The essence of ‘When digital becomes human’
Technology as the backbone
Nowadays, technology is the sixth sense for the vast majority of people. Hardly an hour (or sometimes even scarcely a minute) goes by without us using some piece of technology. Technology assists us in our professional life, helps us to enjoy our leisure time and allows us to follow the news. Technology is involved in every step of our daily lives. And during the next five to ten years the scale and pace of digitalization will increase significantly. Today, an average family has three pieces of technology linked to the internet. By 2020, this will be a minimum of ten. In addition to our telephone, our car, coffee machine, shoes, fridge and much more will all be inextricably linked to the web.
This rapid digitalization will also have an impact on the relationship between consumers and companies. The customer relationship will be digitally driven from start to finish. The difference between online and offline will quickly disappear. Consumers now live in a world of self-service, automation, smart data use and proactive customer service. This process of digitalization is already moving quickly and the battle to keep ahead in the customer relationship game is a hard one. Companies with an online origin are currently in the lead and are anchoring themselves ever more firmly into the digital world. Most companies with an analogue background are lagging behind in the digitalization of their customer relations. Their future will be uncertain unless they can make up this lost ground – and quickly.
Digital will become a commodity
In the relatively near future the digital customer relationship will become a commodity. Whoever fails to make the transition to digital will simply not be able to survive. But even the companies that do make this transition successfully will discover that it is not enough by itself to win the hearts and minds of the customer. The digital transformation will also force companies to transform their human relations as well. What role will the human element play in customer relations in five years time? Will self-service, automation and robots come to dominate the customer relations of the future? People can (for the time being, at least) still do something that machines cannot: they can inject emotion into the customer relationship. This means that if people continue to play a role in this relationship, it is important that the focus is set fairly and squarely on emotion. A computer cannot (yet) be creative, empathic or passionate. But people can.
When digital becomes human
The customer relationship of the future will be both digital and human. Innovation is still needed in both these dimensions. Most companies recognize that they still have work to do in the digital domain, but they often overestimate the current quality of their human contact with their customers. Just because companies today still work primarily with people, this does not means that these people necessarily bring an added value to the relationship.
The reconfiguration of the customer relationship runs along two separate axes: the digital and the human. This means that companies can find themselves in one of four different situations:
1. A quick death
Companies that have neither digital qualities nor human qualities at the heart of their customer relationship are doomed to a quick death. A good product, a good location and a good price are no longer sufficient to ensure survival in the modern marketplace.
2. Strong today, but not tomorrow
Being strong in your relations with others is a tremendous advantage. Many of today’s leading companies owe their success to the strength of their human relationships. This is something they need to value and continue to develop. The companies that consumers love are those where the company manager and his staff excel in their dealings with other people. Having a strong emotional relationship with your customers can win you a strong position in the market. Or at least it can for the time being.
Whether or not it will still be sufficient in the future is another matter. Companies of this kind face a very specific danger and one that will often come from an unexpected quarter: a competitor who uses the power of digitalization to drastically change the customer relationship in a manner that allows him to conquer the market almost overnight. For example, the local butcher and baker may in future find themselves in difficulties from a food equivalent of AirBnB. A number of initiatives already exist (in Belgium, for example, www.thuisafgehaald.be) that allow neighbours to provide each other with fruit, vegetables and even ready-made meals. Home deliveries by major companies will also increase dramatically in the years ahead. Moreover, these deliveries will provide a faster and more efficient service than in the past. Google has made it a matter of honour to deliver goods to the customer’s home within one hour of an order being placed online. Every sector, big or small, will be confronted with a digital variant of this kind. When this happens, the quality of a company’s human relationships will be a key factor in deciding whether the company sinks or swims.
Basic service provision will unquestionably need to become more digitalized. But digitalization goes much further than simply having a website or being present on social media. It means the digitalization of all facets of your relationship with your customers. If consumers are unable to find you digitally, or are unable to order your products and services online, the life expectancy of your company is very, very short. Your position might be strong today. But it will not be enough to ensure your survival tomorrow.
3. A fighter’s market
This is the sector where many of the current superstar companies are located. They score strongly in digital matters but pay almost no attention to human relations. Companies like Facebook, Google, Booking.com and Amazon.com have a perfectly working digital interface. But they also have a seeming desire to avoid human contact wherever possible. A limited number of companies will probably be able to continue with this business model and still survive. In general, these will be the companies that already have an unassailable position in today’s market. As such, they will be the exception rather than the rule. They also tend to be the companies that combine an excellent digital interface with very low prices. Both Booking and Amazon are very strong price players. Even so, their customers do not buy from them simply on the basis of price alone. They also know that their purchase will be dealt with quickly, efficiently and digitally.
If, however, you are not one of the handful of digital superstars, this is a difficult quadrant to be successful in – certainly in the long term. In their management classic ‘The Discipline of Market Leaders’ authors Traecey & Wiersema argue that companies must choose between operational excellence, product leadership or customer intimacy. However, the perfect digital relationship has now become the new norm for operational excellence, in a new and more customer-oriented variant. A Harvard blog describes this trend as ‘when operational excellence meets customer intimacy’. In other words, companies must strive to provide ultimate efficiency linked to excellent service and user friendliness. Nowadays, many customer relationships are a combination of operational excellence and customer intimacy. This has resulted in the development of a fighter’s market in which it is difficult to survive and where price is ultimately the deciding factor. If a company only succeeds in accomplishing its digital transformation, it will find it hard to differentiate itself. When an optimal digital interface becomes a commodity (as it will), price will often be the only differentiator that remains.
4. When digital becomes human
This is the quadrant containing the new digital superstars, such as Uber and AirBnB. A recent study compared the customer perception of classic hotel booking sites like Booking.com with AirBnB. In general, customers were satisfied with both AirBnB and Booking. However, the intensity of the customer relationship was much higher with AirBnB. Consumers often described their relationship with AirBnB as passionate.
Combining a digital and a human customer relationship is the only way for the vast majority of companies to survive in the future. It is not a guarantee of success, but most companies in the other quadrants will face even more severe challenges in their struggle to keep their heads above water. A recent IBM survey concluded that the most profitable companies succeed in creating a strong emotional bond with customers on top of a strong transactional relationship. In other words, success is achieved through linking digital perfection (modern operational excellence: strongly customer-oriented and efficient) with human emotion. And the stronger the emotional relationship, the greater the success.