Recently, Amazon recognized that it was losing certain customers to brick-and-mortar retailers that could offer customers instant gratification: order online and pick up in the store the same day. But rather than laying brick, Amazon began working with partners to deliver items to customers in certain locations the same day. Google also set up deals with contractors to offer same-day delivery from retail affiliates, including Target and Costco.

Meanwhile, retailers Macy’s and Bloomingdale’s, with brick-and-mortar legacies, are partnering with Silicon Valley–based startup Deliv to offer its shoppers same-day at-home delivery. Deliv uses crowdsourced drivers to pick up orders from local stores.

Business-to-business (B2B) companies have similarly invested in a network of partners to meet customer demand. Cisco relies on large and small partnerships to sell, install, and provide additional services for the company’s routers, servers, security devices, and other networking equipment. These partnerships extend the company’s reach and serve its customers in ways Cisco could not do effectively or cost-efficiently on its own.

“As companies rethink their business models in the context of what their customers really want, many are realizing they just cannot do everything themselves,” says Kerry Bodine, customer experience consultant and co-author of Outside In: The Power of Putting Customers at the Center of Your Business. In today’s digital age, consumers and businesses have grown accustomed to getting what they want, how they want it, when they want it. But investing in all the new people, processes, and technologies required to meet these new expectations is often not possible.

Instead, collaboration with customer-facing partners is on the rise.

“Companies need to start thinking about doing with their demand chain the same thing they did with their supply chain,” says Curtis Bingham, executive director of the Chief Customer Officer Council. “It’s about inviting partners to integrate more closely with you to better serve customers and to create incentives for doing so.

Demand chain collaboration is emerging as a clever and cost-saving way to deliver increased value to the customer.

Back in the old days, big companies simply dictated how, when, and at what volume their supply chain partners were going to supply their widgets, Bingham says. Yet over time, they realized the value in developing more collaborative relationships.That’s easier to do with partners on the back end, however, by rewarding suppliers based on easy-to-quantify metrics like the revenue flowing through the supply chain. Companies are just beginning to explore how to create appropriate metrics and incentives—based not just on volume or margins but also on results that customers value—for multiple partners who handle the customer experience. Any mistakes or missteps in the demand chain are immediately visible to the customer and can have an instant negative impact.

Don’t Integrate Systems, Create Microservices

Today, those who share common technology systems with partners can extend their reach through customer-facing partnerships and still remain involved in managing that customer experience as conducted through a third party.

However, integrating your software systems with your partners’ would be tilting at windmills: impossible, expensive, and time consuming. Yet, there’s a way to do it on a small scale that is both inexpensive and easy: microservices platforms, which break down the functionality of a software application into a set of collaborating services.

These platforms, which are hosted in the cloud, offer much promise for customer experience collaboration. Their modularity facilitates integration and enables companies to more readily make changes to systems in response to changing customer demands than they could with older, traditional software. The cloud architecture’s flexibility enables companies and their partners to easily share systems and deliver a more seamless collaborative customer experience.

Jamie Anderson is Director of Global Solutions Marketing for Customer and E-Commerce Solutions at SAP.

The Danger of Distance

Companies partner with each other in the supply chain for a variety of reasons, including cost savings, expertise, flexibility, and scalability. “No single brand exists in isolation,” says Bodine. “Every company depends on an ecosystem of other companies behind the scenes.”

For years, brands relied on big-box stores and other retailers to deliver their products to consumers, keeping themselves one step removed from their customers. Today that’s a problem. Because the Internet and social media have enabled consumers to interact directly with companies, customers expect a more intimate relationship with brands, not just retailers.

In today’s marketplace, customer experience is the competitive differentiator, customer trust the primary currency, and brand loyalty the ultimate value. That makes these front-end alliances risky. Companies can no longer afford to keep their distance from customers, lest they cede control of the customer experience to their partners.

For example, if a Cisco buyer’s experience with a brand partner breaks down at any point, Cisco takes the hit. “Customers don’t care who owns what parts of the value chain,” says Bingham. “They have a deal with you and they hold you accountable. The customer’s social and financial contracts are with the company, not with whoever is standing there at the last mile.”

Demand chain collaboration is emerging as a clever and cost-saving way to deliver increased value to the end customer, whether it’s same-day delivery from Macy’s and Bloomingdale’s or a two-bedroom Airbnb condo on the beach. The potential benefits accrue to the customer experience, but that’s also where the danger lies.

When a breakdown occurs in the customer experience at any point, the effects can be devastating. Research is showing that emotion drives the customer experience. And when a customer experiences a negative emotion, such as frustration or anger, from a gaffe, it can drive a wedge—sometimes a permanent one—in the relationship.

(For more on emotions and the customer experience, see “Customer Relationship Status: It’s Complicated” in this issue.) According to a survey by Dimensional Research, 66% of B2B customers and 52% of business-to-consumer (B2C) customers stopped buying from a company after a bad customer service interaction, while 62% of B2B and 42% of B2C customers purchased more after a good customer service experience. And the effects of a poor customer experience linger. Dimensional Research found that one-quarter (24%) of customers continued to seek out companies two or more years after a good experience, while 39% continued to avoid those brands that delivered a bad one.

The Importance of Shared Values

There’s no doubt that companies—from retailers and e-commerce companies to manufacturers and service companies—will increasingly recruit a network of demand chain partners to serve their customers. But they will need to mitigate the risks of such customer-facing collaboration by recognizing that they must drive positive emotional affinity at every point in the customer experience.

The last bastion of competitive differentiation for any company is the brand: what it stands for and how customers feel about it. It’s critical that any partners can execute on that brand’s tenets. That’s why signing a deal with the more cost-effective partner may not be in an enterprise’s best interest. Instead, companies must seek out alliances with other organizations that share their values.

Companies that want their partners to care about their customers will also make an effort to care about their partners.

But values can be a nebulous concept, difficult to articulate internally, let alone with potential partners. To find companies that treat customers the way you do, says Bodine, you must first have a deep understanding of who your customers are, what they value, and what they want or need. Only then can a company communicate its own values to a partner.

When customers hear the Amazon name, for example, they may think about ease of ordering, broad product selection, fast delivery, and personalized service. So when they walk into one of the stores Amazon partners with, they’ll naturally want to see those values at work. They’ll want product availability, fast service, an understanding of who they are, and a seamless interaction.

A set of items next to screen

Target recently partnered with startup Curbside to offer its customers the ability to order online and pick up their purchases at one of the company’s retail stores without leaving their car. It will be critical that Curbside meets not just Target’s expectations but also Target’s customers’ expectations. “They have to make sure their corporate objectives are aligned,” says Bodine.

Businesses that seek to collaborate with partners at critical customer touch points must quantify the value of the customer experience to the business and invest accordingly in shared tools and processes to make it as seamless as possible. If the returns aren’t there, it’s probably not worth exposing the brand to the risks. When problems occur, companies “must have mechanisms in place so you can efficiently resolve issues,” says Joseph Pine, co-founder of Strategic Horizons LLP and author of The Experience Economy: Work Is Theatre and Every Business a Stage. “They also need the ability to escalate issues when they’re not resolved,” he says. “Again, it hurts your brand more than the partners’ brand because you are the one that the customers feel they have a relationship with.”

Companies should also work with partners to find ways to improve the customer experience. “They should look at this as an opportunity for brand amplification by enabling their partners to deliver on all of their brands’ promises,” says Bodine.

Successful partnerships in the supply chain ultimately deliver more than just decreased costs and increased efficiencies. Close collaboration with the right partners on the back end have enabled companies to increase market share, meet emerging customer demands, increase sales volume, and develop new processes. Similarly, demand chain partnerships can yield not just operational benefits but also strategic business value.

Partner Engagement = Customer Engagement

Companies that come up against issues in the demand chain would be wise to look closer at how partners really feel about them—and why—just as they would if a relationship with a supplier goes awry.

Tight contractual agreements and incentives for customer experience excellence are certainly important. Partners need a financial reason to serve your customers and your brand well. But companies that want their partners to care about their customers will also make an effort to care about their partners. “Partners are viewed by many companies as a necessary evil. If we’re big enough, we’ll simply dictate the terms and performance measures,” says Bingham. “But there’s no trust. There’s no partner engagement. Partners will resent being dictated to and, in most cases, won’t even let the company access their data.”

A set of items next to shopping bags
Partner emotions matter. The key to customer engagement within an increasingly distributed demand chain is to focus on partner engagement, says Bingham. “The partner experience is the exact same principal as the customer experience. Companies need to change their attitude and behavior towards their partners so that they treat them as well as they do customers. If there is no partner engagement, the company has limited ability to influence the customer experience at the far end.”

Where there is engagement, those partners will be more willing to collaborate to improve the customer experience because they see the mutual benefit, says Bingham. They’ll be more likely to share their data for improved customer insight. They’ll be more responsive to efforts to educate them about how to improve the customer experience. Some companies invite their customer experience partners to participate in problem resolution or innovation jams, says Bingham.

Companies seeking to effectively partner on customer-facing processes should also articulate their customer experience standards. In much the same way that companies set service standards for partners—“the what you do” piece of things—they should set experience standards—“the how you do it part,” says Pine. “What companies need to do, particularly in today’s experience economy, is have experience standards.”

The annals of supply chain management are filled with partner failures; in the demand chain, they can have an even more immediate and long-lasting impact. Consider the now-famous customer service disaster of computer maker Dell, which marketed its “award-winning service support” and then faced a consumer backlash when its India-based call center failed to deliver on that promise. The experience was so bad that Dell was forced to bring customer support stateside. And that was an issue with a foreign subsidiary, not a third-party collaborator.

Lessons from Extreme Demand Chains

There are perhaps no demand chains more distributed than those being managed by companies that have emerged in the collaborative economy. Uber built a car service without buying any cars or hiring any drivers. Instead, it developed a smart, map-based connector platform and borrows cars and drivers. Instacart created a one-hour grocery delivery service without buying any warehouses or vehicle fleets. Airbnb established a hospitality company without building any hotels or hiring any front-desk clerks.

IconsSuch companies lean heavily on third parties to deliver their services. “They depend on those relationships to deliver the actual experience customers have inside a rented room or within a car,” says Pine. “Their brands are in the hands of those individual drivers or property owners, which is why they need to vet them heavily,” just as a manufacturer would do with its suppliers.

Airbnb hired hospitality industry veteran Chip Conley to work more closely with the company’s 800,000 hosts around the world. In addition to the nine customer experience standards that Airbnb asks its property owners to stick to, Conley trained hosts in 17 cities on what he calls the “five moments of truth” for its customers.

Last November, Airbnb held its first international conference for 15,000 hosts with a program to educate, support, inspire, and celebrate those partners. Conley’s “major portfolio is to teach and to train and to cajole their suppliers to provide a great experience to their customers, and that’s a key to their ongoing success,” says Pine.

And companies must provide incentives for their partners in the demand chain to meet those standards. The Cisco Channel Partner Program, for example, rewards partners who create customer value, no matter their size or sales volume. As more companies enter into customer-facing partnerships, they too will have to figure out the best ways to reward partners for excellence in delivering their piece of the customer experience.

Such joint customer experience delivery is not right for every brand. “Some companies are beginning to recognize that there are some things that are just too important to their brand, to their customer experience, that they can’t delegate,” says Bingham.

But companies that create mutually beneficial relationships with their demand chain partners will not only be able to safeguard their brands and customer experience standards. They will also deliver new value to customers that they could not provide on their own.