The Two Ultimate Questions For XM Metrics

Experience Management (XM) programs often rely on one or more key metrics that track items such as likely to recommend, satisfaction, effort, or engagement. As I’ve written in the past, the success or failure of these metrics often has little to do with the actual metric. Instead, the key to success is the program that is wrapped around those numbers (see our 5 steps for an effective CX metrics program). 

Many organizations, however, treat the metric as the core focus of their efforts; overly-obsessing on the data. They regularly spend (actually waste) hours and hours of valuable leadership bandwidth discussing and debating numbers, acting as if a discussion about the metric will magically improve the business.

Let’s think about this situation in a completely different realm… golf. Consider two new golfers. One spends his time debating how to keep score and whether or not his scorecard is accurate, while the other one looks at where she’s losing the most strokes and focuses her time on making improvements in those areas. Which of these golfers do you think will get better faster?

Senior Leaders: Ask These Two Questions

While there are many reasons why organizations fall into this metric-obsessive behavior, senior leaders have the ability to stop it and create a much more productive environment. How? By asking questions that drive the right behaviors.

Here’s my advice for senior executives… Whenever your staff shows you any XM metrics (this includes CX, EX, PX, or BX measurements), ask these two questions:

  1. What have you learned?
  2. What improvements are you making?

That’s right, don’t ask about the data. These two questions will push the organization to focus on the right things and avoid unproductive discussions about numbers.

If people aren’t learning anything from the metrics then you need to encourage them to look deeper (if it continues, then you might need new metrics). If people aren’t making improvements, then you need to ask them “why not?” The only exception to this process is for organizations that are happy maintaining the status quo.

Don’t ask those two questions once or twice; ask them all of the time. This simple change in leadership behavior will have a dramatic effect on how the rest of the organization behaves. As you repeat these questions (over and over again) and stop obsessing about the actual numbers, I’ll bet that your metrics will actually improve even faster.

The bottom line: Leaders can improve XM metrics by simply asking two questions.

The Four P’s of XM Insights

In a recent XM Institute report, we discussed how to Operationalize Experience Management (XM).  Why does XM matter? Because it creates a discipline that helps organizations continuously learn (how people are thinking and feeling), propagate insights (to the right people in the right form at the right time), and rapidly adapt (to an increasing flow of actionable insights).

As we look into the future, just about every organization is facing more demanding customers, more demanding employees, and shorter product lifecycles. In this environment, they need to make smarter, faster decisions… They need XM.

Organizations that master XM will adapt faster than their peers. That statement alone should be compelling enough to focus on building XM capabilities. What happens to your organization if your competitors are systematically adapting faster than you?!?

To understand where XM will come into play, I’ve identified four categories of insights that XM leaders will better understand and more quickly respond to than their peers. Let’s just call them the Four Ps of XM Insights:

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  • Problems: Have an issue with a product, a brand message that’s going awry, a manager ruining morale, or a process that’s turning customers into detractors? XM leaders will spot those problems and make appropriate adjustments, before their competitors have any indication that there may be an issue.
  • Preferences: What features do key customers prefer, which brand messages resonate with target audiences, and what benefits will have the most impact on employee retention? XM leaders will know the answers to these types of questions and make adjustments before their peers even formulate the questions.
  • Possibilities: What unspoken needs do your customers have, what innovations are in the minds of employees, how can you reinvent your brand, and what should your next generation of products and services look like? XM leaders will have a continuous pulse on these types of insights, while their competitors just brainstorm about them during planning off-sites.
  • Priorities: Which actions will drive the most loyal customers, the most engaged employees, the most vibrant brands, and the most irreplaceable products? XM leaders will understand these connections and focus their resources on the most impactful areas, while their competitors debate options with random groups of employees who happen to be invited to meetings.

The bottom line: XM leaders will adapt faster to problems, preferences, possibilities, and priorities.

New Research Digs Into Industries And Consumer Feedback Patterns

The XM Institute is kicking off the year with a research bang.

In a previous post, I mentioned two reports from late last year that show the business value of CX, The ROI of CX and What Consumers Do After a Bad Experience. Since then, we’ve actually published a number of new research reports with an emphasis on industry-specific data. These reports are based on a survey of 10,000 U.S. consumers and examine almost 300 companies over 20 industries.

Enjoy these free reports:

200120_XMIResearch

Industry CX Snapshots

2001_CXRetailIndustryGraphics_v1This series of reports dig into CX data for a number of industries:  AirlineAutoBankingHealth InsuranceHotelInsurance, and Retail.

Each Industry Snapshot looks at how the highlighted industry’s XMI Customer Rating compares to the Ratings of the other 19 industries and examines the connection between a customer’s experience and the likelihood that they will recommend, rebuy from, and trust a company within that industry. These Industry Snapshots also explore the potential cost of delivering poor experiences, the most broken journeys within each industry, and how experience perceptions differ across age groups

How Consumers Give Feedback

Download the free report, Data Snapshot: How Consumers Give Feedback

2001_HowConsumersGiveFeedback_Graphics1Did you ever wonder what channels consumers use to give feedback, and how that differs between good and bad experiences and across age groups? Then this is a great report for you.

We found that people are more likely to talk about bad experiences than good experiences. When consumers do tell someone about an experience, only one-fifth of consumers provide that feedback directly to the company. We also looked at how consumer behavior differs across age groups.

Thankful For A Decade Of Great Experiences

Happy New Year!

Wow, it’s 2020… the start to a new decade. I’m really looking forward to what’s ahead. My previous post discusses how 2020 will be the Year Of Insightful Actions, but I also wanted to zoom out and share a broader perspective.

Appreciating The Past 10 Years

Before focusing on the 2020s, I’d like to pause and express my gratitude for the 2010s. It was a great decade! I’m very thankful for all of the wonderful friends, family, colleagues, and clients that I’ve been privileged to spend time with during the previous 10 years.

It’s been a fantastic decade from a personal standpoint. My kids graduated college and have started their paths towards highly productive careers. My Boston sports teams won many championships, and I was able to attend three Super Bowls. I adopted a healthier lifestyle, with better eating habits and more exercise. I expanded my worldview, traveling to many new countries.

I would never have had such an amazing decade if it weren’t for YOU. If you’re reading this post, then thank you! You’re one of the people who has motivated my work. I’ve always felt that my team’s primary audience are the many people who follow what we write, whether or not we’ve ever had the opportunity to meet or work with you.

And most of all, I’m thankful that I’ve been able to go on my personal and professional journey with my best friend, my wife Karen.

A Decade of Professional Changes

It’s also been a fantastic decade from a professional standpoint, full of interesting shifts and turns. Here are some of the highlights:

  • Forrester Research. I began the 2010’s as a VP and Principal Analyst at Forrester Research, introducing the world to the practice of customer experience. It was a great opportunity, as I built a wide range of new skills over my 12-year stint. In particular, I learned to be a strong researcher, writer, and storyteller, which enabled me to be the most-read analyst for my final 13 quarters at Forrester. This experience also provided me with the platform to establish a large community of people who followed my work.
    • Special thanks to the the many people across Forrester who helped me hone my skills, especially Bill Bluestein (R.I.P.), Bobby Cameron, Chris Charron, George Colony, Waverly Deutsch, Stan Dolberg, Bill Doyle, Harley Manning, John McCarthy, Chris Mines, Mary Modahl, and Ted Schadler.
  • Temkin Group. In April 2010, Karen and I founded Temkin Group. I still remember a meeting with my friends Ingrid Lindberg and Steve LaValle who convinced me not to name the company “CX Institute” (which is where we were heading), but instead to name it “Temkin Group.” It was a great decision. Over the next eight years, we built a fantastic team and worked with an amazing array of clients—all from our basement. Our little company built a large global brand, as our research and content was used by practitioners around the world. We never had to make any sales calls, as we were very lucky to build our business based on our reputation and word of mouth.
    • Special thanks to the Temkin Group employees who joined us on this journey. It started with Andrea Fineman who was brave enough to be the first to join us in the basement, followed by Aimee Lucas, Isabelle Zdatny, Denise Bahil, Julia Jaffe, Jen Rodstrom, Laura Wells, and Maggie Mead. Also, thanks to Mike Flint and the team at Metropolis Creative who built our websites.
  • CXPA. During the Summer of 2010, Karen and I started developing a plan to build a community of CX professionals, along with Andy Freed from Virtual (an association management company). We recruited Jeanne Bliss to co-found what became the Customer Experience Professionals Association (CXPA). And in April 2011 we launched the CXPA. We hired the amazing Lesley Lykins in early 2012 as the CXPA’s Director of Member Engagement, and she became the heart and soul of the community. I had the immense pleasure to chair the CXPA and to shepherd its growth into a thriving 4,000+ member non-profit association. Over those five years we established the CX profession and created many industry-defining things such as CX Day and the first professional CX certification, CCXP.
    • Special thanks to Karen, Andy, Jeanne, Lesley, and the entire staff at Virtual (especially Janice Carroll, Shannon Taylor, and Megan Cannon who managed the relationship). I also want to thank the initial CXPA board members who trusted our vision and helped bring it to life: Brian Andrews, Parrish Arturi, Lior Arussy, James Bampos, Jeanne Bliss, Erica Bullard, Ginger Conlon, Chris Davey, Kim Edmunds, Karyn Furstman, Ian Golding, Dorsey McGlone, Jason Mittelstaedt, and Karl Sharicz.
  • Qualtrics. In October 2018, Qualtrics acquired Temkin Group. While we were happy to keep going as-is with Temkin Group, Karen and I saw that Qualtrics was becoming the dominant market leader and we felt that its XM message aligned directly with our point of view. Joining forces provided us with the opportunity to amplify our impact on the market. So our entire Temkin Group team joined Qualtrics to create the XM Institute. Over the last year we’ve had the opportunity to work with a great team across Qualtrics and deliver new thought leadership around the world (including in-person sessions in Toronto, London, Dubai, Dublin, Madrid, Brussels, Stockholm, Helsinki, Singapore, Sydney, Melbourne, Kuala Lumpur, Paris, Berlin, and Munich).
    • Special thanks to the Qualtrics team that helped complete the acquisition at a very fast pace, especially Austin Bankhead, Cate Isert, Iris Ng, Zig Serafin, Jeff Shaw, Ryan Smith, Tucker Stockman, and John Torrey. And I’m also thankful for the entire XM Institute team, Moira Dorsey, Ben Granger, Aimee Lucas, Maggie Mead, David Segall, Karen Temkin, Laura Wells, and Isabelle Zdatny.
  • SAP. Three weeks after Qualtrics acquired Temkin Group, SAP acquired Qualtrics. Talk about a crazy month. Luckily, I’ve known SAP since my days at Forrester, and Temkin Group had worked with many large enterprise software companies. So we know that world. While it’s been somewhat dizzying to try and respond to requests from across our 100,000 new teammates, SAP provides the XM Institute with an even larger platform to bring XM to the world. Thanks SAP.

I feel great about all of my professional accomplishments over the past decade except for one gap… a book. I started to write one in 2011, but had to put it aside as the CXPA ended up taking up just about all of my time. While I’ve been too busy to get back to it, I’m committed to writing a book at some point during this current decade.

Comparing Three Exciting Decades

I’m even more excited today about the future then I was a decade ago. Over the past 10-years we’ve established the foundation upon which organizations will transform into the future. Here’s how I see the connection between this new decade and the previous two:

  • 2000s: The Decade of Process And Technology. While the phrase “people, process, and technology” has been around for decades, the 2000s were all about enterprise technology and process management (no real focus on people). It was a very internally-focused period. Laws such as Sarbanes–Oxley put pressure on organizations to establish enterprise wide control and visibility. This propelled the importance of CIOs, as they led programs to centralize and rearchitect the core infrastructure within most large organizations. The dominant form of transformation, business process re-engineering, was also very internally and cost focused. At the same time, the Internet started to penetrate technology and process boundaries, with companies enabling customers to start self-serving for simple purchases and a handful of basic service interactions.
  • 2010s: The Decade of Customers And Digital. With customers starting to directly touch enterprise technologies/processes and fueled by momentum from the end of the “Great Recession,” organizations not only acknowledged the value of customers in the 2010s, but they also started to focus much more attention on understanding and catering to their needs (thanks in part to the mainstreaming of academic domains such as neuroscience and behavioral economics). We defined and established customer experience management as both a critical capability and as a thriving profession. Disruptive online businesses such as Amazon, Uber, and Airbnb forced organizations to rethink how they interact with customers. At the same time, the rapid growth of mobile along with Cloud/SaaS models made every interaction—internal and external—fair game for digitizing. This customer/digital movement led to the rise of experience design, mobile-enabled processes, and the shift in customer research from a one-off activity to a more continuous process. At the end of the decade, the CX movement started spreading to other areas, most noticeably employees (which started the rise of XM).
  • 2020s: The Decade of Humanity And Intelligence. During the upcoming decade, we’ll build upon what we’ve learned from customer experience and apply it to every part of an organization. Driven by the momentum from the 2010s along with an emerging view among leading executives that the purpose of a corporation is to serve humanity, we’ll focus more on the needs and feelings of all human beings in our ecosystems (e.g., suppliers, employees, customers, influencers, etc.). Organizations will deploy more advanced and automated analytics on top of their growing digital/mobile infrastructures. This will make it much, much easier to discover and distribute tailored insights from increasingly larger and more diverse datasets. In this environment, organizations will infuse Experience Management—the capability to continuously learn, propagate insights, and rapidly adapt—throughout their entire operating rhythm. Using the distributed insights, enterprises will provide more individualized interactions and actively decentralize more decision-making.

I’m excited about where all of this is heading, and believe that the XM Institute is well positioned to keep helping organizations navigate through the change.

A Look Back At 2010 CX Recommendations

I thought it would be fun to close out this post by sharing content from a 10-year-old post that I wrote to prepare people for the start of the previous decade. It’s pretty cool that the recommendations are still relevant today. So here were my 7 keys to customer experience in 2010:

  • 1) Drop the executive commitment facade. It’s very easy for executives to say “customer experience is important.” But it’s much more difficult for them to dedicate the time and energy required to make it a real priority. So in 2010, executives should either get actively involved in customer experience transformation or drop it from their agendas.
    • Start here: Develop a customer experience dashboard and manage the results with the same energy that you manage financial results.
  • 2) Acknowledge that you don’t know your customers. When market research teams require long lead times and expensive projects to answer questions about customers, too many organizations go without this insight. But the path to customer experience success requires significantly deeper customer insight. So in 2010, companies need to develop voice of the customer programs that provide ongoing and continuous access to customer insights.
    • Start here: Create a voice of the customer program with a cross-functional team that focuses on four “LIRM” components: listening to customers, interpreting the feedback, reacting to the insights, and monitoring results from actions over time.
  • 3) Keep from getting too distracted by social media. Twitter, Facebook and other social media sites may seem sexy, but they aren’t the only channels for customer feedback. Other channels like comments on surveys and calls into the call center can often provide even richer insight. So in 2010, companies need to learn from social media feedback, but not overreact to it.
    • Start here: Treat social media as one of many listening posts in a comprehensive voice of the customer program that examines both structured and unstructured feedback.
  • 4) Stop squeezing the life out of customer service. My research shows that consumers care more about good customer service than they do low prices. It also turns out that many customer service interactions are critical “moments of truth” that drive customer loyalty. But companies often treat customer service an unwanted stepchild; focusing almost exclusively on aggressive cost-cutting. So in 2010, companies need to start viewing customer service as a strategic asset.
    • Start here: Measure customer service organizations based on how effectively they help customers instead of efficiency metrics like average handle times.
  • 5) Restore the purpose in your brand. True brands are more than just color palettes, logos, and marketing slogans, they’re the fabric that aligns all employees with customers in the pursuit of a common cause. They represent a firm’s raison d’être. Unfortunately, many companies have lost this sense of purpose in their brands. So in 2010, companies need to redefine their brand and embed it in the hearts and minds of all employees.
    • Start here: Translate your brand into promises you will make (and keep) with customers across every key touch point.
  • 6) Don’t expect employees to get on board. Employees are often the most critical element of any customer experience effort. But firms can’t just hope that everyone will participate in these change initiatives. So in 2010, companies need to actively focus on engaging employees at every level across the organization in their customer experience efforts.
    • Start here: Communicate (a lot) about “why” customer experience is important and allow employees to participate in defining “how” to make improvements.
  • 7) Translate customer experience into business terms. My research uncovered a strong correlation between customer experience and loyalty. An average $10 billion company can generate $284 million of additional revenues from customer experience improvements. But most companies don’t fully understand the link between customer experience and business results. So in 2010, companies need to identify how customer experience impacts their financial results.
    • Start here: Engage the CFO to develop a model which shows the impact that customer experience has on customer loyalty.

The bottom line: The 2010s were fantastic, but the 2020s will be even better!

2020: The Year of Insightful Actions

As 2019 comes to an end, it’s time to think about what we’ll see next year. I collaborated with our XM Institute faculty (Aimee Lucas, Ben Granger, Isabelle Zdatny, and Moira Dorsey) to pull together a picture of where we think XM will be heading in 2020. As we looked across the different elements we were expecting to see, an overall theme for 2020 emerged… The Year Of Insightful Actions.

Looking Back At 2019

In the Global State of XM research, we found that senior executives around the world recognize the importance of XM. That mindset propelled many companies to deploy components of an overall XM program in 2019. As we found in the State of CX Management where only 6% of large companies have reached the top two levels of maturity, most companies remain in the very early stages of building their XM competencies.

Customer experience (CX) remained the most common area of focus for XM efforts, with employee experience (EX) gaining significant traction.

Few organizations have yet to take an enterprise-wide view of XM, instead they’ve most frequently deployed XM within isolated compartments of their organization. While narrow XM remained the norm, we started to see a few companies take a more holistic view of XM, often starting with an integrated view of CX and EX.

Five Trends In The Year of Insightful Actions

While most XM efforts have focused on isolated data collection and reactions, we expect organizations to become much more intentional about how their efforts drive actions that create value. That’s why we’re calling 2020, The Year of Insightful Actions.

What does this mean? While many XM programs claim to drive action, they don’t treat this effort as a primary objective. We expect this to change. During the upcoming year, organizations will prioritize their XM efforts in areas that directly help their organizations make better decisions and deliver more tailored experiences. In this environment, we expect to see:

  1. The marriage of CX and EX. XM programs will spread into adjacent areas. The most common form of this diffusion will be the an increase in the combination of customer experience (CX) and employee experience (EX) efforts. Why? Because there’s an inextricable link between CX and EX. Insights from customers can target high priority employee improvements, while insights from employees can identify key customer improvements.
  2. The reversal of metrics mania. Many XM programs have built up a slew of measurements, viewing their experience data (X-data) as a source of metrics. As companies pivot more to insightful actions, they’ll cut back on some of those metrics and focus more of their attention on developing insights in specific areas where they see opportunities to improve.
  3. The reorientation to action-first. In early maturity XM programs, there’s often a focus on collecting as much data as possible. The data, along with some insights, is then delivered to different groups. We expect that many organizations will shift this flow. They’ll start by identifying the actions that people make and use that information as requirements for insights, and then focus data collection on fueling those insights.
  4. The creation of a new discipline, IXD. Rather than just distributing data, organizations will more actively design the insights they deliver to specific groups across the organization. We call this Insight Experience Design (IXD). XM teams will use their experience design skills to integrate insights into different teams’ operating processes and decision flows. This process will also require change management to increase data-centric mindsets across their organizations.
  5. The rise of XM-enabled processes. As organizations use XM to power more key decisions, they’ll spot new ways to inject insights into their ongoing operational processes. Leading companies will start redesigning processes like product development and employee promotion cycles to embed XM insights. Look for existing methodologies like Lean and Lean Startup to incorporate XM insights into their methodologies.

Impact Across The XM Operating Framework

This focus on insightful actions in 2020 is merely a step on the path towards increasing XM maturity. As we described in the report, Operationalizing XM, organizations are on a multi-year journey to create the capabilities to continuously learn what people are thinking and feeling, propagate insights across their ecosystem, and rapidly adapt based on the most important findings. To establish these capabilities, companies will continue to expand their XM efforts in 2020 across the three elements of the XM Operating Framework, technology, competency, and culture.

1912_WhatIsXM

Here are some of what we expect to see in 2020:

  • Technology: Within XM, technology plays a very important role. It allows the automation of key activities and it enables strong practices to scale across an organization. In 2020, we expect to see more use of text analytics to tap into rich insights from unstructured data, more predictive analytics to uncover insights from a growing volume of both X-data and operational data (O-data), more instrumentation of growing digital channels, more automated and customized distribution of insights, and the enablement of more closed-loop processes for responding to feedback.
  • Culture: The norms within an organization can both inhibit and nurture XM capabilities. As the Year of Insightful Actions rolls out, companies will need to make adjustments to their culture to ensure that employees understand why XM is so  important for their future success, recognize their personal roles in helping the organization deliver better experiences, and become increasingly comfortable with more rapid, distributed decision-making based on highly tailored insights.

Changes Will Affect All Six XM Competencies

As we often say, the key to path to XM success requires mastering competencies that are enabled by technology and nurtured by culture. Here’s a taste of what we expect to see across the Six XM Competencies during 2020:

  • LEAD: Organizations will expand their governance to cover a broader set of XM areas, starting by connecting many of their CX and EX efforts. The focus on actions will also drive organizations to adjust their program roadmaps to more efficiently deploy their resources.
  • REALIZE: As insightful actions become more of the norm, organizations will start making the case for XM based on the establishment of capabilities to rapidly adjust to changes in the market, not just based on near-turn upticks in business results.
  • ACTIVATE: The spread of insightful actions will force more employees across the organization to rely on data insights in their day-to-day roles. This will require new training to improve overall data literacy and the capacity to use insights to drive decisions.
  • ENLIGHTEN: To fuel insightful actions, companies will redefine what X-data they collect. Rather than relying on static mechanisms that remain as-is, they’ll build more dynamic approaches that they regularly adjust to fuel an evolving set of required insights.
  • RESPOND: This competency will get a lot more attention across the board, as XM programs turn their focus more explicitly on the actions they enable.
  • DISRUPT: With the spread of insightful actions, more employees will benefit from applying experience design skills. Look for organizations to find ways for propelling experience design across their organization.

The bottom line: Welcome to The Year of Insightful Actions!

New Research Shows Strong ROI of CX

The XM Institute has published new research that examines the impact that customer experience has on the loyalty of U.S. consumers across 20 industries. You can download these reports for free:

  • The ROI of Customer Experience. This research examines the correlation between customer experience and the likelihood of consumers to exhibit the following behaviors: purchase more products or services, recommend a company, forgive a company, trust a company, or try a company’s new product or service.
  • Data Snapshot: What Happens After a Bad Experience, 2019. This research shows how often consumers run into bad experiences, and then examines how consumer spending changes based on those miscues.

The graphics below from The ROI of Customer Experience show a strong correlation between good customer experience and improved levels of consumer loyalty. While these graphics cover some of the overall findings, the report also includes data showing the impact of CX on loyalty for 20 industries.

1912_ROIofCX_v2.png

The graphics below are from the Data Snapshot: What Happens After a Bad Experience, 2019. As you can see, the percentage of consumers reporting bad experiences ranges from a high of 17% for TV/Internet service providers to a low of 3% for retail and streaming media. We also found that the impact that a bad experience has on spending is greatest in fast food and smallest in health insurance and utilities.

AfterBadCX_v1

Remember, you can download these research reports and many, many more for free from the XM Institute.

The bottom line: If you improve CX, you’re very likely to improve customer loyalty.

New Research: The Global State of XM

GlobalStateOfXMThe XM Institute published a new report, The Global State of Experience Management (“XM”). The research is based on a survey of more than 1,200 senior executives from across six countries: Australia, Canada, Germany, Japan, the UK, and the U.S..

Before I share some of the findings, I just want to say that this report is free to download. As I’ve mentioned in the past, one of the cool things about moving to Qualtrics is that we get to share more of our research like this. Now on to my commentary…

First of all, we found that executives around the world regard XM as important – which is not surprising given its correlation with sales growth and profitability. However, the degree to which they focus on XM varies between countries.

Canadian executives are most likely to consider improving XM a top organizational priority, while German executives are least likely. Additionally, which experience areas executives are most concerned with improving also differs from country to country. Respondents from Germany and the U.S. are most focused on customer experience (CX), respondents from Australia and Canada are most focused employee experience (EX), respondents from Japan are most focused on product experience (PX), and respondents from the UK are equally focused on EX and brand experience (BX).

This report also examines how executives expect to use customer and employee feedback in the coming year as well as what obstacles are impeding their path to XM success. Organizations that are leading the way with XM most often describe technology limitations as an obstacle, while firms that are lagging in XM point to a lack of a clear strategy as a key obstacle.

Go ahead and download the report… it’s free.

Stop Employees From Asking For Good Ratings

Over the last few weeks, I’ve run into a couple of examples of a common problem with some Experience Management (XM) programs… “gaming.” Here’s what I found…

During dinner with a friend who is an executive at a large bank, our discussion made its way to XM (no surprise). He mentioned that his bank has an employee engagement study and that leaders are compensated based on the results.

Sounds like a good thing, right?

My friend then shared a conversation that his boss had with the leadership team. This senior executive told my friend and the rest of his direct reports that they needed to give him better ratings, because the current scores were negatively impacting his compensation.

Now for the second example. I’m a frequent flier, and regularly receive requests from airlines to provide feedback after a flight.

Sounds like a good thing, right?

During a recent trip on Delta, the flight attendant announced that we’d be receiving a survey and that she hopes they exceeded our expectations and will give them a 5 (see note about Delta below).

Do these two situations sound like a path to better employee experience (EX) or customer experience (CX)? Of course not! Both of these examples represent inappropriate behaviors. Whenever a person is pressured to give a specific score, the integrity of the measurement system is broken. We call this type of behavior “gaming the system.”

Gaming is a common problem. It happens when an organization puts too much emphasis on specific measurements — at the expense of the overall XM program.

The goal of XM is not to achieve some number, but to create a discipline to continuously learn, propagate insights, and rapidly adapt. This enables an organization to consistently deliver experiences that meet the needs of its key audiences. When an organization overly focuses on a number, often by attaching strong incentives to individuals based on the data, the system is bound to create these types of counter-productive “gaming” behaviors.

To help discourage this type of behavior, consider adopting these five rules to stop employees from gaming that I’ve described in a previous post:

  1. Don’t mention or refer to a score
  2. Don’t mention specific survey questions
  3. Don’t mention any consequences
  4. Don’t say or imply that you will see their responses
  5. Don’t intimidate customers (or employees) in any way

The bottom line: Make sure you’re not encouraging gaming behaviors.

Note: I regularly fly with Delta and this is the only time that I’ve run into this type of gaming behavior.

XM Versus BI: No Real Comparison

When I was at the SAP Select event in Berlin last week, I was asked a great question… Isn’t Experience Management (XM) just like business intelligence (BI)?

First of all, they’re nothing alike. However, I understand why they may appear similar at a surface level. That’s why I really like this question; it gives me the chance to provide additional clarity around XM.

Here’s why XM is nothing like BI:

  • BI is a technology, XM is a discipline. BI is a tool that takes streams of data and transforms them into presentable formats. XM is a discipline that helps organizations deliver differentiated experiences by continuously learning, propagating insights, and rapidly adapting. Organizations adopt XM by mastering a set of six competencies that are enabled by technology and nurtured by culture.
  • BI focuses on O-data, XM adds X-data to O-data. BI collects operational data (O-data) from a number of internal systems, looking at how operations are performing. While O-data provides some insights, it lacks the deep understanding that comes from people (customers, employees, partners, etc.) who can explain why things are happening, with information about what they are thinking and feeling. That’s why XM collects this experience data (X-data) and drives insights by combining it with O-data.
  • BI enables analysis, XM embeds analytics. BI provides a platform that analysts can use to manipulate data, often connecting it with other analytical tools. A strong XM platform uses analytics at the core of its data processing engine, so that all types of users can gain instant access to deep insights. The Qualtrics XM Platform includes Qualtrics iQ, which makes it easy for novices to tap into the power of powerful capabilities such as text analytics, predictive analytics, and voice analytics.
  • BI is about reporting, XM is about acting. The output from BI is typically a set of dashboards to be reviewed by a limited group of people across an organization. An XM effort may provide dashboards, but only when that format is part of driving smarter actions across an organization. That’s why the Qualtrics XM Platform supports a robust set of workflows based on insights that drive action across an organization and can integrate into process flows within systems such as CRM and HRM.

The bottom line: XM is a capability that is woven throughout your operating fabric.

Discussing The Experience Economy With Joe Pine

TheExperienceEconomy_Ruled_2Welcome to the Experience Economy. That’s the title from an HBR article written by Joe Pine and James Gilmore in 1998. It was a seminal article, laying out the important role that experiences play in building differentiation. Pine and Gilmore went on to write an amazing book, The Experience Economy: Work Is Theater & Every Business a Stage.

The Experience Economy was more than an article or a book, it was the start of a movement. And it continues on today. As a matter of fact, Pine and Gilmore are rereleasing the book with a new forward. They’ve also created an online training series focused on helping frontline employees stage remarkable experiences.

I caught up with Joe Pine during his global travels to discuss the Experience Economy. Here are his answers to some questions I posed:

Q: How has your view of the Experience Economy shifted since you originally introduced the concept?

Pine: Interestingly, not that much! My partner Jim Gilmore and I always thought that the experience staging would grow many-fold, that every year more and more companies would embrace the Experience Economy, and it would be both caused by and cause goods and services to be increasingly commoditized. One big difference is that we used to talk about the nascent, the emerging Experience Economy — and now we say it is here. Experiences have become the predominant economic offering, what people prefer over mere goods and services. I remember having to argue with people about it, making the case of the shift into the Experience Economy; now, however, I just describe it and everyone gets it.

Q: What role does new and emerging technology play in the future of the Experience Economy?

Pine: One of the big growth arenas is in experiences that fuse the real and the virtual, including virtual reality, augmented reality, and many more possibilities I wrote about in my book Infinite Possibility. Digital technologies also enable companies to mass customize their offerings so much more than in the past, for anything that can be digitized can be customized. And that’s actually how I discovered the Experience Economy, by realizing that customizing a good turned it into a service, and customizing a service turned it into, yes, an experience! So companies can now know who their customers are, where they are, their context at this moment, and how to fulfill their individual wants, needs, and desires. The “Wow!” effect that engenders can turn such interactions into engaging experiences. I’m also enamored with the potential of 3D printing, for it makes matter programmable, effectively digitizing materials to be (almost) instantly customized to the individual.

Q: I like to talk about Experience Management as a discipline that need to be woven throughout an organization’s operating fabric. How does that mesh with your view of the Experience Economy?

Pine: I think that’s true — while companies can make progress by feel, by art rather than science, it will tend to be sporadic and lessen the chances of truly embracing today’s possibilities. Also understand that many companies aim their Experience Management activities too low, at merely making their interactions with customers nice, easy, and convenient. These are all well and good — and often very necessary before proceeding further — but do not rise to the level of staging a true, distinctive experience. As a distinct economic offering, experiences are about offering customers time well spent, not the time well saved of services. So, yes, make the service aspects of your offerings frictionless, and then use the time saved to build atop this to offerings that are engaging, memorable, and personal, experiences that customers view again as time well spent.

Q: Can you share a couple of the coolest examples you’ve seen of a company shifting it’s approach and embracing the Experience Economy?

Pine: My favorite experience stager these days is the Princess Cruise Lines unit of Carnival Corp. for its Ocean Medallion program. The Medallion is an IoT device (speaking of new technologies) that enables the cruise ship to mass customize everything on the ship — and eventually off it — to each individual guest, family, or other unit (such as wedding parties or reunions). Guests upload their passport data beforehand and then simply walk up and onto the ship without ever having to show it, as Princess crew members have tablets that identify each guest by name and picture based on their unique Medallions and welcome them aboard. Guests also specify their preferences before boarding, which Princess uses to create a mass customized itinerary that can be updated as it learns more and more about each guest. It can even learn about context, knowing for example that on the pool deck with the kids your favorite drink is an iced tea with no lemon, while in the bar with your buddies it’s a coconut mojito, and at dinner with your spouse it’s a glass of Shiraz! True, though, that as a cruise company Carnival has always been in the experience business, but now it is elevating that experience for every guest, eventually on every ship.

One of the cool things I see happening turning service providers into experience stagers is retailers, restaurateurs, and others actually charging admission for the experience! Next in Chicago, Trois Mec in LA, Noma in Copenhagen, and a host of other restaurants, for example, now have you go online to reserve a table, pay the admission fee, print out your tickets, and then present them at the reserved time for the dining experience. Even Venice, Italy, is starting to charge admission to alleviate the overcrowding in the city center.

And I’ll also mention hospitals, of which so many are taking on experience-related themes or purpose statements, such as Holy Redeemer in Philadelphia with “My. Life. Story.”, Mosaic Life Care in St. Joseph, MO, with “LIve Life Well”, or Mid-Columbia Medical Center in The Dalles, OR, with “Personalize. Humanize. Demystify.” I work more in healthcare than any other industry for the basic reason that research shows that the better the patient experience, the better the outcomes, and that is what healthcare is truly about.

Q: What advice do you have for a non-traditional experience company like a chemical manufacturer or shipping company to embrace the Experience Economy?

Pine: It may seem like a stretch, but even B2B manufacturers or service providers. First, they can understand a basic principle that in today’s Experience Economy, the experience IS the marketing. So they can stage marketing experiences that generate demand for their offerings., such as CASE Construction Equipment does with its Tomahawk Experience Center in the north woods of Wisconsin, or the World of Whirlpool on the banks of the Chicago River.

Any company can also turn mundane interactions into engaging encounters by understanding that work IS theatre. It’s not a metaphor — work as theatre — but a model for work, understanding that whenever workers are in front of customers, they are on stage and need to act in a way that engages those customers. In shipping, a costumed UPS route driver performs an act of theatre with every package she delivers, while FedEx’s overnighting is absolutely, positively theatre when its employees deliberately rush about to convey the impression of speed as the essence of the company.

Whenever I work with B2B companies I also make the same point as earlier that mass customizing their goods turns them into services, and their services into experiences — and that B2B customers can far better gauge the value of such customization than consumers can. Moreover, no business customer buys their offerings because they want their offerings; they are always the means to an end. If you supply the end rather than the means — and that means focusing (as healthcare should) on outcomes, not inputs — then you will gain much more economic value. In fact, you can then go beyond staging experiences to guiding transformations for your individual customers. And there is no greater economic value you can create than to help customers achieve their aspirations.

The bottom line: Make sure to read the book!

Three Characteristics of XM Leaders

Earlier today, I led an roundtable discussion at SAP Select in Berlin entitled “Become a XM Transformation Leader.” This is a critical theme for many executives. If you want the benefits of Experience Management (XM), then you will need to lead a transformational journey across your organization.

If you’ve been reading my work, then you realize that XM is not about the delivery of a single great experience, but it’s a discipline that’s embedded across an organization’s operating fabric that enables it to Continuously Learn, Propagate Insights, and Rapidly Adapt.

How do you embrace this discipline? By adopting what the XM Institute has defined as the XM Operating Framework, which focuses on building six XM Competencies: Lead, Realize, Activate, Enlighten, Respond, and Disrupt.

This effort isn’t easy, and it requires a multi-year journey. In order for an organization to sustain a change agenda over that span of time, senior executives need to actively drive the effort. What does that mean for those leaders?

Three Characteristics Of Transformational Leaders

In my work with dozens of companies that have gone though transformations, I’ve observed that the most effective transformational leaders demonstrate three key characteristics. They:

  1. Communicate Why
  2. Model Desired Behaviors
  3. Reinforce Change

1) Communicate “Why”

The only way to get people to truly buy-in to change is for them to understand why it’s happening. Most executives tend to under-communicate, or they over focus on “what” the company needs to be doing and “how” it will get done. If you can land the “why” message, then people will support the change from a position of ongoing commitment, instead of just as an act of transactional compliance. Here are some ways that executives can improve their communications:

  • Develop a clear script about “why” the company is going through the change
  • Develop a clear script about “why” the change is good in the long run to your organization and its employees
  • Make sure that your direct reports fully understand why the change is going on and have their own scripts
  • Make sure that you regularly discuss the “why” in your ongoing communications

2) Model Desired Behaviors

One of our Six Laws of Customer Experience is simply: “You can’t fake it.” Your organization gauges what’s truly important not by listening to your speeches or reading your email proclamations, but by observing your actions. If people see that you haven’t changed, then they won’t change either. Here are some ways that you can model new customer-centric behaviors:

  • Look for new ways to use customer or employee feedback; consider regularly calling out to customers
  • Find ways to incorporate customer, employee, brand, or product data/insights into your decision-making
  • Start asking people-centric questions like: who is the target audience and how will this help them?
  • Make the XM change a top item on your meeting agendas; even above the normal operational items.
  • Make choices about what meetings you attend or decisions you make based on the signal it sends to the organization about your support for the change

3) Reinforce Change

It’s very easy for organizations to fall back into their regular, “comfortable” routines. So you need to make sure that you continuously and very purposefully reinforce the changed behaviors. Here are some of the things you can work on:

  • Hold your direct reports accountable for change in their organizations
  • Make “leading and supporting change” a key objective that you use to measure your direct reports
  • Publicly recognize and call out people in your organization that are acting consistently with where the company is heading
  • Don’t promote anyone in your organization, even high performers, if they are not proactively supporting the change
  • Embed the new direction in the hiring and new employee on-boarding process
  • Ask people in your organization what you could be doing to more effectively support the change
  • Develop personal goals every quarter for how you will reinforce the change

If you’re a leader who’s looking to drive transformation, then make sure to focus on these three characteristics. Your actions are more important than you think.

The bottom line: Transformation takes strong, committed leadership.

Expansion Of Experience Management And XM Professionals

It’s great to see so many people starting to see the potential of Experience Management (XM). As I’ve discussed, XM is the natural evolution in enterprise transformation. XM will improve just about any organization with the infusion of intelligence and humanity.

The Discipline of XM

XM is more than just a technology. It’s a discipline that needs to be woven across an organization’s operating fabric. When an organization fully adopts XM, it will not only be fully aware of the human beings that it touches, but it will proactively cater to their needs by continuously learning, propagating insights, and rapidly adapting.

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Two Dimensions of XM Expansion

That’s the end point, but how do organizations get there? By expanding their efforts along two dimensions:

  1. Maturity of competencies. For an organization to adopt XM, it needs to build a set of capabilities that we’ve defined as the XM Operating Framework. This means mastering the Six XM Competencies (Lead, Realize, Activate, Enlighten, Respond, and Disrupt) and evolving through five stages of maturity (Investigate, Initiate, Mobilize, Scale, and Embed).
  2. Diffusion of use cases. Once an organization starts building its XM competencies, it will want to expand the use of those capabilities to other areas through diffusion stages (Isolated, Expanded, Adjacent, and Extended). For instance, a company may start with a customer relationship NPS program and expand into transactional in-product feedback effort or employee engagement.

The Rise of XM Professionals

Over the next decade, I expect to see organizations building XM competencies while expanding the places where they apply those capabilities. There will be a constant flow of learning in one area and then applying that knowledge to other areas.

You can already see that starting with customer experience (CX), which I consider to be the initial use case of XM. Skills that have been built up in CX such as shifting from annual surveys to ongoing insights and uncovering opportunities to improve with journey mapping, are now also being applied to employee experience (EX).

That’s why it’s a great time to be an XM professional. The capabilities you develop in whatever experience area you start (CX, EX, PX, or BX), will be valuable across just about every component of every organization. It’s a set of skills that will become increasingly important and will, therefore, be increasingly in demand.

The bottom line: The world needs more XM and more XM professionals.

Your Organization Is An Experience Factory

Experience Management (XM) isn’t just important, it’s the primary function of every organization. Let me explain…

The XM Institute team spends a lot of time thinking about and researching XM. Which means we spend a lot of time trying to understand how human beings think, feel, and behave.

What’s become clear is that experience is not just an interesting topic, it’s a fundamental component of life. As a matter of fact, I believe that it’s one of three core human domains:

  • Body: How we maintain life.
  • Mind: How we think and feel.
  • Experience Processing: How we interact.

Experience is the one and only way that human beings interface with the world. We create, consume, and remember experiences… that’s it.

If you want to communicate with or influence someone, then it requires some experiences. If you want to teach or love someone, then it requires some experiences. If you want to learn or enjoy something, then it requires some experiences. If you want to sell or provide services to someone, then it requires some experiences.

Our lives are a sequence of experiences strung together and built on each other. These experiences can be as mundane as ordering paper towels off Amazon or as life changing as giving birth to your first child. And though experiences themselves only last a short time, they can have long-lasting consequences, shaping our behavior, attitudes, and understanding of the world.

If experience represents how human beings interact with the world, then it’s also the input and output of every employee, every customer, every partner, every supplier, and every person that touches an organization.

Therefore, all that an organization does is create experiences. It creates experiences for the employees who spend 8+ hours every day at the organization. It creates experiences for the customers who visit its website or use its products. It even creates experiences for shareholders who benefit or lose financially based on the organization’s performance.

When you get down to it, experiences are the sole output of a company. Which means whether an organization thrives or fails comes down to the experiences it delivers.

That’s why every organization (including yours) is an experience factory.

With this new context, focusing on XM is not an optional decision; it’s already the primary activity of every organization. Think about the experience chain where your organization continually creates experiences for employees whose actions then continually create product and brand experiences for the rest of the world.

While you don’t have a choice about engaging in XM, you do have a choice about being purposeful in those efforts. Too many organizations fail to focus on the experiences they deliver and leave this fundamental activity to chance.

To create a thriving experience factory, you need to build the capabilities to continuously learn about the needs and feelings of human beings across your ecosystem, propagate those insights to the people who can take action on them, and rapidly adapt your operations to adjust experiences based on those insights.

How do you create those capabilities? By mastering Six XM Competencies, and remembering that your organization is—at its core—an experience factory.

The Purpose Of A Corporation, Redefined

This week, almost 200 CEO’s agreed to an updated definition of “the purpose of a corporation.” The statement was made by the Business Roundtable, a very influential group chaired by Jamie Dimon, the CEO and chairman of JPMorgan Chase.

The new definition starts like this…

Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.

This new view on purpose pulls from the community of “conscious capitalism” which has been pushing for companies to recognize a broader responsibility to society, which requires considering all stakeholders (not just shareholders) in its decisions.

My take: I totally agree, it’s a long overdue shift in leadership thinking.

For many years, I’ve argued that management viewpoints have become woefully outdated.  As I wrote in a 2009 post “Fundamental Flaws In Management Education” which captures some ideas from an amazing paper written by Sumantra Ghoshal in 2005:

Management focus has been driven by economists like Milton Friedman who argued that corporate officials have only one social responsibility: making as much money as possible for their shareholders. But the value that a company creates comes from a combination of resources contributed by different constituencies. In most cases, the contribution of knowledge and skills of employees is more important to the success of the company than the contribution of capital by shareholders. And since most shareholders can sell their shares easier than employees can find new jobs, they are actually taking on less risk. So it does not make sense to maximize the returns on only one of those resources, especially the shareholders’ financial capital.

Even Jack Welch, the ex-CEO of GE who really championed the notion of shareholder value during the 1980s and 1990s has updated his thinking and said, “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy.”

To me, the purpose of an organization is very simple… “to create value.” All of the participants in an organization, including employees, investors, suppliers, and the communities in which organizations operate, are dedicating some of their scarce capacity to an organization. The output of those contributions should deliver value for all of those stakeholders beyond what they’d gain from dedicating those resources to other options.

The key to success is to redefine “value.” Instead of thinking of it as a stock price or monetary valuation, consider value to be a broader set of returns that come from enhancing the lives of all stakeholders.

The bottom line: Let’s define our purpose as adding value to people’s lives!

The State of CX Management, 2019

I’m particularly happy to announce a new research report, The State of CX Management, 2019. In the past, Temkin Group published similar research and we charged for the reports. One of the great things about now being a part of the XM Institute is that we can give it away for free.

To understand the current state of customer experience (CX) management, we surveyed 212 CX professionals around the world from companies with at least $500 million in annual revenues. Respondents at these large firms not only answered questions about their organizations’ CX efforts, they also completed our CX Competency & Maturity Assessment, which evaluates the Six Experience Management (XM) Competencies: Lead, Realize, Activate, Enlighten, Respond, and Disrupt.

Since you can easily download the report, I won’t provide a full summary. Instead, here are some of my favorite data points along with additional commentary:
  • The focus on CX is growing. Eighty-one percent of respondents plan to increase their focus on CX in the upcoming year, while only 4% plan a decrease. That represents significant momentum for CX.
  • CX and EX make sense together. Seventy-two percent of respondents felt that it was at least moderately important to improve employee experience (EX) while they are improving customer experience. That shouldn’t be a surprise. As I’ve said in the past, CX and EX are inextricably linked.
  • CX professionals are leading the way. About two-thirds of companies have a senior executive in charge of CX and a centralized CX team. And a third of those CX teams have 11 or more full-time employees. This makes me feel great. When we launched the Customer Experience Professional’s Association in 2010, our hope was to create a thriving CX profession… we’re there! Check out my comments about the future of the CX profession.
  • Digital channels need an XM infusion. When we asked respondents to evaluate the experiences they deliver across multiple channels, the two experiences they rated most highly were on the phone with an agent (59% said it was at least good) and in a store/branch (41% said it was at least good). Digital channels fell well behind. Companies not only need to better understand these experiences, but they should also learn from human interactions. Check out our report, Humanizing Digital Interactions (yes, that one’s also free).
  • Companies get in their own way. What challenges do companies typically encounter as they work to improve their CX? At the top of the list is other competing priorities, which was selected by 59% of respondents. This has been the top problem for years. It’s important that CX teams link their efforts to business results that the company cares about and the individual goals of the senior executives. It’s worth taking a look at another free report, Activating Executive Commitment.

Comparing CX Leaders With CX Laggards

The XM Institute has built an XM maturity model based on the Six XM Competencies. Respondents completed our assessment and only 6% of companies ended up in the top two (out of five) stages of maturity. We compared companies with higher levels of maturity (CX leaders) with those who had lower levels of maturity (CX laggards). When compared with CX laggards, we found that CX leaders:

  • Enjoy stronger financial results. Seventy-one percent of CX leaders report that their CX efforts had a positive impact their financial performance over the previous year, while only 38% of CX laggards report the same.
  • Have more senior executive support. Fifty-seven percent of CX leaders consider their most senior leader, such as their CEO, to be a “strong” or “very strong” champion of CX, compared with only 38% of CX laggards.
  • Have more coordinated CX programs. Sixty-four percent of CX leaders report having significant CX efforts underway across the company with significant coordination across these efforts, compared to only 26% of CX laggards.
  • Foster a more empathetic culture. The two groups differ across a number of cultural elements. We found the largest gap in agreement with the statement our organization demonstrates empathy for its customers; 80% of CX leaders agreed, while only 37% of CX laggards agreed.
  • Deliver better digital experiences. As you’d expect, CX leaders report delivering a higher percentage of “good” and “very good” experiences across every interaction channel we examined. Leaders and laggards diverge most when it comes to the experience they deliver in mobile apps, online self-service, and online chats.

As I’ve said, we’re excited to be publishing this research as part of the XM Institute. Make sure to download the free report, The State of CX Management, 2019.