Over the course of the digital age, passive consumers have become empowered buyers whose access to information gives them greater influence in which products get developed and how they are marketed. In his book The Network Is Your Customer: Five Strategies to Thrive in a Digital Age (2011), David Rogers shined a spotlight on this new phenomenon, introducing the concept of “the customer as marketer.” His newest work, The Digital Transformation Playbook, looks at how companies started before the Internet must rethink their strategy to thrive in the digital age. When not writing books, David’s also a consultant, speaker and faculty member at Columbia Business School.
Key Learnings:
1. Digital-age customer behavior, particularly social media, has changed the way businesses and their customers interrelate. Customers are constantly sharing information, whether it’s with other customers or with the businesses they patronize. In response, businesses need to think of customers less as individuals and more as groups. This calls for new strategies that appeal to these customer networks.
2. If you’re going to consider embracing a new trend, think first about the forces behind it. What could be the reasons a certain demographic appears to be adopting a certain behavior? Why or when is a country developing its business or technology differently? On the flip side, why might a certain business not pursue a strategy others are adopting?
3. One strategy to invigorate your customer networks is to find out what kind of content your customer network values and become a trusted source for that content.
4. Digital transformation is a matter of executing the strategies that will help pre-internet companies join the digital age. It’s about recognizing how these companies were built and groomed in their day, and providing strategies that will help them adapt and thrive today.
5. Data, once a commodity managed compartmentally to optimize discrete processes, is becoming an integrated strategic asset in more organizations.
6. Making data work holistically requires organizational changes: defining and acquiring new skill sets, knocking down silos and more.
7. Companies often struggle with the discrepancy between abundant data on their tactical sides and scarcer information that would help with strategy.
8. Companies, search engines, service providers and others continue to struggle with the question “Who owns data”?
Interview:
ML: If we were to sit on a plane together, how would you introduce yourself?
DR: My name is David Rogers; I teach in the executive education department of Columbia Business School, and I get to work with businesses all over the world who are grappling with how you respond to new opportunity in a business world that is increasingly shaped and defined by the rapid changing in technologies. I work with companies and teach classes on certain subjects, generally digital business strategy and digital marketing. These are relatively short programs for working executives from all over the world who are in leadership positions at their companies, and they are willing to take a few days or a few weeks of their time to come to a school like Columbia, with an extraordinary peer group, and dive into topics that are really critical to their business. I really challenge these leaders to come at these questions and then ask themselves, what will I do differently in my business when I get back to the office on Monday?
ML: That is actually how we met. I attended one of your programs that we found very beneficial for our business.
DR: It’s great to hear that. I love keeping in touch and reconnecting with executives who have been through the programs.
ML: So, you pioneered the concept of a customer network, and your third book was on that topic. Can you tell us a little bit more about what a customer network entails?
DR: My book The Network is Your Customer is really aiming at how we need to think differently about customers as marketers and as businesses in order to understand marketing in the digital era. What I found in researching different industries and their customers over 20 years is that there have been certain fundamental shifts in how customers are behaving and buying, but there’s also been a change in how customers relate to businesses and to each other.
Traditional thinking had us looking at the customer a mass of individuals outside the company and the job. Marketing, for example, was charged with assessing them and looking for some commonalities, and then the company would use mass production to try and produce a few products that suited the needs of as many people as possible. Meanwhile we were using mass communications to reach and persuade and influence as many of those people as possible. So it’s a method that was very effective in the 20thcentury, but one in which the customers were very passive.
But today that relationship is flipped on its head. If you look at the customers in the network your company belongs to, you realize you still have a very active and important creative role; you still want to be a source of innovation and to help define your brand. But the customers are influencing each other, and they all have access to platforms that allow them to communicate, to shape your business for better or for worse. They can pose challenges much like a competitor, but they can also be the best enablers, champions and marketing forces you can have. So it requires thinking differently about customers and how you relate to them.
ML: As a professional, you obviously possess a tremendous amount of information. With so much new data coming out every day, how do you go about analyzing that information yourself? How do you figure out if you’re looking at an incident not really worth paying attention to or a trend that will become the wave over the next two or three years? Do you have a certain process or methodology that you follow to understand what’s taking place in the world and decide what to pay attention to?
DR: The answer to that is twofold. One way is to spend less time looking for information and more time looking for filters you can trust, for voices you can trust. So, not just looking for the maximum number of data points you can digest per day via tweets, articles and video clips — we all have limits and attention spans. Instead, you’re trying to figure out who are these different voices from whom you find out one or two things that are meaningful, but who also give an insightful perspective and a well-reasoned and developed interpretation of their data.
My goal is not to find 10 or 20 writers or people or colleagues or investors who have a similar point of view. I look even more for business people, people from different backgrounds, who seem to be very smart in terms of the kind of thinking that they bring to the context. That takes place with social media, which is very good at finding people in diverse domains, industries, as well as geographies. So part of it is finding those filters you can pick that will help you to surface interesting pieces of information from diverse sources, who are not all looking in the same places. It is also about finding people who will present an interesting interpretation for you to consider and then push back against or accept.
The second thing is to make sure you spend more time thinking about the whys than thinking about the whats. If you’re going to consider moving into a possible new trend, you need to really think about what forces are behind it, what could be the reasons a certain demographic appears to be adopting a certain behavior, or when a country or geography is developing differently in its business or its technology. Or why a business is pursuing a certain strategy and succeeding, or perhaps not. The more time you spend thinking about the why behind what is happening, the more likely you are to actually have something to contribute to the conversation.
ML: So let’s switch gears a little bit and talk about your previous book, The Network Is Your Customer. One of the strategies to drive these customer networks is to engage or become a source of great or valued content. From the SEO standpoint, and really from every standpoint, we know that valuable content is the way to go. Yet there are still very few companies that are good at creating content. I guess then the first question is, how do we understand what our audience finds valuable?
DR: That is really the first job of marketers, to begin with. I think sometimes people get a little confused in terms of the role of marketing in the organization. When I meet with marketers, I usually start by asking them what they think marketing is or what is the role of a marketer is within the organization. There are always people who respond with “to support sales, to keep people coming in through the top of the funnel”, which is certainly one of the things marketing does. I think it’s a far too narrow view of marketing. I think the role of marketing is really to keep the organization focused on the customer.
Marketing as a practice always begins with actually understanding the market. Understanding the customer, getting inside their head, understanding what their needs are so that you can actually create value for them, therefore being in a position to return, extract, or receive value back from the customer. So, the question of what do our customers care about and the fact that many businesses find that difficult, is basically them having a very weak marketing function, which many businesses do.
So that is sort of a fundamental view of why that’s the first step before you can conquer the strategy. You actually have to get close enough to and empathetic enough with your customers to be able to genuinely take in their point of view and determine what content they would actually care about. It should be helpful to them rather than serving a promotional point of action for the company. That would really be the first step to creating amazing content.
ML: So when we talk about content creation, the next question is, how much do I need to create in order to start seeing results? Do you have an answer to that or maybe some kind of formula or indicator to help organizations understand if they are going in the right direction with their content creation practices?
DR: Don’t assume that it’s the same amount of content as anyone else. It’s not that every business, regardless of industry or who the customers are, should look like newspapers or blogs and should all be posting 5,000 words a day or 10 minutes of video. It completely depends on your business model and the kind of audience you are trying to reach. It’s not like Apple is churning out content on a daily basis, and yet their customers have an incredibly strong connection to their brand. Then you have a company like Red Bull where their strategy and how they built their brand was to be incredibly involved in content production, like a media company in a certain sense. Neither strategy is wrong. Each one is right for the relationship they have with their customers.
You shouldn’t be creating content just for the sake of saying we are content creators, but neither should you ignore it. I think the main thing is to make sure that content comes from a point of view that any business needs to be communicating with its customers and that communication has to be valuable for both parties.
ML: I have read many sections of The Network Is Your Customer where you talked about the future trends, things you predicted or thought would come to fruition. Were there any of them that did not take place or did not happen as you expected or anticipated?
DR: Well, I think a few trends were a little slower than I anticipated. It looked to me like augmented reality was already going to become a significant kind of experience, or communication medium, for us, by now. I think today, we are actually starting to see it shifted a little bit from the augmented reality of five years ago. What tends to be called virtual reality now is more about an overlay, a completely immersive an opaque projection or experience around you. But What Microsoft is doing with Hololens may be quite impactful, offering the ability to interact in all three dimensions with both the virtual and the physical.
ML: So in just a couple weeks you have a new book that’s coming out, The Digital Transformation Playbook. How did you define digital transformation?
DR: Good that you ask that question, because it’s becoming a very popular term, and I did take care in the book to spend some time defining the key concepts I’m talking about: business models, disruption, etc.. “Digital transformation” is actually fairly easy for me to define. I use it to describe companies that were started before the internet was built, companies that were groomed before the digital era—how organizations need to adapt in order to thrive today.
The real challenge is they need to change their thinking, in five broad areas of strategy. So that is how the book is organized. I’m trying to explore our new strategic principles for how we think about customers, about competition, how we think about data, how we think about innovation and how we think about value. Many of the constraints that the pre-digital businesses grew up under have disappeared. So there are new opportunities, new dynamics at work, but the businesses have a big blind spot. But I what I have seen is that older businesses that are able to adopt new thinking in these five domains really are able to evolve their business models and create new value in today’s digital economy.
ML: You’ve mentioned data as one of those areas. How do you think companies should look at data? And how can it really become a competitive advantage for an organization?
DR: Data has really shifted in terms of its role within the organization. It used to be a sort of a process output of companies: doing your work as a business, you generated data on your inventory, your customers and your assets in the firm. Data often posed challenges, such as how you going to store and manage it. The focus was very much about structured data: data in rows and columns, things you could fit on a spreadsheet.
Data also tended to be managed in operational silos, because the point of data then was simply to optimize your current processes. You’d have your sales data in one place and your customer data somewhere else, product inventory data, your human resources, internal data, etc. And a lot of companies would use different databases that didn’t talk to each other.
Now data is becoming a much more strategic asset. In fact I argued that data is becoming a key intangible asset. It is something that has to be dealt with and grown over time. Data is now continuously being generated everywhere and not necessarily something you have to go out and pay for. The challenge is how you turn data that’s available into valuable information.
There is also a lot more unstructured data now, whether it is visual data, movie images, sound, social media, sensor data, all kinds of things that are potentially useful. The value of data is often in how you’re connecting it across different sources, and linking different types of data across different silos within the organization.
ML: Does the organization need to have some kind of overall change in how they approach data operations? Structural changes in order to create this shift in data?
DR: It does require some organizational changes. Certainly you see this in terms of embedding certain skill sets, but what that means depends on the business you have. Do you need a team of data scientists or is it just a matter of increasing the data savvy of people within a rather small organization? It’s both about the skills they’re getting, and also connecting them to the right problems.
Bridging silos is a big issue. I talked about data being kept in silos in parts of the organization. Professor Don Sexton and I did a study a few years ago at Columbia Business School on how businesses were actually using data in the marketing function and how the data available to marketers was actually being used to understand the effect of marketing. We found the biggest problem people reported by marketers was that data was not being shared within the organization. Now I see the best-in-class businesses’ effort for the last couple of years has been to try and make sure their different data sets are brought together effectively to provide a total view of the customer.
ML: During your course, executives are presented with a lot of information about different strategies. In your opinion, how does one go from knowing the right thing to do and doing it? How do we turn it into an actual skill set? Clearly there is abundance of things people can and should be doing. Where do you think the gap is?
DR: I think actually there is a lot of information on the tactical level. I don’t feel there is a lot of information, thinking and writing, on the strategic level. How do you tie this to the actual strategic marketing planning? And that is the focus of my Digital Marketing executive program at Columbia. And in the full-week version of the program, we take a strategic planning process and apply it to figure out what are the opportunities that match your business objectives, your marketing goals, your customers and your brand. How do you pick out the most relevant of strategies to pursue, and how you do actually figure out the tactics and tools and communications you need for those strategies? Not everything you could do is something that you should do.
ML: Very interesting. So, just to make sure I understand, people bring in cases from their organization where the struggle is. And then groups work together to come up with these recommendations?
DR: Exactly. The participants are working in consultant teams developing strategies for the businesses’ real-world challenges. We’ve actually extended the program; it’s now a five-day course. We actually stay on for two more days and apply a whole strategic plan process, working in teams to address real world business cases.
ML: So, what is the future of data sharing? Who owns data, and especially, who is consuming data? Do you think you’ll ever be in a position where, basically, there is a marketplace where consumers put different data sets about what they’ve done, what they ate? Where different companies would be able to access those specific data sets?
DR: That’s a very interesting question. I just published a study at Columbia Business School with Matthew Quint on the future of data sharing. We’re trying to understand what leads customers to be willing to share data with a company. Expected things like rewards have a lot to do with it. We also looked to the future at emerging models for giving value back to customers for data. We saw some interesting responses to that. People are interested in new kinds of values, such as “I provide you my data, you give me more insights.”
In terms of the idea of actually a data marketplace, we found some interest in the idea of having a broker who will allow you to decide who has access to your data. But we didn’t frame it as you would be selling your data.
ML: So, for the companies that want to collect data, how do they strike a balance between wanting to learn more so they can personalize customer experiences, versus simply being creepy?
DR: Well, it’s tricky. One of the thing we try to look at in the study is the different “data sharing mindsets” of consumers. Not everyone starts with the same attitude about sharing data; that’s one thing to understand. Another finding was that brand trust is a huge factor. So, if customers really feel you’re a trustworthy partner, then they’re more willing to share data with you without you offering some tangible reward.
We found that being transparent about how you gather and use your customer’s data is the best way to avoid the creepy factor, that question of “how did you even know this about me?”, and increase people’s comfort with it.
ML: But the question is, where is the value going to come from? How are you going to make all your money back?
DR: That’s going to depend on the business model. Maybe you’re going to make your money back, because you’re going to identify the most valuable customers. So you’ll make them even more valuable. Or maybe you’re going to make your money back by figuring out who you should be advertising to.
ML: So it almost becomes, what comes first? The chicken or the egg? Do you gather all the data sets first, or ask the “why” first?
DR: I think I know what you are saying. I guess I would stress the “why” first.
You do want to leave some room for gathering data, for discovery and explanation. But I just find that it is a much more serious problem that businesses have not asked themselves why they are collecting data and how it ties to their business goals. I don’t find a lot of firms slapping their heads and saying gee, if I only thought to collect these additional data points, I would be great right now. Most businesses are just swimming in data.
What I do see a lot is the businesses who are in a rush to set up an analytics initiative, but are not at all clear on what the business case is. That is a serious problem. I think you want to have the business case in focus, and be asking yourself about the decisions that you want data to help you make. Then you are in a much better position to start gathering data and building the metrics around that. But, yes, once you have that clarity about why you are measuring, you should also be ready to measure things you are not quite sure yet how you are going to fit, so you can discover as you go.
ML: David, is there anything else you would like to share?
DR: I guess the only thing that did not come up was I have a new executive program at Columbia that is based around the new book, which is my 3-day Digital Business Strategy executive program. This class is focused more on digital strategy, innovation, and business models. (As opposed to my digital marketing programs, which focuses specifically on the domain of marketing.) It is a brand new program and I am very excited about it. We have just had our first class, with a very diverse group of global executives looking at their whole business strategy and how it is transforming. So I am very excited about this; it is a chance to look at how business models and strategy are changing in the digital age.
Resources:
1. You can find David on LinkedIn and Twitter
2. To order his new book: The Digital Transformation Playbook
3. For his executive course at Columbia Business School
