What's the secret to a winning business model and long-term competitive advantage? It's not just about technology, products and services. Your customer experience may just be the ultimate competitive advantage.

Strategy and innovation experts Nicolaj Siggelkow and Christian Terwiesch just published a new book called Connected Strategy: Building Continuous Customer Relationships for Competitive Advantage.  The authors contend that at every step of the customer experiences continuum there's an opportunity to either delight customers, or uncover a pain point or negative experience for them that can be turned into an opportunity.

Customer "journey maps" have been around a long time. Understanding the steps customers go through allows you to simplify or add value within a step or across the full journey.  Siggelkow and Terwiesch distinguish three phases of any customer journey:

  • Recognize--the part of the journey where a latent need of the customer arises and either the customer or the firm is made aware of it
  • Request--the part of the journey where the need is translated into a request for a solution to the particular need
  • Respond--the part of the journey where the customer receives and experiences the solution.

Their research into connected strategies revealed four distinct approaches that organizations use to reduce the friction within the customer journey--i.e., four types of connected customer experiences. These customer experiences are distinguished by the part of the customer journey they affect.

  • The Respond-to-Desire connected customer experience starts at the point in the journey when a customer knows precisely what he or she wants. The company's goal then is to make it as easy as possible for the customer to order, pay for, and receive the desired product in the desired quantity. Thus, respond-to-desire really smoothens the "Respond" part of the customer journey.
  • The Curated Offering customer experience acts further upstream in the journey by helping the customer find the best possible option that would fulfill his or her needs; it helps with the request. Both respond-to-desire and curated offering experiences can only work if customers are aware of their needs.
  • Firms creating a Coach Behavior customer experience help their customers at exactly that part of their journey: they raise awareness of needs and nudge the customer into action, essentially helping with the Recognize stage of the customer journey.
  • Lastly, when the firm becomes aware of a customer need even before the customer is aware of it, it is possible to create an Automatic Execution customer experience, where the firm solves the need of the customer proactively. In this case, the company can short-cut the customer journey tremendously.

Even when you deliver on these customer experiences, there's another element critical to create a truly connected customer relationship: Repeat. If a firm is able to learn from repeated interactions with a customer, it can become better with the Recognize, Request and Response sequence. What makes the repeat dimension so powerful is that it involves positive feedback effects that, over time, can create a tremendous, sustainable competitive advantage.

A tight fit between customer needs and available products--the high degree of personalization--leads to more value, either in the form of higher willingness-to-pay by the customer or by higher efficiency. This allows the firm to provide more value to current customers, creating more future interactions with these customers, which increases the individual-level learning. At the same time, the increased value allows the firm to attract new customers, enhancing the widespread learning. With more learning at the individual and population levels, the firm continuously improves, creating ever-increasing degrees of personalization. It is a process that feeds on itself and can allow a company to get ahead of its competitors and continue to expand its competitive advantage.