Forget Tech – Customer Experiences as a Primary Competitive Advantage

There is a need for senior management to shape up and realize that the true value of their products and services is not inherent in the actual product or services. Today highly skilled decision makers in business of all sizes, still argue that the value resides in the product or service delivered. A very important point and business value is thereby neglected. However, by changing perspective, you can benefit from your customers perceived value and experience of your offering – and the results will be displayed on your bottom line.

The concept of customer experience as a competitive advantage is still daunting to many senior corporate leaders. Even though the concept of customer experience in terms of distinct economic offering was introduced in 1998 (Pine & Gilmore). In B2C people would argue that experience is a growing factor behind success due to digitization and a dynamic and faster moving world. And yet the B2C people have a hard time to pinpoint their own customer experience offering. On the other hand, the B2B people typically argue against the importance of customer experience with loose (and mostly unfounded) arguments based upon rational capabilities possessed by purchasing/sourcing departments in terms of KPIs, quality score cards and competence profiles.

We would argue that none of the two hit the mark. Whether or not a business is targeting consumers or other business is completely irrelevant. Customer Experience is not a B2C or a B2B thing, it is a value thing. CAKE, a young and extraordinary Swedish company that develop and produce dirt bikes with an electric driveline (called KALK), is a brilliant example of how an offering can be designed around a different customer experience. Riding a KALK and interacting with it is a completely different experience from any other dirt bike on the market. KALK is good example of how a new segment and new customer behaviors can be leveraged through an experience approach i.e. riding a high performing dirt bike in near complete silence. Another example is the Danish company Universal Robots that has a full integration approach for their collaboration robots (Cobots). The focus of the offering is the accessibility and human integration, but perhaps even more so, the perception of the Cobots in a production cell and the overall production environment. The Cobots could almost be considered timid. The design and ease of use is more reminiscent of Apple Inc. products than of traditional industrial ones.

Customer values are not static, regardless of B2B or B2C, neither is the economy at large. The world and its economics of the world are liquid, they flow and adapt. The models and how companies create value through their value chains are in a constant flux. Customer value in the shape of activities follow the same pattern as products.  along the innovation of diffusion curve, starting in a birth stage only attractive to a few and should eventually end up as a commodity or standardized format. The typical value chain is not a chain but rather a network spanning several clusters of activities that need conducting in order to create customer values. It is beneficial to divide these clusters into 4 categories:

·      Commodities

·      Goods

·      Services

·      Experiences

Each of these categories typically consists of multiple activities generated by a corporation, spread across different levels of uniqueness/establishment ranging from the stage of birth all the way to perfectly standardized. Commodities typical holds the lowest value in a value chain/network, whereas services and experience holds the highest value. For the untrained eye customer experience might appear similar to services, however there are some distinguishing aspects. Services typically are characterized by customized benefits, which are quantifiable. Customer experience on the other hand is built around customer sensations i.e. feelings or perceptions. Perhaps the reader is saying [out loud] “Purchasing departments in multinational departments do not base their decisions on feelings”. But the thing is, they do – or at least to a substantial degree. What B2B buyers really care about are experiences Two categories stands out, 1) individual values (such as perception of career development and network expansion etc.) and 2) ease of doing business (such as responsiveness, reduced anxiety, transparency, cultural fit etc.). Whether B2B or B2C corporations understand the concept of customer experience or not, customers still typically want experiences and will demand even more.

There are 4 dimensions of control which can be exercised through the support of Innovation Law, IP based control, secrecy-based control, relationship-based control and capability-based control. A combination of these dimensions is typically needed in order to capture all aspects of customer experiences. It is however subjected to the underlying activities.

In order to build and leverage customer experiences in a business context they need to be controlled as any other competitive advantage. Control can be defined as ownership and/or possession over an asset in relation to a graspable/quantifiable time horizon.On a general level, approaching customer experiences in order to sustain them, is similar to any other competitive advantage:

1)      Experience – Identify the customer experience(s) that the organization is creating or desires to create

2)      Activities – Map the activities and their specific characteristics conducted by the organization in order to deliver the customer experiences

3)      Control – Establish what level of control we can exercise over the activities generating the specific customer experiences.

4)      Innovations Law – Implement the control.

How do you do you know the potential of your customers experience of your goods and services? How do you make sure that your efforts show on the bottom line? Start by confronting your own position and biases and acknowledge that innovations occur also within all areas of your entity especially in how your services are perceived by your customers. Customer experience resides in all aspects of innovation. Remember that innovations occur in what customers we choose choice (segmentation), how we organize, where we decide to reside in the value chain, with whom we collaborate in networks and how we use our brands. Innovating in customer experience is just as essential for innovations as products, platforms and systems.

IPQ is a consultancy firm specializing in Innovation law and helps our client’s build and sustain control over their competitive advantages. If you do wish to receive more information of our offerings, or in particular how customer experiences can be harnessed and controlled.

Thomas Randes and Erik Oskarsson 

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