August 29, 2009
By Christopher Musico, Contributor, CRM magazine

Customer Intimacy and Operational Excellence Drive Innovation

For a look at destinationCRM's complete coverage of CRM Evolution '09, click here.

For all the live-twittering, follow @CRMe09 on Twitter, or see all the tweets under the hashtag #CRMe09.

NEW YORK — One phrase increasingly heard in many CRM circles today is "customer experience" — how to define it, start doing it, improve it, etc. According to one session presenter here on the final day of CRM Evolution 2009, however, while customer experience may be valuable, it's not the only point of differentiation that businesses have at their disposal.

"Customer experience is important, but there must be a balance," said Denis Pombriant, founder and principal analyst of CRM consultancy Beagle Research Group. "We could take ‘customer experience' too far in our day-to-day view of CRM."

Refining a point he first outlined in a column for CRM magazine a year ago, Pombriant went on to praise the concept of evolution, describing it as an algorithm that can be reduced to three sequential processes:

differentiate;
select; and
amplify.

"Differentiation, in business or in life, happens naturally in any environment where a lot of organizations are competing," he said. "The market takes care of the selection process, and amplification happens in business through market share and profits."

Pombriant identified two categories that, in the way companies look at CRM, can provide avenues for innovation and evolution: customer intimacy and operational excellence. And successful innovation, he noted, relies on the flexibility and adaptability of evolution: "If you innovate around one idea too long, you get in trouble."

Pombriant also outlined four strategies for customer intimacy:

customer experience;
product-line extension;
product enhancement; and
marketing.

While Pombriant reiterated the fact that he feels the business world is a bit "top heavy" in terms of customer experience, he also pointed out that the popular use of the phrase today no longer matches its original definition.

"Too often, we relegate it to the simple definition of a customer's literal experience with a product," he said. "When it was first brought up by Joe Pine and Jim Gilmore [authors of The Experience Economy] in 1998, the idea wasn't literal. It was about turning products and services into experiences that differentiated them -- and you -- in the marketplace." [Editors' Note: Pombriant wrote at length about Pine and Gilmore in his March 2008 column for CRM magazine.]

Pombriant told the audience that the origins of customer experience -- and, surprisingly, hospitality law -- have their roots in an unexpected place: the Magna Carta. The document, written in 1215 and thought by most historians as both the first example of constitutional government and the starting point for common law in the English-speaking world, also had strict rules protecting travelers, who had been frequent targets of theft by innkeepers.

"This is the first example of customer experience being talked about," Pombriant said. "How this needs to be safe for the traveler and her property. As the law has evolved, the doctrine survived and still protects.... Most things in common law today are referred to as ordinary care." [Editors' Note: Pombriant expands on the history of his research in a blogpost published this week on his Beagle Research Group blog.]

Pombriant knows, of course, that no hotel -- or any other enterprise -- can compete today on just ordinary care. "My point is, we've moved on," he said. "There are different ways that we can diversify -- through product-line extension, enhancement, and marketing -- in addition to the customer experience."

There is also, he said, an operational side to innovation that must be considered. He listed the four strategies in operational excellence:

value engineering;
integration;
process; and
migration.

Here, Pombriant said, is where CRM and social media have critical roles. The key, though, is that customer input must be seriously sought after, collected, and acted upon. "Whether we want to innovate through intimacy or operations, we need to know what customers think," he stressed. "Especially in the social media age...this is mandatory."

Before companies read that and immediately decide to jump into the world of social media, Pombriant urged attendees to take a step back. "You have to do work to reach the innovation point of doing social media," he said. "The first instinct is to get a blog, Twitter account, or Facebook...but then you don't know what to write about."

The risk is that a company might lose out on the power of community, which is used to aggregate customer ideas and input. [Editors' Note: What Pombriant calls "The Customer Module" is another concept he addressed in the pages of CRM, in June 2008, as well as at last year's CRM conference.] Pombriant suggested that companies begin grappling with customer ideas through communities (both feedback and discovery), user groups, polls, and surveys. "Once you know what customers are thinking about, you will have no trouble filling out what social media you want to use in a way that makes sense," he said.

CRM Evolution '09 concluded earlier this week in New York. Full coverage can be found here.

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine. You may leave a public comment regarding this article by clicking on "Comments" at the top; to contact the editors, please email editor@destinationCRM.com.