Problem 6 – The Empire Does
Not Strike Back
History is littered with stories of large incumbents who failed.
We know since the mid ’90s that technology has the power to disrupt industries. We have seen disruption through the creation of products that never existed (Facebook, Google). We’ve seen it through the re-invention of existing industries (Uber for taxis, fintech, Amazon for retail).
New entrants have, if measured by value creation, swept the board – and wiped the floor – for the last 20 years. CX innovation has been at the center of this shift in economic value.
Large incumbents are at a disadvantage
Incumbent companies have found themselves at a disadvantage. Traditional defensible qualities, such as economies of scale, carried a downside. Corporations lost to companies which created offerings that target specific customer segments. Access to risk capital shifted from large corporations (public capital markets) to new businesses (venture capital).
In truth, there would be little opportunity for disruption if incumbents didn’t leave an opening. Often there is a gaping ‘CX door’. It may be the easiest one to saunter through.
Maybe your organization is doing fine. But always remember the words of renowned business strategist Willie Pietersen. As he likes to say, “Somebody, somewhere in the world, has just had a brilliant idea that could kill your business!”
“Somebody, somewhere in the world, has just had a brilliant
idea that could kill your business!”
– WILLIE PIETERSEN
Barriers to entry are disappearing
Traditional barriers to entry have fallen as customer power has swept high-customer-experience innovators into commanding positions. Government regulation has been in the mix, often playing a contradictory role. It can thwart innovation. But innovators do find ways to reverse the regulatory logic, backed by the political and financial clout of eager customers.
If the last 20 years has been an almost one-sided rout, established enterprises have no excuse not to focus on winning the next 20. To do so requires grasping two major realities.
Customers are not comparing you with traditional competitors
The first reality is that customers benchmark experience not just against traditional competitors, but against best-in-class experiences. You may have the best in-store experience as an auto distributor. If customers benchmark your convenience, transparency and service against the Apple store, things look different. Or maybe they are car purchasers and look at the online Tesla store.
By the same token, hospitals (if in a competitive environment) should care more about hospitality. Airlines should care more about e-commerce. An area of lived experience may not fall under the traditional scope of your business. But if it is part of your customers’ (or patients’) experience, you should be aware and beware.
The second reality is that all experiences are digital hybrid experiences. The integration of digital experiences into the physical is now near-complete. Virtually no industry can afford not to optimize that integrated interaction.
Digital transformation is a popular concept, but ‘digital integration’ may prove a more appropriate term. This is the ability to complement or substitute elements of the customer experience through use of your digital assets.
Remarkably, many incumbent industries still consider themselves immune to this digital shift. They take solace in the similar outlook of traditional competitors. Given the investment and time cycles required to compete, this attitude does not augur well for them.
Many incumbent industries still consider themselves immune to this digital shift.
Large incumbents can still win
We believe that winners will emerge out of incumbents in the same way that they emerge out of new entrants. The incumbents may well do so with a higher success ratio. To thrive, traditional businesses will re-design their internal processes, organizational structures, and digital ‘DNA’. They will find competitive battlegrounds where scale is an asset, not a liability.
Organizational incompatibilities can be a challenge
We must not underrate the challenges that new technologies represent to organizational structures. Here is a sobering example, raised by Tim Harford in his ‘Cautionary Tales’ series.
The British invented the armored tank towards the end of the Great War. Deciding where tanks should report organizationally turned out to be an insurmountable challenge. Cavalry? But it’s not a horse. Infantry? It’s not a soldier. In the end, the British did almost nothing.
The Germans built their forces from zero in the 1920s and ’30s. They faced no such organizational challenge. The horror that was blitzkrieg – armored divisions with air support – destroyed all ‘incumbents’ in its way.
These are more peaceful examples:
- Kodak could not integrate the production and sale of digital cameras into the organization.
- Xerox invented the mouse and the graphical user interface. But the organizational immune system rejected the idea that Xerox would produce and sell PCs. Xerox sold and serviced copiers, basta!
Sony invented the digital Walkman. Its organizational structure couldn’t cope. The rest is Apple history.
The same can happen with the reinvented and more strategic CX tools, processes, insights, and potential outcomes that we discuss in this series. The toolkit may be organizationally incompatible with companies that, it turns out, only want occasional scorecards.
Don’t be those companies. Don’t be the Xerox that Steve Jobs took a stroll through in 1979.
Differentiate your customer experience
At the heart of this new world is a realization that differential customer experience must be a core element of any strategy. If absent, other potential advantages weaken to the point of irrelevance.
Scale is no defense against new entrants. Customers only care about their own experience.
You can find the next problem statement, Problem 7: The Red Queen Theory is Still Valid.
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