The Most Important Thing Your Business Needs to Focus on in 2020
And what your customers have been craving more than ever.
There’s no doubt that you’ve observed how fast things are changing and evolving with how we do business today. 10 years ago, we said “we have an app for that!” and now we say “we really need an app to manage all of our apps!!”
New services
New ventures
More aggregation
More data
The list goes on…
But what is all of this change and growth attributed to? The rise of interconnectivity and social? The IoT? All of the above? Or something more?
There is a massive change happening, and while technology definitely amplifies the rate of change, I believe we’re also seeing a fundamental shift in how customers desire to engage with brands. Customers want more than just a better user experience or more features, and many times those can just distract from the real solution and delay the inevitable of what you might already be experiencing… more competition, more commoditization, and ultimately less market share.
However, as with the pains that accompany every economic shift, there is a massive opportunity ahead and there are very few who are actually capitalizing on this shift…
The most valued business strategy of the future will be one where the foremost aim is to transform and empower customers for the better.
The evolution of engagement
B. Joseph Pine II and James H. Gilmore describe part of this shift in “The Experience Economy”. They propose that there are 4 levels of increasing value and engagement between a business and its customers; goods, services, experiences, and transformation.
The first and lowest form of engagement is to simply provide goods. Our economy saw a tremendous rise in this type of interaction with the industrial revolution. Raw materials and bulk goods were produced like never before. To borrow a comparison with my favorite product, coffee, the transaction of goods would be centered around the coffee beans themselves.
The second, more engaging form of transacting is to provide services around those goods. We’ve created services around almost every good that exists. Services to ship, market, and sell the goods. Again, using coffee, the examples of this form of engagement would be a coffee distributor or roaster.
Thirdly, and further increasing customer engagement, a business can provide valuable experiences around goods and services. Who doesn’t love moments of escapism, entertainment, or ease? From Disneyland to Uber to Airbnb experiences package goods and services together in such a way so as to create elated, memorable moments that set their businesses apart. In the coffee market, this could be seen as the orchestrated efforts of a coffee shop to provide a unique experience.
Transformations, on the other hand, are the highest form of engagement because they create entirely new customers through a relationship with a business. Transformations don’t typically stand on their own, a business needs to have great goods, services, and experiences as a baseline for any transformation they offer. Take Airbnb’s “experiences” product, which are immersive experiences designed to transform you into something of a local and less of a tourist in any destination you choose. They couldn’t offer such an engagement without having a top-notch product and user experience to support it, anything less wouldn’t let them scale as they have now. Or to borrow my coffee analogy again, you might see a craft coffee shop offer classes in-person/online to learn about different kinds of coffee, how to brew different types of beans, etc.
Until now, our economy has thrived off of creating the newest service or newest experience and capitalizing before consumers get bored or change preferences altogether. It’s almost as if we ride a wave until it’s time to catch a new one.
Inevitably, as more businesses enter your specific market, offering similar services and experiences, along with this comes commoditization, lower prices, and less brand loyalty. Remember when Robinhood was one of the first platforms to let you buy and sell stocks with no commissions/fees? Now there are several big players following suit. Soon that will become the standard.
To be fair, though, most companies struggle to even provide engaging and valuable experiences, unique to their industry. The ones that do provide creative experiences are still reaping the rewards of little competition and riding that wave. Take a financial planning firm or a medical clinic that offers a subscription membership for a new tier of service for their clients who want more engagement, guidance, attention, etc. this is certainly not the norm but is brilliant strategy right now to add recurring revenue to these age-old services.
So, how do we get out of this mode of wave after wave after wave… feeling like we are chasing our customers with the rise of each “next big thing”? The goal of most customer engagement strategies is to remove pain, meet a need, and provide some level of comfort/enjoyement. These are not a bad intentions by any stretch and remain central to product development. However, to achieve an emphasis on transformation the focus becomes empowering them in some way. The premise I propose here is that customers ultimately want to be empowered and changed for the better in a world of so many options/information overload, and they will hold the highest value and loyalty for the brand that can give them this via experiences, services, etc.
A “transformation-first” strategy does not negate certain methods of engaging, but simply provides a clear direction across all of your efforts to create the most impactful relationship between you and them.
It’s time to move beyond just user experience
This market shift is not a trend, this an culmination following the preceding general market behaviors. Really, this is a fundamental shift to meeting consumer demand like never before because this while services and experiences meet some of our needs and desires, transformative engagement puts us in more control as consumers… which we love to our core.
Consider this — what is greater than experiencing something that is better, faster, entertaining? Answer: Actually becoming empowered to be better, faster, more entertaining, etc. for yourself or your business. That feeling of being put in the driver's seat of your destiny and growth is unmatched.
The real power of emphasizing a transformation-first organization is twofold:
- It’s extremely hard to replicate. Since customer transformation empowers them to face challenges head-on autonomously, scaling this type of engagement requires the feeling of customization at scale. It’s easier to scale other forms of engagement with less concern for an individual or team’s respective growth, but to turn that customer into a better one altogether? That’s a different ballgame that requires deep customer knowledge, process, and product lifecycle planning.
- It creates a deep loyalty. What happens when you impact someone, and irrevocably change their life for the better (even if only slightly)? There’s a strong relationship formed through the transformation process itself, along with subconscious reciprocity when all is said and done, and the consumer is better on the other end. It’s much harder to break away from a business that has transformed you, versus one that provides you industry-standard results, just had the right prices or speedy service, etc.
It’s easier said than done
Some of you might think, “I’ve been greatly transformed by a business” or “I transform my customers and change them for the better, haven’t people been doing this already?” and you might be 100% correct. I know many great employees that work tirelessly in their current environment to provide an outstanding experience and see to it that their customer is far better and more self-sufficient than when they first engaged with them. They are also top performers as a result of this focus. However, they are usually the exception and not the rule. More than likely the business you work for is still working to differentiate itself with a stellar user experience and innovative products. To reiterate, this is foundational, it is a necessary growth step, but these often distract from the blue ocean of opportunity to be positioned as a “transformation first” brand.
Great opportunity doesn’t come without its challenges. It is extremely hard to give away control to customers. There is a delicate balance between “guiding” a customer through a transformational experience and empowering them to grow on their own. Transformation always requires both aspects. At times, it can feel like you’re giving away your best secrets or missing out on revenue. Shaking up the education landscape, the Lambda School is a programming school that only charges tuition after you secure a job, making over 50K/year. While this comes with a seemingly large risk and deferred accounts receivable for the school, it ultimately incentivizes students to learn well and finish school successfully to get hired and the school is invested in making them gainfully employable in order to get paid. Interestingly, this perceived increase in risk actually aligns incentives better for company<>customers. This also serves as a strong marketing differentiation to attract new students.
On a somewhat related note, transformation doesn’t always come in grandiose packages, but it is almost always a “game-changing” encounter. When Slack entered the office collaboration technologies space, they had an environment that invited innovation, customization, and integration unlike any of its predecessors. Skeptics scoffed and said ‘this is just another chat tool’. It wasn’t a white glove on-boarding experience, no 30-minute tutorial overview because it didn’t need one. It was a conceptually simple, massively time-saving, intuitive tool that guided teams to become more interconnected and less dependent on siloed communication tools. Simple features can equate to significant transformation.
Transformation in action
So where can you start for your business? To reiterate, the most valued business strategy of the future will be one where the foremost aim is to transform customers for the better. Here are a few questions to ask yourself to have a better, transformation-first strategy:
- How well do you understand the desired future state of your customers? Is this a part of your hypothesis you are testing?
- Do your product's features and customer lifecycle “lead” to the desired future state?
- Does the future state of customers generate greater LTV? If not, re-evaluate if incentives are correctly aligned.
Inevitably, once you begin to think this way about your products and your customers you’ll start to see opportunities everywhere. Name any business and I guarantee there’s latent transformation opportunity available. Do you work at Boring Example utility company (not the actual “Boring Company” which is really not boring)? Why not make an application to educate customers on how to maintain their utilities properly, recommend related products to reduce their costs, or even gamify their usage to “level up”/ “compete” against themselves or for charity. The transformation-first focus will quickly reveal gaps where your customer’s growth needs are not being met and spark new ways of engaging with your customers and empowering them to become better customers.
Finally, engaging with customers in this way is clearly beneficial to the customers, but it also yields the highest profits for the business. Customers hold the highest value and loyalty for companies that can help them transform because they now have a greater sense of control over their own destiny (solutions). If you can offer this value proposition versus simply a transactional product or momentary experience, they become more invested in the results you have to offer and are willing to pay higher premiums. Look at the prolific amount of meal planning services (Blue Apron, HelloFresh, etc). These “meal kit” delivery services created over a $7 billion dollar market by 2019 that had not existed several years prior. The cost to purchase a kit is definitely more than taking a recipe to the store and buying your own ingredients, but it can transform your diet, your lifestyle, and your cooking skills.
The exciting truth about this market opportunity is that when there is a transformation-first focus in your business, everyone involved wins at the highest level, both relationally and economically.
