Transforming the customer experience (CX) isn’t about playing hard and fast. To succeed in the long game, companies need to manage it systematically. Doing it well is a game changer, which is why more than 70 percent of senior executives rank CX as a top priority for the coming years. Indeed, companies that effectively organize and manage customer experience can realize a 20 percent improvement in customer satisfaction, a 15 percent increase in sales conversion, a 30 percent lower cost-to-serve, and a 30 percent increase in employee engagement.

In working with hundreds of clients across industries and geographies, we have found that companies that lead successful CX transformations take action in three areas: building aspiration and purpose, transforming the business, and enabling the transformation. One of the most crucial enablers for an effective CX transformation—and one of the biggest roadblocks to greater CX impact if not addressed properly—is integrating customer experience into the organization and operating model.

Of course, organizing the business and operating model around customer experience is easier said than done, and there’s no one-size-fits-all way to go about it. But by establishing clear design principles for a customer-centric organization, creating a CX-organization blueprint, and redefining the operating model with customer journeys at its core, companies can get on track to unlock the full value potential of superior customer experience.

Common pitfalls to avoid

On the journey toward CX excellence, there are pitfalls that prevent many customer-centric organizational transformations from succeeding as planned. Here’s how to avoid the most common:

• Define your ambition clearly: Structure follows strategy. CX leaders must first clearly define their North Star, link it to actionable initiatives and targets, align all stakeholders behind it, and then translate it into implications for the organization and its operating model. Failure to create a strategy without clearly defined goals could make it difficult or even impossible to seamlessly tackle customer experience improvements across functions and journeys.
• Focus on new ways of working, not on ‘boxes and lines’: A customer-centric organization has agile cross-functional collaboration in its DNA. Designing these cross-functional processes, and training people for new ways of working, is more important than reshaping formal reporting lines.
• Establish decision-making criteria: Reshaping the CX organization and its operating model to be customer centric involves making trade-offs and choosing among countless potential courses of action. CX leaders need to decide on clear principles for the organizational redesign, based on criteria that are in line with their customer experience ambitions.
• Take a holistic approach: Trying to solve only selective organizational issues, such as who owns the website or redesigns journeys, can result in only incremental improvements instead of a comprehensive redesign of the organization for greater customer-centricity. Due to its broad implications, CX is by nature a top-management task, and it requires an operating model that defines CX roles and responsibilities up to the board level.
• Minimize functional silos: Customer experience is inherently cross-functional and top down. Keeping functional silos as dominant decision-making units may lead to the optimization of individual processes and customer touchpoints but not of the end-to-end customer journey. The risk is making ineffective improvements that don’t fully solve underlying customer pain points.

Aspire, architect, act: three steps to making CX core to the organization and its operating model

This three-step plan can help companies effectively integrate customer experience in the commercial organization and operating model: by formulating clear design principles and capabilities in line with CX ambitions (aspire), translating these design principles into an actionable CX blueprint (architect), and bringing the redesigned organization to life through systematic change management and an effective day-to-day operating model (act).

Aspire: establish clear design principles

Let’s assume a company has successfully formulated a concise CX vision and ambition—for example, to be an industry leader across customer satisfaction, reliability, and convenience. Translating this foundation into implications for the organization and operating model starts with a systematic assessment of the current CX maturity.

Architect: translate the design principles into the organization’s CX blueprint

Once a clear CX ambition and actionable design principles are in place, leaders are equipped to design the CX target organization and operating model in a way that will allow the company to achieve its unique goals.

Act: bring the CX organization to life through the operating model

Once the guardrails for a customer-centric organization are set, companies can bring the CX transformation to life through systematic change management and an effective day-to-day operating model.

Managing innovation in a customer-centric way

No matter how hard companies try, their approaches to innovation often don’t grow the top line in the sustained, profitable way investors expect. For many companies, there’s a huge difference between what’s in their business plans and the market’s expectations for growth (as reflected in firms’ share prices, market capitalizations, and P/E ratios). This growth gap, as we call it, springs from the fact that companies are pouring money into their insular R&D labs instead of working to understand what the customer wants and then using that understanding to drive innovation. More often than not, the traditional approach thrills R&D teams, but not customers or investors. As a result, even companies that spend the most on R&D remain starved for both customer innovation and market-capitalization growth.

Having collectively worked with senior executives of hundreds of companies all over the world and in all kinds of industries—from heavy manufacturing to abstract research, from retailing to financial services—we have developed a process for making innovation deliver results that meet or exceed market expectations. We call this process customer-centric innovation. CCI is not just about top-line growth; it’s about sustained and profitable top-line growth, which in turn raises market capitalization.

At the heart of CCI is a rigorous customer R&D process that helps companies continually improve their understanding of who their customers are and what they need. Customer R&D focuses on developing better ways of communicating value propositions and delivering complete, satisfying experiences to real customers. Since so much of the learning about customers and the experimentation with different segmentations, value propositions, and delivery mechanisms involve those regularly dealing with customers, it is essential for frontline employees to be at the center of the CCI process. Simply put, customer R&D propels the innovation effort away from headquarters and the traditional R&D lab out to those closest to the customer.

Companies that use the disciplined customer R&D process we describe—such as Best Buy, Royal Bank of Canada, and Seven-Eleven Japan—accrue three linked strategic benefits. First, they gain knowledge that is often opaque to competitors, effectively allowing them to block disruptive threats. The more customer-centric you are, the longer it takes your competitors to figure out your game, and the more times you will probably win. Second, employees closest to the customer become intensely engaged through their central role in CCI; as a result, employee loyalty increases, turnover declines, and the customer goes away thrilled. Third, the process of deeply learning about and then addressing customers’ needs leads to the kind of innovation that closes the growth gap.

CCI need not require a huge monetary investment; rather, it may simply require a redirection of funds from traditional product R&D into customer R&D. It also demands an investment of time and patience. Learning to do CCI well is not something that happens overnight. If your company wants a quick fix or an easy solution, it may play right into the hands of a hungrier and perhaps more patient competitor. Indeed, if your competitor is willing to work harder at CCI than you are, you will likely fail. CCI also demands sustained and focused effort and—perhaps hardest of all—a willingness to break through existing mind-sets. (See the sidebar “How to Kill Innovation.”) But if you do the hard work, your new offerings will result in a virtuous cycle of learning, sustained profitability, and growth in your market cap.

How to Kill Innovation

Customer centricity is not just a slogan. It’s a prerequisite for sustainable profitable growth. But it’s the rare organization that understands what it means to be customer centric, and true customer-centric innovation includes two additional efforts that both frame and go beyond the customer R&D endeavors