In the last few years, Experience Management has emerged as one of the biggest differentiators behind business success. Yet for far too many organisations, Experience Management – or XM – is only just starting to be incorporated into business processes.

In its simplest form, XM is the process of monitoring every interaction people experience with a company in order to spot opportunities for improvement. By understanding what people are feeling and why, companies can focus their efforts and resources on the changes that will have the biggest impact on their customers or employees.

The first step to effective XM is understanding how people feel when they interact with your business. This information is called Experience, or X-data. When this is combined with traditional, operational or ‘O-data’, such as sales numbers, processing times or staff turnover, it enables companies to understand what is happening and what they need to do to fix or improve operations.

Experience Management is already big business: the market is now estimated at more than USD$44bn annually. In Australia, XM has been adopted by the likes of Volkswagen, Chobani, Allianz, Finder, Fuji Xerox, and Sigma Healthcare. In fact, Gartner’s 2019 Customer Experience Management Survey revealed that 90% of the world’s biggest companies now have a chief experience officer (CXO) or chief customer officer (CCO), up from 65% in 2017.

Insight into action

It’s not hard to understand why XM is growing so fast. It’s a real driver of business results. Since implementing an XM program, Sigma Healthcare has seen its Net Promoter Score increase by +49 points, while average order sizes have increased by 8%. But beyond the bottom line, Experience Management is also a clear driver of innovation.

At SAP, we believe in the Human-Centred Approach to Innovation. This is an approach that is founded on empathy for the stakeholders involved. Working through the phases of an innovation roadmap (Explore, Discover, Design, Deliver, Run & Scale) you quickly realise how intertwined Experience and Innovation are.

In fact, in many ways successful XM and innovation programs are very similar. Often a fundamental driver of innovation is the need to improve experience.  One common example of poor XM I regularly witness is employees double handling information – due to siloed teams and inefficient processes – which leads to errors, frustration, and wasted effort. Often, this can be solved with innovative approaches and technology, like process automation, edge computing, or new mobile applications.

Getting to the root of a problem

In this example, by using XM to understand the biggest frustrations your employees are facing – and what they want to fix the issues – businesses can get a crystal-clear understanding of the problem, which is the first step on any innovation journey. Key to this approach is gaining empathy for the users by understanding their experience.

What’s more, by engaging and empowering the employees on the front-line, who typically have the best understanding of current systems and how they could be improved, XM also enables organisations to capture feedback and ideas which might not otherwise see the light of day.

Take for example a business complaining of a lack of repeat sales. Through XM, the business can identify that the problem is not the product, the sales process, or even the pricing. Instead, it might reveal the biggest problem is the after sales and service process.

A better understanding of the problem (and the users) helps inform potential solutions. In this instance, rather than dropping the sales price or introducing self-service scenarios, Experience Management enables the business to understand that technology like chat bots, connected products, or digital twins may result in a better outcome. Grounding innovation in deep insights means better problem solving and results.

Empathy and innovation

Using techniques from Experience Management allows businesses to truly empathise with customers. The reality is that too many businesses believe that they understand the problems faced by their customers or employees already. But if organisations do not ask users about the issues they’re facing, and why they’re problematic, it’s impossible for them to get the real picture.

When it comes to solving problems, generating ideas from many different points of view greatly increases your chances of successful innovation. Experience Management is a powerful way of gathering a diversity of opinions and involving stakeholders in the innovation journey. Of course, finding a problem and generating potential solutions is not the end of innovation. But as companies like Chobani prove, user-testing new products at scale with Experience Management means you can get real time feedback on new products and a cycle of continuous innovation improvement.

These days, more than ever, staying one step ahead of the competition is the key to success. Businesses need to ask themselves: are your employees, customers, and partners having their expectations met? Understanding their expectations will be the first step in an effective innovation journey and will ensure you are competing well into the future.

This article first appeared on InsideSAP.