The customer experience is the most powerful — and misunderstood — element of corporate strategy today. Customer experience is, quite simply, how your customers perceive their every interaction with your company. It’s a fundamental business driver. Here’s proof: over a recent five-year period during which the S&P 500 was flat, the stock portfolio of customer experience leaders grew twenty two percent. In an age when customers have access to vast amounts of data about your company and its competitors, customer experience is the only sustainable source of competitive advantage. But how to excel at it?

This book sets out how companies are re-thinking their attitudes. Big is no longer beautiful and many big names are beginning to appoint and employ CCO's (Chief Customer Officers) at the same level of the CFO, CIO etc. reporting directly to the CEO. This book also explains how companies have to learn that "this is a journey, not a project; it has a beginning, but it doesn't have an end", a quote eloquently made by one of their interviewees in the research for this book.

The new reality is that customers have more choices than ever before, courtesy of our global economy. They have options galore, information (and with it, information overload), and a multitude of devices that enable access to almost anything, anywhere, anytime. By most counts, this is a good thing. But until organizations get their arms around their part in mastering the equation, it continues to be a source of uncertainty for some, and even angst for others.

Manning points out: “What we concluded was that companies that want to survive and thrive in today’s reality will adopt a perspective that reflects today’s reality — a reality where the balance of power has shifted to their customers. It’s a perspective that we call ‘Outside In’, which was also the genesis of our book about customer experience.”

At the start, there’s the customer journey. Customer experiences are how customers perceive their interactions with a company. That seems obvious enough. One way to think about it is through the lens of the “customer experience pyramid.” This is a model in which the “base” equates to meeting customer needs. The next step up centers on “ease” — how easy is a company to do business with? And at the top is the “enjoyment factor,” where the best experiences are pleasurable and can lead to loyalty, the ultimate nirvana.

At Forrester, Manning and his colleagues study the most important things that companies do to create superior customer experiences. Taking it a step further, he highlighted the “6 Principles of CX” — Strategy, Customer Understanding, Design, Measurement, Governance and Culture. Companies that want to produce a high-quality customer experience need to routinely perform a set of sound, standard practices that fall under six high-level principles:

1. Strategy: First, you need to describe the attributes of the intended customer experience and ensure that your vision is consistent with your corporate strategy and brand.

2. Customer understanding: Your strategy needs to be informed by a shared understanding of who your customers are, how they perceive the interactions they're having with your company today, and what they want and need from your company in the future.

3. Design: Once you understand your customers' needs, you can use those insights as part of a human-centered design process that includes iterative idea generation, prototyping and testing to define new interactions or improve existing ones.

4. Measurement: After you design (or redesign) customer interactions, you need to determine whether they're having the effect you intended. That means you need to quantify customer experience quality in a consistent manner across the enterprise and deliver actionable insights to employees and partners.

5. Governance: Customer insights and metrics are most valuable when you use them to identify and fix customer problems. To ensure that your company acts on these inputs consistently, you need to proactively manage and oversee customer experience improvement initiatives.

6. Culture: To make sure that employees actually adopt all of the above disciplines, you need to create a system of shared values and behaviors that focus employees on delivering a great customer experience.

In most industries, customer experience is the greatest untapped source for decreasing costs. For example, Fidelity Investments spent a modest $20,000 to fix a problem that made it difficult for customers to log into their accounts through the company's automated phone system. This single fix saves Fidelity $4 million a year by averting calls to customer service. And it's just one of more than 160 projects that came through Fidelity's experience improvement system in 2011. Together those projects account for over $24 million in annual savings.

Customer experience also drives increased revenue. Several years ago, B2B technology reseller and service provider CDW added a question to the customer survey it fields: "What additional things would you like to talk to your sales team about?" The company funneled the answers to this new question to the appropriate account managers. The account managers, in turn, closed the loop by getting back to the customers with a simple message: You told us that you have a need; we'd like to offer you something that could meet that need. And guess what? Customers took the CDW sales reps up on it. This seemingly simple innovation drove more than $200 million in incremental revenue in just one year.

Despite its economic power, customer experience remains the most misunderstood element of corporate strategy today. Many companies talk about the importance of customer experience. But to achieve the full potential of customer experience as a business strategy, you have to change the way you run your business. You must manage your business from the outside in — bringing the perspective of your customers to every decision you make — and you must do it in a systematic and repeatable way.

What’s the best way to optimize your customer experience? Why not fix it at the source? Improve the experience on your website. Improve the experience in your retail locations or call centers. This strategy makes perfect sense, and it aligns nicely with the way your company is probably organized — with the website, retail locations, and contact centers each in their neat little silo.

But based on the research of Harley Manning and Kerry Bodine, this natural strategy doesn’t work because it lacks any understanding of the larger, cross-channel journeys that your customers take.

Over the past years, there has been an increase in the number of companies that have a single executive leading customer experience efforts across channels and business units. Whether firms call them chief customer officers or give them some other label, these leaders sit at high levels of power in organizations as diverse as Fidelity, General Motors, and The Washington Post.

Companies typically appoint a chief customer officer (CCO) to drive change that needs to cut across channels and business units. For example, in the case of Walgreens, CEO Greg Wasson personally recruited a chief customer officer to help bring about his vision for transforming the company. That vision includes reinventing the pharmacy by letting customers do things like order prescriptions online, then pick them up at in-store kiosks. That in turn frees up pharmacists to get out from behind their counters — which are lower in Walgreens’ new store formats — and spend time counseling customers.

Completely transforming how you interact with customers is a larger, more complex task than simply optimizing channels to work better as a whole. Walgreens’ CCO does a number of things to make that transformation happen, including organizing facts gathered through customer understanding programs to clarify what customers actually want. Based on that understanding and the company’s strategy, he leads change management efforts aimed at improving the customer experience. And he measures results to make sure that transformation efforts are actually happening and producing positive results.

Adopting these tactics requires no more commitment than what companies typically apply to practices they routinely perform in business disciplines like marketing, pricing and logistics. But the business benefits of improving customer experience across channels remain in the cloudy, undisciplined “nice to have” parts of most businesses. It’s time to put customer experience on par with other business disciplines, so every part of the business thinks from the customers’ perspective — from the outside in.

Kerry Bodine is an independent customer experience consultant with expertise in human-centered design, marketing and branding. She helps executives co-create innovative products, services and experiences that truly matter — for their customers, for their employees and for their businesses.Kerry spent seven years with the customer experience practice at Forrester Research. As Vice President and Principal Analyst, she led Forrester’s research on customer experience design and innovation. She was also the creative force behind the customer experience ecosystem, a framework that helps companies diagnose and fix customer problems at their roots.