Digital Darwinism Drives Innovative Business Practices

Within the last few years, digital strategies have flipped traditional business models upside, emphasizing ambition and ability over company size and seniority. Thus, as organizations move beyond transactional interactions to build upon customer relationships, flexibility will be essential for enduring success.
Customer Strategy

Within the last few years, digital strategies have flipped traditional business models upside, emphasizing ambition and ability over company size and seniority. Thus, as organizations move beyond transactional interactions to build upon customer relationships, flexibility will be essential for enduring success.Because the consumer landscape constantly changes, brands must prepare for this perpetual shift by embracing the opportunities generated by new customer behaviors, as those who fail to keep pace will inevitably lag within their given market. Here, we speak with Kyle Hutchins, director of customer experience at West Monroe Partners and co-author of Darwinism in a Consumer-Driven World, to explore how and why companies must adapt their relationship-building strategies to focus on serving customers as they wish to be served:

1to1 Media: How has the digital revolution altered traditional business models? Why are such models being replaced by relationship-based commerce and how will this impact operations in the future?

Kyle Hutchins: The digital revolution has shifted the balance of power in the business-consumer relationship from companies to consumers. Consumers--who want to choose how they engage with a brand and options for defining the relationship on their terms--now initiate, decide, and manage the relationship. For example, today's hybrid consumer cares less about owning a product and more about having access to the service that the product fulfills, as we've seen with wildly popular services like Spotify and Netflix.

This power swing, understandably, has shifted companies' business models from an emphasis on back-of-house (operations, supply chain) to consumer-facing functions (sales, marketing, service). Companies that adapt their consumer-facing functions, and do so quickly and efficiently, are the ones winning consumer loyalty and competitive advantage in the digital marketplace. Great companies also know that connecting front-end functions to back-office operations is the only way to deliver a scalable, sustainable customer experience.

1to1: How has the shift from emphasizing company size and age to focusing on adaptability and ambition changed the way businesses of all sizes perceive growth and success?

KH: Digital channels have opened visibility and access to consumers that many smaller and medium-sized enterprises previously couldn't afford. As a result, businesses of all sizes are establishing direct consumer relationships, and new opportunities for growth and success. Creativity and innovation are the keys to doing so, and there is no size limit on creativity. In fact, smaller organizations are more agile and often better at innovating than larger companies with more traditional R&D processes. In other words, where smaller organizations within a market may have once focused on a niche to drive success, in the digital world, some are proving that the sky's the limit, and size isn't a barrier to results. Businesses of all sizes are beginning to realize that there is no longer such a thing as "strength in numbers," meaning headcount, office locations, or years in operation. Instead, the ability to make consumers lives easier and keep up with customer demands is the priority.

1to1: What role does flexibility play when it comes to evolving alongside the constantly changing consumer landscape? What benefits and challenges does flexibility bring to the enterprise?

KH: Flexibility is non-negotiable for survival in a business world characterized by rapid, disruptive change. Just like with species in the natural world, companies that are unable to adapt as fast as their marketplace will become extinct. Building flexibility and adaptability is expensive and distracting in the short term, and often requires different perspectives and new hires. It requires a willingness to move away from traditional business cycles that are becoming less relevant and sustainable every day and the to ability to innovate quickly.

In Darwinism in a Consumer-Driven World, we talk about co-creation--the concept of innovation by engaging people outside the organization on a voluntary basis--as a means of boosting customer commitment. But this is also a critical way of moving faster to understand and respond to what customers want, need, and expect. We talk about the importance of being able to initiate and end projects quickly. So many of the best innovators use small teams--what Wal-Mart calls a two-pizza team. If you can't feed the team with two pizzas, it's too large.

There are a number of different models to help organizations know what goals to work towards (symbiosis) and target areas for adding flexibility. For example, the digital era rewards companies for compiling and reusing existing content, data, and services, so it stands to reason that companies need employees with skills to do this adeptly--rather like a DJ compiling and replaying music. In the past, people used to reject ideas or services that they did not create (the "not invented here" syndrome). In the consumer-driven era, "not invented here" is an asset. The better "DJs" employees are at finding and reusing content, the more agile a company becomes and the better it is able to survive natural selection.

1to1: Briefly describe the four nature-inspired strategies businesses can employ to build stronger customer relationships. How can said strategies help companies stay competitive amid disruption?

KH: Inspired by Darwin and his non-competitive features of evolution (variation, heredity, and symbiosis) and by leveraging our collective worldwide research and projects, we have identified four key nature-inspired models that provide a framework for building stronger customer relationships:

- Develop symbiosis to unleash customers' potential. The way in which nature has provided for collaborations between species suggests new ways to identify business opportunities between consumers, a company and the environment. Symbiotic opportunities that can boost competitiveness include co-creation and innovation with customers/suppliers and collaboration with innovative new market entrants.

- Enhance migration capabilities to explore new habitats. The way in which the search for new habitats is embedded in some species' lifecycles suggests how businesses could hunt down new opportunities enabled by technology disruptions. For example, digitizing all functions and processes and not just the front office, or being radical in digital initiatives by involving customers as co-producers.

- Supercharge your instinct and identify usually unpredictable risks and opportunities. Companies that leverage analytical tools for Big Data and root causes rather than relying on traditional statistical methods, can heighten their instincts, provided they invest in gathering diverse data, developing analytical skills, and establishing the capabilities to respond quickly to what they see.

- Leverage natural selection, which, if properly understood and used at an internal and external level, helps us question some current business priorities and innovation processes in customer management. Embracing a "fail fast, fail cheap" approach to innovation and deploying small project teams, sometimes working in competition, can boost adaptability and ability to improvise.

We have found that these four nature inspired models provide an effective structure for evaluating how to shift all or some of an organization's business strategy.