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The true promise of digital operations: serving your customers better

11 Jun 2019
Want to become a digital frontrunner? To avoid lagging behind in the digital race, you should drastically improve your customer's experience. How? By deeply incorporating your customer's wishes into your operations.

Today, most companies invest in digital capabilities. But a lot of this digital-capability building is 'non-customer facing.' Sure, many organizations implement efficiency- and productivity-enhancing apps, and AI-based forecasting is growing increasingly popular (take an airport, for example, which uses AI to accurately predict how many people will arrive at what time). Briefly put, Big Data and analytics are used to improve decision-making – and it pays off. However, this merely equals automation: you're doing the same things in a slightly better – and perhaps somewhat cheaper – way. But you are not living up to the true promise of 'digital,' which is to drastically improve your customer's experience – the only way to create more value and become the digital frontrunner you aspire to be.

From Dynamic Interaction to Revolutionary Delivery

I believe at least two components are crucial to improve your product or service in the digital age:

1. Dynamic Interaction: you intensively interact with your customers – you are always ‘on’ and ready to engage your customers using all the channels they want to use. You can, for example, implement a highly active social media customer service department (such as KLM). Or, you can – like most car brands – offer advanced online configurators that allow customers to configure the product they want.

2. Revolutionary Delivery: you change your proposition, increasing the value of your product or service for customers.

Most companies have tackled the first component by now, which is the easier one. The second, however, is more difficult. But it's also the most rewarding.

Here's the crux. Dynamic Interaction makes it easier to do business with you. You improve the customer experience, but your product or service basically remains the same. Sometimes, this can be enough. Take Uber, for example. The ride is no different than any other cab ride. But the whole interaction is so smooth that many consumers prefer Uber over its competitors. For Uber, Dynamic Interaction might suffice. But in lots of cases, Revolutionary Delivery is the true differentiator.

How to put your customers in control

The essence of Revolutionary Delivery is giving customers what they want. Famous digital examples include Netflix (unlimited viewing of a preselected, changing catalogue for a monthly fee) and Apple’s iTunes (listening to any song, anywhere, for $0.99 per song).

However, these businesses offer a fully digital product. For most businesses that sell physical products or deliver their services in the physical world, Revolutionary Delivery is about giving customers more control over their operational processes. Think about it: in your operations, you make many decisions that impact the quality, cost, and timeliness of what you end up delivering. Traditionally, the customer has a very limited say in any of these decisions: prices are based on (average) cost, and margin calculations and lead times are set to accommodate all sorts of product mixes. But what if a customer is willing to pay more to get a product faster? And what if he is prepared to move his order back when capacity is scarce? Figuring out how to pull your customer into your operations is the essence of Revolutionary Delivery.

The following example can provide useful insights. At a well-known steel parts manufacturer, customers can order steel parts through a fully online interface (Dynamic Interaction). But they can also determine their own lead time. As this manufacturer cuts parts from a large metal sheet, one of its key cost drivers is how many customer orders can be cut from a single steel sheet. This ‘nesting puzzle’ gets easier when more orders (or, puzzle pieces) are available. When lead times are longer, there are more available orders, which results in better nesting and lower cost. Based on its experience, this manufacturer offers customers a variable discount depending on the required lead time.

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