MIT Sloan Executive Education Blog

How the digital marketplace is redefining customer relationships

Many people today buy their household telecommunications services—house landlines, Internet access, and digital TV—in bundles. Yet go to the average telecommunications services provider’s website and you have to select which product you are inquiring about or need fixed.

From an organization’s perspective, this makes complete sense. There’s a division for phone service, a division for Internet service, and a division for television. Specialists and technicians exist in each department to help you with whatever you need. But you get one bill each month, so why can’t the company recognize you as one customer with multiple products, instead of three separate customers?

This approach to customer “service”—what works best for the company, not the customer—does not work in today’s digital marketplace. Instead, the digital marketplace is redefining customer relationships, the way employees work, and how companies build internal and external capabilities.

Peter Weill, Senior Research Scientist at MIT Sloan, argues that changing an organization “to dramatically increase the quality of the customer experience using digitization usually does require fairly radical organizational surgery.” In many cases, this requires a significant cultural change, often including product consolidation.

One clear example, which Weill cites often, is that of USAA. As detailed in the Forbes article, “You Are In The Customer Experience Business, Whether You Know It Or Not,” USAA’s executive team “concluded that in order to be fully customer-centric, it required a world-class voice-of-the-customer program so it could understand member needs in new and deeper ways.” USAA changed how it segments customers and used the new approach to design its products and services. Over a five-year period, the company transitioned its organizational and governance structure to move away from traditional product silos. The “new” USAA is organized around member life events, not individual products.

Evolving into a Digital Organization

While each organization is different—and will take a different approach to evolving into a digital organization, Weill shared some general recommendations with bcg.perspectives, a blog from The Boston Consulting Group:

  • Some types of businesses, such as financial services, are new to process optimization excellence; the transition to digitization can “entail significant cultural change.”
  • New skills—especially those in “process optimization, mobile-app development, big-data analysis and social media”—will be required for the transformation.
  • Digitized platforms play a critical role. “We think of these platforms as shared business processes and data that help companies flawlessly execute their core activities while maintaining world-class service levels and unit costs,” said Weill.
  • It is also important to understand the role of the CIO, who needs to ensure that “the conversation about how digitization threatens or provides opportunities for the company’s business model occurs at the right level.”

Weill admires several companies that have made this transition, including USAA, Commonwealth Bank of Australia, and Seven-Eleven Japan.

“I think that what has helped these companies become successful is their understanding that digitization offers opportunities for dramatically improving the customer experience and replicating that improvement across the whole company while reducing costs and decreasing time to market … It’s illustrative that, in these companies, it’s much more difficult to tell who works in the IT unit and who works in the lines of business. This is evidence of the team approach required to blend the customer, process, data, and financial focus to achieve breakthrough performance,” sums up Weill.

Peter Weill is Senior Research Scientist with MIT Sloan School of Management and Chairman of the Center for Information Systems Research. He teaches in the Revitalizing Your Digital Business Model and Essential IT for Non-IT Executives programs.