January 10, 2017 | Written by: Dee McGrath
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I’ve spent most of my life as a satisfied consumer. Whether I bought a new outfit, hailed a taxicab, invested in stocks or bonds, or rented a movie, I viewed almost everything as a transaction. The transaction either succeeded or it didn’t. Most of the time, it did.
That’s all changing. And the pace of that change is astonishing. Customers, in huge and growing numbers, no longer want transactions. They are buying experiences. If you haven’t seen this happening in your business or industry, perhaps you haven’t been looking closely enough.
But leading companies are looking at this trend with great interest and are either planning or already changing strategies to cope with this new marketplace reality.
According to research done by the IBM Institute for Business Value in 2016, 60 percent of global CEOs are expecting more competition from outside their industry; 81 percent of global CEOs want to use technology to develop stronger customer relationships; and 54 percent of global executives believe that customer buying behavior is shifting from products and services to experiences.
Examples are manifold. Rental car, limousine and taxicab companies have seen the impact of Lyft and Uber, which can get you a ride faster and cheaper (and without having to stand outside in the rain or cold). Many major hotel chains are aware that their market valuation has been eclipsed by Airbnb. And Blockbuster, which in 2004 had about 60,000 employees and more than 8,000 stores, was in bankruptcy by 2010 because Netflix and other on-demand video providers figured out how to deliver a much more convenient and rewarding experience.
It’s no different in banking and financial services. Threats and challenges to traditional businesses are coming from the likes of PayPal, Lending Club and Lufax, although the current impact seems to be greater in payments than in investments. However, that may just be a point-in-time.
For traditional businesses, adapting to this trend involves fundamentally reinventing strategy, operations and technology.
- Strategically, digitally reinvented businesses maintain an overarching focus on experience rather than production. They embrace technological change and disruption, and see their company within the context of an overall business ecosystem, including clients, partners and even regulators.
- Operationally, digitally reinvented businesses commit to continuous calibration and improvement. They foster innovation among all employees and across the ecosystem, not just within an innovation team or organization.
- Technologically, digitally reinvented businesses are fluent in the language and business impact of technological innovation. And they seek to realize the full potential of new technologies either directly, or with the assistance of partners.
The fuel for digital reinvention is data. Businesses have access to massive amounts of data about clients, their likes, dislikes and buying habits. Some data last only a fraction of a second, others are stored in vast clouds. And data can be structured in databases or unstructured in social media and video. Unfortunately, greater priority often is placed on structured data. According to an IDG survey, 32 percent of businesses state that managing unstructured data is not on their to-do list.*
A good example of using unstructured data to improve customer experience comes from Royal Bank of Scotland (RBS). RBS soon will deploy a chat bot using IBM’s Watson technology to answer customers’ questions. This will provide consistent, fast, accurate responses without subjecting customers to the call center run-around. Watson also can determine which questions are sufficiently complex and cases where clients or RBS would benefit from more personal interaction. In each case, the customer should gain better service and RBS learns more about its clients.
So how do traditional businesses transform from transaction-based to experienced-based businesses, or what we call digital reinvention.
We’ve identified four steps to get started:
Step 1: Envision possibilities
Hold cross-functional sessions to produce a definitive reinvention blueprint. For example, more deeply understand customers, brainstorm new ideas and visualize unexpected scenarios. Incorporate external stakeholders in these sessions, such as partners, customers and others to encourage thinking that goes beyond business-as-usual.
Step 2: Create pilots
Create pilots and prototypes. Establish communities of interest, creating safe environments to beta test innovations and incorporate them as a central part of design and development processes. Build a foundation of capabilities that supports the ability to scale with speed.
Step 3: Deepen capabilities
As pilots evolve, practical limitations or impediments around development will emerge. Adopt a continuous iterative strategy to build new or extend required capabilities.
Step 4: Orchestrate ecosystems
Embrace holistic reinvention rather than a series of point solutions by maintaining a clear focus on deep needs, aspirations or desires of customers. Focus also on the ecosystems of partners necessary to create and deliver on that customer promise and capable of delivering compelling experiences.
Customers vote with their feet. Banking customers don’t want offers that are meaningless to them. Banks need to move from having “one-to-many” conversations to “one-to-one.” Customer intimacy will be driven by the right conversation, through the right channel, and offering the right products, at the right point in time.
Digitally transforming your business will make you a driver (rather than a victim) of change, so it’s important to start soon. You and your customers will enjoy the experience.
*For more information in digital reinvention please visit the survey. http://www.idgenterprise.com/resource/research/2015-big-data-and-analytics-survey/