15 July 2016
How has digital changed the way people do business & businesses sell?
Sixteen years ago, only 6.7% of the global population had internet access. Today, 3 billion people and 40% of the global population can log on and connect. ¹ And by 2020, that number is projected to double.
With digital growth accelerating, it acts as a disruptor to every organization in every industry. It also fuels what customers want and expect out of an organization’s customer experience. From self-service check-out lines at grocery stores to video kiosks at bank branches to drones that enable 2-hour shipping – if you’re not fast and efficient then you’re out of business.
How does digital disruption influence customer experience?
Because customers value the ease that digital channels offer, organizations strive to compete with newer business models that better serve customers. Look at how large retail banks chase Fintechs, Advertising agencies compete with crowdsourcing companies and retail organizations go head-to-head with e-commerce organizations.
Digital growth has fueled organizational visions of technology, processes and management structures that are open, connected and seamless.
From business models that drive internal and external collaboration to customer service infrastructure that enables fast, efficient, fluid service to data analytics and artificial intelligence that offers the insight to innovate – connectivity across people, businesses and things is at the forefront of customer experience strategy.
What are the business models that digital disruption fuels?
|Subscription||Netflix, Shave Club, Apple Music|
|Freemium||Spotify, LinkedIn, Dropbox|
|Marketplace||eBay, iTunes, Airbnb|
|Pyramid||Amazon, Microsoft, Dropbox|
|Business Ecosystems||Apple, Google|
Subscription-Based Business Models
The way consumers purchase has changed over the last 10 years ago. Back then, if you wanted to purchase Microsoft Office for your computer – you had to go to the store, purchase the box of CDs and insert the CD to install it. Today, you visit the Microsoft website, select Microsoft 365, purchase it, download it and you have software that auto-updates and is always current. You also didn’t pay in the triple digits for it.
This subscription-based business model has a lower cost point for the customer, making the decision to purchase easier and less significant as the month-long duration has little risk.
In customer service departments, cloud infrastructure is on the rise for the same reason: low upfront investment, quick launch timelines and lack of maintenance fees lead to little upfront risk.
Freemium & Free Business Models
Digital brought social media and the idea that sharing content (news, music, video) should be free and easy to do. Spotify gives consumers an alternative to radio, with personalization of channels and music lists. Dropbox gives users the ability to share files that would bounce via email. LinkedIn offers recruiters and salespeople access to potential employees and clients. If a user wants to get premium service – no advertisements, greater file size, the ability to email without connecting – a user can elect to pay more.
These business models leverage technology and the digital channel to make it easy for users to get what they need. They give consumers the ability to choose what level of product and service they want. And they appeal to the masses while allowing users to personalize which music channels they listen to, what they see in their news feed and who has access to their Dropbox folders.
Further, Dropbox also employs the Pyramid business model as it rewards users, with more storage space, for inviting other users to join. This enables them to grow users exponentially because you need other users to join the platform to be able to share content with them.
Access-Over-Ownership Business Model
Organizations like Airbnb and Zipcar took the “easy-to-access” pointer from Freemium models and gave users access to houses and cars without ever having to fill out paperwork and answer endless questions about pre-purchasing gas and the different levels of insurance.
Instead, users self-serve via mobile applications and the web and can book a stay or a car within minutes. It’s a quick, easy, low-investment transaction. There is no barrier to use.
Business Ecosystems Drive Successful Business Models
As consumers value hyper connectivity, organizations focus on business ecosystem strategies to grow.
Platform ecosystems provide the footing from which ecosystem members and owners can develop products and services for customers to use. Marketplace business models are built on these ecosystems, with eBay selling goods from individual providers globally.
While platform ecosystems abound, a few companies who leverage platform ecosystems are…
- Apple: iOS and iTunes enable 1.5 million+ apps
- Google: Android enables 1.6 million+ apps
- Airbnb: Platform connects hosts with customers looking to book a home
Open Innovation Ecosystems
Organizations realize that when faced with a complex challenge, they need to leverage external knowledge and insight to innovate within the organization. Leveraging other business ecosystems for direction and strategy will enable the organization to bring in new ideas and expand its perspective.
Crowdsourcing, leveraging a group of people to compete and bring the best ideas forward for a monetary prize, is an example of an open innovation ecosystem. Many organizations crowdsource designers to help them with brand design and other internal documentation.
For example, crowdsourcing enables organizations to get logo variations from different designers around the world. At 99 Designs, you can simply post a brand brief & brand identity, select a prize amount for the winner and watch the designs roll in around the clock. From there, you can give top designers feedback to heighten the designs. By opening up one’s business ecosystem to a larger body of experts – you get more creativity at a lower investment. This business ecosystem also affords creative types the chance to live around the world and work remotely as needed.
Social media fuels the interest ecosystem, or a number of news and entertainment online sources that are interconnected around one topic. Organizations leverage these online interest networks to cover their products and services, to engage influencers, or for ideation around future state vision.
In the entertainment industry Flixter provides a platform for users to rate, review, watch previews and purchase tickets for upcoming movies and for businesses to advertise. Many organizations also engage in interest ecosystems when they form a customer panel or group to give feedback on products, strategy and experience. Either way, the organization is leveraging a group of people, who share a common interest, to push boundaries.
This ecosystem is most alive in travel, supply chains and IT organizations. An organization like Salesforce brings in an ecosystem of outsourcers, consultants and vendors. In the travel industry, airlines, hotels, car rental companies, insurance companies and entertainment entities create an experience for the customers.
IoT drives next generation business models. In healthcare, devices track patient health and the data is used by doctors to better treat the patient in real time and by patients to make better decisions. Further, patient/physician visits can happen remotely using video chat for better engagement and quality of care.
What does digital disruption mean for you?
Many businesses have multiple ecosystem types as there is need to connect and compete on multiple levels. If you are trying to determine how digital disruption can positively alter your organization’s future state – ask yourself a couple questions:
- Do you have a broader – open – connected ecosystem to drive innovation?
- How do you make use of the digital channel & technology advancements that have followed?
- How would a cross-functional charter help drive strategy and foster your organization’s future state vision?
At the base level, organizations should not ignore how digital technology and digital channels have changed the way people buy. Doing so will harm your customer experience and leave you open to a loss of market share at the hands of digital innovators.
Andy is a consultant with over 16 years of experience in professional services and systems integration who specializes in planning and implementing customer-centric, multi-channel solutions that increase customer satisfaction, decrease cost, and increase revenue throughout the customer journey. He’s an expert in customer experience and contact center strategies, processes, and technologies.
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