Let me tell you about my evening routine. Every night, my dog Romeo and I come home from the Cambridge, Massachusetts, offices of HubSpot, where I’m CEO, by taking a Lyft. We play our favorite band on Spotify. Cranking the music, we boogie over to the dog area, clean out some of Romeo’s toys, and see if he got a new package in the mail from Chewy — he loves their chicken lollipops. After a snack, I head down to the gym for a workout I booked through ClassPass. I come home and shower and shave using a new package from Dollar Shave Club. I order something from DoorDash, and, after it arrives, Romeo and I put our toes up and check out a favorite movie on Netflix. Then we lie down on our Casper mattress, and we get a good night’s sleep.
I think we have a fascinating evening routine. Why? Because all these companies — I just ripped through eight of them — have replaced companies I used to do business with.
It’s not just my evening routine; it’s my daily routine. It’s all of our daily routines, isn’t it? There’s been a massive wave of disruption happening in the consumer world, courtesy of companies like Lyft, Netflix, and Spotify.
The same shift is going on in the business world. When I’m on the West Coast, I set up in a remote office and collaborate with team members on Slack. When there’s a meeting, I fire up Zoom. When I’m hungry, I scarf down something from ezCater. Again, this is a wholesale swap of vendors.
But this isn’t disruption in the way most of us think of it. We tend to think about technology disrupters — the browser, Google, Intel, the iPhone, maybe the Tesla someday. Big technology companies with lots of patents. (In 2018, Intel was granted 2,735 patents, Apple 2,160, and Google 2,070.)1
Companies like Chewy and Dollar Shave and ClassPass — are they technology disrupters? I’m not so sure. I went very deep on this list of companies plus a few others, about 20 altogether, with two of my colleagues at HubSpot. We talked to almost all of these companies’ founders. We purchased pretty much all their products, we read all their terms and conditions, we talked to their big investors. We asked about their patents and found only about 50 total. And my theory is that these companies are not technology disrupters.
Instead, I think we’re seeing a new species of disrupter emerging in our economy, a species I call experience disrupters. These organizations all have great products, but they offer even better experiences. How they sell is why they win.
Of course, all companies aim (or should aim) for great customer service, but that’s not what I’m talking about here. These companies have fundamentally reshaped what their customers come to expect in the experience of purchasing and using their product or service. This is a central insight of Clayton Christensen’s Theory of Jobs to Be Done, which tells us that customers don’t simply buy products or services. They hire them to do a job for them. Doing that job well for customers involves creating the right experiences for those customers, from the moment they begin to think about purchasing the product to their everyday use of that product. It’s an essential part of developing a deep relationship with customers: You solve their struggle for them.
What I think we are seeing now are companies that outmaneuver the competition by excelling at this. After studying such companies, what they’re good at, and the customer experience with each of them, I’ve come up with five things I call modern adaptations that allow these experience disrupters to run over the incumbents in their industries. Here, I’ll discuss what I’ve observed about those adaptations, leaving you with a playbook to use in your company.
They Give You Experiences You Didn’t Know You Wanted
The first adaptation is that while incumbent companies focus on product-market fit, experience disrupters work on experience-market fit. Product-market fit, when you’ve found the right mix of product for just the right target market, is considered by these companies as necessary but insufficient to get the disruption they’re really after. For experience disrupters, what matters is offering experiences that surround the product and that customers didn’t even know they wanted or could ask for.
Let me give you an example. I first heard of Carvana when we started this research project. It turns out a bunch of my colleagues had purchased cars from this online used-car company and were raving about it. Carvana was founded in 2012 and was the eighth-largest used-car dealer in the United States in 2018.2 It went public in 2017. As of this writing, it has a market cap of roughly $12.5 billion. And it is a killer experience disrupter.
How did Carvana become so successful so fast? You might think it was about inventory: Typically, a car dealer has cars all over parking lots, and Carvana instead has a giant online car vending machine.
Now, that step is necessary, but insufficient, to get the crazy growth it’s had.
The reason Carvana has exploded is that it’s focused on the experience-market fit. The company’s leaders set out to create a whole new way to buy a car. You have a very Amazon-like experience, in the sense of how user-friendly the online interface is. You choose the price range, mileage, condition, and type of car you want. You can get alerted when a car in your range is available near you. Once you select a car, you can view a 360-degree inspection with annotated zoom-in areas to see where there is wear and tear.
But you don’t just buy the car from Carvana: The company deals with the department of motor vehicles, it deals with the taxes, it deals with the registration. It does all the crapola that none of us wants to do. Then you tell Carvana, “Hey, I bought the car, and I want it delivered to my house on Tuesday afternoon” — you pick a time and a place, and the company brings it to you. Awesome. And then you drive the car around for a week, and if you’re not happy with the car for whatever reason, you can return it, no questions asked.
Carvana has taken the cringeworthy process of buying a car and automated it, institutionalized it, and made it awesome. That’s experience-market fit.
They Make Interactions Frictionless
The second adaptation is that experience disrupters pull the friction out of each customer interaction. The analogy I like is the mechanical flywheel — the circular device that can provide a continuous power output. In this analogy, the less friction customer interactions have, the faster the flywheel spins, and the faster a company grows. In businesses that are struggling to keep up with experience disrupters, their flywheels are full of friction. Experience disrupters are very good at reducing that tension.
Consider Atlassian, an Australian B2B collaboration software company that is a friction-fighting superhero. It’s a large company that is growing very fast and is very profitable, with a market cap near $36 billion. The company’s president, Jay Simons, serves on HubSpot’s board, and we are one of Atlassian’s biggest customers, so I know the business well. Simons told us that changing the process of buying B2B software meant rethinking how the marketing and sales departments interact with customers, and even how the contracting process works.
First, Atlassian’s marketing department looks just like a B2C marketing department, focusing less on generating new leads and more on activating current users and multiplying the number of users and teams within a customer. Instead of fighting the uphill battle for senior-level evaluation of their solution, Atlassian focuses on the ease with which an end user can invite a colleague to a collaborative project.
Now, most of the B2B experience disrupters do a really nice job of marrying low-friction, B2C-style marketing with a slightly-heavier-friction traditional enterprise sales model. But Atlassian doesn’t do this. What impresses me is that most of its transactions happen without the sales team. Salespeople negotiate the highest-sticker-price deals — basically, the deals that generate the top 1% of value. Otherwise, sales are straightforward, with no commissions. Just a few years ago, you’d buy a toothbrush or a comb online, but now people are buying multimillion-dollar pieces of software the same way.
Atlassian also tweaked the contracting process. Think about how the process typically works: Potential buyers will Google something they need, find a product on a website, and possibly check out the company’s blog and social media and do the same with its competitors. They’ll call the company, ask to talk to someone on the sales team, and maybe have a great experience with a salesperson who engages them, understands their pain, and solution-sells them.
Trust and goodwill are built up, and the customer is ready to buy. And then: A brutal negotiation over the course of weeks or months ensues.
All that trust, all that goodwill, all that goodness — it goes down the tubes. I really don’t like this. Jay Simons doesn’t like this, either. So what he said was, “Basta. Enough. No more negotiations. I’m not giving discounts to anyone. I don’t care if it’s my sister. No discounts.” What he wants to do is keep the goodwill between us. He doesn’t want an adversarial relationship. So when a prospect asks the inevitable question, “How about a discount?” Atlassian staff are trained to explain that the software is relatively lower cost because the company builds discounts directly into the prices to treat every customer equally and to take away price uncertainty. The purchase price is online, and because they don’t negotiate changes in prices or terms and conditions, the contracting process is not complex — and it’s easily automated. All these decisions eliminate friction at this stage of the sale.
They Personalize the Relationship
The third adaptation is that experience disrupters are awfully good at creating a personalized experience. Their competitors, the incumbents in the industry, offer a more generic experience when they’re prospecting customers. In our research project, when we talked to the founders of experience disrupters, I was surprised at how much they didn’t sound like tech people. The language they used made them sound more like executives from The Ritz-Carlton or the Four Seasons. The way these companies cater to each customer makes them less like tech companies than like ultramodern hospitality companies.
Think about Netflix. Inside the company’s database, there’s a fingerprint for every one of us customers. The more we use their product, the more shows we watch or click on or give up on 10 minutes in, the better the company gets at personalizing its recommendations to us. Netflix suggests new content based on viewing history, but even the finest details — such as the thumbnails that accompany each show — are tailored to an individual user’s browsing habits. This is one of Netflix’s real secrets of success.
Now, Netflix isn’t the only company using data to be much more prescriptive about experience. This is also happening at Stitch Fix, an online personal styling company based in San Francisco. The company offers customized clothing selection for customers and also sells the outfits. When Stitch Fix first got started, individual stylists recommended combinations of apparel solely on the basis of lengthy profiles completed by customers about their style preferences and specific measurements.
But Stitch Fix CEO Katrina Lake knew the value of data to deepen the accuracy of stylists’ recommendations and to give scale to the business. Today, in addition to the initial customer profile, the company uses direct feedback from customers on their purchases, mountains of data from across all its customers about which items were purchased together and which were rejected and returned, and fastidious details from its merchandise team about the precise measurements, textures, and aesthetics of each clothing option. All this arms Stitch Fix with an opportunity to base recommendations on much more than just “customers who bought this also bought that” logic.3
The company’s algorithm helps generate recommendations that have progressively led to increased purchases over returns, and more additional purchases by repeat customers. It’s working: Stitch Fix, which went public in 2017, has a market cap of $2.4 billion.
Netflix and Stitch Fix are playing the same game: They use lots and lots of data to highly personalize your experience with them. How they sell is why they win.
They Get Customers to Sell for Them
The fourth adaptation is that while the incumbents know how to sell to their customers, the experience disrupters are very good at selling through their customers. One of my favorite examples is Emily Weiss, founder of the cosmetics company Glossier. She started off as a blogger — she’s a fabulous content creator, and her blog,Into the Gloss, was blowing up with beauty tips. And then she started developing beauty products.
Where Weiss is next-level and a bona fide experience disrupter is her ability to not just create her own content but also encourage and enable her customers to create content. Glossier makes its products available to popular video bloggers, known as vloggers, sometimes even prior to public release to build buzz. For instance, Glossier worked with Jackie Aina, a Top 20 YouTube beauty vlogger who has more than 3 million YouTube subscribers, to review a product when it was still unannounced. Thousands of wannabes and micro influencers who may have a few thousand followers each imitate the most popular vloggers with their own video reviews. The result is hundreds of thousands of pieces of content out there about Weiss’s products — all created by her customers. Some of those individual videos have more than a million views. Glossier is still a private company, but its estimated valuation is $1.2 billion.
Warby Parker, the eyeglasses company, is another classic experience disrupter for similar reasons. Neil Blumenthal, the cofounder and co-CEO, thought the old process of buying glasses was a pain. And it was. You had to schedule going down to the store, and the scheduling was a bear because you had to bring your most judgy friend with you. Blumenthal said, “I’m going to rethink that. I’m going to mail you the glasses so you try them on, you can post photos on Instagram, and you can then ask all your judgy friends which one they like.” Again: How they sell is why they win.
They Empower Employees to Make Things Right for Customers
This brings us to the fifth adaption: Experience disrupters enable customer-facing employees to fix things when they need to.
Traditionally, companies woo customers to make a purchase, but the second that purchase is made, it becomes the customer’s hassle to get service on it or return or exchange it if there’s a problem. Lots of companies offer free shipping, for example, but customers have to pay for the shipping to make a return, they have to have kept the receipts, and they have to pay attention to how long ago the purchase was made.
Experience disrupters make all these details much more customer-friendly. I was surprised at how powerful this play was. By rethinking something as mundane as terms and conditions, they are able to bust through those their industry models in effective ways.
A great example is online pet store Chewy, which I mentioned earlier. I ordered a medium shirt from there for Romeo. He’s always taken a medium. But when I put the shirt on that poor dog, he could barely breathe. It was too tight — too many of those chicken lollipops. So I called Chewy, and I said, “I’d like to return my medium for a large,” and the woman said, “Nope, that’s not how we’re going to do it today.” She said, “Give your medium to a friend of yours, and we’ll send you a large for free.”
Chewy gives its customer service reps a discretionary budget to create opportunities to build goodwill with customers, and this empowerment allows for a customer experience that feels seamless. Obviously, this worked out great for me: I didn’t have to do the return, I didn’t have to do any paperwork, and Romeo got a shirt that fit. And it worked out really well for his friend, Woodford, who now has a new free shirt.
What I like about this model is that Chewy’s costs to acquire Woodford as a future customer were very low, right? I got Woodford for them. Chewy didn’t have to spend very much to do it. And the total lifetime value of Romeo is now very high.
Experience disrupters know how incredibly significant it feels for customers when there’s a genuine change in the power balance in post-sale interactions. A friend of mine got herself all worked up before calling her cellphone company about something she thought was a mischarge on her bill — a situation most of us have been through with a phone company or cable provider — anticipating yet another interaction that would go badly. She hung up in near disbelief just a few minutes later when the customer service rep believed her, fixed the billing charge while they were on the phone, and offered her a courtesy credit for the hassle. There is unbelievable value in this adaptation.
These experience disrupters really are a different species. They think differently, and the founders have a healthy disdain for conventional wisdom. They spend hardly any of their energy extracting value from their customers. Instead, they spend all their energy thinking, “How do I add value for my customers?” They’re really good at this stuff. One last time: How they sell is why they win.
Here’s a summary of the five points:
- Don’t obsess completely about product-market fit. Obsess about experience-market fit. Embrace your inner Carvana.
- Remember that dollars flow where the friction is low. Mechanically remove friction. Automate like the superheroes at Atlassian.
- Personalize, personalize, personalize. Stop embracing automation without personalization — that’s what people call spam. Think like Netflix. Dust for fingerprints.
- Sell through your customers, not just to them. Let Glossier be your model.
- Rethink how customers get treated after the sale. Look at your terms and conditions. Give your customer-facing employees the tools to make things right. Delight people, the way Chewy does.
I started this article talking about my nightly routine. Routines can be good. But they can also hold you back.
You have routines in your job, and when you finish reading this, you’re going to return to whatever it is that you do. You have a choice. You can do your normal routine: Drag the spreadsheet on your career, drag the spreadsheet on your company. Or you can set out on a new course, a more exciting one. Stop meeting your customer needs, and start exceeding them. Choose to become an experience disrupter.
Read the full article here.
This content was originally published by MIT Sloan Management Review. Original publishers retain all rights. It appears here for a limited time before automated archiving. By MIT Sloan Management Review