“Only 5 percent of organizations feel that digital gives them a point of differentiation over their competitors,” according to an Accenture study published in October 2015.
So what will? Customer centricity. As customers become more powerful they will gravitate towards organizations that treat them best. Good pricing will be a key gravitational force, but service and simplicity will be equally important.
The competitive landscape of the past focused on the new customer. The competitive landscape of the present and future must focus on the current customer.
A physical landscape is full of barriers. A digital landscape is fluid and ever-changing. It is evident that the barriers of entry are collapsing. New competitors could come out of anywhere. The Barriers to Exit are also collapsing. It is getting easier and easier for customers to leave, and they are leaving in historic numbers.
The Switching Economy, a study by Accenture, estimated that customers switching brands accounts for $5.9 trillion every year. In the US, switching has grown by 29 percent since 2010. A 2014 survey by Xerox found that customers under the age of 34 are twice as likely to switch.
The business model of many of the world’s biggest brands has been built on customer apathy. Because of this apathy, brands have been able to charge their most "loyal" customers more and more. The root of customer apathy is laziness and lack of information. Because of complex pricing and charges, many customers don’t know how much their apathy is costing them. They also feel that it is too much hassle to switch. Digital is eating away at these two barriers to exit. Simplicity is the twin of transparency, and simplicity is the driving characteristic of digital behavior and expectations.
Digital brands such as Apple, Google and Amazon have trained customers to believe that they can use complex products to lead simpler, more convenient lives. From a customer perspective, digital means empowerment. Digital — from the search engine to the smartphone — is putting customers more and more in control of their lives.
The simple act of moving to digital means nothing if all you are doing is migrating physical practices into the digital realm. (A PDF is most definitely not digital transformation.) The real transformation that is required is in culture and business practices. If this is the age of the customer, as so many claim, then it is an age of customer-centricity, not organization-centricity.
Digital competitive advantage will ironically be emotional and relationship based. As digital technologies reduce all sorts of barriers, it is the genuine feelings towards a brand that will be hardest to shift. What happens when customers discover that their genuine brand loyalty has been exploited? That in fact they are being treated like suckers? There is a digital day of reckoning coming for the brands whose business model is to exploit their most loyal customers most.