improvements a finer odometer needs to be used more frequently – to demonstrate quick wins and proper momentum, testing and learning, or quick course correcting.

XM measuring system should include four components, each with a distinct role to play:

• Annual Customer Survey:?provides a comprehensive view of customers on ongoing topics of interest – a mechanism to track progress over time. Offers an opportunity to test a greater variety of questions and stimuli, including new hypotheses from product and marketing teams. Typically, XM metrics included in the annual customer survey would include customer satisfaction, NPS, specific touchpoint assessments based on recent experience e.g. the more popular/recent CES (effort), and competitive benchmarking.
• Transactional Survey:?provides a more nimble and frequent view of the most critical leading and lagging indicators identified by internal leadership and the annual surveys – all to help drive short- to mid-term decision making. This might be in the form of a website pop up survey right after you finish a transaction and have that experience fresh to mind.
• In-Depth Customer Immersion:?provides an opportunity to conduct in-depth research (typically qualitative) on specific subjects based on acute or broader strategic questions. Helps generate new ideas and opportunities to track/test in the annual survey efforts. For instance, the sales are down this month in a specific region and leadership is wondering if there are XM mistakes they need to learn from – given the narrow concentration and timely manner of this issue, in depth qual is best chosen over a survey
• Account Conversations:?plays a vital role in identifying account-specific issues and insights through the relationship managers, front-liners; many a time, these folks render the last mile experience (which makes or breaks).

Phygital experiences permeate all aspects of our lives - life journeys. It's in a constant adaptive state. An epoch ago, we'd argue experiences are to be seamless, frictionless etc.; just a few months into 2020 - that irrevocably changed. Our expectations of experience is now underpinned by trust and transparency. Today, as citizens first and as consumers second, the experience is the product. What's more as we traverse in and out of life-journeys, the better brands and service providers become 'invisible', the higher the degree of trust and transparency (with all the ease and frictionless prerequisites intact). No brand, entity, is an island - the only way is for ecosystems to render the requisite experience ambitions as bop in and out, between life-journeys..