How to make customer experience a CEO agenda item

Delivering a superior experience to customers is a powerful – arguably the most powerful – differentiator that a business can deploy.  Yet in many companies, hospital customer experience management is treated as a tactical rather than strategic issue, prescription to the great frustration of those responsible for it.

As next week’s article will highlight, much can still be achieved through low cost, tactical initiatives.  And in companies where senior managers are likely to be sceptical about the benefits of ‘soft’ differentiators such as improving the emotional engagement with customers, tactical initiatives are probably the best place to start, with the results providing the ‘hard’ evidence that such executives demand.  But even when armed with such data, customer experience professionals will need to make their case in a compelling way if they seek recognition for the importance of the customer experience agenda, its elevation to the strategic level and the investment that typically requires.  Achieving that requires taking the following steps:

1.    Seeing the CEO as an internal customer

It is understandable that customer experience professionals should see their domain as being the most powerful source of differentiation (I certainly do); and therefore the most effective way to generate organic growth and most deserving of management attention and corporate funding.  The trouble is that other functional managers will believe the same about their own areas – R&D professionals may believe product development is key to growth; supply chain managers may see strengthening the procurement capability as critical for achieving cost competitiveness; and operations managers may argue that investments in new machinery to reduce defects will please both customers and reduce the costs of re-work.  The internal competition for time and money is tough.

The advantage that customer experience managers have is that the necessary response – treating the CEO as a customer – should come naturally.  As with any customer, it is important to see things from his or her perspective – seek to understand what he/she is trying to achieve, his/her pain points and the opportunities that are ‘hot buttons’. To win the CEO’s support, what is required is a compelling case for investment – both in absolute terms and relative to that made by competing initiatives – and that requires really understanding the pay-offs that the CEO is seeking by walking in his/her shoes.

2.    Making the CFO your coach

In any compelling case for investment, the predicated financial returns are critical; in particular, understanding the scale of return required for grabbing the CEO’s interest.  The CFO can provide some coaching on this, firstly to outline what the CEOs priorities are (in terms of revenue growth versus cost reduction).  But more importantly, the CFO can provide guidance on the size of profit uplift that will register with the CEO as being significant; also on the return on investment and other acceptance criteria that will be applied.  (For example in one business we worked with recently, the CFO highlighted that if the profit impact was less than $1 million it would be of no interest to his boss but if it was over $5 million she would want him to be all over it.)

Determining the profit increase necessary to hold the CEO’s attention sets the financial target, but that is the easy part.  The harder part is working out how that will be achieved in terms of acquisition of new customers, reduced customer churn, increased business with existing customers or increased profitability on the same level of business with existing customers.

Ultimately to make customer experience a strategic initiative, customer experience managers will need to both sign up to delivering a set of financial targets and convince senior managers of their credibility in how they plan to achieve it.  And if through the coaching received they have gained the trust and support of the CFO, they will have an influential advocate in resource allocation decisions.

3.    Aligning customer experience with how the CEO articulates strategy

Passing a financial threshold, either in terms of ROI or profit uplift, is a necessary but not sufficient condition for customer experience to be seen as strategic.  In addition it needs to be seen as a key component of delivering the business’ strategy and reinforcing its sources of differentiation.

As Michael Porter has argued, the starting point for any strategy is the value proposition for customers.  Peter Drucker made the point even more strongly, stating that the “purpose of a business is to create a customer”.  Businesses can generally differentiate themselves in how they create value for customers in one of three ways – through offering the best products (product leader), offering the lowest prices (cost leader) or delivering the best overall solution (often described as being most customer intimate).

In the case of the last one, customer experience is critical – it is the differentiator.  Differentiating on superior customer intimacy is arguably the most powerful of all three.  But it is also the most difficult requiring a greater outside-in perspective than the others to ensure the superior experience genuinely delivers value for customers.  And it also requires high capability levels to ensure the superior experience can be delivered consistently; (capability levels being a function of the processes in place, the system-enablement of those processes, organisation design, roles definition and performance management, competencies and culture).

But even with a strategy of cost or product leadership, the customer experience needs to be designed.    Its strategic importance will be slightly less, but it still needs to align with how the business tries to create value for customers and capture value for itself.  So for a cost leader, the customer experience strategy may focus on offering the best self-service experience.  A product leader may choose to design its experience so as to provide industry-leading technical support.  Customers still have an experience whether that has been consciously designed or is a random product of service evolution.  So it is far better to manage it than not.  And most important of all, it needs to be strategically aligned.

The three main sources of differentiation are primarily a means for categorisation and most CEOs are unlikely to articulate their strategy using such terms.  Investing in customer experience needs to be mapped against the language the CEO uses, how he/she describes how the business will differentiate itself.

For example, if the CEO is stating that the business will increase its value-addition to customers to differentiate against commodity offerings (e.g. imports from low-cost countries), showing how investing in customer experience, for example by enabling greater service pro-activity and customisation, is supportive of this provides strategic justification for it.  Equally it is necessary to show how a programme to improve customer experience will fit with existing initiatives – showing how it will enhance without delaying, derailing or devaluing them.

4.    Committing to win the CEO’s head, then heart

Making customer experience an agenda item starts by winning the CEO’s head.  But if the objective is for customer experience is to become a sustaining differentiator, the ultimate aim should be to win the CEO’s heart.  The businesses that continually rank high in polls on customer experience are those that believe it is the right thing to do, the ones that have made customer-centricity a corporate value.

In Built to Last, Jim Collins and Jerry Porras defined a corporate value as being something that a business would continue to do, even if it became a competitive disadvantage.  When that test is applied, a value – something that collectively the business believes in deeply – can be distinguished from an intended differentiator.

Perversely, the more a business believes in the importance of customer-centricity – the more senior managers genuinely follow Drucker’s philosophy of the purpose of a business – the more customer-centricity becomes a source of competitive advantage.  (So long, of course, as pricing reflects a fair sharing of the additional value created between the business and its customers – services aren’t given away free in name of customer-centricity – and the costs of being customer-centric are monitored and managed.)

Such a bold target will not be right for every company.  Some will be happy with more incremental advances, but all would benefit from thinking strategically about designing and managing the experience provided to customers.  Convincing the sceptical of that is the biggest organisational challenge natural remedies for herpes that customer experience managers face.  Evidence of the impact that improving customer experience has on financial results can help in this regard.  And next week’s piece will outline how tactical initiatives can be used to generate the evidence required to make customer experience a strategic agenda item.

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About Jack Springman

I am a consultant with experience in business strategy and customer strategy development, customer management and customer service transformation.