Jul 10, 2017: Weekly Curated Thought-Sharing on Digital Disruption, Applied Neuroscience and Other Interesting Related Matters.
By By Raffaele Breschi, Tjark Freundt, Malin Orebäck, and Kai Vollhardt
Curated by Helena M. Herrero Lamuedra
Lines between products, services, and user environments are blurring. The ability to craft an integrated customer experience will open enormous opportunities to build new businesses.
Time was, a company could rely on a superior product’s features and functions to coast for a year or more before competitors could catch up. Or a well-honed service advantage could single-handedly buffer a company from start-up challengers looking to nip at its heels. No more. As digitization drives more and faster disruptions—and as customers increasingly desire the immediacy, personalization, and convenience of dealing with digital-marketing leaders—the business landscape is undergoing an upheaval.
Products, services, and environments—both physical and online—are converging to anticipate and meet rising customer expectations. That’s giving birth to a proliferation of new products, often from unexpected sources. It is also stirring up a storm of new, unanticipated competitors. In this novel mix, product companies will be pushed to create services and service providers to incorporate products into their offerings. Both will face the challenge of developing great user environments as part of customer-centric strategies.
The signs have been apparent for some time. Technologies regularly compound each other’s effects, with a dynamism and speed of innovation that has become unpredictable: for example, the combination of global positioning systems (GPS), radar, video object recognition, and infrared sensors gave birth to the development of self-driving cars. In smartphones, manufacturers once focused on features and functions as selling points. Today that emphasis has shifted completely to style, lifestyle, and simplicity of use. These permeate the customer experience and define the value proposition for such products.
This evolving convergence of products, services, and environments affects some industries more than others. Telecommunications, automotive, and consumer-product companies, for example, have already embarked on a convergence journey; other industries, such as insurance, banking, and energy, lag behind them. Understanding the way this phenomenon is taking shape can help companies prepare for the comopetitive opportunities and challenges.
A convergence triad
Three basic types of convergences reshaping the landscape for customer-centric strategies:
- Traditional product companies are transforming themselves into providers of services and ecosystems. Some innovators, such as Rolls-Royce, some time ago moved beyond merely selling jet engines to selling engine hours in a lifetime service relationship with customers. Elevator operators, such as KONE, emphasize the number of floors their products will serve over time, not just their physical products. Microsoft Azure sells computing as a service, not as software; Philips is transforming the home-lighting business into a “connected business” to improve sustainability, cost of ownership, and smart control by integrating applications such as scene personalization, home automation, security services, and sleep quality into its core product.
- Service companies are integrating physical products into their customer experience. Amazon’s Echo, for example, provides quick access to the company’s services. Evernote and Moleskine have collaborated to create notebooks that seamlessly integrate physical notes; capturing handwritten ones with the Evernote camera allows you to search and organize them digitally. Progressive Insurance’s connected-car devices allow the company to charge drivers according to their driving behavior.
- Companies are investing to create a customer environment that builds a connection with their products. Online players such as Amazon open physical stores; car manufacturers (Tesla, for example) open fancy showrooms in shopping malls and prime locations, with a completely transformed customer experience. Electronics companies, like Apple, stage the customer experience with open-space concepts, a sprawling Genius Bar, and diverse sales staffs.
In essence, highly successful companies have realized that the boundaries between products, services, and environments have blurred. They know as well that they need an integrated view to design end-to-end experiences that are truly valuable to consumers and successful in the market. It’s not just about designing the best product or service but rather about striking the right combination and making sure the integrated customer experience is compelling. This kind of successful, convergence-designed strategy can deliver a durable competitive advantage. Done well, the strategy will also make implementation more intuitive for the company and more seamless for the customers who engage with the product or service. In this evolving environment, maintaining an integrated customer-experience perspective is necessary right from the beginning of any improvement or transformation effort.
Today’s consumers do not buy just products or services—more and more, their purchase decisions revolve around buying into an idea and an experience. This change in expectations will give product and service businesses opportunities to create new revenue streams by expanding into adjacent territories. Given these complexities, the shift also requires an innovative approach to business models and a new look at how companies provide value to customers.
Five principles of the design-led customer experience
Each company’s efforts to shape design-led experiences will unfold differently. But it is possible to draw lessons—several principles for shaping a design-led customer-experience strategy—from these examples, unique as they are. As companies increasingly turn to design strategies, it is helpful to keep the principles in mind to guide their efforts.
1. Understand the customer’s needs and perspectives. Companies often approach innovation from a technological point of view and already, at the outset, have strong ideas about what the solution should be. To arrive at a new, integrated solution that taps into the power of convergence, it’s better to start from a people perspective. Companies can begin to study key aspects of the customer’s experience and try to understand and resolve core pain points by answering a few questions:
- What do customers really need, desire, and aspire to?
- What are they trying to achieve by consuming a product or service?
- What kinds of behavior are connected to the experience, natural or constructed?
- What do customers think about the product, the service, and the experience? And why do they think the way they do?
Often a company ought to consider shifting its mind-set: away from a technological solution (“what product or service can we provide to the market?”) to a consumer-oriented one (“what customer needs do we aim to fulfill through this integrated solution?”). An unmet need, even if for the most part unexpressed, frequently turns out to be a company’s next business opportunity.
2. Draw inspiration from other industries. Companies increasingly look beyond existing industry boundaries and try to adopt better approaches from unrelated contexts. Some examples:
- A hotel company that wanted to improve its customer experience drew inspiration from the world of senior-executive assistants. The company reasoned that the best assistants anticipate the needs of their executives, sometimes even before the executives are aware of those needs. By applying that principle to its customers, the hotel company emphasized service that anticipated their needs, as though it already knew even first-time visitors.
- A software provider of e-trading platforms wanted to redesign its core product. When it decided which information to place centrally and which could be relegated to a peripheral view, it took a hard look at airplane cockpits.
3. Get a glimpse of what’s on the horizon. By definition, design is a creative and exploratory process. Looking into the future allows a team to project an industry’s circumstances as far as 15 to 20 years away by framing the landscape of products and services. The primary elements to consider are typically societal shifts, such as changes in behavior, demographics, and social norms, as well as technological improvements.
The exercise can also be useful with a much shorter time frame by projecting emergent trends that can already be observed to a certain degree: for example, the new EU payment directives in banking—PSD2—will remove the banks’ monopoly and allow nonbanking players to initiate payments and access account information. How will this change the landscape of the banking industry? What if you could use Facebook or Google to pay your bills? What about the effects on other industries? What new business opportunities could be created when these developments combine with other shifts that happen simultaneously?
4. Empower multidisciplinary teams. Designing a convergent, end-to-end customer experience requires the broad involvement of stakeholders across the organization and beyond. They will have expertise in fields such as design research, anthropology, and business, and spheres of influence, such as product development, marketing, or finance. Creating a multilayered experience requires a variety of design capabilities, such as designing products, services, user experiences, and interactivity. Such multidisciplinary teams can break through silos and foster cross-disciplinary collaboration. Decision makers from all stakeholder groups should align together and embrace uncertainty together, developing capabilities throughout the entire design process. The use of existing resources can keep the investment in time and costs low.
5. Use agile techniques to prototype experiences and business models. The challenge of mastering many convergent opportunities is that solutions often reside in complex ecosystems that either stand alone or depend on other, related systems. Think of air travel, for instance, as a combined experience of products, services, and environments. Despite this level of complexity, companies can achieve rapid progress through prototyping, which quickly brings to life new opportunities and perspectives for effective implementation.
An experience can be prototyped through simple cardboard models, role playing, or clickable digital prototypes. This approach focuses on eliminating mistakes and highlighting possibilities for further development. Alternative business models can be visualized and prototyped to explore where value is added, costs occur, and efficiencies or new revenue streams lie in wait. We find that it’s most efficient to iterate a prototype of the customer experience and the business model—these pilot efforts can secure the best outcomes before scaling. The goal should be managing prototypes in an agile way, through sprints and frequent feedback from users, with a focus on developing business value.
The convergence of products, services, and user environments is just taking flight. In this environment, large and unexpected business opportunities will appear, along with unlikely competitors. To prosper, companies must balance agile, design-led development processes with the continual redesign of customer journeys