June 5, 2018

Market Analysis

Is the employee experience the digital transformation linchpin?

This article first appeared on CIO.com.

Leadership experts have long held that unhappy employees equal unhappy customers. Therefore, the opposite must be true, right? Business leaders, however, must go beyond that simple intuition and determine if an investment in the employee experience will deliver measurable customer experience outcomes.

There’s a new buzzword in town, and it’s taking the industry airwaves by storm. Our industry’s new object of affection: the employee experience.

Of course, the idea that organizations should pay attention to and improve the employee experience in the form of the workplace, the tools, and the processes they use to perform their tasks is not new. But the idea has found a fresh and reinvigorated buzz as vendors and pundits connect it to both the need to improve the customer experience and the broader push around digital transformation.

The thinking goes that the customer experience is now essential to driving competitive value, but that an organization’s employees must have a conducive work environment to deliver such a positive experience to the customer. Ergo, an investment in the employee experience yields value in the form of a winning customer experience.

On the one hand, this is intuitive. Leadership experts have long held that unhappy employees result in unhappy customers, leading to the assumption that the converse must also be true. The resource-strapped business or IT executive, however, must go beyond that simple intuition and determine if an investment in the employee experience will deliver measurable customer experience outcomes, and, if so, where and how to make those investments.

ServiceNow resets around the employee experience

At its recent user conference, ServiceNow placed a significant bet on the rising importance of this connection and the power of the employee experience to drive business transformation.

“If the last ten years has been the consumer revolution, the next 3 to 5 years will be the revolution at work,” stated John Donahoe, ServiceNow’s CEO, in the opening keynote of the company’s recent Knowledge18 conference. The company, in fact, is pivoting its entire go-to-market message around this idea. To wit, it’s new tagline: We make the world of work, work better for people.

ServiceNow, of course, is not the only technology provider making a play for the burgeoning employee experience market, such that it exists. Major companies such as SAP, VMware, and IBM have also dipped their toes into the space. There has also long been a segment of the industry focused on things like measuring employee sentiment and delivering employee collaboration tools.

Still, ServiceNow seems to be pivoting most entirely around this idea and most directly connecting the employee experience to the broader digital transformation trends.

“[Digital transformation] boils down to three things: speed, intelligence, and experience,” explained Chris Bedi, the company’s CIO. “I think we are one of the few platforms that can deliver on that promise of how do you get faster, how do you get smarter, and how do you deliver great experiences.”

And, as the company’s solutions do little to directly impact the customer experience, it seems clear that the company is connecting the dots between a positive employee experience and both improving the customer experience and executing digital transformation.

But is this connection real?

Connecting the dots between the employee and customer experience

While the connection between the employee and customer experience may be intuitive, progressive executives must substantiate and deconstruct it before they can justify meaningful investments.

“There is an undeniable link between employee experience and customer experience,” says Blake Morgan, a customer experience futurist. “Companies that lead in customer experience have 60% more engaged employees, and study after study has shown that investing in employee experience impacts the customer experience and can generate a high ROI for the company.”

Enterprise leaders, however, are understandably gun-shy. Many organizations have made significant past investments in employee engagement and similar initiatives in the hopes of delivering business results — but most have little to show for it.

Recent data, however, suggests that this is not because the connection between the employee and customer experience isn’t real, but because organizations have approached it improperly. In his Harvard Business Review article entitled Why the Millions We Spend on Employee Engagement Buy Us So Little, Jacob Morgan (Blake’s husband) points out that most enterprise efforts have not focused on the totality of the employee experience, but only on a short-term boost in the form of a perk or program.

Through his research, Morgan further deconstructed the employee experience into three components: cultural, technological, and physical. When organizations improved the employee experience across each of these components, the results were clear.

“Compared with other companies, the experiential organizations had more than four times the average profit and more than two times the average revenue,” Morgan reports. “They were also almost 25% smaller, which suggests higher levels of productivity and innovation.”

This connection between the employee and customer experience is driving an unexpected alliance between the Chief Information Officer (CIO) and Chief Human Resources Officer (CHRO) in many organizations. The importance of this newfound alliance may, in fact, prove to be differentiating.

As Andrew Wilson, the CIO of Accenture put it from the main stage at Knowledge18, “The relationship between the HR officer and the CIO is one of the most critical in the modern enterprise.”

All of this would seem to indicate that ServiceNow is at the leading edge of what will shape up to be a significant industry trend and pivot. The question, however, is if they and their varied competitors in the space will be able to execute this far afield from their more familiar domain space.

A muddy future

The challenge for those technology companies trying to help their clients improve the employee experience is two-fold. First, as Jacob Morgan points out, a technology transformation represents just one-third of the employee experience. This limit means that having a consumer-like interface and slick, intuitive, and automated processes will only get organizations so far.

While some technology solutions may also help organizations transform the cultural experience (see, for instance, HappySignals and Zugata), it means that any solution that targets the improvement of the employee experience is, by default, dependent on other significant factors to deliver such improvements and achieve the desired customer and digital transformation outcomes.

Nevertheless, it seems clear that there is plenty of fertile technology ground from which tech companies can harvest improvements in the employee experience.

The second issue, however, may prove more difficult to overcome, even though it is entirely within their control: a discomfort with an employee experience focus.

Even for companies, such as ServiceNow, that have historically focused on IT service delivery and management, the focus on the employee experience, rather than on the more technical needs of the IT organization, may seem foreign.

At the company’s recent Knowledge18 conference, for instance, the executive team was not singing from the same hymn book. While Donahoe’s messaging from the main stage was focused and direct, it became muddied in private conversations with other members of the executive team and even during other main stage presentations.

Despite the new tagline and top-line message, the rest of the messaging was heavily focused on the company’s traditional positioning and could have been pulled from last year’s event. Each executive seemed to have their own interpretation of the new vision, a different way of saying it, and many seemed to have trouble connecting it to their product strategy.

The company’s ecosystem (as represented by its partners on the exhibit floor) seemed likewise out-of-sync with this new messaging. Few of the exhibiting companies focused on anything related to the employee experience.

This discomfort, however, is not unique to ServiceNow. It exists to varying degrees — commensurate with the degree of their pivot — at all of the technology companies looking to address this emerging space.

The question for each of them, therefore, will be whether or not they can transform their own employee cultural experience and become comfortable with this new, decidedly less technical focus — or will they be unable to overcome their own inertia and instead remain focused on delivering technology solutions and serving IT needs.

It is clear that the connection between the employee and customer experience is real and presents a significant opportunity for those technology companies willing to step into this uncomfortable space — and it may just be the linchpin to successful digital transformation for those that get it right.

[Disclosure: ServiceNow and VMware are Intellyx clients. IBM is a past Intellyx client.]


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