In today’s digitised world, well-established incumbents are being disrupted by new business models that deliver significantly better customer experiences at considerably lower costs.
Raghuram Devarakonda, MD, Advanced Customer Strategy, Accenture Strategy, cites the instance of Netflix, which digitised the delivery of video entertainment using the internet. “It’s only a matter of time that other digital disruptors will rise in other industries,” says Raghu, who is also an experienced management consultant with expertise in business strategy, sales and customer services, product development and supply-chain transformation.
He tells Sudhir Chowdhary in a recent interaction that companies that fail to innovate customer using digital technologies risk being disrupted and may scramble trying ‘not to lose’ when they should be ‘playing to win.’
What do you think has led to digital transformation being the hot topic in the industry right now? How are companies using it to get closer to their customers?
Erik Brynjolfsson and Andrew McAfee in their book, ‘The Second Machine Age’, explain that we are in the midst of a momentous time, where computers and other digital advances will help humans move beyond the realms of our mental capabilities with exacting accuracy and at near real-time speeds, similar to how the industrial revolution helped us move beyond our physical limitations to manufacture high quality goods at quicker speeds. This is largely due to Moore’s law which has made computing power, storage capacities and communication all sit on a micro-chip that can be manufactured in large volumes and at affordable prices.
Greater access to digital technologies has given rise to digital disruptors who have thrown knock-out punches at well-established incumbents by creating new business models that deliver significantly better customer
experiences at considerably lower costs. Take Netflix, for instance, which digitised the delivery of video entertainment using the internet. The rise of ‘on-demand’ derailed the fortunes of Blockbuster Video which operated with a wide physical network of retail stores requiring customers to visit, locate and return their favourite videos and DVDs. In addition to the physical inconvenience of having to travel to the nearby store, the process did not guarantee availability. It’s only a matter of time that other digital disruptors will rise in other industries with new business models that provide a vastly superior customer experience at a fraction of the cost.
For example, the banking industry is seeing tectonic shifts happening through mobile wallets and other services that are going digital. Every segment of its value chain is being digitally disrupted by niche players, particularly payments and lending. “Death by a thousand cuts” is the phrase used for such disruptions; not necessarily one disruptor taking it all, but a pack of them nibbling away at every link in the value chain.
What is it about digital disruptors that make them perform well and how have they adapted to the changing behaviours of the customers?
Whether it be a solitary disruptor or an ecosystem of digital disruptors, they all have one thing in common: they all leverage digital technologies to deliver dramatically greater customer experiences at lower costs. Combine this with the penetration of smartphones in India—the market has exceeded 200 million users, topping the US as the world’s second largest smartphone market—the reasons for the high adoption rates for these digital newbies can be explained.
In a connected world, digital disruptors can make themselves accessible by their stakeholders in a quick, easy and even fun manner. Unlike the physical model, digital also allows for rapid scaling of their businesses at not so significant costs. In a recent Accenture Strategy survey, it was reported that the Indian consumer has come of age.
The results indicated that 88% of respondents switched companies in at least one industry due to poor customer service—a number significantly higher than the global average of 64%. This is happening in the back-drop of many products and services becoming commodities, with nearly similar price-value propositions and quality levels across categories.Companies need to execute robust plans by developing a comprehensive digital roadmap for their businesses to not only respond to the digital disruptors but more importantly to remain relevant to their stakeholders in the digital era.
Given the current environment where emerging digital disruptors are restructuring the landscape, how does an organisation tweak its customer strategy so that they are more profitable?
Quite simply, if this is the way the market is evolving, companies need to deliver unique and highly differentiated customer experiences in order to retain existing customers and acquire new ones. Digital technologies allow organisations to deliver highly personalised and differentiated experiences in a cost effective manner. We call this the ‘digitalisation of business’ where disproportionate topline growth is achieved at efficiencies delivered through digital technologies.
How should one start the journey of digitalisation of the businesses?
To maximise return on digital technology investments, organisations need to first identify target customer segments that hold the most potential for profitable growth. To acquire more of the same, companies also need to have a deep understanding of the customer journey, and identify areas for improvement. It is important that digital channels provide a quick, easy and intuitive way for customers and influencers to interact with the organisation.
Can you share some examples of Indian companies where digitalisation has been effectively put to use to gain customer mindshare?
Indian companies are launching creative ideas to capture more market share. HUL, for example, set out to use mobile as a marketing medium by launching Kankhajura Tesan (KKT). KKT is a mobile service that provides free entertainment content, such as jokes and movie songs, to subscribers in Bihar. The service is activated when a customer delivers a missed call to a toll free number. The customer then receives an automated call from HUL
delivering entertaining content, interspersed with advertisements for HUL products. Boasting a subscriber base of nearly 10 million, KKT has the largest listener base among radio stations in Bihar.
The HUL example demonstrates a novel way to deliver brand awareness, in a cost-efficient manner, with 100% confirmation that their target consumer base has learnt about their brands unlike an above the line campaign through TV/Radio or press ads. In this case, the ‘spot’ picked for enhancing customer experience in the purchase journey is to generate brand awareness amongst the target segment, that is, rural consumers in Bihar.
How optimistic are you about the digital era and how do you see the future of digitisation shaping up?
The digital era is yours for the taking. To quote Satya Nadella, the CEO of Microsoft, who said, “The world does not respect tradition; it respects innovation.” The digital era is here to be leveraged, for organisations to innovate and provide customers with differentiated experiences at different points in their purchase journey.
In other words, companies that fail to innovate customer experience using digital technologies risk being disrupted and may scramble trying ‘not to lose’ when they should be ‘playing to win.’