Marketing & Sales Practice

The three building blocks of

successful customer-experience
transformations
Meeting new consumer needs and expectations is critical to post-COVID-19
business success. Here’s a proven formula for upgrading customer experience.

by Victoria Bough, Ralph Breuer, Nicolas Maechler, and Kelly Ungerman

© Getty Images

October 2020
 Leading a customer-experience (CX) The good news is that there is now a proven
transformation can generate a lot of anxiety. Many formula for executing customer-experience
leaders hesitate to even start because they are transformations. It comprises specific steps
overwhelmed by the many challenges of driving across three core building blocks: a clearly
change across virtually every silo in the organization. defined aspiration, an agile transformation
But this hesitation creates real risks for the approach, and a thoughtful deployment of new
business. The recent shifts in consumer behaviors capabilities, particularly advanced analytics
and expectations brought about by COVID-19 are (exhibit). By combining all three building blocks,
forcing companies to change how they connect with companies can create a competitive advantage
and serve customers. Those that do not adjust to in their industry. In ten years of helping more than
the next normal will quickly be left behind. History 900 companies design and execute enterprise-
clearly shows the value of investing in customer wide customer-experience programs, we have
experience during a downturn. In the last economic seen this approach deliver powerful results: 15
recession, companies that prioritized customer to 20 percent increases in sales conversion
experience realized three times the shareholder rates, 20 to 50 percent declines in service costs,
returns compared to the companies that did not. and 10 to 20 percent improvement in customer
The time for action is now. satisfaction.

Exhibit
The threebuilding
The three building blocks
blocks of customer-experience
of customer-experience transformations.
transformations.

Build aspiration and purpose

Develop customer-centric vision and aspiration
Establish link to value
Translate into roadmap

Transform the business

Discover customer needs
Design solutions
Enable the transformation Deliver impact
Transform mind-sets and build capabilities Journeys
Step up technology, data, and analytics Products
Establish cross-functional governance Services
and agile operating model Business models
Deploy measurement and performance-
management system

2 The three building blocks of successful customer-experience transformations

Build aspiration and purpose development of the required capabilities to create
The first step in a successful customer-experience a road map that identifies critical activities quarter-
transformation is to align on a crisp definition of by-quarter. These companies typically plan their
the type of experience you want to deliver. When investments in 24-month increments with frequent
companies set out to define their customer-experience stage-gates to validate that the expected financial
aspiration, they often fall into one or both of two traps: impact has been realized.
either the aspiration is generic and does not align
tightly to the company’s purpose, or it’s unclear how
the aspiration will create value that can be measured Transform the business
and tracked. Falling into either of these two traps leads While executives often successfully develop
to CX-transformation programs that lack clarity and comprehensive CX-transformation road maps, many
coherence. fall into the trap of implementing business-as-usual
programs to execute the needed change. The most
A good CX aspiration delivers on company purpose common mistake is parceling out various elements
and brand promise. In alignment with their company of the program to different functions. That leads to
missions, Nike seeks to deliver inspirational communication challenges, ownership issues, and
experiences, Starbucks looks to provide experiences accountability problems that sink even the most
that nurture, and BMW seeks to offer the ultimate straightforward transformation aspirations.
driving experience. Costco doesn't try to replicate the
experience its customers have at high-end retailers Customer-experience initiatives at the companies
but instead provides a no-frills in-store experience that that most successfully undertake them look
reflects its low-cost brand promise. and feel completely different. These companies
create agile, cross-functional teams that have
Companies then translate aspirations into expected true ownership of their projects, deep technology
business value by defining the specific changes expertise, and a culture of design thinking and
in customer behavior they expect to see. If a bank continuous improvement. Prior to the pandemic,
were looking to deepen customer relationships, for these teams could be found problem-solving
example, this focus could be reflected in a decision to around white boards in an open floorplan with glass
measure success by the number of customers who walls, background music, and a continuous hum
choose the bank for all their core banking needs. This of activity. One innovative bank adopted a “culture
focus on customer behavior completely changes the of red shoes” to illustrate its innovation speed and
conversation in the C-suite. Leaders start talking about agility, and the CEO would lose his dress shoes in
customers, not about financials. They prioritize the favor of red sneakers when he visited the design
experiences that will lead to the expected customer labs. In the current environment, these teams have
behavior even as customer needs evolve over time. seamlessly transitioned to collaboration platforms
to drive continuous cross-functional innovation.
Many of the best companies use quantitative research For companies truly committed to a CX culture,
and statistical analysis to ground their decisions in these aren’t superficial ornamentations. They
facts about what customers value so they can prioritize reflect a significant investment in recruiting
the experiences that matter most. The most advanced and nurturing agile teams with deep expertise
companies use advanced analytics to run simulations in experience design, developing cutting-edge
of the expected impact of their potential investments omnichannel platforms and technology, and
so they can build compelling business cases for them. reimagining the experiences, products, and
services that best deliver on the brand promise.
Once they have prioritized the experiences with the
greatest potential impact on customer behavior, CX To define customer personas and understand
leaders identify the internal processes and technology customer needs, the cross-functional agile teams
capabilities they need to substantially reimagine them. leverage design thinking and advanced analytics
They consolidate the prioritized experiences and the toolkits to carry out rapid-fire quantitative and

The three building blocks of successful customer-experience transformations 3

 ethnographic research. They conduct cocreation the development of new capabilities. Each
workshops to develop innovative concepts and learning journey is tailored to a specific role
prototypes that address pain points. They use within the organization. For example, front-
advanced analytics to identify and prioritize line employees receive practical tips on how
meaningful performance metrics such as reduced to put themselves in their customers’ shoes
wait time to quantify the actual financial impact of and demonstrate empathy when engaging
changes in customer behavior as reflected, perhaps, with customers. CX managers and innovation
in increased contract renewals, and to track progress. teams build skills around redesigning customer
Once they have developed new products and experiences and mobilizing cross-functional
services, these agile teams make sure they are scaled teams. Executives receive tips on how to
across the business, integrated into the technology support, accelerate, and celebrate customer-
platform, and continuously tested and refined across centricity within the organization—for example,
segments and geographies. by integrating design thinking into the early
stages of the strategic planning process.
These design-driven actions are not nice-to-have
items. In our 2018 research on the business value of — Integrated technology stack. In order to
design, we found that top-performing user-centric deliver exceptional omnichannel customer
companies outpace their peers in terms of revenue experiences, companies need a technology
by nearly two to one. Critically, they also rapidly stack that spans the business. It often takes
iterate as they design new experiences, ensuring they the form of a digital platform built around
prototype and test them with consumers to increase microservices and APIs to quickly and flexibly
their chances of success. offer a variety of services to customers, an
omnichannel contact-center platform with
Another critical element of all successful CX call recognition, chat, video chat, and email
transformation programs is a central team that management, and a single system that
combines ideation tools and methods, continuously integrates the platforms with each other.
conducts both generative and evaluative customer For example, a health insurer that wanted to
research, and brings together cross-functional redesign its customer-onboarding journey
experts with specific expertise, such as scrum pursued two parallel workstreams: one that
masters, omnichannel technology architects, reimagined and simplified the entire enrollment
designers, and researchers. This central team process and another that rebuilt the underlying
ensures that the culture of technology-enabled technology. The two teams, working together,
innovation becomes a distinctive competitive asset were able to modernize the omnichannel
that is sustained over time and across all geographies. platform and technology, which enabled them
to transform what had been a set of disparate,
paper-based, channel-specific processes into
Enable transformations a seamless, digitally enabled omnichannel
Leaders who have successfully implemented new experience. In just six months, this company
experiences for their customers sustain the changes tripled online applications, realized 90 percent
by building new capabilities. There are four that we straight-through processing, and reduced
find are most critical for success: back-office work by 80 percent and front-
office work by 70 percent.
— Customer-centric mindsets. From the C-suite
to the front lines, employees must feel confident — Agile operating model and governance
that they have the necessary skills and tools structure. Innovation teams are only effective
to deliver the best possible experience for if they have the autonomy to make decisions.
customers. Leading companies develop This means establishing agile decision-making
academies that combine digital courses, live processes and assigning formal decision rights
workshops, and ongoing nudges to support to leaders on the team. These new processes

4 The three building blocks of successful customer-experience transformations

 and decision rights often require some internal This included reshaping both the go-to-market
negotiations but yield extraordinary results. approach and operating model to regain a
For example, a B2B financial services firm that sustainable leadership position in their market.
committed to a new agile operating model raised
raised their customer satisfaction score from less To define its aspirations and the value it wanted
than 20 to more than 50 in two years by increasing from the CX transformation, the team quickly
on-time responses to customer requests by formulated clear business objectives. By
90 percent, reducing the request backlog by quantifying and prioritizing the individual CX “value
40 percent, and eliminating the need for 600 pools” in their B2C business—acquisition, service,
employee-hours each month. retention, and process digitization—it developed
a transformation road map for double-digit
— Performance-management system built on improvement in earnings before interest and taxes
predictive analytics and machine learning. (EBIT) over the course of three years.
Leading organizations are now using predictive
analytics, machine learning, and big data to For the second building block, transforming the
overcome the well-known limitations of customer business, the leadership team created a cross-
feedback, which often provides an incomplete and functional team composed of CX “ambassadors”
inaccurate view of actual customer experiences. from ten countries and a core team of designers
At minimum, companies need management and CX experts. They convened for two days
systems with sophisticated feedback loops that a week in a central location and operated as
teach employees which behaviors yield the best a “CX factory” to consolidate customer insights,
results and guide innovation teams on where to harmonize customer-journey definitions, and
focus their efforts. The best tools allow companies translate value pools and customer pain points
to accurately predict the current satisfaction into tangible blueprints and prototypes for optimal
and future spend of each of its customers based customer journeys. Their analysis showed that
on their experiences. One major travel company most high-impact CX levers were applicable
built a capability that scored the experience of across all countries despite differences in
every single customer based on data such as individual markets. The CX factory team created
location, loyalty member history, and recent trip a fully functional microsite for home movers,
experiences. It then used machine learning to took it live in the first pilot country in four weeks,
predict customer satisfaction for each customer and then scaled it to other countries based on
based on their individual experience. This new its demonstrated financial impact: increased
capability allowed the company to dramatically customer retention and reduced servicing costs as
improve its follow-up with customers immediately fewer customers called in for support during their
after poor service experiences, increasing move.
satisfaction by 800 percent for the most
dissatisfied customers and reducing churn intent These changes were only made possible by
by 59 percent. transforming the underlying capabilities and
establishing critical enablers—the third building
block. The organization embraced agile principles
Bringing it all together not only in the CX factory but also across each
The greatest sustained impact in customer experience geographical business unit—rapidly iterating
comes from bringing together the three building and generating ideas, prototyping, and adapting
blocks. Here’s how one European energy provider minimum viable products (MVPs) based on
did just that. Faced with increasing customer customer feedback. To scale these capabilities,
expectations, fierce competitive dynamics, evolving the organization conducted virtual training
market and regulatory pressures, and internal sessions around key skills, such as agile, design
complexity, its leadership team responded with a thinking, and problem solving. It codified best
comprehensive customer-experience transformation. practices in a virtual library for use by any team

The three building blocks of successful customer-experience transformations 5

 member in any country. Finally, it showcased what success looks like by launching one
the dramatic impact of this new way of working or more “lighthouse” projects that show
through videos, communications, and tools shared concrete results with minimal investment.
throughout the organization. Redesigned journeys can often be prioritized,
designed, and prototyped in six to twelve
The redesigned journeys reduced the energy weeks and create excitement and support for
provider’s personal-contact costs by more than 20 subsequent investments. The first lighthouse
percent and customer churn by almost 15 percent, can then quickly be scaled up across multiple
and significantly increased both customer and experiences until it becomes the standard
employee satisfaction. In fact, one-third of the full model.
impact potential from the three-year program was
realized within the first 12 months. — Build an integrated customer insights and
action engine. The most forward-looking
companies have created integrated data
How to get started lakes and used advanced analytics and
Companies that aspire to become more customer- machine learning to improve the experiences
centric can use one of the following quick-start of every customer. An analytics engine that
methods: enables leadership to identify the customer
interventions and investment strategies with
— Set a bold aspiration that reflects the brand the greatest impact can be deployed in three
promise. A series of three to four executive to four months.
workshops is often all it takes to align around
a customer-centric aspiration and the
associated financial performance metrics.
Many companies are able to look to internal and Customer experience is a competitive advantage
external benchmarks in order to set a target and in the new normal. Only by committing to the
establish a timeline for achieving it. three building blocks of a CX transformation can
companies expect to emerge from the crisis with a
— Create momentum with a ‘lighthouse’ sustainable advantage over their competitors.
innovation team. Many companies choose
to give customers and employees a sense of

Victoria Bough is a partner in McKinsey’s Denver office, Ralph Breuer is a partner in the Cologne office,
Nicolas Maechler is a senior partner in the Paris office, and Kelly Ungerman is a senior partner in the
Dallas office.

The authors wish to thank Melissa Dalrymple, Oliver Ehrlich, Will Enger, Harald Fanderl, Alex Lapides,
Pablo Leon, Divya Mittagunta, Jesus Moreno, Friederike Schultz, Rens van den Broek, Maxence
Vancauwenberghe, and Hai Ye for their contributions to this article.

Copyright © 2020 McKinsey & Company. All rights reserved.

6 The three building blocks of successful customer-experience transformations