SAP customers have heard a lot about Qualtrics and Experience Management (XM) since SAP acquired the Utah-based experience management platform. But you may find yourself still wondering how Qualtrics fits in with SAP’s comprehensive product portfolio, or how it could enhance the data you’re already analyzing from your ERP system.
A Human-Driven Mindset
Experience Management—known at SAP as XM—turns out to be more of a mindset than a product. It’s a way to analyze what’s happening across an organization from a human perspective. Where it becomes exponentially more powerful is when you can pair it with the operational data you have living as an asset within your SAP environment. That’s the magic of what SAP refers to as X-data, or experience data, combined with O-data, or operational data. No doubt, the vision for what that could eventually bring to customers may have been part of what drove SAP to acquire Qualtrics.
What You Can See Through the XM Lens
ASUG had a conversation with Bruce Temkin who heads up the XM Institute at Qualtrics to demystify some of the buzzwords around customer experience and to get to the heart of the true value of organizations looking at themselves through the XM lens. We talked about the different areas of an organization that can benefit from a human-centered approach, best practices in customer experience, and some quick wins to help SAP customers build a business case for using XM at their organizations.
Ann Marie: You’ve gone from founding your own company, Temkin Group, to becoming part of Qualtrics. Can you tell us a bit about that?
Bruce: We were acquired by Qualtrics about a month before Qualtrics was acquired by SAP. I like to say that my team went from seven people to 2,007, to 98,007 in a month. At Temkin Group, we were focused on helping large enterprises go through customer experience transformations—looking at everything from how you design experiences, to how you use insights, to how you prepare your culture for change. We were acquired by Qualtrics to build the XM Institute. The XM Institute is an extension of what we were already doing. How do we help the world understand the approaches and methodologies of Experience Management (XM)? How do we provide the content and training so that practitioners around the world can get the value from the vision of XM?
Ann Marie: What does it mean to be a customer-first organization, and what are some of the steps an organization should take when embarking on a culture change to become customer first?
Bruce: I’m going to give you an answer you’re not expecting. I think customer-first organizations need to be employee first. All the work we’ve done shows that the experience you deliver externally reflects who you are internally. You can’t really be customer first externally if you’re not looking in and focusing on your employees. Being customer first externally, to me, requires empathy for human beings. We have to remember that our customers are people, our employees are people.
To me, empathy breaks down into three parts. It’s understanding who an individual is as a person and how they are responding to the environment around them. The second part is a personal reflection on what you’re doing and how your actions are affecting how that individual feels about the world and themselves. The third part of empathy is making decisions about how you were going to treat that individual differently to change how they view themselves in the world.
I think that enterprise empathy looks like that. How do we understand how people are thinking and feeling? How do we look at what we’re doing and how it’s influencing their feelings, and then how do we make changes to affect how they feel? That’s the XM story too.
Being customer first is recognizing that you have an impact on human beings, and it’s like a superpower that an organization is given that they can use to affect both customers and employees. You want to be a superhero who recognizes that. You want to be like Captain Marvel. You want to use those powers effectively.
Ann Marie: Right, exactly. If your employees are not feeling confident or appreciated, that will show.
Bruce: Think about an employee who doesn’t get the skills that they need to do the job. Like you said, that person doesn’t feel appreciated. Then we come out with this big program about how we’re going to be great to our customers. You can already picture the attitude of that employee: “Yeah, right. I’ll go out and treat the customer well. Sure.”
Ann Marie: You didn’t surprise me with your answer, but I think it’s a good one. I like your breakdown of empathy, as well. I agree with you that’s become a buzzword that’s almost lost its meaning. But you presented a very technical way of looking at it that’s really helpful.
Bruce: That’s been my career, even when I was at Forrester for 12 years. We take concepts and put together a simple breakdown of the elements of the concept. It’s hard to learn about a concept that is ill-defined. It’s easier to learn when we break it into three or four elements.
Ann Marie: Why is it important for organizations that have been focused heavily on the operational management side to understand and adopt Experience Management practices?
Bruce: I’m going to give you Bruce’s view. If you think about the history that got us here, SAP has been a big part of bridging technology and operations. We’re almost to the point where technology and operations covers the entire enterprise. It also connects to customers and employees and suppliers outside the enterprise. We’re now all connected through technology and process.
This is why I think XM will become so important for the next couple of decades. The entire system has been built as if the technology and the processes are the primary element and that human beings are merely there to participate in those predefined operations. We’re seeing more people now understand the importance of the human being—that human beings are not just cogs to participate in a set of processes and technology. They are, in fact, the focal point of all of it, whether they’re customers or the employees who participate in it.
We’re shifting to say, OK, we’ve done a good job of understanding and instrumenting the operations, but we haven’t done a good job of understanding and instrumenting the human experience side of things. It’s not that we should stop focusing on our operations and focus completely on XM. This is just a natural evolution to improving our operations.
Ann Marie: What’s the risk of not investing the time in understanding the human side of your organization?
Bruce: Monopolies are breaking down. Product life cycles are shortening. Customers are getting more demanding. The market environment is requiring us to say, how do we understand and adjust to the customer landscape?
Ann Marie: Which of the three major areas—customer experience, employee experience and brand experience—do you think has the most potential to drive competitive advantages for SAP customers?
Bruce: XM is a fabric that runs across your business. For different companies, this answer will be different. If your company needs to differentiate its brand, then it’s going to have to focus on the brand part of experience. If you tend to be a customer-first organization in your competitive environment, that’ll be it.
If we think five or 10 years out, the minimum level of XM across all of those is going to be so much higher than it is today. It’s not going to be a question of, do you adopt brand or customer product or employee experience? It could be, to what degree do you invest in it? I can’t believe that any competitive company won’t be better at all three of those experience areas in the next five years.
Ann Marie: If someone is building a business case to prove to leadership that XM is driving success, what are the metrics they should be looking at or benchmarking themselves against?
Bruce: Ultimately, I think you measure XM success by business success. The idea of XM is that it’s the critical lever in achieving those business goals you’ve always had, not to create a separate and distinct scorecard for how you run your business. You can ask another question. To what degree are we understanding the areas of experience on the way to improving our business? There are a lot of different measurements. NPS is a popular one. It’s valuable in some places, not valuable in others. How do you pick the right metrics? Which ones do you use? How do you link them together?
This is why I think XM is the next level of enterprise transformation. We’re not saying XM is a separate department. We’re not saying we’re going to add a separate stack and a separate department for that stack. It will require some new skills, but, ultimately, XM infuses across every part of the business.
The HR department needs to understand XM. The customer success and customer service organization need to understand it. Finance does. Everyone. It’s going to make everyone better at what they do. We’re helping organizations get there. If we can continue to take these tools and capabilities and embed them in SAP systems, if we can automate a lot of the processes like routing data and information, and if we can look at best practices in artificial intelligence (AI) models so that you don’t have to learn things that are there for you automatically—which is what we’re working on—then it gets easier to adopt good XM practices.
Ann Marie: Who should be responsible for making sure that XM is infused through the organization? Do you need to bring a new type of role in or extend that responsibility through an existing role like a CMO or COO?
Bruce: Great question. For me, it’s easier to break apart the notion of transforming into a mode or operating in a mode. The first part is how do you transform? How do you change the business to adopt more XM capabilities? That requires a leader who’s focused on transformation. I’m not worried about the title. Lots of titles can work. But if you’re going to adopt anything across the enterprise, you need senior people who are dedicated to driving that.
After it becomes more mainstream and more embedded in your organization, then the question is how do you operate it? Ultimately, you may not even need anyone with an XM title at that point because it should be just part of your operations.
Ann Marie: That’s one of the reasons why I think it’s so hard for customer experience initiatives to succeed. Because it does cut across the organization and it’s often not one leader’s domain.
Bruce: I want to push that thinking even more because we have visions of making XM even easier than that. Let’s go back to empathy for the customer. How is the customer feeling and thinking? As an individual employee, what is the thing that you’re doing in this system that’s affecting that? You can give employees a priority list for the things that they are doing in their job that affect how the customer feels along with the changes and decisions they can make to improve what the customer experiences.
The vision around XM is not just a scorecard of metrics, but how do we put these insights about the effects of their actions in the hands of people across the organization. We want to automate those insights and embed them in their normal operating systems so employees don’t have to go look for it. If what we’re giving you is the tools to understand and make decisions, then it makes no sense for these tools to be in a separate application from how you run the rest of your business.
Ann Marie: Understanding the context for where these insights came from and what you can actively do to change the results for the better is key. That makes it easier for leadership to guide employees and for employees to know the two or three things they can do differently to move the needle for customers.
Bruce: Exactly. Translate it into their words, their decisions, and what they do day to day.
Ann Marie: What are some of the practices that the leaders in customer experience are doing that stand out to you?
Bruce: We’re still in the very early stages of companies completely adopting XM. This goes back to your question about who leads this area. Especially early on in a transformation, you must be committed to overcome the resistance to change. The early leaders are going to be people who see the vision, even if the reality isn’t exactly there today.
Let’s say we can get employee feedback through employee studies. First stop is using that X-data to understand employees better. We can understand, are they happy? What’s driving them to stay loyal or not? Then let’s look at the life cycle of an employee. We’ll be able to trigger insights about how they’re feeling and thinking at different stages in their career with us. We can tie that to our recruiting database to understand where we recruited, how we recruited, and suddenly we can have a picture of not just whether our employees are happy or not, but what are the recruiting decisions we make that lead to acquiring employees who thrive, who are loyal, and stay with us?
We start to have an amazing view that we’ve never had before. Level one, let’s understand the people. Level two, let’s understand the people inside of the system in which they live and more about who they are. We can make dramatically better decisions because we have dramatically more information to work with.
Ann Marie: I think it’s going to be a leap for some organizations to acknowledge the importance of the employee experience. HR is generally viewed as a cost center. But having the wrong employees or not being able to retain good employees costs businesses a lot.
Bruce: We talked earlier about the notion of human capital. Human beings are the most important asset and the critical component of any system. HR leaders should be thinking about their role in engaging employees and not just focusing on the operational day-to-day of hiring, training, promoting. and firing employees. If I were an HR leader, I would be on this so fast because it’s an opportunity to become even more strategic among your peers and to raise the visibility of your entire organization. For every HR leader who reads this, think about the next person you hire and make sure that person has an XM mindset.
Ann Marie: You can get the data you need to tell this story with Qualtrics, as you described in the example of aligning employee satisfaction with employee life cycle information. You can make a case that your organization may be losing significant sums of money each year because of high employee turnover—Gallup estimates that loss at one and a half to two times the cost of that employee’s salary.
Bruce: Hopefully, some of this data will start to tell that story and bridge the gap for the C-suite so that they can make smarter decisions about treating their employees as a resource. It’s in the name, human resources, but not always viewed that way.
Ann Marie: As our members start to learn about Qualtrics and XM, what are some quick wins that Qualtrics could offer to help them make a business case for it?
Bruce: Every SAP customer can think about the people that they’re touching with their business processes, whether they’re customers, employees, or financial analysts, and ask the question, “If we understood something new about this individual, how could we dramatically change and improve what we do?” Look for that one use case. Don’t get overwhelmed by all the big grandeur and the keynotes. Think about what’s the one decision that could help you do your job so much more effectively through a new combination of insights. That would be my recommendation.
Ann Marie: Thanks, Bruce, for introducing us to the XM mindset and how Qualtrics fits within the SAP product stack.
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