Coping with digital disruption can be challenging for an established organization-often referred to as an "incumbent." Digital transformations happen lightning fast, filling a natural vacuum in the market, such as the demand for omnichannel support or the appeal of personalized products.
Although none of us can predict disruption, having a working knowledge of its contributing factors and how it impacts the customer experience will put you and your organization in a better position to adapt.
What is Digital Disruption?
“Disruption” is a buzzword for change that happens quickly, triggered by a new development. McKinsey’s well-known model illustrates how the process usually unfolds:
Image credit: An Incumbent’s Guide to Digital Disruption | McKinsey
In a digital context, disruption involves a fundamental acceleration in the way information is exchanged between businesses, products, and customers. Some factors at play in the current wave of digital transformation include: mobile (52 percent of the world’s web traffic came from mobile phones last year), cloud computing, crowdsourcing, and artificial intelligence (look no further than the spread of virtual assistants like Alexa, or the number of business solutions now incorporating IBM’s Watson). Despite the unpredictability of disruption, most companies are at least vaguely aware of both its productive and destructive potential.
Digital Disruption in Action
Amazon is one of the more commonly cited examples of digital disruption. The company’s vast and varied inventory from thousands of vendors, their ubiquitous distribution centers, and their efficient order fulfillment processes have revolutionized the way consumers buy everything from flip flops to electronics. Meanwhile, Amazon collects valuable data about all of their members, which they use to further fine-tune the customer experience and launch new products with (almost) instant appeal.
Established brick and mortar retailers like Walmart and Target have no doubt felt the strain of this transformation, and they’ve been forced to adapt. That’s why we’re seeing free two-day shipping on thousands of items at Walmart.com (no membership required) and why Target bought order fulfillment service Shipt for $550 million.
The genius of Amazon’s business model—and the reason it’s disruptive—isn’t that they’re good at giving customers what they want. It’s that they’ve expanded their scope from strengthening an existing value chain to building an entire ecosystem that continually feeds on its own success.
Another example might be the digital mortgage revolution, which is still in an earlier phase of McKinsey’s model—probably somewhere between “clear” and “inevitable”—but rolling with plenty of momentum.
It started with the emergence of online lenders like Quicken Loans, whose mobile app (and its “push button, get mortgage” publicity campaign) turned an intimidating process into something the masses could initiate in minutes.
Now, Quicken Loans is the largest home lender in the U.S., beating 30,000 other lenders for market share. Because of that, local brokerages and credit unions that once enjoyed a steady stream of referral business are now working to streamline their origination process, reduce fees, and build sleek online platforms.
The Commonwealth Bank of Australia (CBA) pioneered a similar shift by rebuilding their customer experience around home-buying, rather than mortgage applications. Their innovative mobile app lets users point their phone at a house and get instant info about sale price and local comps. This process delivers valuable intel for the user, and a bottomless source of mortgage leads for CBA. In its first six months, the app processed over a million property searches and generated a 109 percent return on investment
Digital Disruption and the Customer Experience
Thanks to the internet, modern buyers are research-obsessed. By the time they actually make first contact, they’ve already read a dozen reviews, watched online demos, and compared your solution with five others.
Google analysts report that searches including “product reviews” and “top or best brands” went up 35 percent and 95 percent, respectively, between 2015 and 2017. Searches ending with “to avoid” grew 150 percent. That means whether you work in manufacturing, retail, professional services, or B2B, you're fighting an uphill battle against invisible forces before the customer experience even gains traction.
Image credit: The Curious Consumer: Researching everything, no matter how small | Think With Google
If you want to keep the upper hand in the midst of digital disruption (or better yet, initiate some disruption of your own), it’s important to have a deep understanding of the entire customer experience. Companies that build customer maps enjoy 54 percent higher returns on their marketing investments, massive reductions in customer service overhead, 3.5X customer referral revenue, and 56 percent higher cross- and up-sell revenue.
When do consumers or businesses realize they need a product or service like yours? Where do they go to find information about it? Who are the key decision-makers, and what are their priorities? What kind of service levels do they expect, and how likely are they to churn?
While it's hard to account for every possible flavor of disruption, there are a few best practices that will help companies in any industry stay agile when change inevitably comes:
1. Gather customer data across every touchpoint
If you’re still operating based on assumptions your R&D department made two years ago or leaning on a bunch of “market data” from a third-party vendor, you won’t have a clear understanding of your customer's needs. You need a single-source-of-truth approach that compiles accurate, current data about where your customers are coming from, how they make decisions, and how they interact with your product or service on a daily basis. The key here is not just to gather data through existing channels, but to rethink your digital capabilities and move towards an ecosystem that sustains itself.
2. Build a customer-centric company culture
Rolling out new products or features might seem like the most direct route to transformation, but in this case, change should originate internally. Every decision-maker and decision influencer in your company should have a functional knowledge of customer needs and sentiments. In most cases, this should revolve around quantifiable metrics such as Net Promoter Score (NPS) or Voice of the Customer (VoC). It’s important for company leadership to champion these metrics and evaluate new efforts based primarily on their customer impact. Making your product/service the top choice for your target market should be more influential than profit and efficiency goals.
3. Invest in the right tools
If your customer-focused teams are still relying on some bloated legacy system that doesn’t connect all of your channels and doesn’t provide real insight, it’s time to upgrade.
A good solution should be flexible enough to match your current IT environment (whether that’s cloud-based, private cloud, on-premise) but scalable enough to grow as your needs change. If you don’t have a central platform that ties marketing efforts together with customer accounts and communications, you might consider some combination of marketing automation and customer relationship management software.
If you’re looking to build a better web presence and connect efforts across multiple brands, consider a content management system. Look for a solution that’s scalable and secure—something that will support growth and give your teams the ability to maintain a compelling online presence, without creating developer dependencies. With fast and effective tools, you can focus on improving the experience and staying competitive.
The most progressive companies look for ways to be the disruptors, rather than the disrupted. Maybe that’s not always in the cards. Maybe it’s all you can do right now to keep costs down, keep your contracts active, and stay out of the red.
Still, preparing for digital disruption is an investment no business can afford to ignore. Better to have a positive plan championed by company leaders than an eleventh-hour wake-up call from a new contender who’s already gained a competitive advantage.