It is old news, but worth repeating. A constellation of forces, including rapid technological change and a fundamentally digital, multi-channel and increasingly disloyal consumer, are radically changing entire industries on a global scale. This phenomenon, called ‘digital disruption’, is the process by which industry incumbents react too late to competitors that leverage new technology and consumer behaviour to change the game.
In this environment, the role of the CMO has never been more challenging. One tough question for many is: “Where do I start?”
One place to begin is to look at cases of success and failure in the world of digital disruption. In doing so, three key actions for survival are clear: Obsess about the customer; think big; and realise that big data isn’t about the data.
1. Obsess about the customer
The demise of Blockbuster Inc, a once global giant with a market capitalisation in excess of US$8 billion, illustrates the importance of customer centricity.
From its peak in 2004 it took just four years for Blockbuster to collapse, running into bankruptcy by the rapid rise of DVD rentals by mail, and then online from companies like Netflix. Jim Keyes, Blockbuster Inc’s last chairman and CEO, said: “I’ve been frankly confused by this fascination everybody has with Netflix… Netflix doesn’t really have or do anything we can’t or don’t already do ourselves.”
Some might argue Blockbuster was a very customer-centric company, having figured out a way to mass market and distribute filmed entertainment and games at reasonable prices. But a key flaw in Blockbuster’s business model was late fees. Late fees delivered up to 6 per cent of Blockbuster’s revenue but deeply displeased customers. With options evolving to rent and buy videos by mail and online, and Netflix’s elimination of late fees altogether, a trip to Blockbuster became less and less convenient.
Netflix, ironically founded by Reed Hastings after he was upset by a $40 late fee at Blockbuster, introduced an “all you can rent” subscription service and online recommendations that began to skim off Blockbuster’s customers. This forced Blockbuster to abandon late fees and to make increasingly unaffordable investments to compete with Netflix – eventually resulting in an unrecoverable death spiral.
Lesson: Map your customer experience in detail – and fix it fast
There are very few companies that have a systematic way to identify and fix customer experience issues. But in a world of increasingly disloyal customers, creating a great customer experience while maintaining profitability isn’t a choice: Tomorrow’s winners will have to achieve both.
Start by mapping your customer experience in detail across the business. This will make clear where your products, services and processes show strength and where they fall short. After you have identified the key customer experience issues, fix them and do it fast.
2. Think big
It’s hard to remember BlackBerry was once a dominant force in mobile and captured more than 20 per cent of the world’s smartphone market by 2009. Today the company’s share is less than 1 per cent in the US and is effectively zero in critical growth markets such as China.
An insight into BlackBerry’s sudden collapse is found in the now famous quote from Jim Basille, RIM’s co-founder and CEO, about the iPhone when Steve Jobs announced the device in 2007.
“It’s kind of one more entrant into an already very busy space with lots of choice for consumers... but in terms of a sea-change for BlackBerry, I would think that’s overstating it.”
BlackBerry badly misjudged the demand for Apple’s touchscreen and the potential for customers to use their mobile device in ways far beyond email.
Lesson: Break through entrenched orthodoxies
Incremental doesn’t cut it anymore. Today’s leaders are going to have to change the game. This is not to say incremental thinking and improvements aren’t important. But the nature of the threat, and the concept of digital disruption, may require a leap of faith that is uncomfortable because it means breaking free of entrenched orthodoxies.
You can do this by asking provocative questions that open the aperture to what is possible. For example: “How would Amazon run my business?”
3. Big data isn’t about the data
Google is a company built on capturing data and making data accessible and useful to consumers. But without a great search algorithm, the mechanisms necessary to keep geospatial data for accurate mapping up to date, and the front-end tools for marketers to successfully advertise, Google’s data would not be nearly as valuable.
Data is incredibly valuable and can help you change the game, but only if you can build intelligence on top to make it useful and then drive changes to the front line.
Lesson: Invest in a big data capability
Start by thinking systematically across the enterprise to identify numerous ways to use big data to improve the customer experience, cut costs and open up game-changing opportunities. For example how are products developed, how do we price, and how do we spend limited marketing budgets? These are but a sample of ‘use cases’ for big data in marketing.
Once you have a clear view of the opportunities, work backwards to figure out what data, analytics, user-facing tools and organisational changes are required to turn information into action.
- This article originally appeared in CMO Australia's inaugural magazine in March 2014. To get your complimentary copy or to sign up to our weekly newsletter service, subscribe online today.
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