The Impact of Digitisation
Digitisation changes business and consumer behaviour in ways that go well beyond the technology.
Machine learning produces unbiased, non-emotional data points, and those become the basis for customer strategy. The result is an upward shift in the demand curve.
Customer-centric replaces product-centric. Product-based supply chains become services-driven platforms. Operating margins rise as focus moves from costly production to high-margin, instant services tailored to what users actually need.
The crowd replaces the specialist. Through platforms, retailers reach the diverse and free expertise of the crowd instead of relying on expensive in-house specialists. Information becomes available immediately, at little cost, from a wide pool of opt-in experts, rather than from a handful of technicians with niche knowledge and the salaries that go with it.
Network effects convert suppliers into customers and customers into suppliers, which broadens the marketplace for everyone and makes the exchange of feedback and information frictionless. That is the beginning of a self-servicing marketplace.
Where the impact shows up
- Marketplace effects. Platform economies aggregate supply and demand.
- Dynamic pricing. Platform economies generate the data points that make it possible.
- Network effects. Increased liquidity, product innovation, and pressure on pricing strategy.
- Self-regulation. Customers and suppliers curate behaviour, service quality, reliability and trustworthiness between them. In a digital marketplace curation is not optional; it is what makes the value work for anyone.
- Customer loyalty. Personalised experiences, and switching costs that rise with them.
What it does to management
Externally sourced skills displace internally focused specialist teams, and that changes the shape of the organisation.
Decentralised, user-driven marketplaces replace complex management structures. People willing to share knowledge — the crowd — replace costly in-house core competencies. Automated data sets analysed by machine learning come to dominate decision-making, which puts decisions on an informed and analytical footing. And real-time demand, driven by customer engagement and feedback, changes the cost of holding stock.
Product against customer
Product-centric businesses are built around production and assembly lines. Critical thinking and order drive the decisions.
Customer-centric organisations are built around service and durable relationships, and around converting those relationships into revenue. Subscriptions, add-ons and upsells are what drive that model.
In summary
Executive management becomes the customer service champion, and the customer moves to the centre of strategy. Management shifts from running product pipelines to running a user-centric marketplace driven by network effects, where every user benefits from everyone else's input.
Buyers become sellers and sellers become customers. Everyone participates in curating behaviour and services, and that feedback keeps improving the quality and relevance of what is offered.
Previous one-off customers become loyal platform members. And platform owners move from lumpy, one-off revenue to reliable annuity income.
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