forrester survey reveals rising customer expectations & improving efficiency drive firms’...

A Forrester Consulting

Thought Leadership Paper

Commissioned By HP

October 2014

Rising Customer

Expectations And

Improving Efficiency

Drive Firms’

Transformation Efforts

Table Of Contents

Executive Summary ........................................................................................... 1

Firms Are Forced To Make Significant Changes To Meet Customers’

Expectations ....................................................................................................... 2

CEO Leadership Breaks Down The Organizational Silos ............................. 2

Customer Journey Mapping Eliminates Channel Silos And Justifies

New Technology Spending ............................................................................... 4

Significant Investment On New And Upgraded Technology Platforms

And Applications Improves The Experience .................................................. 5

The Creation Of Digital Teams Drives Reskilling ........................................... 8

The Transformation Sets The Stage For Creating An Agile Execution

Culture Across Business And Technology .................................................... 9

Transformation Dos and Don’ts ..................................................................... 11

Key Transformation Innovation Recommendations ................................... 11

Appendix A: Methodology .............................................................................. 12

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1

Executive Summary

Customers are changing their behavior faster than

companies can evolve their business models, operational

processes, and technology platforms. As a result, firms are

changing their organizational structures and technology

platforms to break down the silos that hinder delivering

compelling customer experience.

In May of 2014, HP commissioned Forrester Consulting to

conduct research on digital transformation efforts across a

mix of industries. The research delved into the business

drivers, process changes, technology implications, and skills

retraining that underpin firms’ re-engineering initiatives.

Forrester conducted 11 in-depth phone and face-to-face

interviews with CEOs, COOs, CIOs, and transformation

leaders across North America, Europe, and Asia from June

2014 through September 2014. Even though their

transformations are multiyear projects, these business

leaders are already seeing dramatic increases in Net

Promoter scores for customer satisfaction, the ability to

compete on service not price, and more engaged

employees with lower attrition.

KEY FINDINGS

As firms undertook their transformation journeys, Forrester’s

research uncovered a number of critical success factors:

› CEO leadership breaks down the organizational silos.

Senior management’s buy-in is critical to creating a

culture of serving the customer.

› Customer journey mapping (CJM) eliminates channel

silos and justifies new technology spending. Over

50% of the interviewees leveraged customer journey

maps to articulate the needs/requirements of their

transformation.

› Significant investment in new and upgraded

technology platforms and applications improves the

experience. Rebuilding legacy systems as well as

Internet platforms is at the center of firms’ re-engineering.

› The creation of digital teams drives reskilling.

Companies are making major changes to their skill and

process portfolio as part of the transformation.

› The transformation sets the stage for creating an

Agile execution culture across business and

technology. Companies’ efforts are ongoing as they

develop a more adaptive sense-and-respond culture.

“We needed to meet our end customers’

expectations that had been set by Internet-

based ridesharing services for real-time

information and self service via a mobile

app.”

— CEO, North American transportation company

“We had to build a new broker/middleware

platform that sits between our tablet apps

that drivers use and our legacy systems

with the data.”

— VP of application development, European

transportation company

“The CEO’s direct reports are part of our

customer experience council. He wants to

see our value proposition in terms of

customer journeys. Only by getting to that

level of detail can you provide a

differentiated experience.”

— CIO, Asian bank

“The CEO and CFO do not want to be asset-

heavy losers where an agile, digital startup

steals the customer away.”

— CIO, European logistics company

2

Firms Are Forced To Make Significant Changes To Meet Customers’ Expectations

From June 2014 to September 2014, Forrester conducted

11 in-depth interviews with CEOs, CIOs, and digital

transformation leaders from financial services, hospitality,

logistics, manufacturing, retail, telecom, and transportation

companies in North America, Europe, and Asia.

Respondents faced a number of challenges that forced

them to undertake a major redesign and renovation of their

businesses. But at their core, these companies were

grappling with how to meet rising customer expectations

and grow the business.

“We needed to meet our end customers’

expectations that had been set by the Internet-

based taxi startups delivering real-time

updates and self service via a mobile app. At

the same time, we needed to reduce the volume

of calls to our more expensive call center.”


To truly become customer-centric, interviewees were using

tools like customer journey mapping — “a visual

representation of the series of interactions between a

customer and a company that occur as the customer

pursues a specific goal” — to change their processes,

customer loyalty systems, technology platforms, skills

portfolio, and coordination with their business partners.

One of the more interesting benefits to come out of the

customer-centric investments was lower operational costs

(see Figure 1). By breaking down the organizational silos

and simplifying their processes from a customer-first

perspective, firms saw greater efficiencies from the

customers doing their own ordering, lower call center

staffing requirements, and streamlined decision making.

During the interviews, we uncovered five critical factors that

were shared across the majority of respondents: 1) CEO

leadership breaks down the organizational silos; 2)

customer journey mapping eliminates the channel silos and

justified new technology spending; 3) significant investment

on new and upgraded technology platforms and

applications improves the experience; 4) the creation of

digital teams drives reskilling; and 5) the transformation sets

the stage for creating an Agile execution culture across

business and technology.

“We’re moving to a very customer-centric

approach — what can we do to make this as

simple as possible for our customers? We want

to add value to what they’re doing and to

encourage them to buy groceries.”

— VP of applications, North American retailer

CEO Leadership Breaks Down The Organizational Silos

In the majority of cases, the CEO or at least the CIO was

driving the vision and the transformation efforts within firms.

The research shows that senior management’s involvement

was critical in two key areas:

FIGURE 1

Better Customer Experience Drives Improved Operational Efficiency

Source: Forrester Research, Inc.

Improved

operational

efficiency

Better

customer

experience

3

“The CEO had the vision about being the leader

in customer service. He oversaw and drove the

original strategy definition and then the focus

on customer experience. Now, 80% of the

executive team’s conversations center on

customer journeys, and we have 100 projects in

progress to improve it. ”

— CIO, Asian bank

› Creating the business/customer vision at the center

of the transformations. To ground and focus the re-

engineering efforts, the CEO plays a crucial role in

defining and communicating the goal of the projects.

Senior leadership is also critical in holding the business

accountable to make the required culture, process, and

technology changes (see Table 1). Forrester found that

firms’ transformations centered on becoming more

customer-experience-focused and putting the client at the

center of the organization.

TABLE 1

North American Transportation Company

Drivers of the

transformation

This transportation company needed to meet travelers’ needs for real-time status updates and

self-service that were being set by an Internet-based taxi/limo startup. At the same time, it needed

the empowered traveler to use the mobile app to offload calls from its expensive call center.

Scope of the

transformation

The transformation involves all customer-facing systems, dispatch, and driver communications, as

well as back-office processes. It’s an end-to-end commitment to streamline the customers’

experience.

Changes in skills

portfolio

The firm had to master Agile development processes, customer experience thinking and design,

API management, and a new security model based on protecting data rather than networks.

Technology

implications

To accomplish this, the firm had to re-architect its closed back-end systems and security model to

integrate its core reservation system with third-party travel sites and provide better tools for

different customer segments (personas).

Innovative

transformation

practices

It started with a focus on the overall flow of information between the company and different

customer segments (personas) and not on specific devices or applications. This led to a clearer

understanding of how travelers use information and the best ways to improve their travel service.

Benefits and

outcomes

Travelers feel more in control. The firm now competes with a traveler’s tool to help enterprises

better manage travel. The firm also now competes with the analytics tools that it provides to help

customers better manage their overall travel and not just the price of the ride to airport.

Next steps

The firm plans to integrate systems with even more third-party travel sites and supporting systems

(hotels, airlines, etc.). It will improve travel analytics tools for corporate clients so it can better

optimize overall costs (rather than compete on reduced fees).


4

› Breaking down the organizational silos impeding

great customer experience (CX). The focus on

improving customer experience often uncovers the critical

need to break down the business structures that impede

serving the customer. CIOs are creating cross-function

teams within IT as part of those transformations to make

technology management more responsive and agile. In

parallel, CEOs are breaking down the channel silos and

other parochial organizational thinking to simplify the

customer journey.

“The transformation started as a discussion

with me and the new CEO. Initially, it was

about streamlining and simplifying IT. But

very quickly the focus shifted to breaking down

the organizational product silos so we could

build and deliver more connected digital

products and services.”

— CEO, healthcare products division, European

manufacturer

Customer Journey Mapping Eliminates Channel Silos And Justifies New Technology Spending

One of the critical tools in respondents’ digital

transformation was customer journey mapping.

“We invested in a new CX team. Previously,

mapping the customer journey for us was just

tracking the internal sales or lead generation

process. When you’re mapping the customer’s

actual journey, it’s about understanding

everything that touches that journey. We

invested in a team and gave them responsibility

on customer experience.”

— Executive vice president, platform services, North

American business services company

The interviewees were using CJM as the cornerstone of the

transformation in three fundamental ways:

› Creating outside-in customer perspective to make

vision actionable. The use of this process tool became a

critical way to illuminate the bottlenecks and frustrations

of customers as they tried to execute tasks like ordering

or placing a customer service request. Firms where using

customer interviews captured on video to cut through the

politics and deliver the bad news to senior management.

› Understanding of how siloed organizations block

great customer experiences. In many companies, one

of the biggest CX challenges is creating a holistic view of

what the customers are trying to accomplish. CJMs help

the business see the entirety of the workflow and not just

their narrow, channel-only perspective.

› Establishing the ROI for legacy application rewrites

and upgrades. One bank used the process to define the

need to rewrite legacy systems. Like most companies, the

back-end rationalization efforts have been caught in an

endless loop with IT talking about the costs and the

business complaining about the lack of business agility.

To break the logjam, the bank used CJM to clearly

document every instance of where the current systems

were not working and create a clear value statement for

redesigning the systems. This business context gave the

CEO the rationale and confidence to sign off on a major

legacy rewrite (see Table 2).

“The CEO’s direct reports make up our customer

experience council. He wants to see our value

proposition in terms of customer journeys. You

need that level of detail before you differentiate.

We show the customer feedback with videos

from the CJM exercises so the CEO hears the

cold hard truth about what works and what

does not. It drives a higher degree of honesty

and accountability.”

— CIO, Asian bank

5

Significant Investment On New And Upgraded Technology Platforms And Applications Improves The Experience

As the embodiment of the respondents’ processes and

organizational models, transformation initiatives quickly

uncovered issues and challenges in the existing technology

platforms and business applications.

“We had to build a new broker/middleware

platform that sits between our tablet apps and

our legacy systems. It does user authentication

and it manages the APIs that we use to access

the legacy systems.”

— VP of application development, European transportation

company

TABLE 2

Asian Bank Company

Drivers of the

transformation

At an Asian bank, the CEO believes that growth will come from a relentless focus on the customer

service and improving it across every facet of its products, operations, marketing, and service.

Scope of the

transformation

This strategy involves the entire organization, thereby cutting across functional and product line

boundaries. Business processes that customers touch directly and that support customer-facing

staff are examined and optimized.

Changes in skills

portfolio

This outside-in focus with customers at the center has required the bank to master new skills in

user-centric design, software development, and voice of the customer investigation.

Technology

implications

The need to improve customer experience has driven the redesign of the website, mobile apps,

and a grounds-up rewrite of the core banking system. In parallel, the bank has swapped out large,

established vendors for smaller, more nimble players with expertise in new technologies like

analytics and processes like Agile and customer journey mapping.

Innovative

transformation

practices

An outside-in focus on customers has pushed the bank to master good user-centric design, Agile

development, and customer journey mapping using videos to communicate the customers’

challenges. This technique unites all stakeholders around a common good: happy customers. It

also used journey maps to highlight the problems of legacy systems and the business value of

rewriting the platform to focus on direct customer outcomes.

Benefits and

outcomes

This transformation has already led to a 25% reduction in customers’ time to self serve and

significant increases in the bank’s Net Promoter Score.

Next steps

Next steps include extending the banking platform to new developing markets with digital-first

capabilities.


6

Firms quickly realize that their systems are as fragmented

and siloed as the organization and, as a result, would

require an increased level of spending and management

attention. The technology makeover focused on four critical

areas:

› Major investments to modernize back-end systems.

Many of the core systems that manage transactions are

30-plus years old and need to be radically overhauled for

the age of the customer. Respondents specifically called

out that their efforts to improve CX had finally forced

senior management to fund the complete replacement of

systems like core banking and central reservations (see

Table 3).

› Adding new functionality to improve multichannel CX.

It’s not just the main business systems that are being

replaced. Fifteen-year-old web commerce platforms were

also being upgraded and leveraging the cloud to address

the multichannel requirements.

› APIs to facilitate internal and business partner

integration. Firms were also going into existing systems

and applications and adding APIs to make it easier for the

business and developers to share data with resellers and

product development partners as well as new mobile and

tablet applications. One company had to create APIs so

customers could make a reservation from within the

Internet travel portals.

› Focus on data capture and flows, not specific

hardware or applications. Three of the respondents

were focused on the growing importance of capturing,

managing, and analyzing data/information as a key

element of their transformation. In one account, they had

increased their data management budget by a factor of

five in order to uncover the granular insights needed to

improve execution as part of the transformation.

“Initially, I challenged the team to not think in

terms of devices or apps: ‘Focus on the value of

information to us and our customers.’ Our

mantra was ‘one view of the core information.’

Whenever something moves, the traveler needs

visibility to that information and [we need to

aggregate it] for the travel manager.”


7

TABLE 3

North American Hospitality Company

Drivers of the

transformation

This global hospitality provider competes with a premium customer service offering. The focus of

the transformation is to deliver a better experience for customers across every channel,

particularly the guest experience on a mobile device

Scope of the

transformation

The transformation is forcing a realignment of business priorities, systems, and the organization. It

affects franchise partner relationships and hotel operational systems as well as the company’s

core reservation and customer-facing systems.

Changes in skills

portfolio

The biggest change is alignment and cross-functional coordination, but the company is also

investing in Agile development processes and skills. Further, every staff member must be

retrained to use the new digital systems.

Technology

implications

The mobile interface has required back-end systems to be exposed through more granular, on-

demand APIs. The company is also tackling the tough transition of full integration between its

reservation systems and hotel operational applications.

Innovative

transformation

practices

The most important change has been the adoption of Agile techniques and alignment among

business and technology teams. The team blends skills and functions and uses two-week sprints

and three-month release cycles.

Benefits and

outcomes

The big payoff is an increase in room nights booked, particularly for travelers booking on their

mobile device. Senior management now understands that digital transformation is not just about

building a mobile app, but also re-engineering the underlying systems and processes.

Next steps

The company will rebuild the reservation system for digital-first experiences and more fully adopt

Agile processes throughout the organization and franchise relationships.


8

The Creation Of Digital Teams Drives Reskilling

Digital is also forcing firms to rethink their skills portfolio in

both the business and IT. The retraining efforts, coupled

with hiring around a different talent profile, were part of the

cultural change that firms needed to make.

“Since we do not have the new technology skills

in-house, we are leveraging innovative, smaller

vendors and not our traditional suppliers. To

manage this growing portfolio, we are

bolstering our vendor management.”

— CIO, Asian bank

Overall, companies were focusing the culture and mindset

shift in four key areas:

› Creating formalized cross-function teams with new

skills. In addition to adding staff with an expertise in user

experience design and CJM, interviewees were actively

trying to break down the talent silos and creating

multidisciplinary teams where marketing, sales, service,

and IT worked directly together. Firms were creating

these hybrid groups with titles such as “customer

experience council” or “digital accelerator lab.”

› Investing in Agile and development/ops processes

within IT. Most of the re-engineering efforts focused on

changing the IT culture. The core element of the

technology management change was the adoption of an

Agile development methodology that had initially been

used to develop mobile apps (see Table 4).

› Improving new technology and architecture

proficiencies. To build new apps and update their

existing platforms, interviewees were relying on an

extended portfolio of technologies in areas like analytics,

cloud services, and API management. In parallel, firms

were implementing modern application architecture with

composite apps and a service-oriented design. This left

companies either retraining their employees, hiring new

staff, or using third parties.

› Focusing on vendor management. The growing use of

a broader array of smaller, more innovative vendors,

external business, technology services, and third-party

open source platforms forced a number of respondents to

improve their supplier oversight skills beyond a low-cost,

procurement-focused strategy.

“As part of the transformation, we are

converting from a reactive IT department to

proactive consultancy. The development team

was a black hole and did not interact with the

business. The move to Agile has been a key part

of this openness and culture change.”

— Vice president of development, North American retailer

9

The Transformation Sets The Stage For Creating An Agile Execution Culture Across Business And Technology

None of the respondents talked about doing a large-scale

single-phase implementation like the re-engineering efforts

of the past. They all saw their transformations as an

ongoing effort that circled through the different elements like

culture, business models, processes, technology, and skills

in multiple phases. Firms planned to continue their multiyear

efforts well into the future.

“CEO and CFO take the transformation very

seriously. They do not want to be asset-heavy

losers where a digital startup steals the

customer because they are more agile.”

— CIO, European logistics company

At a broad level, the goal was to make their organizations

better able to deal with customer- and technology-driven

change. Companies were attempting to create a sense-and

-respond culture that can quickly adapt to market and

customer changes (see Table 5).

TABLE 4

European Transportation Company

Drivers of the

transformation

A global shipping company is transforming to increase revenue and find operational savings.

Changes in the global transportation market drove a re-engineering of the entire business from

operations efficiency to new product development and IT.

Scope of the

transformation

The project started with a single massive effort to connect key assets so they can be monitored,

tracked, and optimized. IT, sales, and logistics teams worked side by side to accomplish this.

Changes in skills

portfolio

The company is investing in much more advanced IT capabilities to surround connected products

with predictive analytics services. This forces an upgrade in service design and sales team ability,

as well as changes in IT to implement the improvements.

Technology

implications

IT had to transition from being an expensive operations organization to a nimble innovation

partner to the business. It moved its technology center to outside London to attract top

development and program management talent. The company simplified its infrastructure and

application portfolio to reduce IT operational costs by millions of euros.

Innovative

transformation

practices

IT was able to keep 10cents from every euro it saved to fund the reskilling of its people and its

process and infrastructure upgrade.

Benefits and

outcomes

What started as an operational cost-cutting play with smart-connected shipping containers ended

up being an opportunity to grow revenue through improved service levels and visibility.

Next steps

The firm is investing heavily in analytics to uncover and document operational improvement and

cost-cutting efficiencies.


10

“At the core of the transformation is the

thinking around the ‘scaled’ Agile framework.

The framework is about applying Agile in how

the business operates, not just within IT

development.”

— CEO, healthcare products division, European

manufacturer

TABLE 5

North American Business Services Company

Drivers of the

transformation

This corporate travel and expense services company has a healthy paranoia about being

replaced by a more agile startup and feels the relentless pressure coming from the world’s most

mobile people — travelers. As a result, the company’s transformation centered on improving its

ability to innovate and create a travel ecosystem of partners.

Scope of the

transformation

This CEO-led investment involved the entire company, including technology, customer service,

product development, sales, business development, and strategic partner investment. It involved

most technology platforms, and the culture of the firm had to be technology-centric.

Changes in skills

portfolio

The company has learned to master customer experience design as a core competency, Agile

development and DevOps as a product development skill, and customer journey mapping as a

communications vehicle.

Technology

implications

The firm transformed from an on-premises software provider to a multitenant software-as-a-

service provider over six years. This has required a complete overhaul of the technology platform

to become a travel-and-expense cloud with over 2,000 integrations to partners’ system.

Innovative

transformation

practices

The firm created a new customer experience group to bring the voice of the customer into the

development and service design process. It built customer journey maps to get people on the

same page and focused on the software platform and using software to define and express the

brand.

Benefits and

outcomes

The firm improved customer satisfaction and raised its Net Promoter Score from 28 to 60 over

three years. Better internal alignment around customer outcomes improved its ability to innovate.

Next steps

The firm plans to build out a travel-and-expense cloud as an ecosystem of partners and startups,

creating more value and capability in employees’ travel days, with corporate expense managers

managing and optimizing travel costs and risk. It will think about how to embed travel and

expense management into communication so the traveler only has to handle the exceptions.


11

Transformation Dos and Don’ts

The interviews uncovered a range of challenges and pitfalls

to avoid in terms of process mistakes, mindset changes, the

scope of the change, and the technology investments (see

Table 6).

TABLE 6

“If You Could Do One Thing Differently About Your Transformation, What Would It Be?”

Asian bank “I would have not started with process re-engineering; I would have gone directly to implementing

customer journey mapping. It injected a needed customer perspective into the organization.”

North American

hospitality

company

“Make sure that the people on the team who are doing this work are not allowed to have an

orientation to a predisposed solution and are empowered to develop their own software, use a

cloud solution, etc. that meets the actual needs of the customer.”

North American

retailer

“I would move more quickly to drive tighter alignment with the business and be more customer-

centric. We were doing technology for the sake of doing tech better before.”

North American

restaurant chain

“You need to understand the back-end systems and business process integration requirements

upfront. We can do location-based marketing, augmented reality, Bluetooth. But it’s integrating

them with the business operation that’s difficult.”

North American

business services

company

“I would start from scratch in terms of our applications and infrastructure and put our entire

existing technology stack in the convalescence mode. I would then invest and build the entire

product and ecosystem APIs from scratch, in parallel. I would run a complete redesign of our

technology separate from the current systems.”


11

Key Transformation Innovation Recommendations

Forrester’s in-depth interviews with business and IT executives yielded several important observations/best practices:

› Create a new account management role in IT to improve technology management/business alignment.

One CIO created the “account manager role” to interface with the business in the same way that a salesperson

would. The AM was responsible for coordinating the different projects within IT for each individual business

group. They were also chartered with managing the “leads/demands” for new applications and services while at

the same time bringing to bear the appropriate technical resources within IT to help the business.

› Allow IT to keep part of operational savings to invest in new process and skills. In one interview, the CIO

had struck a deal with the business so IT could keep 10% of the savings from reducing its operating costs. They

then used the newfound budget to fund the upskilling of IT in areas like program management, CX, and Agile to

better support the company’s innovation agenda.

› Create cross-functional teams to break down organizational blinders. Multiple respondents have created

dedicated groups together to drive the interdisciplinary thinking key to digital success. One company focused on

creating a single customer experience council where all the channels got together to solve consumers’ pain

points across the silos. Another created a digital innovation center with combined business, technology, product

design, UX, and program management skills.

› Establish a special lab where the business can see digital products/services in action. To drive buy-in from

the business, one company set up a digital product/service platform innovation center. The lab built out product

and services prototypes so senior managers could have a “show and tell” program that made the opportunities

posed by digital products more tangible.

› Leverage customer journey mapping to create a business case for replacing legacy systems. One Asian

bank used the customer journey mapping process to break the year-long logjam on legacy replacement. The

CJM process clearly documented where the traditional online banking system was not meeting customer needs

and created a well-defined ROI for building of a whole new digital banking platform.

12

Appendix A: Methodology

In this study, Forrester interviewed 11 companies from the financial services, hospitality, logistics, manufacturing, retail,

telecom, and transportation industries in North America, Europe, and Asia to evaluate their digital transformation efforts.

Survey participants included decision-makers in CEO, CIO, VP of applications, and VP of transformation roles. Questions

provided to the participants asked about the business drivers of the transformation, the role customer experience played in

the changes, how respondents re-engineered business processes and technology platforms, and what they would do

differently. Respondents were not offered incentives to participate. The study was commissioned in May 2014, and the

interviews were completed in September 2014.