In July, I delivered a webinar about customer experience innovation. I explained that in order to create innovative experiences that drive differentiation and long-term value, companies need to triangulate on consumer needs, the business model, and the brand. I received several great questions during the call, and I thought it would be worth answering them again (in brief) here:

How many companies are following that process of developing customer experience innovation?

Unfortunately, not as many as I’d hope.

In Forrester’s recent survey of 100 customer experience professionals, 69% percent of respondents reported that their companies have dedicated personnel for customer experience innovation. Sixty-four percent have allocated time to innovation activities. And 55% have dedicated innovation budgets.

These numbers sound promising — but they just don't add up. In 2013, only 8% of the companies in Forrester’s annual Customer Experience Index received a top grade from their customers — and that's a pathetically low number in comparison to the amount of professed innovation in the industry.

Companies seem to be missing the point about aligning innovation efforts with consumer needs, business model, and brand — and that’s what keeping many from differentiating.

Is it possible that “staying with the lines” of the current business model or corporate brand squashes innovation?

Companies need to analyze innovation ideas within the context of core business mechanics like resources, activities, partnerships, cost structure, and revenue structure. But that doesn’t mean you need to stick with your existing business model. On the contrary, customer experience innovations are often tightly intertwined with — and driven by — new business models. Consider the mobile operator giffgaff, which often comes up in conversations about innovative experiences. Its customers discover, evaluate, buy, and get support online and in social forums — the direct result of a cost structure that includes only a handful of employees.

The brand is a company’s genetic material — a powerful code that enables the organization to express itself appropriately in an infinite number of customer interactions. The problem I see in most companies is that they simply lack a unique brand personality that sets them apart from competitors and provides a platform for launching ideation. Our recent research found, for example, four major banks, two telecoms, and two airlines touting “integrity,” “responsibility,” or a similar brand attribute. Other common themes for these industries include “leadership,” “people,” “community,” and “caring.” (Yawn.) For more info on how your current brand can drive innovation efforts, I recommend an excellent book called Brand-Driven Innovation by Eric Roscam Abbing.

Is it innovation if it hasn’t been applied to your industry?

Fifty-eight percent of our survey respondents said that their firms drive customer experience innovations by watching what their direct competitors are doing. A full 72% look to copy companies in other industries. Imitation may be the highest form of flattery – but it’s not innovation.  In fact, it’s the very opposite of innovation. It’s parity.

Certainly, companies should keep a look out for new touchpoints and interactions that can provide value to their customers and their business. That’s why we saw a slew of financial services firms including Bank of America, Wells Fargo, Chase, Charles Schwab, and State Farm copy USAA’s innovative mobile check deposit app after USAA launched it in 2009.

But they shouldn’t fool themselves into thinking that this is innovation. True customer experience innovations are new to your company, they’re new to your customers, and they’re new to the world.

Do you see a difference between CX innovation and more sustained CX improvement programs inside organizations?

Yes! Eighty percent of our respondents say that their companies’ approach to customer experience centers on making incremental improvements. Only 20% said that their firms are focused on creating radical CX innovations.

I’m currently writing a report on how companies like Fidelity, GE Healthcare, Intuit, and Kaiser Permanente fuel customer experience innovation within their organizations. But the bottom line is that these efforts are largely removed from sustained improvement activities like voice of the customer, measurement, and governance.

Do you have any general advice for evaluating agencies’ innovation chops, or sniffing out the lack thereof?

A lot of companies turn to outside innovation consultants for help, and finding the right partner can be tricky. I’d encourage prospective clients to return to Forrester’s CX innovation framework — aligning innovation efforts with consumer needs, business model, and brand — and then dig into each agency’s capabilities in these three areas. How many ethnographers do they have on staff and what’s their educational background? (You’re looking for a degree in design, anthropology, or a related field.) Where have their business strategists and brand experts worked in the past, how many years of experience do they have, and what are their personal track records on innovation projects? Also ask about the innovation projects each agency has completed recently. What big a-ha’s did they discover through research and how did they apply those insights to their clients’ business challenges? What did they actual develop as a result? And what were their clients’ business results?

I'll be speaking more about innovation at Forrester’s Forum For Customer Experience Professionals West, October 9th and 10th in Los Angeles. Hope to see you there!