Creating Customer Value on the Digital Frontier

Creating Customer Value on the Digital Frontier
After several years of hunkering down in response to the global financial crisis, many companies are shifting their attention to creating customer value through innovation.

Businesses have always done so by reconfiguring the three fundamental dimensions of the universe — time, space, and matter — in different ways from their competition, and ideally in different ways for different customers. Think of how FedEx exploits time to get any package from point A to point B overnight, how Starbucks shifts the space where people experience both the production and the consumption of coffee drinks, and how LEGO modularizes matter with its simple brick that kids (and plenty of adults) still play with over 60 years after the company's innovation.

In today's world, however, executives cannot ignore how digital technology reshapes the landscape. You must, therefore, take your explorations out onto the digital frontier. Here you will discover how digital technology extends each of these dimensions of value creation and explore the opportunities they afford.

Most obviously, offerings need no longer be comprised merely of material substances but can also be formed from digital substances. In terms of the fundamental dimensions, this means shifting from matter to no-matter, creating offerings made up of immaterial bits rather than physical atoms. Consider how digitizing music upturned the entire industry, with only now a company — Spotify — coming up with a streaming music offering that seems to satisfy distributors, consumers, and artists alike. (Got your invitation yet?)

Digital technology is not just about the bits; it also enables you to shift from space to no-space, to construct offerings in virtual places rather than just in the real places of the physical world. Companies can interact with customers on websites, via social media, in virtual worlds, and even by fostering customers' own imaginations on whatever device best meets their individual needs. Consider what Shareables bills as "The World's Most Futuristic Online Sales Experience." You have to see it to fully appreciate it, but basically clicking the "3LIVE SHOP" link near the top of Swedish telecom provider 3's home page brings you face to face with a salesperson, live and in real time, who virtually demonstrates its offerings there on your own screen.

Finally, digital technology enables you to shift time to no-time. Such offerings leave the normal sequence of actual events in real time to enact autonomous events that engage people through nonlinear, asynchronous methods that today's digitally savvy customers so often prefer. People want to interact with companies when it fits their own schedule, rather than having to match a company's predetermined priorities, including TiVoing their TV viewing, banking at an ATM in off-hours, leaving voice mails at odd hours, sharing updates on Facebook, and so forth.

Of course, do not explore single dimensions or just the digital side of each. Focus on all the ways you can fuse the real and the virtual. Nokia, for example, bested Motorola in mobile phones when the underlying technology shifted from analog to digital, but was in turn beaten by Apple when the latter innovated the iPhone, designing for its look and feel as much for autonomously accessing virtual places.

FedEx lets customers instantaneously access the physical whereabouts of any package through its virtual web site. Starbucks enhances its real places through Wi-Fi access to virtual places, while becoming for so many an autonomous respite in an otherwise all-too-actual workday. And LEGO's Digital Designer lets consumers create models, brick by virtual brick, and then its Design by Me offering sends them the exact set of bricks it takes to build the physical model on their family room floor.

While digital technology has been around for quite a while now, those businesses that fully embrace this dual nature of time, space, and matter — the ability to create value through actual and/or autonomous events, in real and/or virtual places, with material and/or digital substances — open up new opportunities never before envisioned, engendered, or encountered. With the full power of digital technology at our disposal, the possibilities are now endless, for they are limited only by our imagination. And of that there is no end.

Source: HBR Blog Network,
9:58 AM Monday September 12, 2011
by B. Joseph Pine II and Kim C. Korn