What it takes to deliver breakthrough customer experiences

By Xavier Lhuer, Tunde Olanrewaju, and Hyo Yeon

To create distinctive customer experiences, large companies need to push the boundaries and adopt next-generation digital thinking and practices in seven key areas.

Seven minutes.

That’s how long it takes financial-technology start-up Kabbage to approve a small-business loan—nearly 5,000 times faster than the 20 days it takes a typical bank. It’s no wonder that customers’ experiences with technology companies have not only altered their behavior but also raised their expectations about how interactions with all businesses should work. As a survey conducted by Ipsos and LinkedIn found, some 67 percent of affluent millennials are open to using non-financial-services brands.1

Incumbents are moving fast to adapt, applying a range of approaches to improve customer experiences. These include everything from design thinking, which involves applying creative, nonlinear approaches to reinvent how customers interact with businesses, to agile, which calls for fielding prototypes quickly, gaining early customer input, and then iterating continually.

With so many players in the mix, the bar is being raised ever higher, and the danger is that an incumbent may work hard but end up with a “me too” customer experience that does not set it apart. Instead, a great experience that delights customers and earns their loyalty is needed. We’ve found that improving a customer experience from merely average to something that wows the consumer can lead to a 30 to 50 percent increase in measures such as likelihood to renew or to buy another product. Here are seven areas we’ve identified where incumbents can step up to design and deliver great customer experiences.

From measuring customer behavior to spending time with customers to truly understand them

Most companies conduct quantitative research on customers. Such data provide important insights, but to create distinctive customer journeys, companies must not only understand their customers’ behavior but also develop deep empathy. In particular, companies need to empathize with customers when they experience difficulties and obstacles.

This means embracing new techniques for intimately understanding customer journeys: ethnographic observation and “shop-alongs,” where researchers watch or accompany customers in stores; customer diaries, where customers describe, hour by hour, their activities and reactions as they interact with products and services; codesign, where customers give feedback about early versions of proposed offerings; and continual live testing and design iteration with customers after launch.

Top-performing companies also develop a clear vision of the entire customer ecosystem, understanding relevant interactions that extend beyond the core journey the company controls. For example, the journey to securing a mortgage includes an understanding of how potential home buyers consider schools. Such an approach allows companies to uncover new insights that allow them to design and deliver truly transformative customer experiences.

Example: Climate insurance for farmers

An insurer was developing a new product to protect livestock farmers from the greater variability in hay yields caused by climate change. It undertook traditional market research but also sent a product-design team to observe the daily activities of farmers.

The team learned that farmers are pressed for time but also very tech savvy, relying heavily on PCs and mobile devices in their daily activities. The insurer had originally planned to market its new product through traditional channels, but insights gleaned from an observation trip led it to create a digital solution, which allowed farmers to gather information and buy policies online at night and on weekends. The user interface was streamlined and incorporated the farmer’s perspective: for example, it quantified the number of cattle and sheep using the term “livestock units.” The insurer also provided additional value to customers by offering historical weather data and future forecasts on the app.

From designing the user interface to designing the complete customer experience

Many executives believe design is about making devices and screens look pretty. Good visuals improve any experience, but being great requires thinking about everything—and everyone—it takes to fulfill customer needs. True customer-experience design involves crafting each interaction customers have with a company along the path that runs from the minute they consider a purchase through their entire relationship with the product or service. As Steve Jobs said, “[Design is] not just what it looks like and feels like. Design is how it works.”

To design a compelling customer journey, companies must enlist everyone who has an impact on any part of a customer’s journey, not just people with the word “design” in their title—in particular, operational and IT groups should be involved. Companies need to not merely map out customer touchpoints but also implement changes that must occur in the background to deliver a superior journey.

Example: Disney’s MagicBands

After a five-year effort to root out pain points in the experience of visitors to its theme parks, in 2013, Disney introduced MagicBands. These brightly colored wristbands allow visitors to board rides, pay for meals and gifts, and even unlock the doors of their hotel rooms. More important, the bands and the technology behind them—which is stitched into every part of the park—allow visitors to select exactly what they want to see and do in advance. That has helped turn a day at Disney from a series of highlight attractions interrupted by waiting in line to a magical end-to-end experience.

From addressing issues in the customer journey to completely rethinking the customer experience

Many companies spend a lot of time improving their current customer journeys. This can lead to incremental cost reductions and quality enhancements. But such an approach may also cause companies to narrow their horizons and blind them to better overall solutions.

True reinvention requires taking a hard look at journeys from the customer’s perspective to find the pivotal insight around which a new journey should revolve. The focus is addressing customer needs, not improving a process. Bringing in people who are not normally involved in the process can be a great way to encourage fresh thinking. Assessing the best digital experiences employed in other industries can also be useful inspiration.

Example: Amazon Dash

Online retailers recognize that customers often forget to order household items when they run out, resulting in lost sales. Most deal with this problem using solutions that reside online: standing orders delivered on a periodic basis or checklists on the company website to jog customers’ memories. But Amazon bridged this gap by wholly transforming the order experience.

Amazon’s pivotal insight was that the moment when people want and are most inclined to reorder is when they’re using an item and realize they’re about to run out. So it created Amazon Dash, a small Wi-Fi-connected device the size of a USB drive, decorated with the logo of a common household item such as laundry detergent, plastic wrap, or coffee. Customers place these “order buttons” around their home on appliances or cupboards and simply press them when they realize they are running low on an item.

From working around the regulations to rewriting the rules

At many companies, particularly those in financial services, efforts to transform customer journeys have been constrained by the understandable and necessary caution of internal groups responsible for ensuring compliance with regulations. Some companies address this challenge by being innovative about everything but the mandated steps, often leading to a jarring or cumbersome experience for customers: “You can complete this application online, but you then need to print everything and come to the branch next week.”

The best companies focus on the underlying purpose of the rules, engaging regulators and lawyers to show how technological advances can make things better for customers while improving risk outcomes. This process also often uncovers status quo situations where people assume there are constraining regulations—“Things have always been done that way for a reason”—when in fact that isn’t the case.

Example: Digital identification and verification

Advances in optical character recognition and machine learning have allowed technology companies to develop solutions for the verification of government-issued identity documents, such as national identification cards and driver’s licenses, with a high degree of reliability.

Many banks wanted to adopt digital identification and verification to enable online opening of accounts. But internal compliance groups were wary. One bank broke the logjam by going directly to national regulators with a pilot demonstration showing the new, technology-based process was even more reliable than the existing process, paving the way for regulatory acceptance. As a bonus, the digital process automatically captures names, addresses, and dates of birth from documents used to verify identity, so customers don’t even have to type that information when they open a new account online.

From developing software using agile to becoming an agile organization

Many incumbents use agile software-development practices inside their IT departments and believe this means their organizations are agile. But if only IT adopts agile practices—fast, iterative development—companies can’t reap its full benefits and are still slowed by traditional decision-making and deployment processes. Creating responsive and adaptive customer experiences requires the entire organization to be agile. Making that change begins with putting in place new governance standards and ways of working.

Product managers responsible for developing new offerings, for example, need the authority to make decisions quickly and to hold staff from functional groups accountable. This means metrics and incentives also need to be adjusted to focus on end-to-end, rather than functional, objectives. Instead of asking for detailed business cases, companies should fund projects the way venture-capital firms fund start-ups: making a number of small bets at first and providing more money if early results are promising. Small pilots can be tried in a few locations and, if successful, be rolled out across the entire network.

Example: Rapid development teams that extend across the organization

One European bank set up scrum teams in its IT department. Yet it still took up to a year to bring new customer offerings online, due to slow decision making and delays in the deployment of new software. To shorten this time to market, the bank created cross-functional teams accountable to empowered product managers. Because legacy IT systems can block the move to agile, the bank shifted to a modern IT architecture and cloud technologies, which allowed new software developed by the scrum teams to go live on the company website in a matter of seconds.2 By making the whole organization agile, the bank dramatically reduced time to market.

From delivering a product to constant iteration

Many incumbents figure out what new product or service offering they want to create for customers and then launch pilots, projects, or trials. These typically emerge as infrequently as once a year, or perhaps every six to nine months if sped up. Live customers are often excluded from pilots in a bid to do thorough testing before release.

But an article of faith among the start-up community in Silicon Valley is that a product is never done. These companies launch a minimum viable product with the express purpose of getting customer feedback and then iterating. Based on customer input, improved versions of the product are released quickly and continuously. Our Digital Quotient analysis3 has shown that the best-performing digital companies embrace test-and-learn approaches that value speed over perfection. As LinkedIn founder Reid Hoffman once said, “If you are not embarrassed by the first version of your product, you’ve launched too late.”4

The truth is that it’s impossible to know in advance how an experience will be embraced by customers. It’s better to launch sooner with fewer features and a simpler interface and learn what works, based on real customer input. This approach requires not just ensuring speed in delivering a product but also putting in place an infrastructure—customer-satisfaction metrics, live and A/B testing capabilities, product development, and empowered managers—to act quickly on feedback and iterate the experience.

Example: Tablet-based account opening

When a European bank tried several times to fix its account-opening process with large projects, it floundered. Stung by these false starts, it instead launched a small pilot in a few locations, focused only on student customers. Using this new approach, the bank was able to build a new tablet-based account-opening app in just 16 weeks. It then iterated new versions based on user feedback, improving the verification process so applicants could open accounts immediately and letting some customers request overdraft protection. After these tweaks, the app was scaled across new segments and more branches.

From collaborating under the guidance of leaders to working together spontaneously

Companies need to push their people to move beyond traditional functional roles and work together to reinvent customer journeys. This is typically done by creating temporary project teams or task forces. But responding to a customer issue or improving a journey requires a culture where people from different functions work together spontaneously. Our Digital Quotient analysis revealed that less than 30 percent of companies say they have a highly collaborative culture.5 Improvements can come from having motivated, empowered frontline employees driven by clear purpose. Technology has a role too. By moving into cloud-based, virtualized environments, for example, companies can help teams to experiment and innovate.

Example: Supporting collaboration for an agile program

At another European financial institution, an agile program had been mobilized for three months, and individual teams were working hard, but no real progress had been made in building the planned offering. Why? The company had formed a cross-functional team that included all the key units, but its members still reported to functional heads and were housed in six different locations. Recognizing the initiative was stuck, the company appointed a single executive as end-to-end leader and held five full-day in-person meetings, allowing many people to meet their peers face-to-face for the first time. Coaches provided live on-the-job coaching, helping team members gain new skills via experiential learning while building cohesion and trust.


Many incumbents are working hard to reinvent their customers’ journeys. The ones that win will be those that push the boundaries and simultaneously adopt next-generation digital thinking and practices.

About the author(s)

Xavier Lhuer is an associate principal in McKinsey’s London office, where Tunde Olanrewaju is a principal; Hyo Yeon is a principal in the New York office.

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