The Customer is at the Core of Digital Business

Today it is almost impossible to have a strategy discussion, attend a conference, or even walk through an airport without being bombarded with the proposition and promise of digital business. Every organization wants to become the next Uber or Airbnb of their chosen industry. Most have bought the hype and believe digital technologies are the path towards being nimble, customer-centric profitable business.

Unfortunately the current battle cry of our corporate leaders is not well defined and even less understood. This confusion results in disconnected strategy and companies that are more concerned with update their Facebook status or leveraging Pokemon Go, then with actually transforming their how they do business to compete in a digital world.

Digital is not about technology enabling business, or even about technology, for that matter. Digital business is about the customer and putting fast, smarter, better connected solutions in place that allow the customer to achieve their goals. Ideally, achieve those goals in a better fashion than they were before. Customer expectations are changing. What was fast is not slow and the path to delighting customers comes down to understanding their needs, enabling them to work for themselves, and providing the right resources and information for them to accomplish their goals. The core of digital business is not technology, it is the customer.

Know Your Customer

Customer expectations are changing. Customer’s simply expect more from every organization with whom they choose to conduct business. The unfortunate part of this new world is that very few companies ground their digital initiatives with an understanding of the customer. Solutions are defined by consultants and internal stakeholders who are not themselves the end-users. The result is mismatched solutions built to define needs and goals that may not actually exist. In the new digital economy external stakeholders are the primary stakeholder and the company with the better understanding of their customers is going to succeed.

One of the best ways to know your customer is to understand their goals, what business they want to transact, and how easy or difficult your organization makes it for the customer to accomplish those goals. This is the concept of Customer Friction. Customer Friction is defined as any aspect of customer interaction that has a negative impact on the customer’s experience. The basic premise is that the less friction a customer encounters, the more likely they are to be satisfied with a product or service and continue to do business with that company.

This topic will be covered in more depth in a future blog, but for now keep this in mind: You cannot delight your customers if you do not understand their goals and how you can help accomplish those goals

Business Process at the Edge of the Enterprise

A hallmark of digital transformation is the movement of business processes closer to the customer. This self-service model takes activities and tasks that use to be performed internally and allocates the primary responsibility for their execution to the customer. Today this is what the customer expects. A recent Forrester study states that more than half of customers (55%) say they are likely to abandon a transaction if they cannot easily accomplish their goal. These customers were working inside of business processes that were not enabled for their self-service execution.

For a real-world example we just need to take a look at the changes that are happening to lending as financial institutions begin to embrace FinTech concepts. In many cases the loan office is being removed from the process all together. Mobile applications, straight-through processing, and big data allow for the loan applicant to take custody for the business process. The results of this transformation include greater customer satisfaction and a lower per-loan cost for the bank, win-win.

To embrace digital business companies need to embrace their business process before they look to technology. Stepping back and understanding which processes are going to be driven towards a self-service model, and then focusing on how will provide a clear path for success.

Coordination of Information and Resources

A second aspect of digital business is the sharing of information and coordination of resources in order to deliver value for the customer. The sharing economy is built upon this concept. From the early days of Zip Car to the current day proliferation of services like Task Rabbit and Instacart, the basis of the sharing economy is to provide value to the customer through the dissemination of information, such as tasks or grocery lists, or where a car is located. From there it comes down to coordination of the usage of scarce resources, vehicles, time, etc… to provide value to the customer. People have been car-pooling and outsourcing tasks for years. This is not anything incredibly new or revolutionary. What is new are the platforms, such as mobile technology, which are now widely available to support dissemination of information and coordination of resources. The sharing economy was not created by new technologies, its growth was driven by digital technology.

Disrupt, but Have a Strategy

In the world of digital business, or even just business for that matter, it is disrupt or be disrupted. If your organization is not thinking about how it can deliver greater value to your customer in a way that is better, faster, cheaper than the status quo, then someone else will and they are going to be more than happy to take your customers.

Disruption is not spontaneous. It takes the understanding of customers, the market and what is missing so that this void can be filled by a new solution. Once that solution is identified focus needs to shift to how it can be realized, scaled, and maintained. This type of disruption needs to be about differentiation if great ideas are to be realized. Differentiation is how a company separates itself from its competitors, and at times even the industry, by establishing new business models or ways of doing business. The solutions that are the realization of differentiation may come in the form of a new application, service, feature, or business model.

A recent presentation from Jeanne Ross at the Center for Information System Research at MIT defines differentiation in the context of digital business into two broad categories that make a lot of sense.

    • Differentiate on Customer Experience by Delighting Your Customer
    • In this model an organization is offering an existing product or service, but ease of doing business, the reduction of friction, is the primary value proposition for its customers. Uber provides a perfect example of this type of differentiation at work. Uber leveraged mobile and GPS technology to improve the transportation experience for their customers by changing the methods for requesting and paying for the service from the transaction.
  • Differentiate by Providing an Improved Solution to Your Customers  

 

  • Here the customer is being offered an entirely new product or service that is solving one of their problems. In this case the solution tends to be enabled by digital technologies. One such example is GE Aircraft and their use of IoT, Big Data, and other technologies to enable the leasing or jet engines. Here they solved the customer’s challenges around capital expense and maintenance by establishing a technology enabled business model.

When it comes down to digital business, decide how you want to differentiate and eventually disrupt. Make this your strategy and use that strategy to guide the implementation of the tactical initiatives that are going to transform your organization into a digital business.

Much more on many of these topics in future posts. Digital business is a challenging concept to grasp for far too many organizations, but by considering the customer, starting with business processes, coordinating resources, and deciding how to disrupt, any business can be better equipped for the world of digital business.

6 comments

  1. I agree with your point that catering to the customer need is the key to success in digital business, and that this doesn’t always mean implementing the most advanced or up to date version of technology. The concept of Customer Friction is interesting. When the layout of a familiar website or app is redesigned there is always a learning curve for the user. This can be frustrating and difficult. There are times when the new release of website or app turns out to be less functional and less user friendly than the previous release. In the long run, It seems like innovating and updating technology is essential to the success of a company. Some companies will release various trial versions of a new website design and listen to customer feedback before releasing the new version to all customers. Are the any other strategies that companies will use to combat Customer Friction when they update technology?

    1. As basic as it sounds, many organizations do not always take the customer’s needs into perspective. the biggest thing that we can do to combat customer friction is to understand what contributes to a negative customer experience and take proactive steps to remove those friction points from the transaction. You never realize how long 10 seconds can be, until you wait for a website to load. This is a simple, but very real example of customer friction.

  2. I think you bring up a really good point in this; good digital business is still, above all, about providing value to the customer. It reminds me of two comments we have heard so far in class which have resonated with me. First is Clay Shirky’s idea that technology only matters to a certain point, and second, Professor Kane’s note from his report that companies need to change from “doing” digital to “being” digital. Incorporating digital features without providing something of worthwile benefit to the customer is merely a gimmick. Successful disruptors have focused on improving how its industry functions, with digital capabilities being used as a means to achieve that goal. As far as disruption goes, how do you think companies should actively create strategies to do this?

  3. Good use of section headers, but some images would have helped spice it up.

  4. I think that your commentary is particularly interesting for consumer brands that are trying to transition to a digital landscape. It brings back memories of cringing at Domino’s ads buttressing articles about a tragedy when the company should’ve been working out a better online ordering platform. Beyond that, your emphasis on strategic disruption rather than harboring grandiose dreams of becoming the next uber without a clear plan made me speculate about the mentality of many of the entrepreneurs that are running early-stage startups. For example, are these grandiose visions commonplace, or are people’s ideas sometimes just not good enough? Looking forward to reading more on the topics that you discussed!

    1. Even early stage start-ups need to figure out what need or opportunity their product or service is addressing. In my opinion, many start-ups fail because they are unable to cross their barrier. Forget even worrying about monetization, focus on solving a real problem or making life easier.

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