It has been a year of disruption on all fronts… My customers – leading consumer goods companies & retailers – have been battling the impact of the Digital forces. Each of them are dealing with shifting of their customer behavior preferences and trying to evolve a successful model to win in this new paradigm. But one thing is very clear – as Christensen has articulated in his theory of Disruptive innovation that Digital has become mainstream, and no longer a niche applicable to a small section of the enterprise.
Endless articles have been written on Digital disruption, the power and reach and I am not going to bore you with another one around the same topic, but it really got me thinking…Is it really that technology / Digital to be solely blamed for bringing this calamity to Retail & Consumer Goods? Mainstream media seems to make us believe it, that Amazon with its artificial intelligence and infinite computing power, knows all about the consumer. Hence, it has a stranglehold on the retail market and everyone else is playing catch-up. However in that case, what really explains the meteoric performance improvement of TJX – TJ Max Home Goods, etc. following the age old retail principles of human intelligence-based merchandizing, brick and mortal retailing and absolutely minimal Online presence. Similarly, we need to think how can a start-up like Dollar Shave club create a loyal customer base in the face of Billion Dollar brands like Gillette?
The answer in my opinion lies in “experiences delivered”. Every business needs to think about delivering a unique frictionless experience for their customers (and also partners, suppliers, etc). It is no longer about having the best product or the leanest supply chain or the fastest logistics or the largest assortments. Well yes, those are table-stakes but no longer elements of a winning strategy. The secret sauce is the end-to-end customer experience that an enterprise consistently delivers to their customers, and how unique and differentiated that is. Best Buy is able to deliver to its customers the experience of physically examining an aspirational purchase. It also has folks who can engage in “nerd talk” to add to a differentiated experience than purchasing the same electronics item in the isolation of their bedroom.
Similarly, TJ Max, Home Goods deliver more of a treasure hunt type experience since the merchandizers stock unique items, and in limited quantities, and their stores are replenished multiple times each week as against once a week or less, for other stores. This results in newer shopping experience every time the customer steps into the store and the thrill of scoring a “treasure” is something that cannot be replicated in a standard shopping channel or even online.
Consumer Goods companies similarly need to equally move their focus from product to service again focused on this uniqueness of experience. Laundry as a service through Dash buttons, Shaving as a service thru Dollar shave club are all winning examples of how consumer goods companies are evolving. In fact, each consumer goods companies need to figure out innovative ways to engage their end consumers, instead of just focusing on their customers – the retailers and channel partners. They need to segment their end consumers more granularly and almost be able to personalize their product to N=1. Some of the leading CPG companies are already making strides in this space, where they are conceptualizing consumers an ability to personalize product in terms of color, smell and other attributes in a way that creates that uniqueness of experience. Of course, this is not easy since this means that the manufacturing, supply chain, logistics – everything needs to be geared for this hyper-personalization.
So is Digital a true disrupter? Absolutely, but not by itself! Digital Technologies have helped Amazon and other new age players to come up with newer differentiated experiences for their customers across the retail / buying lifecycle, but the key is the experience that has been delivered. The sooner companies realize this, they will stop worrying about just Digital Disruption and focus on creating that differentiated experience. Each enterprise needs to re-invent what experience it wants to deliver and then look at Digital technologies as tools to help them get there.
More on that in the next edition…