Welcome back to my mini-series on digital transformation (DT). This is the 3rd installment of this mini-series. Previous blog entries can be accessed via the following posts:
In my last blog entry, we learned that technology-driven business transformation, such as DT, is not new and has happened throughout human history. History also revealed a defensive argument for companies to transform digitally. Companies must transform themselves to take advantage of the new technologies, otherwise, they won’t exist very long.
More importantly, we introduced the 4 gears model that could guide you through this transformation process. Companies must evolve from the operating norm that only focuses on 2 gears (i.e. acquisition and monetization) to the new model that also focuses on engagement and enlistment. Today, we will examine the 4 gears model in greater detail to reveal the offensive logic for companies to transform their business digitally.
The Ultimate Differentiator in a World of Mass Commoditization
As the market becomes more competitive, many products and services are being commoditized, where they become indistinguishable in the consumers’ eyes except their price. Therefore, companies engage in price wars constantly to stay competitive. This squeezes the profit margin of brands and threatens their business. Consequently, brands are struggling to differentiate in order to avert the commoditization of their products/services.
Today, many brands focus on customer experience (CX) as the ultimate differentiator. This is confirmed by a survey conducted by Gartner, which reports that 89% of the companies are expected to compete on CX. There are at least 2 good reasons for this:
Digital transformation can help companies provide their customers a better CX. If done right, companies can even deliver a unique CX for everyone—a hyper-personalized experience that is optimized for a single individual. In order to deliver a hyper-personalized experience for everyone, brands must master 2 prerequisites as part of their business operation:
Digital transformation can help brands realize hyper-personalization because it’s much easier to achieve both prerequisites above in the digital space. That is the digital advantage. Companies that engage their consumers digitally have an edge over those who don’t, because they can:
Surely a hyper-personalized CX will help brands get more attention from their consumers, but it will also help brands win the engagement game and start spinning the engagement (and enlistment) gears.
The 4 Gears Create a Journey, Which Creates Experiences
Over the past century, businesses had much time to optimize the 2 gears model with many technologies that were invented along the way. Consequently, both the acquisition and monetization gears can spin very fast; they are so efficient that they can pretty much happen instantaneously. It only takes a few seconds to swipe your card, tap your phone, or simply click a button to monetize a consumer. Likewise, it takes anywhere from seconds to minute to capture a consumer’s attention with all the media impressions around us. Moreover, consumers expect acquisition and monetization to be fast, so most of them wouldn’t want to spend more than a few minutes with brands on these 2 gears.
The interesting question is, when do consumers ever seek out and want to spend time with a brand? There are actually 2 windows along the customer journey where this happens.
If we map the 4 gears model to the customer journey, these 2 opportune windows correspond to the 2 new gears. During the pre-purchase window is when you should engage your customers, and during the post-purchase window is when you should enlist them.
By introducing the engagement and enlistment gears, the 4 gears model effectively created a journey for businesses that coincides with the customer’s journey. The implication is that brands that take engagement and enlistment seriously will gain many more opportunity to interact with customers throughout their journey. This is important because it serves as the foundation for companies to compete on the basis of CX in a market where everything else is being commoditized.
I must emphasize that a journey is what creates memorable experiences for people. Because acquisition and monetization happen so quickly, there is almost no time for any meaningful experiences to develop. Moreover, you can’t artificially slow down acquisition or monetization either, because consumers would feel that’s an unpleasant experience. By focusing on engagement and enlistment, you could create effective touchpoints that your customers want to interact with. And if you go further to improve the CX at those touchpoints, you could effectively redefine your customers’ experience with the brand.
As you can see, the 4 gears model is really a CX-centric model that helps sustain your business in the digital age. This model has already revealed a defensive reason for businesses to transform themselves digitally (see my previous entry). The logic is simple. They must in order to ensure the long-term viability of their business.
The offensive logic for digital transformation is also simple. Brands have 2 fates in today’s highly competitive world. They can either let competition drive their product and services to mass commoditization, or they can choose to differentiate. Since the ultimate differentiator is CX (due to their effectiveness and irreplicability), brands must transform themselves digitally to exploit the digital advantages that enable them to deliver the optimal CX—personalization.
Interestingly, the 4 gears model also provides the strategic framework that helps brands deliver a better CX. It does so by creating 2 extra gears that force modern enterprises to focus on engagement and enlistment in addition to the 2 conventional gears (i.e. acquisition and monetization). This effectively creates a journey for consumers to engage with brands during their pre- and post-purchase window. Consequently, brands that choose the engage and enlist will gain the golden opportunity to create the optimal (personalized) CX for their customers.
Michael Wu, Ph.D. is Lithium's Chief Scientist. His research includes: deriving insights from big data, understanding the behavioral economics of gamification, engaging + finding true social media influencers, developing predictive + actionable social analytics algorithms, social CRM, and using cyber anthropology + social network analysis to unravel the collective dynamics of communities + social networks.
Michael was voted a 2010 Influential Leader by CRM Magazine for his work on predictive social analytics + its application to Social CRM. He's a blogger on Lithosphere, and you can follow him @mich8elwu or Google+.
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