WHITE PAPER BY DR PAUL TURNER

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1 WHITE PAPER BY DR PAUL TURNER DIRECTOR OF PORTFOLIO, GEORGIA GROUP Customer Experience Management - The Value of Transformational Leadership to the Customer Experience. ABSTRACT Purpose; to outline how a transformational leadership approach can add critical value to a customer experience management strategy. Approach; to discuss the concept of customer experience management and consider how an organization can align leadership behaviour to their customer experience management strategy so as to achieve competitive advantage. Findings; to maximize the value of a customer experience management strategy it should be aligned to the organizational vision, the brand DNA and other organizational characteristics including values, behaviours and leadership style. The development of a leadership message and a transformational leadership style is critical to the delivery of a successful customer experience management strategy and value added customer experiences. WHAT IS CUSTOMER EXPERIENCE MANAGEMENT? Ever since the release of the book Experience Economy (Pine and Gilmour, 1999) there has been a growing interest in the concept of customer experience. Indeed our client experiences at Georgia Group show that interest in the concept of customer experience is accelerating at a tremendous rate as our clients are seeking ways to move beyond product and service delivery to creating value driven customer experiences. This is most likely due to an increasing amount of evidence linking it to value creation ((Prahalad and Ramaswamy, 2004). It s clear that leading organizations are increasingly seeking to influence their customers experiences as part of a desire to achieve competitive advantage. Customer experience as a concept could be defined as a customer s perception of and response to, service encounters with an organization. Customer Experience Management exists to influence the make-up of the strategic customer experience whether that be the environment, people or process; providing a systematic and strategic view rather than focusing on individual experiences. Omni-channel delivery has grown in response to the ever increasing ways in which customers communicate with organizations to access their products and services. Yet despite the growing interest in this area there is still a lack of knowledge and understanding of customer experience and a scarcity of research (Texeira, 2012).

2 Whilst there is no universal agreement on the inputs (drivers) and outputs (measures) of customer experience, research is gradually taking the debate forward. Recent research in the banking sector (Garg et al, 2012) found that the main drivers of a customer s experience related primarily to convenience of service/product and employee interaction; with lesser emphasis on service process (in this case technology). Another research study based on a case study involving a multi media provider again identified convenience, employee interaction and service/product process but also affordability and customer engagement (Teixeira, 2012). Whereas a research study based on a 5 star hotel identified comfort, educational, hedonic, novelty, recognition, relational, safety and beauty (Rageh, 2013). Whilst these drivers may vary dependent upon sector there are some common themes around the factors that are likely to be critical to the impact of customer experience in most sectors. There is commonality around the importance of convenience/ comfort, surprise/novelty, engagement through employee interaction and/or brand, added value (in some form) and environment. Those organizations which are ahead of the field instinctively know that their customers are beginning to demand more than a product or a service. Yes they still want affordable good to great products and services but more and more they want to be surprised, excited and to feel a positive emotion linked to their purchase. Pine and Gilmour (1999), arguably the fore-runners of the customer experience concept, proposed that customizing a service turns it into an experience, and customizing an experience turns it into a transformation asserting that businesses should mass customise their goods and services. Further they argued that the use of techniques such as customer satisfaction or voice of the customer surveys were not sufficient to determine the products for mass customisation because customer satisfaction data often measures market satisfaction not individual customer satisfaction. Their 3-S Model shows their view of the importance of driving up an organization s understanding of it s customer experience promise through a three steps approach (satisfaction, sacrifice and surprise) aimed at increasing the economic value from every customer experience. Their 3-S model proposes that it is not enough to achieve customer satisfaction by meeting their customer expectations or setting new expectations by reducing customer sacrifice. A great customer experience is also not just about seeking to exceed a customer s expectations, along a known axis of competition, nor just about uncovering new service factors upon which to compete; as these relate to satisfaction and sacrifice. Rather, it involves staging a surprise based on a strategy of driving up satisfaction and driving down sacrifice. This involves going one step ahead of conventional thinking and going beyond asking customers how did we do? and what do you want? to what did you remember. In other words moving from a transactional experience to a transformational experience. The creation of a memorable experience through suprise is no easy trick. For example this might involve giving away items randomly on certain days or being aware that a customer is a regular shopper and linking such loyalty to an in-store experience. Yet when will a customer s expectation overtake the surprise element. And certainly a high level of customer satisfaction (and a low level of customer sacrifice) must be in place before doing so. Such a challenge requires employees to not only adopt a creative and innovative mentality to ensure each and every customer experience is special but they must also be emotionally aligned to the organization s brand values so as to respond spontaneously to the developing experience which is being created between them and their customer. Based on the work of Kajalainen (2004) undertaken at a Volvo site Clatworthy (2009) showed the importance of congruence between brand associations and service manifestations, for example an interaction in a service industry between an employee and a customer. Organizations who seek to align a brand startegy to customer experience should consider defining the relationship between their brand strategy and customer experience. By doing so they can determine how their brand strategy can be transformed into relevant customer experiences by enhancing existing or introducing new ways, of interaction through the delivery of their services and products. To achieve this Clatworthy (2009) proposes defining the brand DNA before developing the service personality and then enacting and refining the customer experience. Juttner et al (2012) though identified the importance of values in this process and in their research, based around a case study within the hotel sector, showed how company stimulus impacts upon cognitive and emotional responses which links through the brand personality to personal values of the customer. I would further argue that such strategic centric driven approaches often fail to grasp the critical relational role of front line employees to the development of a great customer experience. This relational capability is key, as a great customer experience is co-created between the organization (employees) and its customers and is dependent upon employee behaviours (and therefore values) being aligned to the brand values, which the customer is aware of in some way. If one accepts the argument concerning the importance of relational and emotional capability within an organization s people then a question arises from this. How can organizations encourage and foster the link between their brand DNA and their people so as to ensure alignment to the end game, a transformational customer experience. Based on our research and client experiences it is clear to us that the influence of a transformational leadership approach creates a way in which to achieve such an alignment.

3 THE INFLUENCE OF TRANSFORMATIONAL LEADERSHIP ON THE CUSTOMER EXPERIENCE As mentioned in the earlier section the importance of customer surprise is seen as an increasing value added factor when introduced on a strong platform of high customer satisfaction and low customer sacrifice. It is further proposed that, based on research to date, the value of employee interaction including leadership style, either in a front-line service role or a support service role, is critical to the creation of customer surprise whether this relates to novelty, innovation or any other perception of unexpected customer pleasure. To achieve such creative and innovative levels of employeecustomer interaction will require in turn a high level of employee commitment and discretionary effort. A transformational leadership approach can help organizations achieve this aim. Slaten et al (2011) found a strong relationship between leadership styles and employees levels of creativity and innovation in frontline roles. A transformational leadership style offers a high potential to influence those key factors that drive employee creativity and innovation, that is the elements of a satisfying customer experience ( i.e. convenience/ comfort, surprise/novelty, engagement through employee interaction and/or brand, added value in some form and environment). Transformational leadership encourages employees to perform beyond their expected levels of performance as a consequence of their leader s influence in inspiring them to transcend self-interest for a higher purpose, mission and vision (Bass, 1985). Numerous research studies have shown that transformational leadership is positively related to improved employee commitment and to encouraging those behaviors such as creativity and innovation which constitute high performance (Bass and Avolio, 1993) and the development of value added customer experiences. In line with this research Georgia Group developed their Leadership Message methodology to enable organizations to create their own unique higher purpose and to enable a framework for leadership action aimed at achieving transformational change. Bass (1997) further defined the transformational behaviours that facilitate extra discretionary effort, satisfaction and effectiveness from team members. These behaviours centre on charismatic leadership, intellectual stimulation, inspirational motivation and individualised consideration; behaviours that are key elements of the Full Range Leadership model, the leadership framework which underpins the Georgia Group leadership development delivery (Turner, 2013). By developing an organization s transformational coaching capability we have been able to assist client s to increase both their employee engagement and performance levels and, in turn, create the additional discretionary effort and commitment that is necessary to deliver the key factors that drive a great customer experience. The diagram below is adapted from an earlier research study and sets out the direct and indirect linkages to the creation of the customer experience. TRANSFORMATIONAL LEADERSHIP ATTRIBUTES Role modelling Relationship driven Building trust Performance focused Transforming Leadership Employee Engagement Emotional intelligence Personal enrichment Transformational leadership drives improved employee behaviour and is a predictor of employee engagement Employee engagement is a predictor of employee behaviour Employee behaviour creates the customer experience Customer experience sustains transformational leadership Customer Experience Employee Behaviour Aligning Organizational Coaching with Leadership Behaviour. Turner. P.S. (2012)

4 An understanding of the concept and value of transformational leadership behaviour continues to grow as more and more organizations seek to effect significant cultural change to manage the people challenges of wide ranging organizational change programmes including the development of customer experience management strategies. Organizations seeking to influence their customer experience outputs to drive economic value will find benefit in aligning transformational leadership behaviours to their customer experience management strategy. CONCLUSION Leading edge organizations have for many years focused on how they deliver their customer experience so as to achieve more economic value. In 1994 Jim Collins and Jerry Porras in their book Built to Last covered several examples including how American Express focused on delivering heroic customer service through encouragement of individual initiative; 3M s passion for innovation ( thou shalt not kill a new product idea ) through respect for individual inititiave or Marriots mantra of make people away from home feel that they are among friends and really wanted which was brought alive through acknowledging people as their number 1 priority. Today s organization faces an even higher benchmark of service excellence. The challenge of developing or re-establishing a customer experience management strategy relates primarily to organizational culture and is reliant on leadership. The technicalities that surround the delivery of great customer experiences often relegate leadership to operational areas and related decision making. Yes a customer experience strategy by its nature involves decisions and delivery around processes, environments and logistics but primarily it is about leaders and the impact of their leadership on the organization s people, whether employees or customers. The success of an organization s customer experience management strategy will depend upon its leadership capability and whether that capability is focused on transformational change through transformational leadership behaviours which positively influence the critical outputs of employees engagement, commitment and levels of discretionary effort. These outputs are critical to moving from a service standard driven mentality of customer satisfaction to a value driven mentality of customer surprise and increasing the economic value of the customer experience. By creating a clear leadership message, together with an aligned transformational leadership style, organizations can create a brand vision and an aligned leadership philosophy based on their customers expectations. With this leadership platform in place brand priorities can be developed through an omni-channel delivery that supports a unified view of the brand whether via in-store, online, mobile, call centre or any other customer experience touch point. The integration of brand personality into these customer experience touch points enables the customer experience to be influenced and reduces lost sales opportunities and increases the consistency of the brand and customer experience across all channels. Brand personality is described by Aaker (1997, p.347) as a set of human characteristics associated with a brand. Within our Leadership Message transformation model we faciliate the creation of the key organizational brand values that drive such characteristics and behaviours. A transformational leadership programme can then transform the brand values, by inspiring employees, into creating great customer experiences not just at the front-end of the business but throughout the organization s omni-channels. In conclusion there is a compelling case for organizations to consider the value of a customer experience leadership strategy with a focus on transformational service rather than a customer experience management strategy with a focus on transactional service.

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