Connected strategies can become a powerful new source of competitive advantage. And connected technologies have greatly advanced over the recent past. Customers and employees are increasingly expecting well-designed digital experiences, a trend that certainly has further accelerated during the pandemic. Consequently, the question companies face currently is not a matter of “whether they should implement a connected strategy,” but a matter of “how.” When designing a successful connected strategy, the technological innovation is only one piece of the puzzle. In order to create a lasting competitive advantage, companies need to match the right technological solutions with the right customer needs. This article discusses four connected customer experiences that firms can create: 1) respond-to-desire; 2) curated offering, 3) coach behavior, and 4) automatic execution, to turn episodic interactions with customers into continuous relationships.
Over the last couple of years, more and more companies have been trying to fundamentally reshape the way in which they interact with their customers — a trend that has been accelerated by the recent Covid-19 pandemic. Perhaps the biggest change firms have made is that, rather than having a few episodic interactions, they are trying to create a continuous relationship with their customers.
For example, in the past, consumers would only interact with their bank sporadically, when they visited a retail branch. Now, online and mobile banking connect the two parties almost seamlessly, creating a delivery model known as connected banking. Similarly, automotive insurance companies used to interact with the drivers they insured only at predefined touch points, such as policy renewals or claims events, but now sensors and mobile apps can continuously monitor driving behavior. This data can enable a connected insurance business model by providing safety feedback to drivers (and their parents) as well as informing future underwriting decisions. And, in healthcare, it used to be that patients often made decisions related to diet, exercise regimen, or medication adherence without the involvement of care providers. Now, technologies such as the Apple Watch, Fitbit, or WHOOP are collecting health data 24/7, allowing healthcare providers and others to learn about patient behavior and nudge them into making healthy decisions rather than just waiting for the patient to fall ill.
In our 2019 book, Connected Strategy: Building Continuous Customer Relationships for Competitive Advantage, we discussed these developments and argued that such emerging connected strategies can become a powerful new source of competitive advantage. In our research, we identified four connected customer experiences that firms can create: 1) “response-to-desire” journeys, 2) curated offerings, 3) coach behaviors, and 4) automatic execution. Each of these experiences can help turn episodic interactions into continuous relationships.
In a “response-to-desire” experience, a customer knows precisely what she plans to buy and wants to press a “button” that makes the rest of her customer journey (ordering, paying, delivery) as easy as possible. For example, buying a book and having it instantly delivered onto a Kindle would be a respond-to-desire experience.
A curated offering helps the customer understand all the available options and find the best option that would fulfill her particular, current need best. A good movie suggestion by Netflix, or the creation of a personalized retirement portfolio by a financial advisor would fall under this category.
A coach behavior enables a customer to become aware of her needs at more efficient times. A digitally-enabled asthma inhaler that can provide real-time feedback and lead to greater adherence would create a coach behavior experience.
Lastly, in an automatic execution, a firm is able to detect and resolve a customer need before the customer has even notices it. For instance, a printer that reorders a cartridge whenever it is about to run out of toner creates an automatic execution experience.
Right now, many firms are in the process of implementing connected strategies. Decisions need to be made about how to execute these strategies, which customer segments they should target, and what operational capabilities have to be developed — and making these decisions correctly is paramount to reaping the full benefits of connected strategies. But, all too often, firms make avoidable mistakes in the implementation process.
In our research and collaboration with a number of connected strategy leaders, we have observed that companies often fall prey to four myths when implementing a connected strategy:
Myth 1: The more connected you are with your customer, the better.
The removal of any friction and pain points in customer-initiated interactions with the firm is at the core of the respond-to-desire experience. Whenever and wherever, customers should be able to seamlessly interact with the firm.
Though there is much to like about this better access, a downside we have encountered is the use of customer support resources. Consider the work we did with a major U.S. healthcare system. In the “old days,” the process of seeing a doctor was far from frictionless. Wait times in the call centers, multiple agents to talk to, and long times until the next available appointments were all pain points that made patients think twice before reaching out to their care team.
When the system rolled out a more connected patient experience — at first allowing patients to directly message their providers and subsequently even allowing for simple video visits on the same day — access was greatly facilitated. This, however, has turned out to be a mixed blessing for the system. More and more patients wanted more and more visits with a fixed number of care teams. Unlike automated services, the care capacity in the clinic was finite, and so the additional demand caused much more work and only slightly more revenue.
When in a follow-up study we looked at the work hours of the physicians, a fascinating picture emerged. Prior to the connected customer experience, physician work hours were mostly limited to a 7:30 a.m. to 5:30 p.m. timeframe, with weekends being reasonably protected from work. Allowing patients easy access to providers changed this separation between work and personal life — a major challenge to every organization concerned about burnout.
Myth 2: The more data you collect about your customer, the better.
As data collection via sensors or digital interactions has become easier, many companies now have a lot of data on customers but don’t know what to do with it. Some are tempted to just resell the data to at least get some benefit from it — but that simply alienates their customers, whose spam folders are now bulging even more.
We advocate that companies engage in “small data” before engaging in “big data.” There is a big difference between collecting data and understanding the pain points of your customers. Understanding pain points often requires ethnographic research, living with your customer, to truly understand their journeys and the obstacles they face in realizing and then solving their needs. Once these pain points are identified, a firm can ask what kind of data would be helpful to be able to remove these pain points.
This approach often requires a cultural change in the data analytics divisions of companies. Many firms lack the necessary capabilities to truly understand customer needs.
Myth 3: Connected user experiences are great additional features for customers.
Cars and trucks are becoming more connected and have incorporated a number of connected customer experiences. Consider the example of the activation of the windshield wipers — a great application of the automated execution customer experience, in our opinion. When the car senses rain, it automatically activates the wipers. Note that this experience is not just convenient for the customer, it can also substantially simplify the design of the car, reduce the number of buttons and controls, and reduce the complexity of the car’s wire harness.
For this to become more efficient, however, the vehicle manufacturer has to discontinue some of the old ways of activating the wipers. This is easy for a new entrant like Tesla or Lucid Motors, who design their cars from the bottom up for connected customer experiences, and who also don’t have the legacy of prior vehicles to adjust. They can just provide one awesome experience. A manufacturer like Daimler, in contrast, is much more constrained, which explains why Mercedes wipers can be activated via a button, a touch screen, a voice control, and automatically, creating additional complexity both for the company and for the driver.
The same complexity problem exists in financial services. Neo-banks such as Wealthfront or Betterment were able to create customer experiences with only the digital age in mind. Legacy banks, in contrast, have a hard time imitating this move, as for every channel they use (web, app, call center, retail), some customers already like that mode of doing business with them.
Myth 4: Connected customer experiences can only be created for your customers.
While connected strategies were originally designed to address the needs of external customers, many firms have internal customers who would greatly benefit from connected customer experiences as well.
For instance, in our work with a legal department of a large enterprise software company, we found that the department operated under a typical “buy-what-we-have” model, waiting for internal “customers” to show up with a request for help on patenting, or drafting alliance or licensing agreements. If the requestor was lucky, the legal department had the required resources available at the time; if not, delays occurred, or suboptimal documents were produced. IT help-desks within organizations often work in similar ways. By trying to create a deeper connection with internal customers, these department can at times anticipate the needs of their internal customers, balancing their workload better and creating faster response times.
***
Connected technologies have greatly advanced over the recent past. Moreover, customers and employees are increasingly expecting well-designed digital experiences, a trend that certainly has further accelerated during the pandemic. Consequently, the question companies face currently is not a matter of “whether they should implement a connected strategy,” but a matter of “how.” When designing a successful connected strategy, as so often in management, the technological innovation is only one piece of the puzzle. In order to create a lasting competitive advantage, companies need to match the right technological solutions with the right customer needs.