Of course, this assumes that those systems and subsystems actually talk to one another and operate in an integrated fashion. In reality, customers often must take on the job of coordinating a company's internal activities from the outside—for example, by getting sales to talk to service, or call centers to coordinate with the Web site. In technology systems, the combination of poor integration and poor presentation layer creates inferior experiences for users. When these same problems afflict business-to-business relationships, and the users are key accounts or downstream accounts in a supply chain, the results can be disastrous. At first, customers become dissatisfied; ultimately, they go away. Despite all the ink that's been spilled about service quality in recent years, dissatisfaction is rampant, and, according to recent American Customer Satisfaction Index data, climbing (see Satisfaction Not Guaranteed).

Decades ago, in an era of less-intense competition, the question of how well companies interacted with customers and markets didn't always qualify as a strategic issue. But, today, with too many companies and too many offerings competing for too few customers, businesses must go beyond product-based advantage. Compressed product life cycles, an accelerating Moore's Law, and rapid-cycle commoditization—formerly true only for the computer and consumer-electronics industries—now afflict nearly every industry that depends on and is driven by IT. This includes automotive, entertainment, hospitality, media, retail, and transportation. A decade ago, Stan Shih, founder of Acer Computer, coined the term "three-six-one" for the consumer-electronics product life cycle: three months to develop a differentiated offering, six months to sell it profitably at an elevated price point, and one month to liquidate excess inventory after it became a commodity. This tyranny of acceleration into obsolescence has become the rule, not the exception, across a wide range of industries.

Given the dynamics of this new marketplace, corporate innovation that's focused only on core product or service offerings—the domain of traditional R&D operations—won't prove sufficient to ensure long-term competitive advantage. Innovation must also address how companies go to market—literally, how they structure relationships with customers, how they manage the interfaces that enable those relationships, and how they evolve operating and economic models to meet changing customer needs. In this sense, sustainable advantage will be built increasingly on a new frontier that's defined by how well companies manage interactions and relationships with customers and markets. When those interactions are sufficiently satisfying and loyalty-inducing, companies can keep customers despite compressed product life cycles, downward pricing pressures, and disruptions to underlying technologies. By the same logic, when customers are dissatisfied, companies forfeit their future.

Though this was once the concern largely of marketing and sales, IT's role in interaction and relationship management makes this a technology issue, too—notwithstanding frustration with many CRM systems. Recognizing and acting on these principles are what distinguish great brands, which transcend the fate of individual products or services—think Intel or Nike—from those that live and die based on the short-term viability of what they're selling—think Ford and General Motors.

If you accept the reality that most companies have become complex systems with poor presentation layers and insufficient coordination across subsystems, then a company's interfaces with its customers become not only a strategic concern but also a potential problem area. Many companies have worked hard to meet customer needs by deploying interfaces wherever consumers or customers want them, whether essential or not. At most companies, this helter-skelter deployment has resulted in a plethora of interfaces—retail points of sale, call centers, interactive voice-response units (VRUs), sales forces and detail people, interactive kiosks, and Web sites, not to mention marketing-communication mixes that range from television and print to events and sponsorships. While managers might question whether all of these elements—especially marketing activities—constitute a company's presentation layer, customers make no distinction. The fact is, every one of these touch points strategically shapes customers' attitudes and behaviors (see chart, above).

To ensure desirable customer experiences, companies must appoint dedicated chief experience officers. Call this individual the "other" CEO—or, as we prefer, the CXO (not to be confused with the commonly used term that refers to any C-level executive). This executive's strategic agenda starts with a line of inquiry regarding the company's presentation layer. In every business that competes on service or relationships, these questions can highlight enormous strategic internal issues, such as operating efficiency, organizational design, and enterprise economics.

To begin, the chief experience officer must ask: Have we deployed the right interfaces in the right places at the right times and in the right ways? Do we have too many interfaces or too few? Have we optimized each of the interfaces according to our customer preferences and needs, by segment? Have we understood the pathways our customers define as they flow through our interfaces in typical purchase processes? And finally, have we aligned and integrated those interfaces into coherent systems?

The new executive must relentlessly focus on unifying the disparate functions of human resources, marketing, operations, sales, service, and technology. For most companies, such integration suggests an unholy alliance of warring fiefdoms and silos, and that's precisely why the C-suite needs an individual with the power and authority to deliver integrated experiences for customers. Such executives may be hard to find, since they need literacy and fluency in the multiple and specialized functional "languages" of the modern corporation, as well as the diplomatic skills to bring disparate managers and organizations together in service of a common goal. Because technology lies at the heart of many new interfaces and interface systems, the chief experience officer will likely fail without the support of the company's technical talent.

Of course, you could argue that this is an old story. After all, many companies—industrial or otherwise, from Citigroup to Williams-Sonoma to Dell—have long relied on multiple service channels to compete. But something else is happening that's upping the ante from both growth and cost-side perspectives. In our book, Best Face Forward (Harvard Business School Press, January 2005), we call this the rising tide of "front-office reengineering." As leading companies find ways to substitute capital for labor in the front office, they're engaged in a reengineering effort analogous to the automation and process-redesign revolutions that transformed agriculture in the 19th century, manufacturing in the 20th century, and corporate information processing only a few decades ago.

In recent years, machine interfaces have emerged to play unprecedented roles in automating interactions between companies and their customers. In the 1970s, the ATM provided an alternative to bank tellers, but as attractive as ATMs became to retail-banking customers, few people considered ATMs true customer-relationship managers. ATMs were all about efficiency. Contrast that cold, mechanical relationship to how we feel today about automated interfaces at Web sites such as Amazon.com, electronic devices such as iPod and TiVo, or virtual agents such as Amtrak's Julie or AT&T's TellMe. Each of these is an automated-service interface that's sufficiently intelligent, interactive, distributed, and networked to transcend a functional role and appeal to users in meaningful and, at times, emotionally fulfilling ways.

Emotional responses to automated interfaces signal new possibilities for the roles that machines can play in the front-line workforce. Affective technologies can enable more effective interchanges between companies and customers, while reducing the cost of each transaction or interaction. While past reengineering efforts focused on efficiency, front-office reengineering focuses on efficiency and effectiveness. It comprises three fundamental impacts on the design of work: substitution (machines for labor), complementarity (machines in combination with labor), and displacement (outsourcing or offshoring of machines or labor). From these choices emerge optimized customer interfaces and interface systems to open new frontiers of efficiency and effectiveness for large-scale companies.

Underlying these choices is a fundamentally novel question facing managers today: What's the optimal division of front-office labor between people and machines? While the CEO must focus on the broad strategic implications of this issue, the new experience officer must design and manage interface systems to ensure that the company's optimal presentation layer becomes a reality.

New sectors replace old ones as needed, and the survey represents scores from about 200 companies in 39 industries. The ACSI is produced by the University of Michigan Business School, the American Society for Quality, and CFI Group.

The historic data on the chart shows that even as overall product quality improved, the index—based on a 100-point scale—declined each year from 1994 to 1997. It has remained below 1994 levels ever since.

In particular, the most recent data for fourth quarter 2004 shows that E-commerce satisfaction is slipping after three years of strong ratings, as the industry matures. The sector scores declined 2.7% from the previous year, but were better than the E-tail sector scores, which fell an even greater 4.8% in the same period.

"Some of the best-known brands are changing business models and their relationships with customers," says ForeSee Results CEO Larry Freed. "That's hard to do without eroding satisfaction." Amazon and eBay both fell a significant four points from last year.

E-commerce sites must continue to improve in a world where customers continuously expect more, Freed says.—Paula Klein