Customers, Etc

By Ben McCormack

Is Your CX Strategic? Part 3 | Customers, Etc

#20・
160

subscribers

51

issues

Is Your CX Strategic? Part 3 | Customers, Etc
By Ben McCormack • Issue #20 • View online
Continuing our exploration of CX and strategy, we take a deeper look at strategic positioning and finally get to a short list of questions that can help you answer if your CX is strategic. Feel free to hit reply to continue the conversation.

The first two parts in this series (1, 2) focused on strategy first from the perspective of customer experience as a strategic differentiator, and next from the lens of activities fitting together to provide a cohesive customer experience. As a basis for our reflection, we’re looking at Michael Porter’s 1996 article, “What is Strategy?”, from Harvard Business Review.
Readers who are familiar with Porter’s work on strategy might have observed that while I’ve covered several areas related to his work, I’ve yet to cover several points central to his core thesis. I haven’t yet written about position, or trade-offs, or what’s required from leadership to make strategy effective within an organization. I intend to dive into those topics today, but before I do, it’s worth reflecting for a second about why we’re taking a circuitous approach to the topic of CX and strategy.
The readers of Harvard Business Review, I suspect, are CEOs, business school students, and perhaps senior executives within an organization. The readers of Customers, Etc., I suspect, are mostly individual contributors and middle managers within customer experience departments, or perhaps those interested in customer experience. There may be a handful of CEOs and senior leaders among my readers, but they’re not my core audience. If you’re reading this right now, it’s very likely that within the past or next 24 hours, you’re deep on the front lines of problems that are immediately affecting customers’ lives. 
So if we’re going to talk about strategy and CX together, we must, I believe, first approach it from the standpoint of where you’re going to encounter it from within the organization. If we start by talking about strategy from within the marketplace, that’s going to be so far removed from our day-to-day experience that for many of us—I’m counting myself in this number—our eyes will glaze over and we won’t have anything to latch on to.
This week, I’m going to start getting at the core theses of Porter’s article, but I’m going to stay at the surface. If this topic is relevant to your interests, I’d encourage you to spend the $8.95 and jump in with both feet. Hopefully this series has been a helpful primer for your continued learning.
Photo by Roman Arkhipov on Unsplash
Photo by Roman Arkhipov on Unsplash
Strategic Positions
Because Porter’s article was written in 1996, let’s go back to 1996 and imagine you need an oil change for your Honda Accord (remember, in 1996 people still drove cars to the office to get to work). 
One option is to make an appointment at your local Honda dealership. When you drop off your car, you’ll sit in an air-conditioned lobby with lots of nice magazines, free coffee, and germ-delivery devices intended for children called “toys”. The customer service is top notch. While you’re there, they’ll do a multi-point inspection, offer to change your brake pads with genuine Honda® parts, and remind you to come back for your transmission flush at 60,000 miles. And why not, sure, take a look at the new inventory of vehicles on the showroom floor. Check out that one with an optional 6-disc CD changer. oooOOOooo. 
The strategy behind this option is one of needs-based positioning because it’s serving broad needs of a few customers. Broad needs? The dealership will offer any auto service you need plus give you the convenient option of purchasing a new car. Only a few customers? Put it this way: you’re not going to drive to the Honda dealership to get the oil changed on your Ford Explorer. Just Hondas, thank you.
Another option is to head over to Jiffy Lube. It’s pretty much a get-in-and-get-out sort of place and relatively cheap. Oh, and they only do oil changes and a handful of other services. The customer service is fine, but if you need any complex maintenance, you’ll need to go somewhere else. And the lobby isn’t very accommodating, which is fine, because you’re not going to be there very long. 
This strategy behind this option is called variety-based positioning—not because it’s offering a variety of products!—because it’s serving few needs of many customers (it’s the customers that have variety, not the product). Few needs? Oil changes plus a few other services. Many customers? Doesn’t matter what car you drive, come on in.
Another option is to head to Mike’s Japanese Motorsports. Mike’s is like any traditional auto-shop, except that they only work on Japanese cars. They offer to “tune your driving machine to its optimal level of performance ” They still take about as long as the dealership and offer a full range of services. The parking lot looks like it belongs in the set of a movie about cars that are both fast and furious.  You suspect the quality is better and there’s no worry of being tempted to check out the new cars with their fancy (optional) 6-disc CD changers. Oh, and shops like Mike’s only really exist in big cities.
This strategy behind this position is called access-based positioning, which is serving the broad needs of many customers in a narrow market. Broad needs? Mike’s can do any kind of maintenance you want. Many customers? Sure thing, all Japanese cars, not just Hondas. Narrow market? Oh right, probably only those with “motorsports” needs, which is going to be restricted to bigger cities.
Why do we care about positioning?
“Having defined positioning, we can now begin to answer the question, ‘What is strategy?’ Strategy is the creation of a unique and valuable position, involving a different set of activities…. If the same set of activities were best to produce all varieties, meet all needs, and access all customers, companies could easily shift among them and operational effectiveness would determine performance.”
By choosing a strategic position, we’re consciously choosing not to be all things to all people.
Determining the Strategic Position of Your Company
Now, given what you’ve read above about strategic positioning, how would you describe the strategic position of your company and other competitors in the industry? Maybe you’re serving a few needs of many customers? Great. What if you start adding features so you can serve more needs? How many features do you need to add to shift into “broad needs” territory? And if you do so, does that mean you no longer have a strong strategic position? And of your many customers, are we saying that because “we seems to have a lot of customers” or because it represents a large share of the total addressable market (TAM)?. And if the TAM isn’t yet fully defined and perhaps is expanding, what is “many customers” now compared to the “many customers” in the future? If you fail to keep expanding, does that mean in the future you’ll be serving “few customers” if the market becomes large enough?
Let’s pause.
I’ll readily admit that this is where I get most confused, stuck in trying to pin down the language to describe the exact strategic position of a particular company. Take the contrived examples I shared above about companies that offer oil changes. Look at the current websites for your local Honda dealership and Jiffy Lube. You’ll probably notice Jiffy Lube offers the same set of services as the dealership. And the dealership now has an “Express Service” option. There are still differences between the two companies—and maybe they have indeed changed a lot since 1996—but identifying the strategic position isn’t as straightforward as it might seem on the surface.
If you work in customer experience and are trying to wrap your arms around strategy, I’m going to suggest that it’s okay if you’re not able to nail down your company’s exact strategic position. Spend some time thinking about it, sure, but don’t get bogged down if it’s not as clear cut as you originally thought. Instead, let’s move on to trade-offs, which will provide a place for us to naturally encounter strategic decision-making.
Trade-offs
We’re going to discuss trade-offs via a mental exercise. Think about the way customers experience pain when they interact with your company. Here are a few to get you started: there are bugs in the software, the handoff from sales to customer success is clunky, customers are struggling to get value from particular area of the product, customers need more help than your support team is able to deliver, customers have needs that your product doesn’t currently solve. You know your business better than I can hope to imagine in this newsletter, so hopefully one of those examples resonates and you can get deep in thinking about customer pain. 
Now try to think of solutions to address one of the pain points your customers have been experiencing. Whether you’re aware of it or not, you’re going to be making trade-offs as you think of solutions to your customers’ pain. For example, let’s think of needs that your product doesn’t currently solve, aka feature requests. You might find yourself thinking of specific requests from your very largest customers. Maybe they require dedicated product engineering resources to help the customer be successful with their specific needs. Or you might find yourself thinking about solutions that would serve a large number of current and future customers. As you think deeply about these approaches, you’ll very likely have to make a trade-off. In order to solve a particular customer pain point effectively, you’ll necessarily be saying no to other ways to solve the customer pain point. Continuing the example above, if you’re pulling engineers aside to work on bespoke solutions for individual customers (broad needs for fewer customers), you’re necessarily making a trade-off against working on scalable solutions that are available to all customers (few needs for many customers). You can’t do both at the same time and be effective.
Trade-offs are where we’re most likely to encounter strategy in customer experience. We’re going to be faced with options for activities and a limited set of resources, and we’re going to have to choose which option is best for our business. Put another way, we’re going to need to advocate for the activities that best fit together with the company’s strategic position.
There’s no perfect customer experience
Notice that I didn’t say “choose what’s best for our customers”. No matter what you choose, you’re choosing something that benefits customers (you’re addressing customer pain, remember?), but if you find yourself making a decision where you’re necessarily choosing to serve some customers better than others, that’s a good sign that you’re making a trade-off. And when you make trade-offs that align with your company’s strategic position, you’re choosing activities that fit together, which ultimately delivers a superior experience for the customers you intend to serve.
We need to set aside the notion that there’s a single “perfect” customer experience. There’s not. Sometimes in CX we feel a certain affinity for particular experiences. Apple makes great consumer devices. Disney has the best theme parks. Ritz Carlton has amazing customer service. All of these things are true, but the customer experience at these companies isn’t better because it fits some sort of platonic ideal of a perfect customer experience. Rather, the experience is good because the activities at these businesses fit together strategically to deliver a cohesive experience for the customer that consistently delivers on expectations.
For many of us in CX, it can be hard to say no to customers or to let them down. Especially if the business has acquired customers before the company’s strategic position was clearly defined, you’re almost guaranteed to be faced with the decision of having to disappoint certain customers that no longer fit your strategy. Perhaps your price will change, or your product will shift direction, or it won’t be able to add the features that certain customers were hoping for. While there are graceful ways to let these customers down, one thing is clear: it’s not strategic to try to continue being all things to all people, even in the name of customer experience. If you want to get to a place where you’re delivering the best possible experience for the customers you intend to serve, you’re going to have to make trade-offs.
Leadership and Strategy
My favorite section of Porter’s article is on the role of leadership, partially because it does a good job of describing strategic leadership, but more importantly (for me and, I suspect, most of my readers), it provides a foundation to engage leadership on questions about strategy.
Let’s start with this damning quote:
“In many companies, leadership has degenerated into orchestrating operational improvements and making deals.”
Oof. Moving on:
“But the leader’s role is broader and far more important. General management is more than the stewardship of individual functions. Its core is strategy: defining and communicating the company’s unique position, making trade-offs, and forging fit among activities. The leader must provide the discipline to decide which industry changes and customer needs the company will respond to, while avoiding organizational distractions and maintaining the company’s distinctiveness.”
It’s somewhat easy, when we’re reading a newsletter, to get our head in a strategy mindset, away from the day-to-day of customer problems. But what about when we’re back working directly with our teams and with customers? In those moments, strategy can get muddy, and it’s not always clear what decisions need to be made. Further, if you’re trying to maximize your operational effectiveness in your area of the organization, you may not be aware of trade-offs that need to be made in other areas of the business. That’s where we can expect to lean on leadership.
“Managers at lower levels lack the perspective and the confidence to maintain a strategy. There will be constant pressures to compromise, relax trade-offs, and emulate rivals. One of the leader’s jobs is to teach others in the organization about strategy—and to say no.”
If you work in customer experience and you’re trying to be more strategic, consider it your job to “lead up” by bringing examples of potential trade-offs or poorly fitting activities to leadership. Your company’s strategic position may not be clear, and these data points force the conversations that can make your company—and your CX—more strategic. And remember, the better your activities fit together, the better your CX.
Is your CX strategic?
We started this series by asking a simple question, “is your CX strategic?” We’ve explored many ways to answer this question, which I’ll boil down to the following bullet points:
  • Operational effectiveness is not strategy (part 1)
  • Do you have fit between activities? (part 2)
  • Does your CX align with your company’s strategic position? (part 3)
  • Is your CX a differentiator? (part 1)
We start with the realization that just being operationally effective in CX does not necessarily make us strategic. Doing a good job within your own silo is not enough .
Next, we can look at the activities adjacent to CX and ask how well the activities of CX fit with the rest of the business. If you don’t have good fit with other activities, it’s going to be hard to say that your CX is strategic. Even if you don’t have a clear picture of the full strategic position of the company, you can look at the activities you connect with and look at how well those activities fit together.
When we’re forced to make trade-offs, our strategic position will start to emerge, and we can ask how well CX aligns with the strategic position of the company. A clear strategic position gives us a framework for deciding what to do, and more importantly, what not to do, in order to align with the company’s strategy.
Lastly, if CX is a deciding factor in a customer’s purchasing decision, this means that our CX not only aligns with our company’s strategy, but has become a critical part of the strategy. Most businesses will not require CX to be strategic at this level, though it’s not surprising that the businesses with the best strategic alignment often have the strongest brands and deliver the best experience to customers.
To be continued
I hope you’ve enjoyed exploring the intersection of CX and strategy as much as I have. Next week, as a bonus in this series, we’re going to step out of the mindset of being inside the business and step into the shoes of the customer, challenging some of Porter’s thinking about who stands to benefit from improvements in operational effectiveness.
Etc.
I’ll get back to providing additional reading next week!
Did you enjoy this issue?
Ben McCormack

This newsletter has moved! Head to https://customersetc.substack.com/ to view the latest issues and subscribe.

In order to unsubscribe, click here.
If you were forwarded this newsletter and you like it, you can subscribe here.
Powered by Revue
Atlanta, GA