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This article shares the introduction to Lean CX: How to Differentiate at Low Cost and Least Risk by Robert Dew, Bill Russell, Cyrus Allen and George Bej. Our thanks to De Gruyter Publishing for access to this chapter. The book is now available on Amazon to purchase.
Introduction
Mice, Monkeys, and Gazelles.
More than two decades ago in 1998 (2) Spencer Johnson wrote a business fable about two mice and two people who all lived in a maze and essentially spent their lives looking for cheese. After successfully finding some cheese, both the mice and the humans had to deal with the challenge of what to do when the cheese runs out.
Johnson’s genius was in describing the differences between the responses to this problem: the mice realised their cheese supply was dwindling and set off on a search to find more, even before their stash was gone. The humans were less open to change and one almost perished because of an inability to stray from the cheese pile they had found. Even though the humans could see their store was running out, the prospect of leaving their comfort zone in favour of the unknown almost proved too daunting.
The problem of being unable to invest in the only viable option for long-term survival against short term incentives is the major strategic issue for most businesses today. We call this problem a ‘monkey jar’ problem. This comes from another fable about how to catch a monkey: You put a banana in a heavy, clear glass jar. The jar must be the correct size. Ideally the bottleneck is wide enough so the monkey can get a hand inside to grab the banana, but not so wide that while holding the banana the monkey can pull its hand back out. You leave the banana jar seemingly unattended (but hide in wait nearby) until a monkey comes along. Once the monkey grabs the banana, it is a simple matter to walk up and catch it, because the weight of the jar prevents it from getting away. Of course all the monkey should do is let go of the banana to get away free. But not being able to give up the banana means the monkey is trapped and caught. We see many businesses are trapped in a monkey jar of their own making.
Every business begins its life as a start-up. During this phase, its founders are on a quest to find a profitable, sustainable market. The odds are that most fail and perish before they are successful in finding their ‘cheese.’ Those that are successful then try to scale. This can take years. Success in this scaling phase comes down to learning how to switch from an entrepreneurial modus operandi to a more corporate management approach. Entrepreneurs are driven by opportunity and characterised by exploring. Corporate managers are characterised by exploiting a proven business model increasing efficiency and consistency. Efficiency and consistency are necessary (but not sufficient) to scale. During this transition some businesses fail because they can’t solve the efficiency problem and end up with too many costs. Others fail because they can’t solve the complexity problem and delivery poor quality at volume. Some fail simply because they grow too fast and become insolvent. Despite the triple threat scaling involves, it is less risky than the start-up.
But it is in the scaling phase that businesses somehow lose their ability to explore.
It’s almost as if their owners don’t believe in their team’s underlying capability or the systems in the firm. They operate as if the business has achieved its market position and profitability by luck. All too often the switch from entrepreneurs to corporate managers means explorers become exploiters.
Nothing lasts forever, and ultimately whatever market opportunity the business originally found erodes. This could be due to competition, technological changes, regulatory reform or market preference shifts. The change can be gradual as the market environment evolves, or rapid if caused by disruptive innovations.
Businesses unable to adapt as their market environment changes will ultimately fail.
Ironically, the research suggests most managers in large business failures were not surprised by their fate. They saw the decline coming. In every case, they were simply unable to switch from exploiting mode to exploring mode in time to find a new profitable and sustainable market. Their very success was the monkey jar of their downfall.
This problem of how to balance the conflicting strategic focus across different time horizons can be simply stated: “Do we stay with the current dwindling pile of cheese or venture out in search of a new cheese source?”
Twenty years on from Johnson’s elusive cheese, business markets are more like mazes than ever. Now they are just harder to navigate. The walls of the maze move as technology advances. The size of the maze increases as globalisation links different markets together. Globalisation increases both opportunity and competition.
Firms are no longer mice. Many have become predators. They build ever more clever traps to catch their customers. It is consumers who are the unwitting Mice wandering around the maze of the market. The predators bait their traps with evermore enticing cheese with the end goal of locking in their prey for as long as possible. These predators want to extract as much from their prey as they can.
Sophisticated traps include things like:
– Subscription contracts designed to compel overconsumption
– Finance products with exit penalties for early repayment
– Requiring the use of overpriced genuine parts to maintain product warranties
– Proprietary connectors to prevent compatibility with rivals’ products or add-ons
– Using two-factor authentication to prevent customers sharing log in details
– Building product ecosystems as mini-mazes to confound customer churn
– Designing shopping spaces with hard-to-find exits
– Locating commonly sought products far from exits to compel more time in the store
– Including in-game bonuses to prompt social media sharing to attract more players
– Offering free drinks to patrons to get them to stay longer and gamble more
– Delaying food service to diners to get them to order more pre-dinner drinks
– Increasing ‘hurry-up-and-wait’ delays at airports to coerce impulse spending as a relief
– Lobbying for laws that restrict free market competition to hold up prices
– Building ‘confusopolies’3 where changing features and prices hinder finding the best value
Businesses doing things on the list above have disappointingly shifted their focus away from earning their keep through providing customer value. Instead, they focus on tricking customers into making a poor purchase decision in favour of their firm. They avoid innovating to create more value. This attitude is the worst amongst executives in large corporates who single-mindedly pursue performance bonuses with an ‘ends justify the means’ philosophy. Ironically, it is this group who become the most trapped as Monkeys locked into a jar of their own making. Instead of exploring for new ways to add value, they erect more of the same type of trap, in the same part of the maze, perhaps with new types of cheese and more subtle snags.
They hope to catch more unsuspecting and careless Mice. They get most excited when they can find rich, dumb customers.
Could algae or seaweed replace oil, gas, and coal for energy generation?
One of the best examples of the Monkey Jar problem is the energy industry (5). The big players in oil, gas, and coal have huge sunk investments in maintaining the status quo. The problem is twofold.
Firstly, oil, gas, and coal will eventually run out. Secondly, it seems before they do, the continued use of fossil fuels will have an adverse effect on our climate. There has been a lot of effort to get solar and wind power generation to work at scale. These technologies kind of work, but they are more expensive, less reliable, and need far more land than fossil fuels (assuming you leave out the cost of climate change like most markets during our history using oil)(6). According to a report published by Reuters (7) the largest 24 oil companies invested 1% of their capital budgets in wind, solar, and battery technologies. In the same report, critics assert the investment is much less than spending to block climate initiatives and regulations and fossil fuel projects. Shell is one of the largest players and most forward-thinking in terms of investment, but even it is apparently stuck in a Monkey Jar. Here is copy from their Energy Future website (8):
“As the energy system evolves, hydrocarbons will continue to play a vital role in the coming decades, providing much-needed energy to fuel transport, in particular aviation, and make everyday products from plastics to steel . . . Today, natural gas – the cleanest-burning hydrocarbon – makes up more than half of our production. We believe it will be vital to building a sustainable energy future, especially in power generation, where it produces around half the CO2 and just one-tenth the air pollutants that coal does. We are involved in several projects to safely capture and store CO2 to mitigate the use of hydrocarbons. These depend on government support to be financially viable and to become more widespread. Replacing a coal-fired power plant with a gas-fired plant that has CCS can cut CO2 emissions by up to 90%. We also have a decade of experience in wind power, with involvement in nine projects in North America and Europe.”
The sector is shifting more to natural gas. Natural gas is cleaner than other fossil fuels and is often used to help manage reliability issues with solar and wind energy. However, there are other clean energy alternatives worth considering.
A range of companies are now exploring algae or seaweed for their potential to replace oil.
These fast-growing plants produce lipids. The lipids can be refined to make diesel, petroleum, and aviation fuel with by-products of food and fertiliser. Algae systems are freshwater and can be based on land or sea. They are typically enclosed and need carbon dioxide and wastewater input. There are both land-based and ocean setups. Typically, the land-based systems need to be near a power station to exploit its CO2 emissions. The ocean setups need to be near sewerage outlets to exploit wastewater. In contrast to algae systems, seaweed systems are usually unenclosed and use natural CO2 and fertiliser runoff from farming. But they still require infrastructure to support the seaweed and additional machines for harvesting. Several different companies are pursuing scaled trials with algae or seaweed, but right now the cost seems to be uncompetitive compared to fossil fuels.
In 2016, Global Algae Innovations was producing fuel at around 10x the price of oil using acres of algae raceways installed beside a power plant in Kauai. They have managed to reduce production costs from $30 per gallon of oil in 2013 down to projecting possibly $2–$3 per gallon at scale (9). At the time of this writing, crude oil costs around $60 per barrel (one barrel = 42 US gallons) or about $1.40 per gallon. Sapphire Founder and director of the California Center for Algae Biotechnology Stephen Mayfield points out algae was already a $US 10 billion global industry in 2015. He asserted replacing 40% of US corn farmland with algae could yield 200 billion gallons of oil. This would have been enough to cover all of the US of annual diesel and petroleum consumption at the time (10).
Project OMEGA is NASA’s attempt at algae energy farming for aviation gas. OMEGA uses plastic tubes of algae located at sea. Like most sea-based installations, energy is only part of what the project is set up to produce. Focusing solely on energy production is uneconomical. NASA is focused on showcasing pollution reduction benefits and the lack of adverse impact on marine life (11). Smith asserted himself as one of the world’s first 3D Ocean farmers (12). He presented his farm as part of the solution to overfishing, unemployment, and clean energy problems. The vertical farm grows a mixture of shellfish and seaweeds to produce local food, organic fertilizer, and biofuel. Both algae and seaweed have a way to go to become economically viable. The suboptimal strategic decision from the major oil companies is not to be exploring these and other technologies beyond just natural gas, wind, and solar to solve our looming energy and climate challenges. It is clear big oil’s customers want cheaper energy.
Over the last decade we have seen examples of businesses trying to improve their customer experience (CX), but still trapped in their own monkey jars. These Monkeys try new CX when their traditional ads fail, online campaigns stall, their investment in the new digital platform or tech widget doesn’t pay out, they realise a lower cost challenger is about to eat their lunch, or they suffer several consecutive periods of revenue contraction. Suddenly they decide they need to work out how to seem more attractive to their customers. Their process is generally the same: They create or ‘steal’ some budget, hire experts (consultants or executives), do some customer research, build a journey map, create a change roadmap, fail to fix most pain points, fail to meaningfully identify their ideal customers, fail to implement major CX change initiatives, and then they run their ‘experts’ out of town. Their failures are almost always at the execution stage. There are many possible causes of these failures: Returns take too long, cross-silo coordination is too hard, key supporters move, politics intervene, and the changes are too extreme. But the root cause comes down to a single issue. These businesses are not customer-centric at their core. They operate to perpetuate their own existence first and consider dealing with customers only as the means to get there.
As consumer goods organisations strive to rejuvenate growth, they face the task of satisfying changing definitions of consumer value. More customers now prioritise purpose-led brands. Research indicates over 65% of consumers are ready to pay more for sustainable products. Apparently 90% are ready to change to sustainable products if price and quality are the same. Danone has developed a “One Planet. One Health.” organisational-level manifesto and the purpose-led brands at the food giant are growing three times faster than the rest of the firm’s portfolio.
Unilever’s 28 sustainable living brands are growing faster than the firm’s other product ranges. These products are driving 75% of the company’s growth (13).
Growth has been hard to find for consumer products companies over the last decade. The majority of established firms have focused on cutting costs to shield margins. They have avoided developing innovations to connect with the higher purpose so many consumers now value. Almost three-quarters of the leading consumer brands reduced their R&D and innovation spending between 2006 and 2017, and only 2% of sales are dedicated to these vital investments in the future (14).
When consumers or professional buyers evaluate any product or service, they are usually assessing the perception of the product or service versus its asking price. The people involved with the overall process of developing an offering and taking it to market are typically more comfortable with the price side of the equation than they are with the value side. Consumers and buyers all find the value equation is amorphous, psychological, and complex. Developing value propositions for target segments is a challenge. This includes how to identify value and figure out how to deliver more of it. This value can be functional (cost reduction, time saving, increased reliability) or emotional (reducing anxiety, providing entertainment, facilitating social connections). Investing in CX is all about managing customer value.
It turns out the biggest waste for companies trying to do CX is investment in research and design instead of market testing. Instead of replacing their trap with something better for their Mice customers, all they end up doing is lining their current trap with fur. At the end of the day this is less bad for the Mice, but still ultimately bad. Fur-lining the trap includes lowering customer effort scores, increasing transaction security, ensuring invoice accuracy, and everything else related to delivering consistently around hygiene factors. Hygiene factors are the things customers expect because they simply should be there anyway. A vehicle should be safe. A restaurant should have clean toilets. A valid refund request should be honoured immediately.
Customer-facing staff should be polite and know what they are doing.
Forms should only have to be filled out once, ever.
This is certainly (and only) the minimum, but effective CX is just not about making your experience less bad than nearby rivals’ CX. You need more than just a softer lining. You need a silver lining. More than ever before customers warn each other about businesses who seem out to get them – they do this face to face and through social media. But they also share standout customer experiences. This is the ultimate goal of CX management. It is about being remarkable. To offer a remarkable experience, a business must meet conflicting requirements of being both safe enough and novel enough to achieve cut-through. Cut-through occurs when your business grows because your customers share their experiences with others to refer, recommend, or endorse what you do. Happy customers are not just satisfied customers, happy Mice don’t feel less trapped, they feel free. In return they help create business growth for free by spreading the word!
There are many examples in this book showing companies growing fast in crowded markets because they have used lean methods (explicitly or intuitively) to discover new profitable market niches across all parts of their market maze. These are the Gazelles (15) who seem to be able to magically leap the walls of the maze and explore more of the market faster, cheaper, and with less risk than the Monkeys stuck with their jars. This book is about what the Gazelles do differently.
The key difference between the Monkeys and the Gazelles is that the Gazelles are customer-centric. They start with a focus on how to create more value for customers instead of scheming how to exploit them more efficiently. This is an abundance mindset as opposed to the Monkeys’ scarcity mindset. Gazelles have empathy for customers and intuition about what might attract them and get them talking. So they go right out and test their ideas for real in the market. As they learn, they adapt and change on the fly. Once they have enough proof of what works, they scale. Many of the Gazelles in this book are start-ups recently grown to scale, but there is no intrinsic reason larger corporates can’t copy the Gazelles to grow fast as well. They can certainly afford to in the short term and can’t afford not to in the long term. They just need to learn why and how. For smaller firms, Lean CX offers a repeatable process to search for their first source of cheese with more of a system, so they too can transform into Gazelles.
Despite its title and focus, this book is actually about ambidexterity. The content covers a range of lean management processes validated in real world organisations.
If you apply the tools outlined in this book, you will learn how to find and implement cut-through for your business. While there are many ways you might get cut-through, this book is specifically about achieving growth through delivering a superior customer experience. But more than that, the book is about how companies can simultaneously exploit their existing market opportunities and explore new ways to add value. The most common way to achieve organisational ambidexterity involves a structural fix where a firm splits into two parts. One part is for business as usual and the other is for so-called ‘skunk works’ to do innovation (16). Lean CX offers an alternative: Instead of a structural change, which creates resource allocation conflicts, use the tools outlined in this book. Instead of trying to squeeze more out of customers, search for ways to innovate and create more value to share in. The CX part helps both with where to search and what to look for. The Lean part lower the risks and costs of the traditional CX management approaches we have seen over last decade. To help you navigate more easily to topics relevant to your size of business, the book is divided into sections:
Chapter 1 provides reasons why changing the approach to CX is critical. It covers the issues of how and why many firms’ CX investments have not been as successful as they had hoped. It also outlines the potential of CX to transform businesses and move the needle on performance for a comparatively small, low-risk investment compared to other innovation options. Read this chapter if you are looking to get traction to try some, more, or any CX improvements in your business.
Chapter 2 is a primer on lean management. It covers Lean’s primary objective of eliminating waste and how this applies to the execution problem for innovation generally. This is expanded to show how reversing the traditional processes companies use to improve their CX can lower the costs and risks involved. Finally, the core process of Lean is introduced. This is the agile management cycle. Read this chapter if you are not familiar with lean or agile management. You should read this chapter and the first chapter if you believe the traditional waterfall process for CX improvement is still the way to go.
Chapter 3 covers creating cut-through. Businesses that grow rapidly do so because they have spare capacity matched to a previously unmet or unrealised market potential. The chapter introduces two places to search for such sweet spots. The external search involves the idea of adjacent market positioning. The internal search involves applying the MAYA design principle (17). MAYA means Most Advanced Yet Acceptable. If you are into high-level strategy, this chapter is foundational and conceptual.
You can skip it if you just want to get directly into what is it is you need to actually do.
Chapter 4 introduces Human Centred Design (HCD). HCD is not so much a discipline as a philosophy based on empathy for the user or customer. The core HCD values are close to the ideals of customer centricity with the main difference being the latter is explicit about commercial considerations. To deliver more customer-centric experiences, this chapter presents a practical model of applied customer psychology and an introduction to the complexities of three-level cognition. Three design methods for CX innovation are shared: the TERMS transaction framework, the Kano quality framework, and the CAPFUL personal needs framework.
How to quickly find relevant cases and examples
We have formatted the mini case studies in the book like this section so it is easy to find concrete examples. There is also a list at the beginning of the book, so you can see examples from specific companies or industries you might know. Each of the formatted examples is coded first for CAPFUL needs (explained in more detail in Chapter 4) and then for whether the CX is positive or negative for customers. The CAPFUL acronym includes six different psychological needs (18):
C +|- Certainty and safety
A +|- Advancement and growth
P +|- Prestige and status
F +|- Fulfilment and meaning
U +|- Uncommon and novel
L +|- Love and belonging
This makes it easy to look up examples to help with inspiration in improving your own CX. For example, a C- case is one where the experience tends to reduce customers’ feelings of certainty (not normally a way to foster goodwill). In contrast, a case coded N+ is an example where something novel in the experience tends to pique customers interests in a good way.
Chapter 4 also suggests an inherent reversal in how lean management applies to CX. In order to reduce experience-related waste in a business, you should work on how to actually reduce the waste on the customer’s side. However, reducing the waste customers experience can increase the costs required on the business side of the transaction. Balancing the two sides can be non-trivial. Generally we find managers are much better at cost management than experience management. HCD is important to cover if you have never tried to design a CX improvement, or been involved in something like new product development or identifying potential new customer value propositions (CVPs).
Chapter 5 presents a modified version of the Kanban method from lean as it applies to CX. This chapter includes the templates for creating testing plans for individual CX initiatives. The summary is critical for being able to conduct split testing for optimisations and identifying when pivots are appropriate to consider for cut-through.
At its heart, the lean CX process uses empathy to design a CX innovation and outline it in two pages, then conducts small-scale market tests, pivoting until you find what cuts through. Finally, split testing is conducted to optimise before scaling. This chapter contains the nuts and bolts of how to manage Lean CX innovation.
Chapter 6 switches focus from B2C to B2B market contexts. CX is still relevant in B2B with some additional considerations. Individual customers become client organisations with multiple decision makers and users. This creates differences in B2B marketing, delivery, service, and support. A framework for dealing with the different buyer types inside client organisations is presented and the concept of client centricity is compared and contrasted with the customer centricity concept introduced in Chapter 4. You can safely skip this chapter if you don’t work in a B2B context, unless you want to get an additional perspective on providing CX for organisations.
Finally, Chapter 7 concludes the book with a discussion of how future organisations might evolve to apply Lean CX to solve the organisational ambidexterity problem.
This chapter is perhaps the most aspirational (and risky) because it presents new ideas about how organisations might simultaneously exploit and explore. The approach is inspired by hive insects (like bees and ants). These creatures allocate resources between harvesting known food sources and searching for new food sources without centralised management controls. The ‘swarming’ paradigm presented builds a case for episodic roles, slack resources, and decentralised controls. These concepts tend to conflict with much of the accepted best practices about how to run a corporation with good corporate governance. So this chapter (unlike the previous) is more of a guess about a new organisational form than a description of current best practices. In short, it is an interesting possibility. Read this chapter to get ideas on how to integrate Lean CX in your business in an (almost) unprecedented way; however, consider the ideas with a grain of salt as they are largely unproven in the market at the time of this writing based on our research. More than the other chapters, this one represents the frontier of Lean CX thinking.
It is our hope as authors that as you read this book you will make a choice to transform your Monkey firm into an elegant Gazelle. This is because we are all customer Mice of the many businesses out there and enjoy or suffer the CX they offer us. It would be much nicer to be talking about the value great companies offer us, instead of warning other Mice about the traps we have fallen foul of in the market.
Don’t you think?
Did you enjoy the introduction to Lean CX?
Endnotes
1 Businessroundtable.org
2 Johnson (1998). Who Moved My Cheese? An Amazing Way to Deal with Change in Your Work and in Your Life, Putnam Adult, https://en.wikipedia.org/wiki/Who_Moved_My_Cheese%3F
3 Scott Adams coined this term in his famous Dilbert cartoon see https://en.wikipedia.org/wiki/Confusopoly
4 See box ‘How to quickly find relevant cases and examples’ later in this Introduction.
5 Mayfield (2015). Food and Fuel for the 21st Century – Algae and the Green Revolution 2.0 with Stephen Mayfield [from https://www.uctv.tv/shows/Food-and-Fuel-for-the-21st-Century-Algae-and-the-Green-Revolution-2-0-with-Stephen-Mayfield-Cavendish-Global-Impact-Forum-29682 last accessed 14/7/19].
Mayfield asserted oil (then at $200/barrel) would never return to $20/barrel, and peak oil production had occurred in 2007.
6 Shellenberger (2018). Why Renewables Can’t Save The Planet [from http://www.tedxdanubia.com/videos?performer=2888, last accessed 14/7/19].
7 Bousso (2018). Big Oil Spent 1 percent on Green Energy in 2018 [from https://www.reuters.com/article/us-oil-renewables/big-oil-spent-1-percent-on-green-energy-in-2018-idUSKCN1NH004, last accessed14/7/19].
8 See https://www.shell.com.au/energy-and-innovation/the-energy-future.html [last accessed 14/7/19].
9 See Global Algae Solutions press releases [from http://www.globalgae.com/news, last accessed 14/7/19].
10 Ibid., footnote 3.
11 NASA (2012). NASA Showcases Innovative Method to Grow Algae-Based Biofuels https://www.nasa.gov/centers/ames/news/features/2012/omega_algae_feature.html (accessed 14/7/19).
12 Smith “Vertical Ocean Farming – The Least Deadliest Catch” TEDxBermuda https://www.youtube.com/watch?v=j8ViaskDSeI (accessed 30/7/20).
13 Gadiesh et al. (2019). “The Power of Delivering Elements of Value® in Consumer Products”
https://www.bain.com/insights/the-power-of-delivering-elements-of-value-in-consumer-products/ (accessed 5/8/20).
14 Ibid.
15 Birch (1987) Job Creation in America: How Our Smallest Companies Put the Most People to Work, Free Press. A Gazelle is a high-growth company with at least 20% year-on-year revenue growth for four years or more, starting from at least $100,000 sales in year one. Birch contended Gazelles (around 4% of all companies) created 70% of new jobs in the US economy.
16 Skunk works are separate divisions inside a company created to do innovation without having to comply with the normal KPIs and processes of business as usual. See Chapter 7.
17 See https://www.interaction-design.org/literature/article/design-for-the-future-but-balance-itwith-your-users-present for an overview of MAYA and its creator Raymond Loewy.
18 This list of needs is adapted from Tony Robbins’ concepts of basic human needs, which in turn seemed to be a reformulation of Maslow’s Hierarchy of Needs from Maslow (1943). “A theory of human motivation,” Psychological Review Vol 50 Iss 4 Pages 370–396. We first came across Robbins’ work at a live event, but check out https://www.tonyrobbins.com/mind-meaning/do-youneed-to-feel-significant/ for an overview. All we did was create the CAPFUL acronym to make them easy to remember.
Recommended further reading: Customer Experience Innovation - How to Get a Lasting Market Edge