Digital disruption is a fairly well understood dynamic: new entrant uses technology in new ways to upend existing business models and disrupt markets. In other words, digital disruption is a distinct force with a distinct life span that is mostly external to traditional markets and businesses.
But what if it is more than that? What if it is the canary in the coal mine representing the first signals of a shift in our economy and society? Consider the following:
7% of jobs will exit the economy due to automation even if one considers the jobs created specifically by automation. Without the creation of different products or markets (think of the app economy), automation can cause a major shock to developed economies.
We are already seeing early indications of how high-performing, highly liquid platforms (think Facebook) can extend services and experiences into different industries (e.g. banking and peer-to-peer lending) to blur or pummel traditional industry lines and norms.
The next step in Uber is self-driving cars which are moving from a cool idea to a reality – and will cause duress or change in automotive, transportation, and insurance markets (let alone public safety norms).
Artificial intelligence offers up the opportunity to change the health of populations, changing life expectancy, the very nature of diagnostic, surgical, and hospital care, and the economics of health insurance.
It came out of nowhere: A muffled, mechanical voice with electronica undertones called out “Hel-lo there.” It was leering down at me and a few other eTail West attendees: Over 7’6”, a fiberglass robot straight out of a Transformers movie with giant glowing blue eyes and dark mechanical fingers that looked as if they had 300 psi of hydraulic force – enough to crush a car.
Of course, this robot was a ContentSquare-emblazoned suit with a person inside, but the subsequent conversation was surreal. “Can I take a picture?” a fellow attendee blurted out. “Cer-tain-ly. Step ov-er here for a nice-ly lit shot,” in staccato English with the eerie, deep mechanical voice. The neurons in my head started firing.
Suppose this robot was real? The technology is mostly here. We have natural language processing, basic AI functionality, robotic prosthetics, centralized controllers. Now – how about if we gave it a bit more capability – perhaps even manage basic functions in a retail environment. How about pick and pack capabilities, identifying objects on store shelves and labeling processes. What about moving it to the front room and engaging with actual customers? I’m sure it could handle basic questions such as where to find my size 34 jeans or directions to the restroom. Add a camera or two and it becomes a surveillance device as well – mobile and dynamic for loss prevention and security. Maybe even a checkout with a torso based kiosk to scan items and a POS.
If you’ve been following my research, you know I like to divide the business world into three categories of company:
Digital Predators successfully use emerging digital technologies to gain market share and/or displace traditional incumbent companies (e.g., Amazon, Lyft, Priceline, Airbnb, Netflix).
Digital Transformers evolve a traditional business to take advantage of emerging technologies, creating new sources of value for customers and opening up new competitive strategies (e.g., Burberry, Nestlé, L’Oréal, Unilever, USAA, Ford, Delta).
Digital Dinosaurs struggle to leave behind their old business model. These companies are typically slow to change because they must defend large P&Ls, or they have a near monopoly position, or they simply don’t see the opportunity/threat (e.g., many retailers, taxi companies, manufacturing firms, legal firms, recruiters, construction firms).
Two weeks ago, I was lucky enough to spend 10 days in Italy on a vacation with my wife and some friends. As we walked the Path of the Gods, made our own Neapolitan pizze, and enjoyed the gorgeous views of the Amalfi coast, different people in our group would pay for a limoncello here or a glass of aglianico there. As such, our financial activity was a mix of different individuals spending various amounts for a range of stuff. But our group was often too busy having fun to carefully track who paid how much for what and when.
Enter Splitwise* a non-bank mobile app that lets groups of people easily track their spending and settle their short-term debts to each other (see screenshots below). We used it throughout our trip, and it was a breeze.
But why didn’t a bank build this kind of convenient digital offering first? Or why don't more financial providers integrate with Splitwise and other disruptors to build ecosystems of values for their customers? Many bank executives and digital banking teams say their goal is to help customers better manage their finances (and increase retention and engagement by doing so). But too few financial institutions have focused on what Forrester calls the shared finances opportunity. Forrester defines shared finances as:
Any situation in which a person acts as an observer of, partner in, or proxy for another person's finances.
Five years into the age of the customer and it's clear that we're just getting started. More technology is coming — Amazon Echo, anyone? — and that doesn't even begin to touch on the stuff that will hit closer to 2020 and beyond: virtual reality, augmented reality, self-driving cars, and robot assistants.
I'm pleased to introduce my latest report: "Leadership in the Age of the Customer." This project is the result of months of work to update our view of the age of the customer, a 20-year business cycle in which power is shifting from businesses and institutions to end consumers. Technology, information, and connectivity are combining to instill in people a belief that they can have what they want, when, where, and how they want it.
The key to emerging triumphant through all of this will be customer obsession. Organizations that put the customer at the center of their process, policies, and practices will successfully develop and deliver the experiences that hyperadoptive customers are ready to embrace. That will mean changing the operating model of the organization to be more customer-obsessed. It will also require that executives consciously lead the organization to customer obsession.
Your customers' digital experiences with other suppliers already shape their perceptions of value. Today, your customer assess the value of your services based in part on your ability to integrate into their digital world. The future belongs to companies able to harness digital to create new sources of customer value - these companies are destined to become digital predators, swallowing up lesser digital prey.
As a business leader, do you get the feeling that you're no longer playing the same game that you once were? It's not you; the world has changed. The things that used to set companies apart — such as economies of scale, distribution strength, and brand — are far less potent than they used to be. Why? Because digital technology has fundamentally changed two things: the dynamics of the markets in which you operate and the speed needed to remain competitive.
The latest report in our series on digital business – Unleash Your Digital Predator – updates our thinking on digital transformation and includes analysis of data from our latest executive research study on digital, conducted in partnership with executive search firm Odgers Berndtson.
Many firms proudly point to their mobile app and proclaim "Hey, we're digital!" While they may be driving incremental revenue, all they have done is bolt another digital touchpoint onto the existing business. Digital transformation goes much further, fundamentally reshaping the way you create value for your customers and drive revenue growth. Achieving this requires that firms approach digital business from the outside in, pursuing two dimensions of digital in parallel: digital customer experience(DCX) and digital operational excellence (DOX).
In the coming weeks Forrester will publish its annual set of predictions for our major roles, industries, and research themes — more than 35 in total. These predictions for 2016 will feature our calls on how firms will execute in the Age of the Customer, a 20-year business cycle in which the most successful enterprises will reinvent themselves to systematically understand and serve increasingly powerful customers.
In 2016, the gap between customer-obsessed leaders and laggards will widen. Leaders will tackle the hard work of shifting to a customer-obsessed operating model; laggards will aimlessly push forward with flawed digital priorities and disjointed operations. It will require strong leadership to win, and we believe that in 2016 CMOs will step up to lead customer experience efforts. They face a massive challenge: Years of uncoordinated technology adoption across call centers, marketing teams, and product lines make a single view of the customer an expensive and near-impossible endeavor. As a result, in 2016 companies will be limited to fixing their customer journeys.
CMOs will have good partners, though. As they continue to break free of IT gravity and invest in business technology, CIOs will be at their sides. 2016 is the year that a new breed of customer-obsessed CIOs will become the norm. Fast-cycle strategy and governance will be more common throughout technology management and CIOs will push hard on departmental leaders to let go of their confined systems to make room for a simpler, unified, agile portfolio.
As CIOs, we all know digital disruption is happening at a rampant rate. The challenge we face is moving it from theory to reality. An executive at a client company recently posed the following questions to me: “How do you actually innovate and defend against this digital disruption without blowing up the budget? How do you really do that?”
For me, there are definitely a few steps that take this often discussed CIO requirement from the abstract to the concrete:
Are you close to your customers?
Everyone has customers of some kind, including B2B. Do you know where the pain points are in your customer experience? Where the opportunities are to innovate? You’ve got to understand this dynamic and the best way to start that is with customer journey mapping. Follow it up by keeping this “conversation” going by leading or staying involved in a regular customer testing and feedback effort or program. Above all, get out and talk to customers!
Can you innovate on your own mainstream platforms, quick and dirty?
If you can’t innovate easily on your major internal platforms — weeks or days, not months for moderately/small-sized innovations — digital disruptors and likely your direct competitors both have a significant leg up on you. This year alone, we’ve launched 35 small-to-medium, innovative improvements to our business by taking advantage of our SaaS platform. Business moves too fast to wait for months.
Do you use the same tools that startups use to go fast?
Title got your attention? It should. In a report I just published this week, I use our Forrester Consumer Technographics® data to identify the 7% of adults who are digital cord-nevers — measured as people who have never paid for TV and who are under age 32. This is the worrisome group whose arrival TV-industry pros have nervously anticipated. As we show in the report, they are officially now larger than the entire adult population of cord cutters, who come in at 6% of all adults. Put them together, and you have 15% of adults who are not paying for TV while still getting all the TV value they need from a combination of Netflix, Amazon Prime Video, and other tools.
Don't jump out of any Times Square windows just yet. TV is still massively popular and will continue to be. I wrote that report earlier this year, and Forrester clients can read it here. These defector groups are going to grow over time, true. And as the title of this post suggests, if we model this behavior out over the next 10 years, we expect that 50% of adults under age 32 will not pay for TV, at least not the way we think of it today. That compares to 35% of that age group that doesn't pay for TV today. (That's right, a third of them are already out of the pay TV game.)