What drives the extraordinary success of new economy behemoths Amazon, Google et al, and how can Australian companies emulate their seemingly unstoppable prowess?
Chief among the factors that keep them roosting at the top of the business tree is their not-so-secret practice of exploiting data, to enhance and enrich their product and service offerings.
It's a phenomenon that's been dubbed ‘data network effects' – a high-tech variant of ‘network effects' which refers to the way in which products and services gain additional value as more people begin to use them. (The internet is a case in point, as are online marketplaces like eBay and dating sites such as Tinder and RSVP!)
Harnessing the power of data network effects can help companies optimise their offerings and deliver the personalised service customers have increasingly come to expect from businesses and organisations.
Why it matters
Is it essential to do so, or merely a bit of icing on the cake? Research suggests the former. A 2016 report by management consultancy PwC examines the emergence of what it refers to as the ‘intelligent experience economy'.
Mobile computing, artificial intelligence and the cloud are collectively redefining the relationships between companies and customers. Enterprises that are unable to create meaningful customer experiences at speed will lose ground to those which can, the report notes.
I'd go further than that. In the next few years, leveraging data won't be a means by which businesses gain an edge. It will be standard business practice – and companies which opt-out will be out of the game.
Organisations which are not using digital technologies and collecting and exploiting data to build connections, drive loyalty and refine their product and service offerings need to start playing catch-up before it's too late.
Room for improvement
Local players have a big job ahead if they hope to regain the ground they're losing to faster moving foreigners.
Management consultancy KPMG's 2018 Customer Experience Excellence Report notes that Australian consumers perceive most experiences as lacking differentiation.
Its survey of 2502 Australian consumers saw overseas brands Singapore Airlines, Emirates and PayPal make the list of the country's top four customer experience providers.
Just one homegrown company joined them – mid-tier bank Bendigo, which was lauded for its successful and consistent execution of a customer-focused strategy.
For international players looking to penetrate the Australian market, this sort of approach has become a given.
The report notes they demonstrate common modi operandi: entering the market with a value proposition and an operating model that's been refined and proven in highly competitive overseas territories.
Personalisation is the facet of customer experience Australians value most highly according to the report. Brands which were perceived to add a personal touch were acknowledged by survey respondents as delivering a ‘top service'.
The current environment offers a great opportunity for local companies which are willing to up their game. Developing a ‘connected enterprise' which delivers consistently across customer touch points can help them differentiate themselves and achieve sustainable growth.
Getting the best bang for the technology buck
Incorporating data network effects into products and services is easily said but perhaps not so easily done. Where should enterprises begin?
Buying or hiring the right infrastructure to support a data-driven culture is the first step.
The former approach has become difficult to justify in the as-a-service era, when the resources and solutions of third-party vendors can be harnessed quickly and economically and scaled up or down at will.
Thinking outside the data feed
When it comes to leveraging data, thinking only in terms of what's generated in-house is a common enough error. For businesses that want to kick their share of data network effects goals, it pays to think more broadly.
Enriching the data pool with data from a variety of external sources can lead to more detailed modelling and more accurate predictions.
Becoming a data network effects driven company isn't just about using data to improve products and services. Collecting data on how customers are experiencing those products and services is every bit as important. It's about closing the loop – using the insights gleaned to keep refining and customising offerings and to predict what customers will look for next.
In today's hyper-competitive business environment, the winners are those which make testing, measuring and iterating their religion. Australian companies that hope to rival their overseas counterparts on the customer experience front need to get with the program fast.