Disruptive: A Letter about Innovation

Damir Bogdan
Disruption does not happen by surprise, but by ignoring innovations until it's too late.
 
Do you remember the mixed feelings you had, when the new model of your car was announced? You were curious about what that new and seemingly better model would be like. Is it faster? Does it have more power? Disappointed about not owning the 'best' model anymore? Immediately, the car you have been proud of since Day One – and it was an expensive purchase – isn't good enough anymore. This is quite a difficult moment in the world of customer satisfaction.
 
Let's check the factors that increase customer satisfaction in these days!
 
(1.) The "Do It for Me" Economy
Customer-centricity comes along with personalization – just like the butler in the old days. It shouldn't be noticed; it just happens. The goal is to bring the company's products and services into a customer's circumstances, where and when he asks for them – or even better, before he even knows he needs them! The secret behind UBER's success is not driving from A to B. It's the certainty that you won't be ripped off by the driver choosing a detour, followed by the "no debate about it" payment process. You simply can step out and say goodbye. UBER automatically takes care of the payment – that's the differentiator in the "Do It for Me" economy. It has already taken over our lives: Outfittery, Hail, Glamsquad, Parkwhiz, Munchery, HotelTonight, Luxe, The FruitGuys etc., to name just a few examples. Incumbent companies should think about how to differentiate themselves, rather than how to block the new market entrants. These companies have found their success, because the 'Do it for me' economy increases customer satisfaction.
 
(2.) Virtualization leads to Agility
'Fortune Magazine' recently conducted a study about how much market value is generated from every dollar invested in physical assets:
(-) General Motor's ratio is 1:2
(-) Apple - 1:30
(-) Facebook is already at 1:53!
Virtualization supports exponential growth and agility; and agility is what – again – drives higher customer satisfaction.
 
Remember the news about the Tesla Model S bursting into flames by the end of 2013? An investigation has been opened and everybody was expecting a massive recall with a painful financial impact to Tesla. However, none of that occurred. The problem was caused by the car's ability to lower the chassis at high speeds to be more aerodynamic. This generated too much heat for the battery pack. Instead of recalling the cars to the dealership, they simply updated the software remotely, overnight, while your car was in your garage and the problem disappeared. Just four months after opening up their investigation, the regulators closed it. Virtualization is far more powerful than physical assets!
 
(3.) Speed is King
Customers' expectations are evolving more rapidly than ever before. The faster you execute, the quicker you'll win them over. Fast execution requires agility and agility requires modern IT systems. Keeping one part slow, makes everything else lag behind too! Therefore, Gartner's bimodal IT approach is insufficient when it comes to the speed of disruptors. As Forrester's John C. McCarthy points out, the bimodal IT approach gives executives the comforting, but misleading, message that backend systems can be safely left as they are. However, having one part of the IT focused on NOT moving quickly, can drag down the whole company. Putting lipstick on an old system is not a valuable digitalization strategy. Considering the financial services industry, banks should instead choose to completely reinvent themselves and act the same way as the new players, such as Mondo Bank, Atom, Starling Bank etc. Starling's CEO Anne Boden pointed out that banking will change so dramatically, the easiest thing to do, is to start from scratch. This is the only way to keep up with the speed needed to satisfy the customer's demands.
 
(4.) Natural User Interfaces
A further trend reflecting customer-centricity is the voice-controlled conversational interface. Apple's voice assistant Siri for the iPhone was just the beginning, and rather dumb compared to Amazon Echo's more advanced Alexa for your home. Alexa recognizes your voice, reads out books or the news, reports on traffic and weather, provides info about local businesses, and provides sports results and team schedules. Furthermore, Alexa controls lights, switches, and thermostats and other smart home devices. The next step up is the newly announced Google Assistant. Assistant easily understands natural language and puts queries into context, by using the search engine. "Every single day, people say 'OK Google' and ask us questions that we help them with," CEO Sundar Pichai said. "We started becoming truly conversational because of our strengths in natural language." Tell Assistant to send a nice picture of your daughter's last birthday party to grandma – done. Google's goal is to position Assistant as the central interface within your life making the customer happy.
 
From simple orders to sentences to real conversations, natural language eases the use of modern technology and leads to higher customer acceptance and satisfaction – whether that is for banking services, bookings or just asking for assistance.
 
(5.) New Rules Arise
Today, anything can be built faster and cheaper than just a couple of years ago. Back in 2000, Microsoft spent two years using 300 engineers to build Microsoft Word. Just ten years later, Instagram was built in six weeks with only three engineers. In comparison, Microsoft's market capitalization is only three times higher than Instagram's, but Microsoft has 300 times more employees!
 
New rules also arise in more traditional industries, like manufacturing. For example, the World Economic Forum already reported on the future of manufacturing: COBOTs. COBOTs are collaborative machines working together with humans on production lines. Thanks to advances in sensors, vision technology and computing power, COBOTs are cheap and have the potential to revolutionize production. Now, small and medium companies can enter the world of automation, which is crucial, considering that SMEs account for 70 percent of the global manufacturing output. Flexibility, agility and speed are the result. Once you embrace these trends, you realize the impact it has on your business model. Good enough is no longer good enough. You have to become better enough. The new rules make agile business models essential to keeping the customers satisfied.
 
What about the announcement of the latest car model? See it through the eyes of Tesla's CEO, Elon Musk,: instead of buying the new model, just download the additional feature you want: be it more power or the new self-driving option. Higher customer satisfaction guaranteed! These are only a few examples of what is already possible. Those who continue to ignore these trends will truly be disrupted by surprise. The real magic happens when you start seeing things from another perspective. Go and mingle around in the Silicon Valley, and see what ideas you pick up on. Only by changing your own perspective, change can be successfully implemented in every single company. (Damir Bogdan, Mountain View)
 
Über den Autoren
Damir Bogdan, founder of Actvide AG, consults companies on digitalization and innovation. He is active in Switzerland as well as in Silicon Valley, mentoring FinTech start-ups. Through his consultancy work he builds bridges between European and US companies. Plug and Play - a major accelerator in Silicon Valley – have mandated him as an Ambassador for Europe as well as an Executive in Residence in Sunnyvale, CA.

Prior to this, Damir Bogdan was a long time CIO & Head of Operations of Raiffeisen, Switzerland's third biggest banking group. As a member of the Executive Board he was responsible for the modernisation of the IT and the implementation of a standard core-banking platform. During his time in the board, the bank started to diversify by implementing a private bank and offering new services to its customers. In his role as Chairman of the CIO's of the European cooperative banks he led several pan-European initiatives.

In his earlier years he had several project und leadership positions within the St. Galler Kantonalbank, AGI IT Services AG und Swisscom. As a member of the strategy team he was responsible for the implementation of an offshoring strategy for Swisscom IT Services AG as well as for the corporate SAP-strategy.

Damir Bogdan is a member of the Advisory Board for Information Management for four universities and a member of several IT committees.

Damir Bogdan holds an Executive MBA of the State University of New York, a Swiss Federal Diploma for Information Management and a Certificate Essentials of Leadership of the London Business School.

Über die Kolumne:
Damir Bogdans Kolumne "Disruptive: a Letter about Innovation" erscheint regelmässig auf inside-it.ch. Wir publizieren die Kolumne in englisch. (Christoph Hugenschmidt)