Welcome to the Age of the Customer. Invest accordingly.
by Josh Bernoff
Do you get the idea that things are really different now?
Everyone has a different wake up call. Maybe it was the day you heard Amazon is selling more books on Kindle than on paper. When was the last time you talked to a travel agent? Or maybe you realized the world had changed when you whipped out your iPhone in Home Depot and checked the ratings before buying that air conditioner. Disruption is rampant, it's hitting every single industry, caused by customers with powerful technology on their side. The question is not whether your industry will be disrupted. The question is when.
We took a close look at Michael Porter's five forces, the definitive framework businesspeople use to analyze competition. There's no longer any barrier to potential entrants or substitutes -- in a digital world, competition can come from anywhere. Customers have real-time information about pricing, product features and competitors; they hold all the advantages. And the key source of supply now is talent -- and talent can get up and leave. The competitive barriers that Porter defined matter far less now. The only sustainable source of competitive advantage, the only defensible position, is to concentrate on knowledge of and engagement with customers. (Scroll down for video.)
Previous sources of dominance -- manufacturing, distribution, even information mastery -- are now just table stakes. This is the age of continuous disruption. Your relationship with customers is the only thing that enable you to survive that disruption (think of the movie industry as it continually embraces new formats). That's why we are christening this "the Age of the Customer." In our new report "Competitive Strategy In The Age Of The Customer," we assert that companies must be more than customer focused, they must be customer obsessed. This is not just jargon, it has a real meaning:
A customer obsessed company focuses its strategy, its energy, and its budget on processes that enhance knowledge of an engagement with customers, and prioritizes these over maintaining traditional competitive barriers.
Maybe you don't believe this. If so, you can keep doing business as you do now and eventually, customer-driven disruption will get you. But if you recognize that customer engagement is your only path forward, you need to make certain changes in the way your company runs.
You change the way you do research. You spend less on surveys whose results come back too late to act on. You invest instead in real-time listening to social media and the search for customers' unarticulated needs. You think the iPad came out of surveys?
You change the way you do service. You invest in a comprehensive cross-channel customer experience program, and stop treating your call center workers as slaves.
You change the way you do sales. You stop incenting your sales force to cram the channel and concentrate on connecting directly with end consumers. (The sorry state of the textbook industry, for example, came from concentrating more on professors than students.)
You take cash from your email and advertising blasts and spend it on interactive content and mobile apps that create real connections.
This is a corporatewide shift in thinking. The companies that master it, companies like IBM, Best Buy, and Amazon, thrive in a world of constant disruption, because their customers know and trust them, and they make investments in those customers. The companies that keep riding their current model and attempt to lock in customers are doomed. They're dead men walking. They just don't know it yet.