The Experience Strategy Podcast: What the Heck is Experience Strategy Anyway?

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From Starbucks to Netflix, companies today are competing to disrupt the market and deliver the best possible customer experience. But what does it take to differentiate your brand and drive results for your customers and your bottom line? Tune into today’s episode as we explain just what Experience Strategy means, and why it matters.

Voiceover: [00:00:00] This is the experience strategy podcast, where we look at the best and the worst customer experiences and ask what were they thinking? And now here are your hosts experience nerds, Dave Norton and Aransas

Aransas: Savvis. Hello, welcome to you. Experience strategy podcast. I'm Miranda status. If you've listened to this show at all, you've probably heard us say the phrase experience strategy million times.

The truth is there's a whole mess of interpretation in that phrase. And we're going to unpack that a little bit today. We're going to start by asking the question. What is strategy, especially in a world where that word seems to be everywhere in every lingo, field, conversation and article on LinkedIn and on the [00:01:00] interwebs.

But nobody ever seems to really talk about what it means and what are we in the context of experience strategy mean by the word experience. And then what does that mean for the phrase experience strategy? Is it like marketing strategy? I don't know so many questions. And in this episode, we're gonna attempt to answer all of them.

So listen, in, as we get into the nitty gritty today, Dave, let's start by talking about some of the traditional strategies people talk about and offices the world over. Did we start with business strategy? How would you define that Dave

Dave: strategy? Wow. Like the, the big thing, the most important thing. Right.

So, yeah, let's start there. So, uh, I'm going to use Michael Porter's [00:02:00] definition of business strategy. Everybody knows Michael Porter as kind of the Harvard. Business guru who's, uh, famously known for describing business strategy. And he says that business strategy is a competitive position, deliberately choosing a different set of activities to deliver a unique mix of value.

In other words, you really need to understand your competitors and the market you've chosen in order to determine how your business should react. So

Aransas: for those of us who didn't go to Harvard, I'm going to try to translate that what I'm hearing is that he's saying business strategy is really at the end of the day about setting your business up in comparison to your competitors.

Is that right?

Dave: That's right. And that's exactly what Porter believed. He was really focused on competition and how to win against competitors. [00:03:00]

Aransas: Oh, got it. Makes sense. Makes sense. So let's talk about marketing strategy. How would you define that?

Dave: Well, marketing strategy means a lot of different things to a lot of different companies, but I like Philip Kotler definition of marketing strategy from Northwestern university.

He says marketing strategy is the basic approach that the business unit will use to attain its goals. And which is comprised of elaborate decision. Those are the strategies on the largest markets, market positioning and mix and marketing expenditure allocation. How's that? Oh,

Aransas: I like it. And again, my takeaway on that is what he's saying is that it's really the, the plan for selling the product.

Dave: Yep. That sounds about

Aransas: right. All right. Okay. These guys use a lot of words to [00:04:00] define these things, and I know there's a lot of complexity built in there, but just to get my head around the sameness and differences here, it helps me to really zero in on. What's most essential about what they're saying does talk about innovation strategy.

Next, certainly when we hear a lot about in organizations that are trying to disrupt industries, how do you define that?

Dave: Sure, absolutely. Clayton Christianson also from Harvard recently passed away, defines a disruptive innovation. Which I think most companies are trying to create at some point in their life cycle, as the strategic framework used by the most successful technology companies, it's a process by which a product or a service initially takes root in simple applications.

At the bottom of a market, typically by being less expensive or more accessible and then relentlessly [00:05:00] moves up market, eventually displacing established company.

Voiceover: That

Aransas: really is an interesting definition to me. I'm just so struck by what he's saying about. Up market moves. And it sounds like what he's really trying to tell us is that disruptive innovation happens by taking the services or the products that only the rich or the elite have had access to and then making them more affordable and accessible.

Is that the hardest.

Dave: That's that's a major part of what disruptive innovation is all about. And of course, there's other things that are associated with disruptive innovation. But the key is that it starts at the bottom of the market and it moves its way up over time, getting progressively more sophisticated, adding more features and so forth until the [00:06:00] competitors can't come.

Aransas: This makes me think of that car phones. There was that one really fancy mom that used to have a car phone when I was in high school. And we all thought she was like the it girl. And then of course, you know, fast forward, just a few minutes really. And, and, and time, and we all had cell phones. It seems like every week they become more sophisticated and more pervasive.

Dave: It was more than a few minutes since I've been in high school, but for you I'm sure.

Voiceover: Well, it was

Aransas: the gap between the car phone and the cell phone. I mean, it, it really did. It felt like. Yeah. And, and it felt like this is the thing that no one would ever have access to. It felt so special and wild and then suddenly it was ubiquitous.

Yeah. All right. So going back to the topic at hand and getting away from my high school [00:07:00] experience, um, why is it important day that we get our heads around these terms in order to understand experienced strategy?

Dave: Yeah, because, uh, we have to decide. What is experienced strategy is experienced strategy, basically in the service of business strategy or marketing strategy or innovation strategy, or is experienced strategy.

A form of business strategy is marketing strategy, actually in the service of experience strategy, uh, do you innovate to create new product? Or do you create experiences? And so the way that experienced strategy plays with these other forms of strategy can have a real impact on how companies create those experiences for some companies experienced strategy.

Actually in the service of all three, it's more like design, a [00:08:00] experienced design than it is strategy, but we believe that companies who lead with experience strategy get the full value of that strategy and that it can become a form of business strategy. Really helped to strengthen marketing strategy and lead to the best types of innovations that people are most likely going to want.

So there's a lot on the table in terms of the definition, when we start thinking about.

Aransas: Right. It's also about what the organization decides to lead with. And then as you said, what supports that leading strategy? And I think that's a really important distinction here because we hear so much these days about brand led organization.

And it's really the organizational decisions at the end of the day are led by a well-defined brand identity and a, a storytelling. And what we're saying is [00:09:00] it's. There is a massive advantage and we can get into this more later in the episode, but there's a massive advantage to a brand to actually lead with the customer.

Before we do that, though, I want to talk about the experience part. Now that we've kind of wrestled the strategy part down. I want to, I want to get clear on what we're talking about when we talk about experience, because when I look at the word experience out, you know, when I. How it's discussed on LinkedIn or how it's discussed and in scholarly articles, or certainly how it's used in lingo, within organizations.

It's kind of all over the map. And so, so often people are talking about a CX strategy or customer experience strategy. I don't think that's the same thing.

Dave: How do you need to. Yeah, [00:10:00] it could have been the same thing, but CX took a turn. Um, and, oh, well, let's just, let's just use a classic definition. This is a definition that I I've found on the internet and it's used pretty regularly.

Um, if customer experience. It is the sum of every interaction a customer has with a business, both pre and post-sale the customer experience strategy defines the actionable plans in place to deliver a positive, meaningful experience across all of those interactions. Now that's a pretty classic definition.

So CX referring to the sum of all the interactions. Uh, that occur and then, uh, the strategy being, how do we actually deliver in an actual and in an actionable way? Um, yeah. [00:11:00] So what do you think

Aransas: about for the business and the customer? Correct? Yeah, and I think that's, that's part of where it breaks down for me, I think is that so often we see.

We see those separated out that the customer experience is separated from the business strategy in such a way. There's no real buy-in from the business to invest in the customer experience.

Dave: Yeah. Let's, let's talk about that for just a second, because if that is the definition, then really good customer experience strategy is really about making things consistent.

Across, whatever you describe as across, you know, across channels, across moments, across product. So customer experience becomes about consistency, maybe a little bit of memorability, like to be remembered. Um, it's kind of service [00:12:00] design ish a little bit in what's been described here. Service design

Aransas: class being the connection between the back of house in front of house experience and you sharing those.

Yep.

Dave: Right, right. That's the most common definition that most people in, in customer experience design or experience design refer to and believe that they're going to be performing when they're hired for that wonderful position as a CX person in some way, shape or form. I,

Aransas: I find so often though, that when you start talking to these people, The thinking is pretty limited that when people are talking about CX they're often just talking about one channel and.

I don't know about you, but so often it sounds to me like they're really just talking about their customer service line [00:13:00] or is that when we're talking about CX or customer experience, it gets to a very, very narrow. Channel delivery

Dave: that they're going to play, right?

Aransas: Yeah. Yeah. It's not thinking about it strategically.

It's thinking about it strictly as something that's executed against to just sort of check the box that we're taking care of customers. Not that we're designing our business. To create an experience that is memorable and meaningful for our customers. What about the role of loyalty? So that comes up a lot.

I think when people are talking about CX strategies.

Dave: Yeah. So, um, because customer experience strategists are often really employing just loyalty strategies, not experienced strategies there. Really in the service of marketing. So for example, net promoter score, which we've talked a [00:14:00] little bit about before, uh, is a loyalty metric.

It's not an experience metric. Um, it measures loyalty to the brand in some way, shape or form in that case. You know, if you're going to be focused, if the strategy is loyalty, then it would be better to call it CX management rather than experienced strategy in that case, because the truly strategic decisions for the business are being made by marketing or by business leadership, the business leadership team.

Aransas: Yeah, I guess that's why, so often you see experience and an org structure sitting underneath marketing. Really this side note for you and I, we need to absolutely. Do an episode soon where we look at the various org strategies that have sort of situated experience within organizations and the [00:15:00] advantages and disadvantages of each.

And that's something we can come back to for sure. But before we do, let's start to. Do a little compare contrast here with some of those other strategic areas we talked about in comparison to experience strategy so that we can further understand we are these overlap. So let's, let's again, start with, with business strategy.

Dave: Hmm. Okay. Um, if business strategy is about competitive position, And for some people, that's the classic example of that would be general electric GE changed their business in the nineties to being about being either first or second in any market that they go into, they had to either build or buy their way to first or second.

And that was the whole strategy. If it's about competitive position, then [00:16:00] experienced strategy is about the replacement of goods and services with a new economic offering experiences. As in the way you change the competitive position is by moving away from an old. Economic category like a service and entering into a new economic category, like experiences.

Think about the difference between serving coffee and Starbucks. They don't even seem to be the same. Uh, in the same category anymore, Starbucks created an entirely new white space around an experience that was very different than the way that coffee had been served at a diner or some other local restaurant.

Aransas: Right. I love that example, Dave. Totally. It is it's and it's so easy to see that difference because it really used to be entirely transaction. You give me money. I give you [00:17:00] coffee. And Starbucks said he not enough. If we want to differentiate, if we want to stand out, if we want to be a leader in industry and an innovator.

We've got to give them something more. So you give me money still, but now I give you the smell of coffee. I give you the chance to witness the artistry and craftsmanship of creating a company, both coffee that is memorable. That is alluring. That that leaves you. Feeling differently than when you came in because of both the experience of the production, the experience of the space and, and really truly at the end of the day.

I give you so much that you want to give me more money for coffee than you were giving the other guy. Who's just giving you this clear cut coffee, money exchange. [00:18:00] Um, how does that look in a marketing strategy day?

Dave: All right. So our definition for a marketing strategy is that it's about market size, defining the market, making decisions based on the market.

Think about segmentation. That's really what segmentation is about. If that's the case, then experienced strategy is about delivering meaningful experiences to each individual customer one customer at a time, Joe pine has often argued that the way marketers defined. Markets is kind of a fiction it's defined by the group.

Instead, we need to treat people as individuals and produce experiences that do just exactly that they, you feel like you're an individual. You feel like it's appropriate for the situation. And historically, we haven't been able to do that, but today, because so many technologies are out there to deliver individual experience.

[00:19:00] We can, we can, we can really focus on individuals instead of thinking about market size. Yeah,

Aransas: let's talk about that for a second, because I think you're right. Like it's pretty inarguable that, that while humans have some overlapping taste and preferences at the end of the day, every single person is unique, has unique needs and expects them to be met differently.

But for generations, if you wanted to scale your job really was to. Determined as many of those overlapping qualities and needs as possible and design your product for those needs. As you said, there were a second ago, technology, as it exists now has opened up a whole other level of consumer expectation around customization and has enabled a.[00:20:00]

An entirely new era of transforming the experience as a result. Can you give us a good example of that?

Dave: Well, there's just so many, obviously some of the big ones that come to mind are, of course, Netflix gives you. What you prefer based on your viewing patterns we've gotten so used to that, we don't even realize that that's customization.

Amazon sells you things based on things that you've bought in the past. That's customization. That's. True. That's at least a first step towards recognizing you as an individual. Um, and it just goes on from there every, every single technology today, customizes in some way, shape or form, as we move into more hybrid experiences where people are both in the place and using technology.

The customization will be even further refined will affect the types of environments, whether it's your car, [00:21:00] your store, your city, so that you can really customize just exactly to the individual and what individual needs are. Why

Aransas: if we think about those examples for a second, my guess, and I don't know this for sure.

My guess is that Netflix and Amazon see themselves as tech companies. Not experience company.

Dave: Well, yeah, I think you make a point there. They see themselves as creating technologies, but from the consumer's point of view, what they're creating, oftentimes as a really wonderful functional experience that the consumer can then build upon to do things that are more meaningful for themselves.

Consumer appropriates the functional technologies and turns them into things that are far more meaningful for them than just a simple Google search or something along that line.

Aransas: Yeah. And I think, I think so many of their decisions, whether they would frame [00:22:00] it this way or not are being led by the customer's experience and, and all of these powerhouse user experience designers really are out there.

Advocating for the customer's needs their experience of navigating the designs within the technology, but also creating some, some real value for the brand and for the business, through the experiences that they're creating. And I mean, that is so central really to product design and development. That there's a lot of inspiration.

I think. Companies of all shapes and sizes can take from that particular element of, of product management. How do we use technology in concert with experience to create something at scale that does hold meaning and value for people? [00:23:00]

Dave: Sure, absolutely.

Aransas: So let's see, let's talk again about disruptive innovation.

Dave: Okay, well, disruptive innovation has completely changed the way that the world looks today. And all you have to do is look at Amazon. Uh, as an example, at one time, no one was paying attention to them and they have completely disrupted, uh, the U S economy. Before that there was Walmart. Disrupted the U S economy from our retail standpoint and disruptive innovations occur almost every day.

If we think about disruptive innovation as a good or service, that's taking root at the bottom of a market and moving its way up and taking over a market, then experienced strategy is about finding new, emotional, Social and aspirational needs of customers and turning those into opportunities that feel like time [00:24:00] well spent.

And from a technology standpoint, I'm thinking about things like iPads, for example, do things for consumers that computers and phones couldn't necessarily do, and therefore can tap into different emotional, social or aspirational needs.

Aransas: My most defining vision of an iPad has always been watching people take photos of the grand canyon with their iPad.

It is. So it's just so interesting how common place that has become. Out in tourist destinations for people to have these giant screens. But it, it is. I think the reason that image is always so striking is because it's sort of jarring to see something that big pop up at these tourist destinations for photography, but it's really serving a need for these people that was [00:25:00] unmet on.

With their other options, certainly they couldn't carry around their laptop. You can do

Dave: more than that or answers someday. I'm going to get you an iPad so that you enjoy all of the other things that make it for

Aransas: you. No, I, it, it is a, it is an audience though, too. And that's so much of what it is. They knew who they were talking to with the iPads.

And I suspect they have a range of different consumer segments with different primary needs that they are meeting with the features and functionality of the iPad.

Dave: Yeah. I think that's the most important thing is each one of those different screens serves a different purpose. And so if you find yourself in a situation where you need that larger screen, but not a full laptop, think about, uh, when you're on the airplane and you're trying to get from one place to another.

Um, that's perfect. It fits the situation. [00:26:00] I myself carry around with me an iPhone, an iPad, and a laptop so that each and every situation I find myself in, I'm able to, to jump right in.

Aransas: Super fan,

you got it all covered. Um, I might be slightly obsessed with my very small

Voiceover: iPhone and just wish it would get smaller

Aransas: and smaller.

Voiceover: I'm not following the curve on this one.

Aransas: Anyway, um, that aside, I want to talk about operations. We haven't talked about that word. All maybe in this entire series and certainly not in this episode, um, I see in a lot of organizations, experience situated as an operational effect versus a [00:27:00] strategic pillar.

What do you see as the risk of, of simpler. Relegating it to an operational aspect.

Dave: Well, it, it really depends. If what you're doing is principally design of operations, then you're probably just improving upon the operations. But if you're actually doing experience strategy, and you're thinking about how strategically you can accomplish more with less, you can allocate your, your resources in.

The right way, you can identify channels that are going to be more successful for you. Then it becomes your operations become far more strategic. And, and I think that, uh, operations. Don't often get the credit that they deserve because they're principally focused on just [00:28:00] delivery, just delivery. You told us how you wanted it.

We came up with a standard operating procedure for that, and we have executed against that for consistency sake. But every once in a while, we have to step back and say, strategically, what are we doing?

Aransas: That's right. And I think as you pointed out before, if we are simply looking at this as an operational. A fact, then we lose the integrated strategic value that comes from really leading with your customers experience. So let's just, let's, let's cut to the chase here. W w what would you say is the reason we need experienced strategy to stand on its own as a powerful force for driving a business model value and growth.

Dave: Well, I tend to disagree with Michael Porter in the way that his model is set up. I don't think that your [00:29:00] primary concern when developing business strategy is your competition. And I think over the last 20 years, we've seen a real shift in the way that companies think. I think the main reason why you have to.

Be very strategic with experience and with CX and so forth is that you want to drive more customers and you want to drive more customers to your business by delivering on their needs. And if you don't have customers, you don't have a business. And if you want customers, I frankly think you have to have an experience strategy.

Aransas: We need t-shirts that say that Dave,

Dave: maybe more succinctly, right?

Aransas: Want customers have an experience strategy?

Yeah, maybe tattoos later. We'll try it out for a

Voiceover: little while. [00:30:00] That's a right.

Aransas: So companies have limited resources and they're trying to decide all the time, what to invest in and, and that, I guess, but that's the nature of strategy. What are we going to spend our time and money on? You're making a really strong.

That what they need to spend money on if they want customers is an experience strategy.

Dave: Yeah. But let me clarify that just a little. Everyone knows that companies, all companies have limited resources. And, uh, one of the key things that experienced strategy should be able to do for you is to tell you where you're going to create the most benefit for your customer.

There are so many. Channels out there every time a new channel is created, the business model almost has to [00:31:00] be rethought. It's crazy what companies have had to go through over the last 20 years. And it's part of the reason why they can no longer depend upon these big strategic documents to help them.

They, they need something that's more agile and more effective. But great experience strategy would not be great if it just gobbles up all of your resources, doesn't leave you in a place where you're actually growing. Doesn't create value. Doesn't understand the bottom line as well as the top line. And so I think it's just as much about understanding how do I allocate my limited resources to get the greatest bang for the buck.

Aransas: I think too, you're starting to describe what makes a great experience strategist, which we also need to spend an entire episode discussing. So second sidebar for [00:32:00] our episode backlog, what makes a great experience strategists. But I think just to just sort of recap what you just said, it really is.

Someone who is able to analyze and understand customer needs while also understanding the business and what drives the business forward in a win-win way. So if we ask ourselves what the big takeaways are from this episode, what would you say to them?

Dave: Well, I think that strategy in general is very, very important, but if companies are going to actually get more customers, they need to think much more.

Rigorously about what our customer needs. How do they deliver on them [00:33:00] personally? And in an individual way, what role does operations play? What role do channels play in supporting what it is that they're trying to accomplish and how do they act? Stage and experience, not just deliver better service, but actually stage and experience.

If you can do all of that and you can support both the bottom line and the top line, then I think you've got a winning combination.

Aransas: That word combination to me is the biggest takeaway here. I see so many brands that are led by these traditional strategies that have the potential to be really groundbreaking and to really take market share, but because they are [00:34:00] neglecting or relegating the heart of their business, their customer, they're not moving.

Growing or changing. And it is the integration of the strengths of these different disciplines that ultimately is what will allow them to break through.

Another t-shirt please. Thank you.

Voiceover: You're listening to our show.

Aransas: Let us know what other topics you'd like to hear. Please. Like subscribe, share this podcast. We. Are learning so much every day through the organizations that we're talking to and are so excited to bring you more actionable insights in future episodes.

Thank

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