Digital channel shift vs. digital paradigm shift

I had the pleasure of speaking with Bill Hutchison a couple of weeks ago. Bill is a pioneer in smart cities, working in Canada, Russia and Asia to evangelise the concept of the hyper-connected city and the potential for paradigm-shift thinking that hyper-connectivity presents. Bill chaired the Toronto Waterfront development, one of the largest urban regeneration and connected community projects in the world. One thing he said to me which resonated was that the last 20 years of digital innovation and disruption have simply set the foundation for even greater change to come. One of the opportunities of digital disruption is the potential it offers to think about paradigm shifts.

Many clients I have worked with over the years have approached digital as a channel-shift project - "if we could shift 10% of calls from our call centre to our smartphone app we would save x%", "if we could switch x% of loan applications to online we would save y% and acquire z% more clients". There's nothing necessarily wrong with that approach but the history of new technology adoption is littered with examples of people using a new technology to enable an old process or an old way of working. Putting a loan application online is not necessarily going to change the game or protect against a future industry disruptor.

10 years ago Nike has very little idea who purchased their trainers and how they used them. Consumers made anonymous purchases in sports shops and department stores and rarely bothered to fill in a registration card to tell Nike about themselves, let alone how they used their trainers. Nike could have adopted a channel shift mindset and approach to digital, creating an online portal for people to register their purchases and upload information about their training regimes. They could have done that but they chose a paradigm shift strategy. By embedding software into trainers via Nike+ and building a gamified community where users set their training goals or participate in virtual / physical games of "tag", Nike has transformed the information and insight that it has about it's consumers. At the point of writing a staggering 2,146,741,969 miles have been run by the community and automatically uploaded to Nike.

GiffGaff could have launched an MVNO with a channel shift strategy. Instead they chose a paradigm shift by creating a peer to peer business model where customer word of mouth drives acquisition and members fix over 90% of service requests for other members in the support forum with an average time to fix a problem of under 3 minutes.

Zopa could have followed a channel shift approach and launched an online only business selling loans, but they chose a paradigm shift model by creating a peer to peer lending forum.

Threadless, Zappos, Kickstarter, eBay, ZipCar, Nabbesh (client), Netflix, Salesforce.com, Amazon, NowTV (client), CDBaby, Spotify, Lastminute.com and many others all could have pursued channel shift strategies in their respective industries... but they didn't.

CRM for a digital age

Most companies invested in CRM software for the first time between 1996 and 2006. That decade saw the CRM boom and bust. Siebel went public in 1996, signed huge multi-million dollar software license deals, peaked at a 45% market share in 2002 and was acquired by Oracle in 2005. The big ERP vendors all entered the market with varying success, Nortel acquired Clarify for $2.1bn in 1999, (before selling for just $200m 2 years later) and Salesforce.com was founded in 1999, winning over 20,000 customers by 2006.

The CRM applications that most companies implemented during that decade of 1996-2006 were predominantly Sales Force Automation solutions and Customer Service /Contact Centre software. Solutions designed to support Industrial Age distribution models of large field sales forces and customer service agents. Many projects failed (analyst estimates range greatly from approximately one to two thirds of projects) and many companies experienced long, painful implementations that rarely achieved the anticipated benefits. As many of the CRM projects were so slow and painful to implement, many companies have retained the solutions that they implemented for far longer than intended and the relics of these systems still power a large part of the customer experience today.

Looking back at the wave of digital change we have seen over the last decade or so, I would pick out 2006 as a tipping point. In 2006 worldwide Internet penetration stood at 15.7% (see http://www.internetworldstats.com/stats.htm). Since 2006 it has more than doubled to over 30%. During the last 6 years we have seen enormous changes in technology and communications. We have seen the mass roll-out of broadband and mobile broadband, an explosion of connected, smart hardware devices like the iPhone (2007), the iPad (2010) and the seemingly unstoppable rise of social networks like Facebook (founded in 2004 but hitting 500m users in 2010 and 1bn in 2012), Twitter (founded in 2006) and GooglePlus (founded in 2011).

There is a stark reality here. Most companies invested in CRM for an analogue age, designed to support a predominantly field sales force and contact centre-led distribution model. They invested before worldwide Internet penetration reached critical mass, before any of the digital disruption we see today became main stream and before digital became baked into the distribution model. Hence we now see IT departments in a spin, trying to keep up with increasingly frantic demands from the business and trying to bolt on new applications, services and channels to legacy systems that were simply never designed to be used in the way they are today.

CRM for a digital age has to look different. It cannot be the technology-centric, monolithic disaster that plagued some (but certainly not all) of the previous generation of projects. CRM for a digital age is not any particular software or technology and it will vary greatly from business to business but it is likely to display some of the following characteristics:

• Designed for Customers and front line customer-facing staff, not just for management
• Focussed on speed to value and positive internal momentum
• Designed with a core foundation (e.g. data, processes) but able to embrace change at the front-end of customer interaction (i.e. devices, apps, social networks etc)
• Delivered in an iterative fashion with constant business involvement
• Open and integratable in nature (often made up of a collection of services rather than a single package)
• Cross-functional in nature, busting through internal silos
• Paid for based on value delivered to the business

The challenge most companies face is one of transition. Shifting not only from legacy CRM technologies, but also from legacy mindsets, procurement models, IT delivery models and of course distribution models. Without question, all of those challenges are difficult, but is it really realistic to continue with a CRM solution designed for an analogue age?