What could customer experience possibly have to do with a business model or its innovation? Actually, a lot. I’ll explain by starting with some definitions and drawing out the connections at a high level.
A business model describes the rationale of how your organization creates value for the business & its customers. It is a blueprint for the strategy to be implemented through your organizational structures, processes, and systems. Customer experience (CX), on the other hand is the perception of the interactions your customers have with your business, and it is the business discipline of how your organization designs and manages the experiences along the customers journey. The CX is enabled by the very organization structures, processes, and systems (behind the scenes) that your business designs to execute on its strategy – using the business model as a blueprint. In other words, the building blocks that go into designing a business model can ultimately shape the customer experiences you deliver. You can see where I am going with this.
Let’s look at some of these building blocks and how they could benefit from CX inputs (as shown in Fig.1 above).
Customer Segment is a key one. It is sometimes referred to as the ‘heart’ of the business model. It defines the different groups of people or organizations that the business aims to reach and serve. Once the segments have been identified (broadly), CX methodologies can help in narrowing down the list and understanding their unmet needs. A thorough understanding of the unique needs can help in a) deciding the best distribution channels to reach them, b) the relationships to cultivate with them, and c) the profitability to expect out of them (based on their willingness to pay).
Value Proposition, the other important building block describes the product/ service that creates value for the customer. It solves the customer’s problem for which s/he is willing to pay. Adopting a design thinking approach can not only help you understand and prioritize the customer pain-points to go after, but also design the best bundle of products and services to address them. Also, businesses are increasingly making remarkable CX a key attribute of their value proposition – using customer experience as a basis to differentiate their offerings from competition and create value for their customers.
Channels describe how you reach the customer segments to deliver the value proposition. Each channel can become a critical touch-point in delivering not just the value but also the intentional experience designed by your business. Understanding the current state of experiences, and pain-points can help you re-define the channels & (re)design the interactions your customers have with them. Ideally the customers should perceive interactions with the channels as low effort and high value.
And finally, the Customer Relationships building block. It defines the types of relationships a business establishes with each customer segment. Some of these relationships may need to be high-touch and require your business to provide dedicated personal service. Whereas in other cases (when appropriate) the relationships can be designed to be low-touch. Self service portals (and now ‘chatbots’) and communities are typical examples of such relationships. CX principles can be applied to identify the relationships to establish along the customers journey to maximize the value and optimize the experience.
So, whether you are a two person founding team trying to craft a business model for your startup or an enterprise trying to innovate the business model to transform your business, adding CX methodologies to your toolkit can help you generate game changing business models. Try it and you’ll never want to do it differently. And guess what! your customers will notice it and be grateful.