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In my experience as a business consultant, I find than most people still believe that technology drives business disruption. I’m more convinced that technology merely enables disruption, and changing customer interests and needs really causes it. Many companies try to recover with more advertising and rebranding, and discover that these strategies don’t work well in today’s market.
Other companies keep the focus on their customers, and seem to thrive on disruption, much less survive. They make it their top business priority to understand, anticipate, and gratify customers’ needs. I first saw this approach outlined well in the classic book, “Customer-Driven Disruption,” by Suman Sarkar, former A.T. Kearney consultant and now leader of his own consulting practice.
As disruption examples, the rise of ride sharing, e-commerce, and social media were clearly driven by changing customer trends, more than technology. Even smartphones, though based in technology, are more of a customer phenomena than a technology play. I like the five strategies that this author recommends for capitalizing on future rapidly emerging customer needs:
- Win with current customers before chasing new ones. New customers are more expensive to acquire, and typically produce less revenue than would current, satisfied customers. Yet, when faced with declining revenues, most companies focus on finding new customers. I recommend creating new services and products for existing customers. When Amazon wanted to increase its revenue, it identified existing best customers and offered a new membership service – Prime “free” shipping. Shipping costs increased, but membership fees from 100 million new Prime members more than made up for it.
- Offer affordable personalization without a premium. Mass-produced products aren’t on anyone’s wish list anymore. Today, customers want personalized products and services at reasonable prices. To make personalization affordable, leaders must use available technologies but not market them, create flexible operations, and reduce waste. Memorable personalization doesn’t always have to include fancy technology or high cost. In many cases, a thoughtful gesture is more than enough. Nordstrom “remembers” the sizes of customers, and Chanel follows up sales with handwritten notes from associates.
- Speed up both the new design and the supply chain. Customers don’t wait today. Most companies take too long designing new products and services. By the time the product launches, more nimble competitors have captured the market, or customer needs have changed again. Often that means finding new channels or a better supply chain. Zara, a fast fashion company, gets new catwalk trends to stores more quickly by a faster supply chain. They keep their manufacturing facilities close to the market instead of locating them in distant Asian countries, so new designs reach stores within a week.
- Develop higher quality than just good enough. Now that consumers judge products based on reviews and peer recommendations, rather than advertising, quality if more critical than ever before. It’s time for designing and thinking outside the box, to offer a level of quality and performance customers can’t resist and the competition can’t beat. Chick-fil-A changed their quality focus to the kind of quality that today’s customers care about. Their birds are raised in barns, not cages, on U.S. farms. They avoid fillers, added hormones, and steroids. Revenue per location now averages double that of McDonalds.
- Continuously revisit and evolve, or re-invent yourself. In today’s fast changing customer environment, what works today may be “old news” tomorrow. Smart companies make and measure change as part of their normal strategy process, rather than only focusing on it when a crisis occurs. Use autonomous teams, rather than functional silos. Disney, for example, has managed to maintain its broad entertainment appeal by evolving from Mickey Mouse cartoons, to Old Yeller type movies, Pixar animation movies, to Star Wars and Indiana Jones. Theme parks and attractions are revised regularly.
Disruption wrought by customer change can be a death sentence to a business, and technology alone is not the solution, or cause. Every business should start capitalizing today on the strategies outlined here to retool their products, services, culture, incentives, and operations to thrive on disruption, rather than fight and fear it, in the days ahead. There is no going back.