Introducing Interaction Value
An indispensable new metric, what it is and why it matters.
If you’re looking across the workings of an organisation and thinking about the amount of money being spent on digital transformation, there’s a new means of analysis and a potent metric to add to your perspective.
It’s Interaction Value. When organisations interact well with their people, customers, stakeholders, that interaction creates an inter-relationship that delivers value.
Interaction Value is an emerging unit of currency. It will very possibly become the most important ROI metric of the digital organisation. Why? Because, put simply, the fundamental unit of measurement of doing business digitally is interaction.
Looking at Interaction Value levels across an organisation is a powerful way to surface hidden digital value. Interaction Value’s an integrated metric to measure organisation health and digital maturity, a means of developing better connections with people and a practical way to create more efficient, lower cost digital strategies.
Page views and click rates have been with us for a while, but as businesses become more joined-up, more digital by default, and neural networks and machine learning are beginning to underpin core operational functions, an integrated and holistic evaluation around interaction and customer contact’s becoming achievable.
Interaction comes in many forms, through many methods and interaction needs to happen well across every part of an organisation for it to thrive in the digital economy.
Visceral Business has been pioneering work in this area for nearly a decade. Now we’re introducing Interaction Value as a means of understanding digital efficacy and how it can work across an entire organisation.
We benchmarked Cost per Transactions metrics (CPT) in our ground-breaking Connected Housing research between 2011 and 2015 and with digital maturity modelling firmly on the agenda of most organisations, we have developed an Interaction Value mapping tool that gets under the skin of digital interaction and how it’s working organisation-wide.
Organisations can use this approach, year-on-year, to gauge and develop levels of interaction value and digital ROI across their organisation, in a way that’s geared to them.
A digital strategy integrated around interaction insights across the business is becoming a must-have. This is a ‘whole world view’ of the digital organisation.
Digital interaction strategies profoundly influence corporate behaviour, performance and reputation, including customer perceptions, experiences and how people respond to them.
The learning loop that interaction value metrics establishes lays the foundations for robust, continual, improved digital performance, helping decision-makers to understand Interaction Value (IV) levels across various parts and functions of the business.
Interaction value evaluations can be machine-readable. They can be embedded into the organisation as a continual, self-running organisational learning tool. Interaction value mapping can help create self-improving, adaptive businesses.
Visceral Business was the first digital business consultancy to introduce the idea of the ‘quantified organisation’ in 2010. Since then it’s a concept that’s been gaining in use. Interaction Value is a step on from that, it’s about the relationship between what the organisation exists to do and how well interaction throughout the business is working to achieve it. It uses data available across core functions and the service or product relationship lifecycle as well as user engagement internally.
Good quality interaction is essentially about getting the best possible desired responses in relation to the minimum organisational effort and outlay. A little effort and lots of return. The advantage of digital business is in the frictionless, low-cost nature of engagement; it makes sense to look at business performance in this way.
Haim Mendelson is the Kleiner Perkins Caufield & Byers Professor of Electronic Business, Commerce and Management at the Stanford Graduate School of Business. He puts it like this:
‘The role of organizational nervous systems is moving away from execution and into business model design, strategy, and control. On the one hand, the increasing capabilities of artificial intelligence create a need for designing and evaluating new business models - something that automation is not good at today. On the other hand, I have argued that business models will evolve to the point where they will be reconfigurable through the intricate interaction of automated agents.’
I want to suggest that developing an understanding of the Interaction Value levels across an organisation is a crucial part of this perspective, a practical manifestation of the ideas laid out in the notion of ‘business at the speed of thought’ Bill Gates wrote about in 1999, that are now becoming plausible as a reality.
There are some shortcomings, I think, in purely technical approaches to digital transformation. You’ll perhaps recognise the focus on three, four, five or more steps in a process of digital transformation. Here, the processes themselves are hero of the piece. What’s lacking is a focus on how the tech stack develops interaction value through the data it produces, or an understanding of how interaction is geared to supporting the operating specifics, cultural values and objectives of the organisation in question to make it successful.
Interaction value mapping gets under the skin of this issue. Proprietary technology does not create points of difference, it’s interaction from the people that use it which does that.
If transformation strategies are abstract and only technically-focused, digital transformation doesn’t deliver the best strategy for developing high-quality, low-cost interaction. A rationale needs to exist between the operating principles being used and the technology, so that digital strategy can be streamlined and tailored to generating the kind of behaviours, human interactions and data points that will create the most value across service design and internal operations.
What is any technological or process stack doing if it does not address and support the operating advantage built into the way the organisation does things? It’s possible to understand this now in digitally developed organisations, and that’s where interaction value kicks in.
Interaction value is the evaluation of how well any digital and data strategy is enabling quality interaction across an organisation and with its stakeholders, compared to the resources and costs needed to achieve it.
We have built a deep understanding about interaction, evaluating it and incorporating it into the way the organisation develops digital maturity across eight core areas, each one supporting the organisation itself.
Good quality interaction is driven by a range of universal activities common to all organisations - the design of technology and data strategies, the matrix of channels and devices used, and that customers use, the way audience engagement and crm are handled as an interaction process, how user experiences are designed and content is managed to support the core purpose of the business, as well as how business modelling, analytics, internal processes and corporate governance knit together.
What knits them together is an integrated picture of the interaction occurring across each of these core areas, and the data points that evidence it. There are ten levels of digital maturity in each area we’ve developed as part of our assessment framework, which we adjust to new technology as it develops and comes onstream. This is an approach that accommodates technological and digital evolution well. It can take on AI, big data, sensors, machine learning or GDPR implementation with ease. And it can do so because each of them, at their root, generate the currency that is interaction data. In this way, interaction value mapping is a methodology that is built to last.
Digital and data strategies can become more efficient and deliver better value with digital activity being benchmarked like this, year-on-year, defining touchpoints, levels of interaction, how they’re developing and adding value across the business as it gets digitally more mature.
Understanding Interaction Value levels powers digital performance. Thinking about a couple of the world’s biggest commercial organisations by capital value and how Interaction Value applies to them, let’s take the ‘A team’, three of the world’s Top 20 largest companies by market capitalisation, Alphabet, Apple and Amazon. It’s easy to see how their Interaction Value mapping might differ in each case, but each of the core parts of the Interaction Value approach apply in all. There are different points of interaction, different metrics. All can be channelled to create a strategic approach to interaction that can build efficiency and value.
Organisations with a heavy amount of fixed capital assets have their own ‘Interaction Value’ footprints they can develop. Walmart’s digital footprint is going to be very different to other large corporates, Toyota, VW Group or Shell, for example. All of these are companies in the Top 10 as measured by revenue around the world, and all are able to benefit from benchmarking how Interaction Value levels are developing year-on-year and in comparison to competitors.
Anyone looking at the digital design and development of their organisation will appreciate how operational capabilities, skills and outcomes inside and outside the organisation are increasingly becoming interlinked.
Understanding what’s going on across the business by looking at Interaction Value provides a complete joined-up view to support and shape the digital business case for digital development, create opportunities for change, and deliver development insights that can yield substantial commercial advantage.
As organisations involved in digital development are becoming more networked, understanding interaction value is increasing in importance. Not every organisation has a fully operational, end-to-end, digital strategy capable of measuring interaction value at this point in time. This is an emerging and pioneering practice but, crucially, it is one very specifically grounded in establishing a direct connection between the purpose and practical activities of organisations and how digital interaction is powering value.
To me there’s no doubt an Interaction Value evaluation is an important piece of the digital strategy jigsaw. Over time, I hope talking about the IV levels of organisations will become a standard. It will generate substantial savings, efficiencies and accelerate learning across the organisation as part of a profit model.
Drop me a line at anne[at]visceralbusiness[dot]com if you are interested in Interaction Value and Digital maturity research work, Digital Innovation workshops or Executive Mentoring.
Visceral Business is a digital business innovation consultancy that began in 2008. It specialises in developing effective, networked organisation. This post first appeared on the Visceral Business website on 27th September 2017.