How the operating model can unlock the full power of customer experience

Key takeaways

• An effective redesign of the customer experience (CX) organization and operating model is a crucial success factor for every CX transformation.
• Such a redesign requires seamless cross-functional collaboration, new ways of working, clear design principles, processes, and target setting in line with defined CX ambitions.
• The right CX organizational structure and operating model setup will vary by industry and company, but there is a set of applicable archetypes.

Transforming the customer experience (CX) isn’t about playing hard and fast. To succeed in the long game, companies need to manage it systematically. Doing it well is a game changer, which is why more than 70 percent of senior executives rank CX as a top priority for the coming years. Indeed, companies that effectively organize and manage customer experience can realize a 20 percent improvement in customer satisfaction, a 15 percent increase in sales conversion, a 30 percent lower cost-to-serve, and a 30 percent increase in employee engagement.

In working with hundreds of clients across industries and geographies, we have found that companies that lead successful CX transformations take action in three areas: building aspiration and purpose, transforming the business, and enabling the transformation. One of the most crucial enablers for an effective CX transformation—and one of the biggest roadblocks to greater CX impact if not addressed properly—is integrating customer experience into the organization and operating model.

Of course, organizing the business and operating model around customer experience is easier said than done, and there’s no one-size-fits-all way to go about it. But by establishing clear design principles for a customer-centric organization, creating a CX-organization blueprint, and redefining the operating model with customer journeys at its core, companies can get on track to unlock the full value potential of superior customer experience.

Common pitfalls to avoid

On the journey toward CX excellence, there are pitfalls that prevent many customer-centric organizational transformations from succeeding as planned. Here’s how to avoid the most common:

• Define your ambition clearly: Structure follows strategy. CX leaders must first clearly define their North Star, link it to actionable initiatives and targets, align all stakeholders behind it, and then translate it into implications for the organization and its operating model. Failure to create a strategy without clearly defined goals could make it difficult or even impossible to seamlessly tackle customer experience improvements across functions and journeys.
• Focus on new ways of working, not on ‘boxes and lines’: A customer-centric organization has agile cross-functional collaboration in its DNA. Designing these cross-functional processes, and training people for new ways of working, is more important than reshaping formal reporting lines.
• Establish decision-making criteria: Reshaping the CX organization and its operating model to be customer centric involves making trade-offs and choosing among countless potential courses of action. CX leaders need to decide on clear principles for the organizational redesign, based on criteria that are in line with their customer experience ambitions.
• Take a holistic approach: Trying to solve only selective organizational issues, such as who owns the website or redesigns journeys, can result in only incremental improvements instead of a comprehensive redesign of the organization for greater customer-centricity. Due to its broad implications, CX is by nature a top-management task, and it requires an operating model that defines CX roles and responsibilities up to the board level.
• Minimize functional silos: Customer experience is inherently cross-functional and top down. Keeping functional silos as dominant decision-making units may lead to the optimization of individual processes and customer touchpoints but not of the end-to-end customer journey. The risk is making ineffective improvements that don’t fully solve underlying customer pain points.

Aspire, architect, act: three steps to making CX core to the organization and its operating model

This three-step plan can help companies effectively integrate customer experience in the commercial organization and operating model: by formulating clear design principles and capabilities in line with CX ambitions (aspire), translating these design principles into an actionable CX blueprint (architect), and bringing the redesigned organization to life through systematic change management and an effective day-to-day operating model (act).

Aspire: establish clear design principles

Let’s assume a company has successfully formulated a concise CX vision and ambition—for example, to be an industry leader across customer satisfaction, reliability, and convenience. Translating this foundation into implications for the organization and operating model starts with a systematic assessment of the current CX maturity (see sidebar, “Sample systematic assessment questions”).

Based on the assessment, leaders can establish a set of clear, actionable design principles that facilitate the following:

• integration of CX with the business: This means embedding customer-centricity in the daily decision making of those who have profit-and-loss (P&L) accountability, as opposed to outsourcing it to a standalone function. This principle also has implications for whether a company needs a chief customer-experience officer; the answer is, only if this role has P&L authority, budgets, and accountability for outcomes.
• cross-functional and agile decision making: While the line organization may continue as the disciplinary home for functional experts, this principle ensures key business decisions are made in cross-functional teams and decision circles, ideally designed around customer journeys and supported by targets and incentives that promote cross-functional collaboration.
• fact-based and data-driven decision making: This enables an end-to-end CX measurement system that continuously tracks all relevant customer signals around customer journeys, from solicited customer feedback to operational process KPIs.

Architect: translate the design principles into the organization’s CX blueprint

Once a clear CX ambition and actionable design principles are in place, leaders are equipped to design the CX target organization and operating model in a way that will allow the company to achieve its unique goals. This design effort can be structured around two considerations: the nature of the dedicated CX function the organization needs, and how to set up the broader organization for customer-centricity. The answers to these questions are company specific and depend on the company’s current CX maturity, complexity, and business archetype (interactive).

Six customer experience pitfalls to avoid

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Creating a dedicated CX function

For most companies that want to make a step-change in customer-centricity, a dedicated customer experience function is likely to be at least temporarily beneficial. Complex organizations with multiple business units and markets may want one team overseeing the CX effort across groups to ensure everyone adheres to best practices in such areas as CX journey design and CX measurement. A dedicated team will also have an integrated view of which customer experience initiatives to prioritize based on their impact across the organization. Furthermore, world-class customer experience requires distinctive capabilities in design, digital, and analytics that are in great demand. Leaders may also want to pool scarce CX talent instead of dispersing it across units, particularly if customer experience is a new endeavor for their organization.

Finally, a centralized function could be the right fit for organizations that want to create real change in a short amount of time. In the long run, customer-centricity requires continuous improvement; it’s not just a box to check off when it’s done. But companies that want to make significant progress over 12 to 18 months—in launching the transformation effort, tackling redesign, and fielding a handful of high-impact CX initiatives, for example—may need a dedicated team to lead the effort.

Two common archetypes of dedicated global customer experience functions are a CX center of excellence (CoE) and a CX factory. The main distinction between these approaches is the role the CX function plays.

• CX center of excellence: The CoE typically focuses on owning key CX methodologies, such as customer-journey definitions, owning the CX measurement approach across journeys, building CX capabilities across the organization, and broadly, managing the CX program including key global change initiatives. The CX CoE typically serves as a support function under the chief marketing officer, chief operating officer, or chief customer officer and should ideally report to a board member to ensure sufficient authority from the top. The size of the CoE can range from around ten to 50 full-time team members, depending on the complexity of the organization’s network of business units and its geographic reach.
• CX factory: The factory brings together representatives from different countries and business units who, with the help of a standing team of customer- and user-experience (UX) designers, redesign journeys and work to optimize customer experience approaches at scale across the organization. This approach can consolidate customer insights and translate customer pain points into tangible blueprints and prototypes for the optimal customer journey, which is typically cocreated with the local representatives to ensure that solutions fit a variety of market needs and are adopted and embraced at the local level.

One European insurance company used a CX factory as part of its overall transformation strategy. To enable customer-centricity, it conducted in-depth customer research and redesigned a critical customer journey. Based on these inputs, the CX team piloted more than 30 ideas and created and tested minimum viable products for 11. The company developed intensive capabilities in customer experience, agile, and management and institutionalized the factory with full-time employees. As a result, the insurer increased customer satisfaction and helped board members and employees across departments adopt a customer-centric mindset.

Enabling customer-centricity

In addition to effectively designing a dedicated CX function, companies also need to set up the broader organization and its operating model for customer-centricity. The ideal approach will depend on a company’s business archetype:

• contract-based B2C and B2B businesses: A customer journey-based organization has proven to be an effective setup for companies that regularly interact with clearly identified customers in a contractual relationship—an arrangement that creates substantial opportunities to harness analytics to optimize the journey. In this approach, the entire commercial organization is built around the customer journey lifecycle, from sales and activation (joining) to operations excellence (paying, using) to retention (leaving). It is supported by a CX CoE and cross-cutting IT and data and resources. Dedicated journey owners take end-to-end responsibility for their respective journeys and manage cross-functional teams to continuously ensure CX excellence and improvements. Journey-based organization is particularly common in the telco industry. Other contract-based industries, such as energy and insurance, are catching on.
• transaction-based B2C and B2B2C businesses: For companies that don’t have a contractual relationship with their customers but rather individual transactions with often unidentified customers (for example, a typical retailer), a focus on omnichannel may be the most fitting. Channel managers ensure customer excellence in their respective online and offline channels and are united by a clear omnichannel governance that promotes seamless linkages between channels in line with today’s customer expectations. A CX CoE or CX factory can also play a key role in this setup to support omnichannel collaboration and customer-centric decision making across individual channels.
• B2B enterprises: For a B2B company, losing a customer tends to be more costly than it is for a B2C. Given this reality, CX excellence in B2B requires bringing classical sales, CRM, and account management to the next level with journey thinking and data and analytics to drive tailored decision making along the B2B customer journey.

Act: bring the CX organization to life through the operating model

Once the guardrails for a customer-centric organization are set, companies can bring the CX transformation to life through systematic change management and an effective day-to-day operating model. To define their target operating model, leaders will need to align on objectives and decide on a rhythm for day-to-day work. With these key building blocks defined, they can manage the change to ensure the entire organization is on board.

Align on objectives

Key stakeholders and owners should consider holding quarterly meetings to align on qualitative CX targets, KPIs, and end products. These targets should align with the strategy and economic plan—for example, prioritizing an uptick in P&L, customer retention, reduction of churn—and provide the basis for determining daily operations.

Some companies have found success by specifying and prioritizing concrete, measurable CX end products on a quarterly basis across the board, N-1 and N-2 levels, and top executives directly feeding into the value levers. They can measure progress toward strategic goals by tracking a clearly defined set of CX KPIs, ranging from financial performance to customer and employee satisfaction.

Establish ground rules

The ground rules relate to the physical or digital work environment, standard work and meeting rhythms, and the overall culture. What does the office space look like? Will the team operate out of a central location? Is there a dedicated workspace for cross-functional work? Leaders will want to embed regular meetings and establish a daily, weekly, and monthly cadence for various tasks and check-ins.

Manage the transition

Almost equally important as defining the new operating model is managing the transition to it. How should the company manage the change and communicate with teams? How should leaders support the redesigned organization? Capability building will not only help develop skill sets, it will help to create and sustain a customer-centric culture. Leaders will likely want to empower the CX team to monitor progress against targeted milestones and metrics, manage talent attraction and retention, ensure business continuity, and make sure employees feel supported and that their concerns are being addressed. Companies that focus on building a customer-centric organization and adopt new ways of working could unlock stacked wins.

Reshaping the commercial organization and operating model with a customer focus is no easy task, but those that do it well stand to reap the rewards. By embedding CX within the entire organization and creating a clear operating model for bringing the vision to life, leaders can get on track to provide superior customer experience and realize tangible CX business impact.