Digital Co 1

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Digital Co 1

  1. 1. The digital company 2013 How technology will empower the customer A report from the Economist Intelligence UnitSponsored by:AT&T, Nokia, PricewaterhouseCoopers, SAPand Concep, Habeas, WebEx
  2. 2. The digital company 2013 How technology will empower the customerPrefaceThe digital company 2013: How technology will ● To supplement the survey results, we alsoempower the customer is the first of two Economist conducted in-depth interviews with 20 executives,Intelligence Unit reports in a research programme including CIOs, managing directors and otherthat explores the impact that technology advances senior managers, as well as academics and otherwill have on how companies do business. Lead leading authorities on the use of technology in thesponsors of the programme are AT&T, Nokia, enterprise.PricewaterhouseCoopers and SAP, and supporting ● Finally, we conducted an extensive programme ofsponsors are Concep, Habeas and WebEx. desk research, including a wide-ranging review of The Economist Intelligence Unit bears sole existing literature.responsibility for this research. The Economist The author of this report was Terry Ernest-JonesIntelligence Unit’s editorial team executed the survey, and the editors were Denis McCauley and Debraconducted the analysis and wrote the report. The D’Agostino. Mike Kenny was responsible for designfindings and views expressed here do not necessarily and layout.reflect the views of the sponsors. Our sincere thanks go to the survey participants Our research draws on three main initiatives: and interviewees for sharing their insights on this● In March 2008 we conducted a wide-ranging survey topic. of senior executives from around the world. A total of 661 executives, more than one-half of them June 2008 from the C-suite, took part. They represent a cross- section of industries and a range of company sizes. © The Economist Intelligence Unit 2008 1
  3. 3. The digital company 2013 How technology will empower the customer Executive summary F ive years is a long time in the world of enterprise than in how companies interact with their customers. technology. In the past half-decade increases The latter will be more closely connected to in network speed, data-processing power and enterprise processes in areas ranging from billing application sophistication have made possible, in to product design and research and development many companies around the world, far-reaching (R&D). Technology will empower customers in their changes in how employees communicate with one interaction with companies to a significantly greater another and how efficiently they operate. Technology degree than is the case today. Executives rightly view advances have also enabled companies to change this much more as an opportunity to be tapped than as their existing business models or create entirely new a risk to guard against. Risks are nonetheless inherent ones. for firms in this development, ranging from the failure Five years from now, the impact of technology to embrace customer involvement sufficiently to the advances on how companies operate will remain yielding of too much power to customer groups. enormous, to judge by the views of executives To explore the impact that technology is likely to surveyed for this study. Numerous developments have on business five years from now, the Economist will influence company strategies over this period, Intelligence Unit drew on a wide-ranging survey including macroeconomic uncertainty, deepening of over 600 senior executives worldwide, as well as shortages of talent and changes in market demand. several in-depth interviews with business leaders It is technology innovation, however, that senior and independent technology experts. The findings executives expect to have the heaviest influence on cover a host of areas where technology impacts on the their business in 2013. business, and they are analysed in depth in two white The technology impact will be no more profound papers. This first paper explores the changes to come in how companies interact with their customers. A The digital company 2013 survey subsequent paper will examine in more detail how workplace dynamics and knowledge management will The digital company 2013 is an Economist Intelligence Unit research pro- evolve, and what all these developments hold in store gramme that explores the impact technology advances will have on how for the respective roles of the information technology companies do business over the next five years. A total of 661 executives (IT) function and the chief information officer (CIO). from around the world participated in the survey. The sample was very senior: over one-half (53%) of all respondents Other key findings from the first of this two-part held C-suite titles, with CEOs and board members alone representing 35% study include the following: of the group. It was also cosmopolitan: 31% of respondents were based in Europe, 30% in Asia-Pacific and 30% in North America, with the remainder Customer-driven innovation will become coming from the Middle East, Africa and Latin America. Respondents hailed mainstream. Companies today tend to rely mainly from across 20 industries, and they represented a range of company sizes, on in-house R&D and other internal sources for their with one-half from firms having annual revenue of US$500m or more. More detail on the survey respondents and results can be found in the appendix. innovative ideas. In 2013 customers, empowered by technology, will represent the leading source2 © The Economist Intelligence Unit 2008
  4. 4. The digital company 2013 How technology will empower the customer Five steps to prepare for the important channels, but substantial inter- tion as the use of social-networking and action will also take place using mobile other collaborative technologies spreads. technology-wise customer devices. The channels companies adopt Policies must be developed that strike a of 2013 will have to be relevant to the next genera- balance between targeting individuals tion of graduates, used to communicating accurately according to their tastes and through social networks. preferences, and encroachment. Getting Start researching and testing now. this wrong will have negative implications Companies must start examining now how Be ready to open up … and protect. not only for regulatory compliance but for they can exploit customer communities. Corporate IT systems must be prepared customer loyalty and retention. Which areas of their business would benefit to accommodate a more open sharing of most (R&D, new product development, information and the greater involvement Match IT to customer demand. The cus- customer service)? How will they process, of customers in business processes. Need- tomer-facing enterprise of the future monitor and control the mass of informa- less to say, information security practices will require systems that make the entire tion received? How can they encourage must be as watertight as possible to ensure workforce more responsive. Pressure customers to “prosume”—in other words, that this does not increase risk unaccept- will increase on the IT function to supply to help solve each other’s problems, vote ably. Likewise, as intellectual property systems that are both flexible enough to on innovative ideas and help the firm in is exchanged more freely, restrictions handle rapid change in demands and able other ways? must be planned carefully and delineated continually to add value in increasing clearly. customer loyalty. With major technology Think multi-channel. Communications spending increases not on the cards for tools to encourage and ease collaboration Revisit privacy and security policies. most firms, IT will need to find new effi- with customers will need to be established. Issues of data privacy and intrusion will ciencies to free up resources for achieving E-mail and corporate websites will remain grow in importance in customer interac- these objectives.of new product and service ideas, according to Maintaining the privacy of customers and thesurvey respondents. This will help make a reality of security of intellectual property will be paramount.“prosuming”, a concept in which the line between The proliferation of online communities will give firmsconsumer and producer becomes blurred and access to unprecedented information about theircustomers freely contribute value. Customers customers. The strength this brings to the innovationwill, however, expect something in return, most process will need to be balanced against the needimportantly a better product or service. to ensure that the confidentiality of any personal information provided is respected. Firms will need toOnline communities will proliferate. Web-based be clear with online communities about the use beingcustomer communities will play a much greater made of privileged data. At the same time, businessrole than today in gathering—from customers and will need to rethink its attitude to intellectualothers—innovative ideas for products and services, property protection in an era of open collaboration.and also to assist in providing product support. Votingand other mechanisms will help to channel customer Technology will give wings to customisation.input and filter for the best suggestions, but firms Fully 70% of surveyed executives expect their mainwill need to be wary of according too much influence products or services to be fully or mostly customisableto communities, lest the latter’s suggestions prove in five years, compared with 40% who say this is theunprofitable to implement. case today. Such levels of customisation will be made © The Economist Intelligence Unit 2008 3
  5. 5. The digital company 2013 How technology will empower the customer possible by, on the one hand, the more sophisticated Will companies be able to accommodate this higher analysis of customer information, and on the other level of customer integration in their business in by the advance of applications and processes that will 2013? Several firms cited in this report have begun make it easier to reconfigure products. to experiment with new platforms for customer interaction. Few, however, have yet to review their Customer interaction will take place far more processes, organisational structures and workforce frequently over mobile devices. Advances in mobile skills with the technology-savvy customer of 2013 technology will impact more heavily on customer in mind. In certain respects it may be early, as some service than any other area of company operation. opportunities and risks will only come into focus as Mobile devices are unlikely to be the primary channel the level of interaction grows. But one thing is clear: of customer-supplier communication in 2013, but enterprise processes and technologies, as well as the companies will need to be able to interact with employees that use them, will need to be far more customers much more widely over mobile channels, flexible and responsive to change than they are today. and using more advanced applications, such as video.4 © The Economist Intelligence Unit 2008
  6. 6. The digital company 2013 How technology will empower the customerIntroductionI n the past 20 years, technology1 has sizeable impact—in terms of both opportunity and fundamentally changed how businesses operate. risk—on how firms interact with their employees, their The proliferation in the workplace of personal customers and the broader public.)computers (PCs) and enterprise software, and the Given the technology-enabled changes thatlater maturing of the Internet and wireless technology have already taken place in the business world, werevolutionised how organisations and individuals have sought to explore in this research programmeobtain, generate and transmit information, as well as the nature of changes that await companies in thehow they communicate and conduct transactions with next five years. Among our findings is that seniorone another. executives of organisations worldwide expect the The bursting of the dotcom “bubble” early this impact of technology to remain profound in thedecade seemed to herald a period of slower change in period to 2013. Political and economic uncertainty,information and communications technology. Few if looming talent shortages and changes in demand areany “big bang” technologies akin to the mobile phone all factors that will influence business strategies in thehave emerged since. Network speeds are nonetheless coming years. For our survey respondents, however,considerably faster, storage capacity substantiallygreater, and devices decidedly more functional androbust than just five years ago. In your view, which of the following developments will have the greatest impact on your business between now and 2013? The applications with which individuals and Select up to two. (% respondents)organisations use these technologies, and the valuethat countless firms have created by putting them Change in business models due to technology innovationto work more effectively, have also advanced over 31 Greater political and macroeconomic uncertaintythe past half-decade. It is now commonplace, for 29example, for senior executives, sales people and other Changing nature of demand for your products/services 28employees to access e-mail and critical company data Greater difficulty in acquiring and retaining employees with the right skillsfrom anywhere using mobile devices and applications. 22Data analytics tools analyse information generated Increasing competition from lower-cost rivals 21internally and over the Internet to help marketing Greater complexity of regulatory and compliance requirementsteams better target their campaigns. Supply chain 19 Rising wealth levels in emerging marketsmanagement (SCM) systems have integrated suppliers 15much more closely into manufacturers’ operations Higher cost of energy resourcesthan ever before. 13 Rising security threats In a different area of ingenuity and 5 1. For the purposes of this study, we defineentrepreneurialism, FaceBook, a social-networking Increasing corporate social responsibility (CSR) requirements technology as all forms 2 of computing andwebsite, did not exist five years ago; it now has communications devices Other as well as software andmore than 70m members. (We will argue later that 3 information systems used by organisations andsocial-networking sites such as this will have a Source: Economist Intelligence Unit survey, March 2008. individuals. © The Economist Intelligence Unit 2008 5
  7. 7. The digital company 2013 How technology will empower the customer In which areas of operation will technology cause the greatest In which areas of operation will technology cause the greatest change in business practices over the next five years? change in business practices over the next five years? (Top responses; % respondents) (Top responses; % respondents) Total Financial services Large firms IT & telecoms Small & midsize firms Life sciences Manufacturing Customer service Customer service 40 36 37 47 43 46 29 Operations and production Operations and production 32 35 36 29 27 17 Supply chain 38 27 Supply chain 27 21 27 25 17 Sales & marketing 40 24 20 Sales & marketing 29 18 21 Research & development 31 22 22 21 23 Research & development 14 Source: Economist Intelligence Unit survey, March 2008. 24 40 22 Source: Economist Intelligence Unit survey, March 2008. the greatest impact is expected to come from communications technologies are empowering changes to the business brought about by technology customers in numerous ways, which we will explore innovation. later. For some companies, this creates the risk of Technology will hold the key to creating an customer groups gaining leverage to force changes environment that is more open and collaborative. that may have a negative effect on corporate “We are moving more and more towards the ‘open profitability. The majority of firms, however—62% of enterprise’ approach—a collaborative way of working our survey sample—overwhelmingly view customer with customers and suppliers,” believes Maarten de empowerment through technology as an opportunity Vries, CIO of Philips, a Netherlands-based healthcare, to be tapped. This positive view of the technology- lighting and consumer goods firm. “This is a move from empowered customer varies only marginally among transaction to interaction. Basically, we want to create firms of different sizes, industry groupings and an integrated chain between customers and suppliers.” geographies. Nowhere will businesses feel the impact of How companies in 2013 will exploit this technology more strongly than in customer opportunity—and safeguard against the risks it interaction, a belief that resonates strongly among creates—is the subject of this white paper. A later the surveyed executives. (Only manufacturers expect paper will examine the technology impact in 2013 on a greater technology impact in other areas—in workforce dynamics, knowledge management and the operations and the supply chain.) Information and roles of IT and the CIO.6 © The Economist Intelligence Unit 2008
  8. 8. The digital company 2013 How technology will empower the customerCommunity-based innovationD eploying web-based communities to marshal held with similar degrees of conviction across all the creativity and insight of customers—with regions, industries and company sizes. In this way, the aim of feeding back to them the products “prosuming” (a concept made popular by futuristand services they actually want—is in evidence Alvin Toffler), in which the line between consumeramong only a few pioneers today, but it is certain to and producer becomes blurred and the customerexpand. “Customer communities will be much more contributes value freely, will be a reality in 2013.widespread,” says Erik Brynjolfsson, a professor at MIT “The process used to be R&D, then development,Sloan School of Management. “Technology will make then maybe some customer involvement at the end,”it easier to harness the wisdom of large numbers.” says Yannis Kavounis, director of Henley Centre The impact of this development will be most HeadlightVision, a UK consultancy. “Key stakeholdersprofoundly felt in how companies innovate. [in 2013] will be involved actively in the wholeCompanies today still tend to rely on their in-house process, due to the ease of interaction. CompaniesR&D departments to generate the lion’s share of will be getting ideas from every avenue.” This typeinnovative ideas. The survey results strongly suggest of collaborative innovation will give flesh to anotherthat in 2013 customers will be the most important concept popular among management consultantssource of innovation in firms, a view which is today—“co-creation”, in which value is created byWhere do your firm’s most innovative ideas In 2013, where do you think its most innovativecome from today? ideas will come from?(% respondents) (% respondents)R&D (in-house) Customers 32 31Employees (non-R&D) R&D (in-house) 23 19Customers Employees (non-R&D) 16 15Partners (in alliances or joint ventures) Partners (in alliances or joint ventures) 11 13Competitors R&D (outsourced) 6 7R&D (outsourced) Industry groups 3 4Industry groups Competitors 3 4Don’t know/Not applicable Suppliers 3 3Suppliers Other 2 2Other Don’t know/Not applicable1 3Source: Economist Intelligence Unit survey, March 2008. Source: Economist Intelligence Unit survey, March 2008. © The Economist Intelligence Unit 2008 7
  9. 9. The digital company 2013 How technology will empower the customer both customer and supplier. Connect+DevelopTM website to source ideas from the This is not to say that in-house generators of public at large, which may include individuals with an ideas will yield supremacy entirely to customers. idea or organisations. The firm claims that its success Manufacturers of industrial goods, for example, are rate for innovation has doubled since launching this arguably more likely than consumer-facing firms initiative. to continue looking mainly to internal impulses for Dell, a US-based PC-maker, which was among innovation. Leng-jin Chan, IT director in Asia for the first manufacturers to enable the web-based Johnson Controls, a US supplier of climate control specification of products by customers, is also actively systems, says that “a lot of innovation still comes developing an online community. When Michael from within, and specifically from my [IT] department. Dell resumed his role of CEO to revive his company Customers are important, but we are also users of our last year, one of his first steps was to establish a systems ourselves.” website, called IdeaStorm, to solicit suggestions from consumers and business customers worldwide. Dell Tapping the community spirit employees now monitor the site to gauge which ideas Proctor & Gamble, a US household goods firm, are most relevant, and the site shows contributors is one of today’s pioneers in using online how the ideas are being put into action. (Some communities, having flung open the doors via its suggestions and comments are decidedly unflattering, Macy’s vision of the future instance, Mr Verma foresees a customer Mr Verma believes technology will using Microsoft Surface—a 30-inch screen make customer intelligence increasingly that sits on a table top—to weave through sophisticated and granular. For instance, While many companies are looking forward a virtual rack of shirts and other clothes in analysis of images from store cameras to closer online interaction with customers order to try out a whole outfit “dressed” on can provide information on the types of using Web 2.0 technologies, Sunil Verma, an image of themselves. This could then be clothes customers are wearing and other head of IT at Macy’s Home Store, a US sent to the customer’s online network with behaviour. “But we have enough customer retailer, is gazing deeper into his crystal a message soliciting opinions—“What do I intelligence already,” he says. “We are ball: “Of course we will use IT to interact look like in this outfit?” mainly interested in discovering whose with the customer, but I do not think that Technology will have an impact on other opinion matters most to our customers. We will be an especially productive relation- operations at Macy’s. Online shopping will get much smarter in finding out these ship.” Much more valuable will be steer- may be customised with the aid of a virtual things.” ing the way Macy’s is discussed on social personal shopper. Employees will get their There is only so far that technology networks, Mr Verma believes. “People will own sites so that customers can find out can go, however. “If you knew exactly not be interested in what is said on Macy’s about their expertise related to specific what you wanted, why go to a department blogs, but they will be influenced by what vendors and products. Customers too store?” asks Mr Verma. There will always their friends on FaceBook recommend,” may get their own sites. Macy’s may give remain a core of customers who enjoy the he says. them a camera to share pictures of their shopping experience and want to see and To that end, it will be important not home, furnished with its products, on the feel the product. But he has something only to ensure that Macy’s gets “air time” web. “We want people to shop with us for up his sleeve to draw on-line shoppers on social networks, but also to “listen in” life,” says Mr Verma. “It is very hard to into Macy’s. “We have to make it more and find out what is being discussed. “We build loyalty with young customers—the fun—[perhaps with] online games in our need to provide services that make it easy ‘millennials’ who were born with the stores that allow shoppers to measure for customers to talk about us,” says Mr Internet and who process information and their chosen outfit against the opinions of Verma. Technology will support this. For form opinions in unpredictable patterns.” fashion models and experts.”8 © The Economist Intelligence Unit 2008
  10. 10. The digital company 2013 How technology will empower the customerhowever, something that companies that wish to reap but they will expect—and companies will need tothe benefits of open communities will have to learn to provide—something in return. Some companieslive with.) may choose to offer tangible rewards for customer Such communities will generate ideas not only for involvement in communities in the form of purchaseconsumer-facing companies. Business-to-business credits or some other type of monetary incentive.(B2B) firms will make use of similar platforms to More importantly, however, customers will need toobtain feedback on existing products as well as new see that the result of their inputs is a better product orproduct ideas. Manufacturers, for example, told the service (or in the case of Novell, a software provider,Economist Intelligence Unit in another recent study more effective product support—see page 10).that online portals designed to achieve this would beamong the primary ways they would seek to integrate Online democracycustomers into the product development process2. A natural byproduct of online communities, Similar initiatives have worked out well for SAS, particularly those oriented towards consumers anda US business software supplier, which operates an the broader public, will be a mass of information thatextranet for collaborating with partners as well as will need careful channelling to be useful. Votingonline forums and external blogs. SAS actively gathers facilities may help to achieve this.input from customers and partners for the software Starbucks, a US firm that operates a global chaindevelopment process, especially through its “Ballot” of coffee shops, is a recent recruit to the onlinesystem, which is used for fine-tuning its software community movement with its MyStarbucksIdea.tools. Suggestions are gathered online and usually com website, launched in March 2008. The site urgesinfluence forthcoming releases. Since it started, more customers to post ideas on ways the firm can improvethan 85% of Ballot input has been implemented by its products and service, and also to vote on otherSAS’s R&D division. people’s ideas. The voting system helps Starbucks “Better companies will be engaging customers in weed out thousands of useless suggestions. Thisthe co-creation of value,” affirms Denis Pombriant, technique is described by Mohan Sawhney, professorhead of the US-based Beagle Research Group, a CRM of technology at Northwestern University in the US,(customer relationship management) specialist. as “using a thief to catch a thief”. The company—inHe advocates inviting a few hundred representative theory at least—will know it has tracked down thecustomers to an online forum that should last right ideas because they have been chosen by thearound 90-120 days: enough time to develop trust customers themselves.and exchange ideas but short enough to prevent Threadless, a US firm that describes itself as “afatigue. This, he says, will generate a cross-dialogue community-based t-shirt company”, has integratedbetween individuals that the company can observe, online voting directly into its business model. The ideathus obtaining genuine, candid input. “There will be is simple: it offers up to US$12,000 for a t-shirt designa distillation of ideas, not data analytics,” says Mr on its website, selects finalists and then invites peoplePombriant. “You will get the considered opinion of to vote online for the best designs. The ones with thethe group.” It will also be far cheaper than staging most votes get produced because they are what peoplea multi-city tour of focus groups, and people can want—something that the company feels immediatelyexchange ideas across time zones. lowers risk. 2. Economist Intelligence Unit, Producing to order: Through such communities, customers will Online voting in customer communities is at an Discrete manufacturers and customer demand, Marchcontribute value freely to the innovation process, early stage of development, and it remains unclear 2008, sponsored by SAP. © The Economist Intelligence Unit 2008 9
  11. 11. The digital company 2013 How technology will empower the customer how valuable this will prove to be to the companies pioneer, and has started to give responsibilities to the that utilise it. Filtering opinions for better product best problem-solvers among its business customers and service ideas will almost certainly prove a benefit. for individual product lines. Each has a web page, is However, according significant influence to voting supported by Novell staff and also gets special access communities could backfire on firms. The majority’s to technical documentation. There is now a body ideas may be attractive to customers, but could of around 18,000 registered contributors available prove unwieldy or unprofitable for a company to to deal with a range of product support issues, and implement—firms will need to beware “the tyranny of Novell’s extended peer-support group deals with more the mob” when it comes to some community votes. than 45,000 user issues per quarter. Of course, companies’ use of online communities Novell has found that end-users often encounter will not be limited to customers. They will also problems that no support team could cover. It has capture the creative ideas of the broader public and also found that the community tends to correct itself knowledgeable third parties. A taste of things to come when individual members step out of line, especially is Innocentive, a website (operated by a firm of the as participants are named. (See box “eBay polices the same name) that attempts to tap brainpower beyond online community”, on page 16.) “We filter language the walls of its client companies. The site embraces but not content,” says Kenny Bunnell, director of more than 140,000 individuals with expertise in Novell’s global services operations. “In fact we have solving specific scientific or technological problems in to do very little as moderators. If someone is acting areas such as pharmaceuticals, consumer goods and inappropriately, the group jumps on it.” Members food products. benefit as relationships grow with, and recognition is received from, other forum members. Customers also Mobilising collective support naturally value the quicker answers they receive to Companies will use online forums not only to solicit their problems. better product and service ideas from customers, but Building the reputations of individuals in the also to enhance product support. As products grow community, and making them more transparent, is an more complex, customer support will grow harder to important future direction, says Mr Bunnell. This will manage. Firms will increasingly manoeuvre customers include facilitating community members’ own blogs. and other third parties online to collaborate with each Video will also be added for members, as well as access other to solve problems. to Novell’s knowledge base when they post queries. A small number of firms have already caught on to In most cases, community support is unlikely to the fact that people outside the firm can often provide remove the need for customer support staff entirely. advice that is superior to that of their own employees. If the right incentives are found to offer customers Some feature reliability rankings in their web-based and other community users, however, firms will find customer communities to highlight how good that such communities offer them an additional and particular customers are at solving other customers’ valuable channel for helping resolve problems—and problems. Novell, a US software provider, is one such potentially reinforcing customer loyalty.10 © The Economist Intelligence Unit 2008
  12. 12. The digital company 2013 How technology will empower the customerTechnology for creating the better productT he purposes of innovation are twofold: to create As customers become more empowered through technology, what will be the overall impact on the following aspects of your a better product or service, and to do it more company’s performance in 2013? efficiently. Improved versions of the familiar IT- (% responding “very positive” and “somewhat positive”)based tools that companies use today to design new Very positive Somewhat positiveproducts and improve business processes are likely Revenue 22 51to remain in favour in 2013. What will change, as we Profithave already suggested, is less the technology but the 20 44 Brandbreadth of stakeholders that companies will draw into 28 42the improvement process—in particular customers— Customer retention 23 39and the depth of their involvement. This will show New product/service developmentthrough prominently in new product development. 31 45 When it comes to how the company’s performance Source: Economist Intelligence Unit survey, March 2008.will be affected by customer empowerment throughtechnology, survey respondents are clear that the value,” he says. “Smart algorithmic technology willimpact will be most positive in the area of new product play the part of manager.”and service development, more so than customer When it comes to the use of online means ofretention, brand or even revenue performance. soliciting customer ideas on products, Mr Pombriant How will this be manifested in practice? Through of Beagle warns that there will not be much roomthe use of web-based communities, as discussed for error. “The innovation process has to begin byearlier, and—in the B2B world—online portals and engaging customers not so much on their productdirect links via CRM and other systems, customers preferences but on their lifestyle preferences,” hewill be integrated more closely into companies’ says. “If you say ‘tell us what to build’ you are askingproduct-design efforts. Well over one-half of surveyed a fish to invent fire. You need to get close to theexecutives expect customers to be linked directly into dialogue between multiple people to find out theirthe company’s product-design processes in 2013, needs.” He warns that pressure will mount to get itcompared with less than one-third who say this is the right the first time. “It is critical to verify the ideascase today. that the community has come up with.” This should Web-based specification of product and service include “beta-testing” in real life the ideas that havefeatures by customers, for example, will be central come out of cyberspace.to improving companies’ product-development Not all customer integration into productprocesses, according to the survey respondents, development needs to be online. China’s Shanghaias will the use of online customer collaboration in Stock Exchange believes it has created a new model ofproviding product and service support. Mr Kavounis of collaboration with customers in the financial servicesHenley believes that technology will help in managing industry, at least in China, through the creation of anunwieldy crowds. “Software will be sophisticated “IT laboratory”. Says the bank’s CTO, Bai Shuo: “Weenough to pick up violators or those that do not add invite our customers—brokers and securities firms—to © The Economist Intelligence Unit 2008 11
  13. 13. The digital company 2013 How technology will empower the customer “Mindstorming” the and Lego to thrash out problems and lifestyle information gathering, he says. discuss ideas, says Robbert Stecher, a vice But Lego also commandeers the panel to better product president at the company. The resulting help with specific innovations. In this case product has received kudos. “Developing the firm writes a formal request and solicits Mindstorms this way is a huge factor in the “concrete proposals” from a selected group A clear example of the way collective inno- success of the product,” says Mr Stecher. within the “Kids’ Inner Circle”. vation, enabled by technology, is likely to “It has inspired Lego to apply this kind of The variety of backgrounds of people proceed is a robot kit called “Mindstorms” development in other areas.” involved in the Mindstorms project gives developed by Lego, a Danish toy maker— As an example, the company has more than a hint as to how rich this with help from Lego fans round the world. launched an online panel of more than 400 kind of “crowdsourcing” can be: ages After receiving nearly 10,000 responses children called “Kids’ Inner Circle”. (They ranged from 18 to 75, one in five worked to an initial request for volunteers, Lego are mainly what Mr Stecher terms “heavy in education and 13 were architects or selected a group of 100 people to help it users”.) On the home page, young visitors engineers—something an internal R&D develop the next version of its toy. Commu- are asked for ideas that would make Lego department could never emulate. “There is nicating in a secure web forum established more fun for them. Mr Stecher says the site no question that we will be developing this by the firm, the group collaborated with has proven to be a “fantastic way to stay in concept further,” says Mr Stecher. He adds, each other over a period of four months. touch with what goes on in children’s lives however, that such co-creation will need to During that time there was continual and what is important to them.” There are be combined with visits to customers in the online dialogue between the volunteers software tools to facilitate this kind of broad physical world. come in [to the ‘laboratory’] and conduct experiments service development in 2013 is likely to be in the together. An example is the launch of our new trading sophisticated analysis of customer information. system—customers were required to make adjustments “We see technology as the key to understanding our to front-end systems, and they did it on site.” customers and offering better service across our 8,500 In some industries, physical proximity to customers stores,” says Yoichi Yokomizo, CIO of the Lawson will remain as important as electronic links with convenience store chain in Japan. “Particularly them. The Asia CIO of a telecoms infrastructure because all stores are franchisees, our IT systems are provider believes that “locating R&D centres closer our major ‘direct’ connection to our customers—their to customers is important—R&D needs to ‘absorb’ purchasing habits and their personal data.” cultural differences in China or elsewhere. This can The ability to put sophisticated customer data only really be incorporated by local facilities. Some analysis to work for new product development will be of those local market innovations in Asia are finding particularly important in 2013 to financial services their way into the global market.” firms—insurance providers, banks, securities dealers and others—judging by a cross-industry comparison Probing customers’ desires of the survey results. (It is less important, by contrast, How companies analyse and respond to customer to manufacturers, whose technology priority in information will be an important competitive product development is likely to remain shortening differentiator in most markets by 2013. (Over four- cycle time.) fifths of survey respondents believe that it will be “There is an arms race on,” says Mr Brynjolfsson “the primary differentiator”.) Executives also feel of MIT, referring to the “profiling and targeting of that technology’s greatest impact on product and customer segments to extract more money”. The12 © The Economist Intelligence Unit 2008
  14. 14. The digital company 2013 How technology will empower the customerIn which of the following ways is Vries of Philips is confident of his firm’s ability to dotechnology likely to have the greatestimpact on your company’s product and this: “We can create a much faster feedback loop on Totalservice development in 2013? Financial services customers’ experience with products, leveraging blogs(Top resposes; % respondents) IT & telecoms Life sciences and other mechanisms, and get information much Manufacturing faster to the enterprise.”Sophisticated analysis of customer information 39 36 53 Customisation advances 31 30 The more sophisticated analysis of customerWeb-based specification of product/service features by customers information will help to drive a trend towards greater 26 customisation of products and services. “On the 24 30 demand side, technologies will make it much cheaper 17 34 to have interactions with the customer,” says MrImproved information and operations management Brynjolfsson. “On the supply side, it will be easier toto shorten the product development cycle 22 reconfigure production processes to supply ‘customer 24 22 segments of one’.” 26 35 Such reconfiguration will be possible, he believes,Source: Economist Intelligence Unit survey, March 2008. as it is increasingly the software and data elements of a product that differentiates it, rather than thewinning organisations will be those more advanced more tangible physical components. According toin filtering and analysing customer data. Increasingly Mr Brynjolfsson, companies’ IT systems—and theiradvanced tools will be available to help them. Banks, supply chains—will need to be able to upload softwarefor example, can now track the profitability over to products to suit the needs of individual users—the past two years of every account and can focus whether business or consumer.retention efforts on their most valuable customers—or “Our products will be more customised,” agrees Mrturn non-profitable customers into profitable ones de Vries. “They will be designed with the customer,by increasing the value of their business. “Business and it will be possible to change the offering at adecisions in this area will become less ‘gut’- and more very late stage [in the production cycle].” In thenumbers-driven,” Mr Brynjolfsson believes, as a result case of lighting controls, for example, IT will beof the more sophisticated analysis of customer data. able “to create a different experience for individual Customer information will be obtained from not customers”.only the customer, but aggregated from internal To judge by our respondents’ intentions, thisdata and myriad public search and social-networking trend will have advanced far by 2013. Fully 40% ofsources. But as Mr Sawhney of Northwestern warns: executives say that their firms’ main products or“Companies have to be sure they act on it.” Mr de services are mostly or completely customisable today,To what extent do you agree or disagree with the following statements about the use of data in 2013?(% respondents) Strongly agree Agree Neutral Disagree Strongly disagree Don’t knowHow companies analyse and respond to customer information will be the primary competitive differentiator in most markets 32 50 13 3 1Customer information will be obtained from not only the customer, but aggregated from internal data and a myriad of public search and social networking sources 25 55 13 4 2 2Source: Economist Intelligence Unit survey, March 2008. © The Economist Intelligence Unit 2008 13
  15. 15. The digital company 2013 How technology will empower the customer To what degree are your company’s main products and services customisable? How customisable will they be in 2013? (Top responses; % respondents) Completely customisable Customisable in most aspects Partly customisable Not customisable Don’t know/Not applicable Financial services: Today 9 32 53 5 1 Financial services: In 2013 28 48 21 2 2 IT & telecoms: Today 13 33 46 8 1 IT & telecoms: In 2013 44 39 13 3 Life sciences: Today 11 11 31 43 3 Life sciences: In 2013 29 26 26 11 9 Manufacturing: Today 8 25 56 8 4 Manufacturing: In 2013 21 47 25 1 5 Source: Economist Intelligence Unit survey, March 2008. whereas 70% believe that this will be the case in five customer (at least not yet). But there may be some years’ time. One-third say that their products will be surprises. He highlights an online experiment being “completely customisable” in 2013. considered by General Mills, a US supplier of consumer Will customisation reach this far? Survey food products. It would seem difficult to customise respondents from life-sciences firms, for example, are breakfast cereals to individual tastes, but the plan less convinced of this eventuality than those from IT is to ask customers to provide information on their and telecoms firms. dietary condition, with the promise that it will design Many products indeed have limited scope for a personalised cereal and deliver it to the customer’s customisation. As Mr Sawhney points out, a carmaker home—for a premium, naturally, over the in-store cannot make a different body to suit the whim of every price.14 © The Economist Intelligence Unit 2008
  16. 16. The digital company 2013 How technology will empower the customerPrivacy and protectionT he advent of the “open enterprise” will expose % agreeing with the following statement: “Data privacy regulation will severely limit our ability to use customer data new vistas for companies in 2013, creating effectively.” enormous opportunities to tap customers and (% respondents)other stakeholders for improving innovation, product Globaldevelopment and customer support. Naturally, this 30 Asia-Pacificdevelopment will not be without risks to companies, 38some of which derive from the fact the technology Europe 27platforms for much of this interaction will be Internet- North Americabased. Data privacy is one challenge firms will need to 26grapple with, as greater intrusiveness is likely to be a Source: Economist Intelligence Unit survey, March 2008.feature of company-customer interaction in 2013. Through the creative use of web-based minority of executives—amounting to nearly 40% ofcommunities and support groups, companies those from the Asia-Pacific region—anticipate thatwill hold volumes of detailed, readily accessible data privacy regulation will severely limit their abilityinformation on people—and not just on their own to use customer data effectively.customers. When someone enters its website, the Although not in breach of regulations, FaceBookcompany will immediately be able to tell who they recently got its fingers burnt when it not only startedare—age, interests, music tastes and other likes and collecting data about its users’ activities on otherdislikes—gained from information given freely on a websites, but made the data available to their namedprevious occasion. Already today, agencies can track friends and contacts on the site. Many members alsothe searches of individual users on thousands of sites felt that FaceBook made it difficult to opt out of thisto build a profile of their preferences. “Behavioural initiative (labelled “Beacon”). It generated numeroustargeting” is the tactful term for sending web users expressions of anger from FaceBook users, andadvertisements based on this kind of personal subsequently an embarrassing climb-down on the partinformation about them. of the company. On LinkedIn, a business-networking site, Some would argue that the backlash was unfair,advertisers can use the information to target senior since the younger generation seems more preparedexecutives of particular types or sizes of company. For than its elders to reveal substantial information aboutKevin Eyres, LinkedIn’s European managing director, themselves on the Internet. Either way, lawyers warnan important question in regard to this and other of trouble ahead for companies that wish to exploitsites is, “How do we create a conversation between personal information through technology.the customers and advertisers which is beneficial for “At its heart, Web 2.0 is about collaboration andboth?” exchange,” says Kolvin Stone, a specialist in online Companies will have to tread carefully, and the law at Fox Williams, a London-based firm of solicitors.survey shows that most believe that they will be able “But there is a trade-off between the value to the userto frame policies that work. Nonetheless, a significant versus privacy rights. Users may be willing to accept a © The Economist Intelligence Unit 2008 15
  17. 17. The digital company 2013 How technology will empower the customer reduction in their privacy in return for a benefit (such Protecting the “open enterprise” as a discounted service). To make this choice, users need to have a clear idea of what a company is doing As companies start to operate in a much more open with their data.” environment, sharing information with customers and The issue of how clear a company needs to be and partners, how will they protect themselves? Experts how far users are willing to forgo their privacy rights generally agree that they will have to cede some will become an area of extensive debate. Mr Stone control as the barriers come down, but how do they agrees with the majority of survey respondents that loosen their grip without losing it? data privacy will not unduly limit firms’ ability to Many executives are alarmed at the prospect of the use it, but he believes they will need to take steps to “open enterprise”, and the arrival of a new generation ensure this. “Companies will need to be upfront, and of graduates used to sharing—some would say to put in more sophisticated data-protection polices,” exposing—information more freely on the web. Mr de he says. “The more intrusive a firm is, the more Vries of Philips takes the analogy of e-mail, chat and transparent it needs to be.” instant messaging: companies do not confine these to in-house communication, and opening up to the eBay polices the online mystery and thus suspicion. who give the most accurate reports to a eBay has taken this a step further. Now, core of 1,000. It is also adding to its own community removal of one-half of all items from the UK resources for policing its site. “We have to site results from member tip-offs. “We are rely on technology [for policing] and to By 2013, networks to manage large groups often asked why we cannot monitor it all provide more staff to support it,” explains of company stakeholders will proliferate, in ourselves,” says Mr Ambrose. “But 11 new Mr Ambrose. “People who try to scam are particular for engaging customers through items are put onto the site each second in incredibly motivated.” online communities. But to be effective, the UK.” He has some tips for those setting up users have to trust them. The issue of how Assistance is needed from the similar online communities: to build and maintain trust within these community itself, but eBay has found that ● Assume that trust and security will networks will become a key concern for the among the genuine reports of wrong- become the biggest challenge: invest digital companies of the future. doing, there is a great detail of inaccuracy, early. Having started life in 1995 selling a including people aggrieved because they ● Be specific about who you want to pro- single laser pointer over the web, eBay have misunderstood the terms of sale or tect (for example, buyers or sellers). has had more experience than most in delivery times. ● Self-policing by members is not a long- policing and building confidence in an In this extremely open environment, term solution. online community. Famously, it has abuse also often comes in the form of ● Install all the required filters and other encouraged the community to help itself by hackers setting up spoof or “phishing” protection measures—and be noticed allowing buyers and sellers to award each sites to defraud members. Although 75% doing it. other points, so they can be vetted before of transactions are made through eBay’s Despite all this, does Mr Ambrose feel money or goods are sent into the ether. PayPal payment-processing system, “the that online communities will become a The feedback record allows users to see remaining 25%, if defrauded, often expect more dangerous place to be in the future? “what people have had to say about other eBay to pay up”, says Mr Ambrose. “I do not expect any nasty surprises,” he people”, comments Richard Ambrose, Using a similar principle to the says. In terms of misuse of the site, “We eBay’s head of trust and safety for the UK. feedback record for users, eBay UK has believe we have already reached a high- Transparency has been crucial in removing whittled down the number of members water mark.”16 © The Economist Intelligence Unit 2008
  18. 18. The digital company 2013 How technology will empower the customeroutside world has brought in viruses, spam and other especially as some partners these days are also oftenproblems. But for him the benefits far outweigh the competitors as well.difficulties. “The challenge is to reach agreement on Some believe, like Mr Stone, that as ideas arespecific standards for collaboration,” he says. exchanged more freely between customer and Experts generally agree that, just as companies supplier, the issue of intellectual property will becomehave to put up with unflattering comments published less important—as it has in the music industry.in online communities, there has to be some give. Nevertheless, companies will need to adapt their“When you open the brand to the community, you can controls to the open environment, keeping track ofshape it, but you have to give up some control,” notes where and how their intellectual property is used.Mr Sawhney. “I tell people, ‘You have to let go’, and Handling “loose canons” in online communitiesthey are uncomfortable with this. There is some risk will never be easy, and controlling them will beand loss of control, but the benefits far outweigh the impossible. Some argue that this illustrates howdrawbacks.” companies will have to change in 2013. As Mr All the same, companies must ensure that sensitive Brynjolfsson of MIT maintains, rather than trying toinformation on corporate strategy does not leak out. exert control over the market with hefty strategicSAS has found that a useful measure for protecting plans, companies will need to become much morecompany information in collaborative ventures has sensitive to market moves and have the agilitybeen to award partners different levels of access to through their IT systems and business processes tothe corporate VPN through their individual profiles— react and respond quickly to whatever is occurring. © The Economist Intelligence Unit 2008 17
  19. 19. The digital company 2013 How technology will empower the customer Preparing for the mobile customer of 2013 W hat technologies will companies and services, suggests Forrester, a research firm3. Such customers use to connect with each other growth in adoption would mean that 125m Europeans in 2013? Survey respondents believe that, will access the web regularly from their mobile like today, e-mail will be the primary channel of phone—triple the number that do so today. communication five years from now along with use of A sharp rise in mobile interaction will place the the corporate website (the view of 87% and 81% of supplier under increasing pressure from a variety the sample respectively). Web meetings (according of angles, believes Laura Marriott, president of the to 70% of respondents) and even videoconferencing US-based Mobile Marketing Association. “In the (66%) are also likely to come into wider use for developed world, the consumer—short of time and customer interaction by many firms. Executives cash-rich—will be looking for relevant, contextualised also expect the mobile phone to supplant the fixed information,” she says. “Mobile does this best.” In handset as the primary device used for voice-based the developing world, meanwhile, mobile devices interaction. And in 2013, nearly two-thirds of will provide the only link with the brand. “Immediate respondents expect their firms to be communicating satisfaction will be critical,” adds Ms Marriott. with customers using some form of mobile data. Ms Marriott believes it is “too aggressive” to say The signs are that customers, as well as that mobile devices will provide the main computer the employees who serve them, will indeed be screen that people use to interact with firms in 2013, communicating far more over mobile devices in 2013 but there will be more mobile devices than any other than today. In five years, 38% of mobile-phone users media, she claims. The consumer will rely on these in western Europe will be using mobile Internet as the first form of interaction with the supplier. Our Which of these channels does your firm use to interact with customers today? Select all that apply. (Top responses; % respondents) 93 Today In 2013 87 81 81 80 76 73 70 64 64 66 48 33 303. Forrester Research, Email Corporate website Fixed-line voice Mobile voice Mobile data (text/SMS) Videoconferencing Web meetingsEuropean Mobile Forecast:2008 to 2013, March 2008. Source: Economist Intelligence Unit survey, March 2008.18 © The Economist Intelligence Unit 2008
  20. 20. The digital company 2013 How technology will empower the customerWhich of the following business functions or processes will be Ms Marriott reckons that the best opportunities willmost heavily affected by employees’ use of mobile technologyin 2013? come through user-generated content.(Top responses; % respondents) As a taste of things to come, a small industry isCustomer service forming today that will enable new uses of mobile 52 devices for customer interaction. For example,Sales software from Scanbuy, a US firm, allows camera 29Marketing phones to take a snapshot of a barcode-like image 21 (posted in a restaurant window, for example) andSupply chain management 20 read it. A web search can then be made using theExecutive decision-making phone’s browser, enabling restaurant reviews and 17 other information to be read. A pilot scheme isSource: Economist Intelligence Unit survey, March 2008. 14 currently under way in the Paris Metro for delivering information in this way to passengers. 13 SnapNow, another US firm founded by memberssurvey lends credence to this assertion: by a wide of NASA’s Jet Propulsion Laboratory, goes a stepmargin, respondents cite customer service as the further. With its technology, people can take a picturebusiness process that will be most heavily affected by of an object on their camera phones that they wantemployees’ use of mobile technology in 2013. to learn more about. The device will use the image The sophistication of mobile interaction is likely as a “hyperlink” to search the web and retrieveto change. In five years there may well be video information on it—in the same way that text isexchanges with the call-centre agent. The phone is normally used for a web search.also likely to be used as a “mobile wallet” for banking Both these types of technology go a step further inand purchasing that can be waved in front of a reader, linking the physical and online worlds via the mobileas already happens in Japan today. Online banking Internet. For Ms Marriott, the main thing is that, usingwill be more widespread, with people transferring such mobile technologies, “the consumer will controlcash from one account to another over the mobile. But the interaction”. © The Economist Intelligence Unit 2008 19
  21. 21. The digital company 2013 How technology will empower the customer Conclusion R ecently, the CEO of a US airline posted a query much will be required of employees, the IT function on its website asking customers how the and the information systems they run. Tomorrow’s airline can make them more productive, and employees, for example, will be no less empowered got more than 150 replies in the first week. It is this by technology than customers, but will they have the kind of straightforward use of technology to gain skills to leverage these tools effectively and to use the value from customers that is likely to thrive in 2013, information they glean wisely? as will simple, practical ideas—although complex to Many firms complain that they are awash today in implement and manage—such as getting customers customer and other information—how will they cope to help each other in company-run web communities. with the much greater volumes of data likely to be “The digital age is about the democracy of a good generated in 2013, and how will they translate it into idea that can come from anywhere, including the valuable intelligence? How will the IT function itself consumer,” says Ajaz Ahmed, chairman and co- need to change to enable and protect simultaneously founder of AKQA, a web-marketing firm. This implies the more open enterprise of 2013? What must the CIO much greater collaboration with customers, combined do to help bring all of this about? with respect for their contribution and influence. These are the questions that the Economist However, to manage this level of interaction Intelligence Unit will address in the forthcoming with customers—and other third parties—and to second report in The digital company 2013 ensure that the information and insights gained programme. actually result in better products and services,20 © The Economist Intelligence Unit 2008
  22. 22. Appendix: Survey results The digital company 2013 How technology will empower the customerAppendix: Survey resultsIn March 2008, the Economist Intelligence Unit conducted a survey of 661 executives of companies from aroundthe world. Our sincere thanks go to all those who took part in the survey. Please note that not all answers add upto 100%, because of rounding or because respondents were able to provide multiple answers to some questions.In your view, which of the following developments will have the In which areas of operation will technology cause the greatestgreatest impact on your business between now and 2013? change in business practices over the next five years?Select up to two. Select up to two.(% respondents) (% respondents)Change in business models due to technology innovation Customer service 40 31 Operations and productionGreater political and macroeconomic uncertainty 32 29 Supply chainChanging nature of demand for your products/services 27 28 Sales & marketingGreater difficulty in acquiring and retaining employees with the right skills 24 22 Research & developmentIncreasing competition from lower-cost rivals 22 21 Executive decision-making 15Greater complexity of regulatory and compliance requirements Risk 19 13Rising wealth levels in emerging markets Finance 15 7Higher cost of energy resources Human resource management 13 6Rising security threats Corporate governance 5 4Increasing corporate social responsibility (CSR) requirements Other 2 2Other 3To what extent do you agree or disagree with the following statements?(% respondents) Strongly agree Agree Neutral Disagree Strongly disagree Don’t knowWe are concerned that an economic downturn over the next two years will have a negative impact on our business. 19 49 20 10 2An economic downturn over the next two years will limit the impact of technology advances on our business in the longer term. 4 21 27 37 11Technology advances will help our business to overcome the negative effects of an economic downturn. 9 41 32 14 3Technology advances will increase both business and technology complexity to the extent of limiting our competitiveness. 5 24 23 37 10 2 © The Economist Intelligence Unit 2008 21

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