Original Article by Jon Arnold
I’ve been reading an advance copy of Empathy in Action, and while I don’t write book reviews as a matter of course, I view this as a creative form of thought leadership about what customer service needs to look like in 2022.
Just to be clear, in case the above title suggests a modern-day pulp romance novel, the full title should clear things up: “Empathy in Action – How to Deliver Great Customer Experiences at Scale.” This brand-new book was co-authored by Tony Bates and Dr. Natalie Petouhoff; Chairman and CEO of Genesys, and Sr. Customer Experience Strategist at Genesys, respectively. Both are seasoned executives in the world of customer experience, and have distilled their latest thinking in this book.
If you don’t know my work as an independent technology analyst, customer experience is a core focus area, and Genesys is one of many companies I closely follow in my practice.
History Foreshadows CX Problems
I chose to focus my review around Chapter 3 – History Foreshadows CX Problems – because as the title suggests, what has come before is often a good indicator of what is to come. History really does repeat itself, but only to the extent we don’t learn from our mistakes.
As an analyst, our stock-in-trade is explaining technology solutions, and while the subsequent chapters cover this in detail, I’m more interested in root cause analysis. Until you properly understand your business problems and what’s causing them, you’ll never pick the right technology solution. You can certainly get lucky, but without getting to the root cause, you’re just guessing – and remember, the customer is always right.
Chapter 3 covers this ground very well, and – doing my own foreshadowing here – when you consider the way businesses have traditionally thought about their customers, it’s not surprising that customer service has long been so problematic. Of course, this is much more than a technology problem, and Chapter 3 connects the dots to show how the past leads to the present. Once cause-and-effect is established, your odds of success going from a problematic present to a rewarding future improve considerably.
Before connecting those dots, it’s important to note the strong foundation provided in Chapters 1 and 2. A key idea from those chapters is how traditional business models are part of the root cause of poor customer service; namely how decisions tend to be based on metrics that define success, such as revenues and profits. While this model has served businesses well in the past, today’s customers are more empowered, and loyalty and experiences are the new battlegrounds.
This is why customer experience – CX – has become so important, at least among businesses that understand two things. First, when CX is great, both top- and bottom-line metrics improve, not just short-term, but long-term as well. Perhaps more importantly, the absence of great CX produces the opposite results, often catching management by surprise – precisely because they haven’t paid attention to the warning signs.
Chapter 3 does a great job showing how to prevent that, and ultimately help businesses to learn from history, adapt accordingly, and avoid repeating the past. My analysis below helps connect those dots, and to really tie all this together, I urge you to give careful thought to the Empathy in Action Equation outlined in Chapter 1.
There are always warning signs
At the outset of Chapter 3, the authors make clear that when disruption happens, “situations never become crises overnight.” When companies get blindsided by change, some respond fast enough to right the ship, but those that do not quickly lose relevance. The key to adapting successfully is to pick up the warning signs and pay attention to what is driving change in the market.
This sounds easy enough to do, but the problem tends to be rooted in long-standing business models that aren’t aligned with the times. The authors note that most of these business models are inward-looking, focused on operations and financial performance. Behaviors are based on what’s best for the business, but that can be problematic if the forces of change are coming externally.
When the needs of customers – as well as employees – are secondary, the warning signs will be missed almost every time. Blame can readily be assigned to broken systems or outdated technology because that’s what these business models are built around. These may be valid issues, but not the root cause, and the answers will come too late.
Instead, the authors contend that businesses built around “human empathy and integrity” will catch the warning signs early enough to adapt effectively to disruption. This is a different model – one that is employee and customer-centric – and will provide better indicators of change than legacy, inward-looking models that have been pervasive for so long.
Clearly, times have changed, as markets are more competitive now, and customers have far greater choices from whom they can buy. Followers of Genesys know how central empathy is to their business focus, so it’s not surprising to see empathy being a common thread throughout the book. That aside, without empathy, business leaders will never pick up on what their employees and customers are telling them – or can tell them – about what’s changing in the market.
You don’t respect me, so I don’t trust you
That phrase sums up all kinds of toxic relationships, and for many businesses, this is what happens when customers are not treated with empathy and integrity. Businesses built solely around company and shareholder profit will never see the warning signs.
The authors use the “freemium model” to illustrate how treating customers as commodities can quickly unravel. For example, television – especially in its earlier days – provided viewers with free programming, but was often used to profit from consumers through advertising rather than delivering value to the customer.
These advertisers had little or no interest in catering to the needs of the individual customers. Rather than talking “to” customers – which implies empathy and integrity for wanting a personal dialog – advertisers talk “at” customers.
The point is that there’s no respect being shown here for viewers as individuals, and when that realization is reached, there’s no longer any trust, rendering the relationship as being wholly transactional. That’s not a recipe for success in 2022, and it’s the complete antithesis of today’s CX model, where everything is about respecting the customer and building trust.
At its core, CX is about any and all interactions with your company, your brand, and your product/service. Prior to the rise of digital transformation, these interactions primarily occurred with the contact center, where customer service was defined by their engagement with agents.
To a large extent this remains true, but there are now many digital channels and touchpoints both inside and outside the contact center, all of which contribute to CX. As such, today’s customer “experience” must be understood in this broader context, where their interaction with agents only tells part of the story.
Call to action – reimagining your business model
With that buildup to the problem set – along with the importance of understanding root causes – the Chapter 3 narrative shifts to providing a solution. All the best technology in the world won’t make a difference if you don’t have a customer-centric culture, or if your core values aren’t built around empathy, integrity, and respect. The pursuit of growing revenues and profits can be sustainable, but only if the business can stay attuned to market shifts, and has a workforce that will follow the vision of its leaders.
The bigger idea here is to recognize we’re at a “turning point” in today’s digital world, and need to “reimagine the corporate model.” That may sound more like revolution than evolution, and for businesses that remain hard-wired to that inward-looking model, it will be. Companies face relentless competition where missing market shifts can sink the business quickly.
This re-imagining isn’t about looking at technology in a new way – it’s about culture change built around customers and connecting with them in more meaningful ways. CX definitely has a role to play here, in that the business strategy needs to shift from selling products and services to selling experiences. This is the best way today to create differentiation, but you need a customer-centric culture to know what those experiences need to be.
That’s all well and good in a stable environment, but these days, when technology changes, it’s often disruptive, in which case those differentiating experiences may no longer be relevant. Revolution instead of evolution comes to mind here as well, as big changes and challenges are now imposed on the business. This is where having the right business model really matters, not just for knowing why those changes are happening, but also to see how that translates into new value for customers.
The solution – the Exponential Business Model
Now we get to one of the book’s core ideas – the Exponential Business Model – which provides a construct to show how things unfold when disruption occurs. As noted earlier, this is where companies get blindsided because they miss the shifts early on, and by the time they see what’s around the corner, the changes become disruptive and they cannot respond fast enough to stay relevant. The following visual of the model is fully explained in the book, and I’ll break down the key ideas below.
Two types of business models
- Linear – this is the gray line, and exemplifies the inward-looking model cited herein. These businesses respond to changing market conditions based on what’s worked in the past.
- Exponential – this is the red curve, and exemplifies businesses that are customer-centric, and build their culture around empathy, respect, and integrity. This may sound a bit idealistic, but the main idea is that they make decisions based on what the market is telling them, and are willing to embrace new technologies to address changing needs.
Three states over time
- Disappointment – I think “complacency” is more apt here, as this is the time when the early signs of disruption emerge but aren’t yet a threat to businesses with a linear model. For them, change is a linear process with a clear beginning and end – and in their view, it’s something they can control. They don’t natively recognize other patterns – until it’s too late. In contrast, exponential businesses recognize both threat and opportunity early on – and where they see meaningful shifts happening, they start moving in that direction, often while no one else is watching.
- Point of no return – up to this point, both types of businesses continue to grow, but in different ways. For linear businesses, they’re just staying the course, not seeing any reason to change – hence “no sense of urgency.” Exponential businesses tend to be smaller, under the radar, at least for now – but starting from a small base, their growth trajectory is faster, where the momentum is just starting to build. As the model shows, this is the point of inflection where the growth patterns start to diverge, and from this moment on, will be driven entirely by how each type of business is able to respond to the disruption that’s about to hit critical mass.
- Chaos Zone – now, linear businesses are out of their comfort zone, as disruption causes chaos for those who are blindsided – it’s too late for them. All they can do is react, usually by cutting prices while they scramble to chase what’s now driving the market. They didn’t see change coming – or willfully ignored it – and while they struggle to hang on, exponential businesses ride a different curve because they were ready for it. Not only that, but by listening to customers and empowering their workers, they have seen the opportunities for new value and are now poised to dominate and displace their linear competitors.
The Kodak example – definitely not a Kodak moment
There’s a lot to think about here, and as we edge to the end of my book review I’ll cite the example used by the authors to illustrate the model in real life. This may have come to mind for you already, but Kodak really personifies every element of this model. Prior to the rise of digital technology, Kodak pretty much invented consumer photography and owned the market end-to-end.
They made the cameras, the film, the chemicals for processing the film, they did the processing, and finally, they delivered the finished product. This was a perfect form of vertical integration, Kodak-branded all the way – tailor-made for the linear business model. As noted earlier, they respected the customer by making photography fun and accessible for the masses, and in return, earned the trust of consumers. All of this created very high barriers to entry, and at the time, it seemed inconceivable that anyone could challenge Kodak. So, what happened?
In short, digital technology and all the innovation that came with cross-pollinating ideas across industries. The blindsiding came here because Kodak’s linear thinking could only recognize threats from within the photography business. As what often happens with digital technology, disruption occurs because players from outside your world can innovate in new ways that create new forms of value. When mobile phones evolved into digital endpoints, photography became a key value driver. Kodak simply could not – or chose not – to see this as another option for consumer photography. The idea that pictures taken on a mobile phone could rival what Kodak provides was something that a linear model could not process.
In hindsight, the mobile phone space is one of the great digital technology success stories, and as those players kept investing in R&D, digital photography on mobile phones became more than good enough for mass adoption. We’ve all lived through this evolution, and when the point of no return was reached, there was little question who was going to own this market. Aside from producing high quality images, digital pictures from smartphones were instant and had zero cost unless glossy prints were needed. There’s no way Kodak’s business model could compete with that, and in short order, their entire value chain became irrelevant for the mass market.
If that wasn’t enough – and this is where the CX angle ties in – the very nature of digital photography shifted the value proposition from product to experience. With everyone using their phones to take limitless pictures, the experience around all this is what really matters to customers – and this is also the “exponential” part of the model. The utility here for customers scales exponentially at no cost, and with this being a new and different experience from Kodak, new forms of value arise that drive exponential growth for these new disruptors.
In this world, as the authors note, we get innovation around new experiences for “how memories are captured, stored and shared.” A new value chain was being created here, one that Kodak’s linear model could never have seen coming. This type of innovation is very customer-centric, and could only have come from the exponential model. To add insult to injury, the pre-digital world that Kodak was rooted in did envision instant photography – remember Polaroid? They had every opportunity to keep their edge with R&D, but with “no sense of urgency,” they didn’t see what was around the corner until it was too late, so now it’s – remember Kodak?
The big takeaway
By now, we’ve learned how digital technology scales quickly and at nominal cost. That’s very different from the linear model, which is characterized by having expensive operational infrastructure and long product development cycles. The key message from Chapter 3 is that the linear model doesn’t stand a chance in today’s environment, and because the exponential model is so new, many of us don’t understand it, and underestimate its potential.
That’s why businesses based on that model often blindside their linear competitors – they can’t see the warning signs, and they don’t have the culture or leadership to pivot the way exponential businesses do. Today’s new businesses are digital-first and will most certainly follow the exponential model, and with so many competitors still being linear, Kodak will not be the last casualty when technology disruption hits.
If you’re worried about whether your company could be the next Kodak, or if you’re looking for a roadmap to displace their equivalent in your industry, Chapter 3 should serve as your entrée to read the whole book.