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This article is by Featured Blogger Richie Etwaru from his LinkedIn page. Republished with the author’s permission.
As I think about 2017, and look to 2018, 2019 and 2020, I am pressed to share my thoughts on how the human experience and commerce will conflict into a tipping point.
We don’t feel it, and it is hard to see; we humans are increasingly being taken advantage of by most organizations. We know less and less about what we purchases, who manufactured them, how much they cost, and why one product or service is different from another in a market. Consumer Trust Index (not to be confused with Consumer Confidence) continues to drop at an exponential rate across most industries, and young consumers are starting to demand more trust and transparency when they engage with organizations.
I believe around 2020 will be the year where we collectively say, “enough is enough”, and begin to demand that organizations earn our trust, and be more transparent.
We are in a state of untrusted and opaque commerce, and I believe a consumer revolution will force our model of commerce to transition to a model that is more trusted and more transparent. I call this state of commerce “Trusted Commerce”.
Such a fundamental change in the model of commerce has precedence. It has happened before. We are currently in Experience Commerce where engagement, experiences and services are the method to attract customers. About two decades ago, we revolted out of the Value Commerce where product quality, pricing and support were the method to attract customers, and we demanded better engagement and experiences which gave us the Experience Economy.
By 2020 we will be demanding more trust, and transparency and here are three reasons why.
1. Imbalances in humanity rarely last forever
Fraud, mistrust and low transparency has rarely lasted forever in our species. From colonialism to Hitler, when we are taken advantage of, we eventually revolt at a tipping point. Today we know little about the value we pay for products and services, and we know even less about where the value we create as employees go. Almost 1/3 of all online reviews are fake, most products that cost a premium are manufactured with the same methods and materials as the low-cost alternative, well known service providers often sub-contract their customers to less known service providers, and the amount of fraud financial accounting makes Enron look like rounding error.
2. Every new generation of customers demand something new
Generationally, we are the last generation of humans that will be comfortable being in a state of “I don’t know”. Our younger generation grew up knowing most things about most things (notice I did not say everything about everything), where each other are, the exact state of packages being shipped, and the activities of each other. As they enter commerce they are stunned by the lack of transparency. Our children not only want a good product and experience, they want to know where the product came from, was child labor used to manufacture it, are the ingredients safe for the environment, and is the price fair and balanced when considering the cost of goods needed to manufacture the product.
3. Large technological paradigms trigger commercial revolutions
Technology is creating the tipping point. Bitcoin and other cryptocurrencies are popularizing blockchains; distributed immutable ledgers to store and share data providing the evidence that there is a better way. Prior to blockchains an argument could be made that it is too expensive and cumbersome to build trusted and transparent businesses, however as the blockchain technology becomes a low-cost and high-performance commodity, the excuses to operate untrusted and opaque will be less valid.
The question is, why should you care? And why would I risk making a prediction as far out as 2020, when the world is full of empty predictions?
With every new model of commerce, the probability that large incumbents will prevail changes.
In the Value Economy which I would loosely characterize as 1980 - 2000, it was easy for incumbents to survive the change in the model of commerce. Being large, allowed incumbents to use the strength of the P&L to optimize supply chains with bargaining power and make better products, at lower prices. Being a new entrant or startup to compete on price and quality was risky and consumers were willing to keep loving the incumbent brands as long as they can make better products cheaper. Incumbents were easily forgiven for low quality products at high prices. Consumer loyalty was still alive.
In the Experience Economy which I loosely characterize as 2000 – 2020, it is less easy for incumbents to survive. Driving better experiences and engagement do not just depend on the size of your organization and the strength of your P&L, it also depended on your agility to change core business processes to create better experiences and engagements. Here a new entrant or startup is less risky, and differentiation with experience and engagement is compelling enough for consumers to love incumbent brands less and switch their loyalty to new entrants and startups with better experience and engagement. Incumbents are not easily forgiven for bad experience and engagement, particularity if they take a long time to better the experience and engagement. Consumer loyalty is schizophrenic; any dying.
Incumbents are not automatically dead in the Experience Economy, many survive, and thrive. However, in the Trust Economy, many incumbents will be dead on the arrival of a new entrant.
In the Trust Economy, incumbents will find it difficult to transition to trusted and transparent companies. An incumbent’s size, strength of P&L, and agility to change will not be enough to become trusted and transparent. This will require metaphoric intestinal surgery in large incumbent companies, to change information access and availability workflows, economic models, and grow the stomach to be ultimately transparent about what a product or service is, where and by whom it was made, what are the cost of goods, quality of ingredients, and how much are the margins. New entrants will have a high degree opportunity to disrupt large incumbent companies with a Trusted Company model. Incumbents will not be easily forgiven for being untrusted and opaque to customers for decades. Consumer loyalty will be virtually dead.
Every company will be at risk of being immediately disrupted by a trusted version of themselves.
Imagine, you and I start Richie & Reader’s Cola. Our brand promise is simple, here is our Cola, it’s just like Coca Cola, except here is the evidence of our entire supply chain on a blockchain, with all the history of the product, the quality of ingredients, and here is our cost of goods and margins – yes, we make a profit you can see it in our P&L, and here is how we distribute that profit to our employees and shareholders. By the way, we know Coca Cola sells for 99 cents per can, our can of Cola $1.09, but our contract with you is you can depend on us to remain trusted and transparent.
It will be really hard for Coca Cola to change and compete, and even if they did the messaging would be “Hey guys, remember us, we bent you over a barrel for the last four decades with untrusted and opaque promises, forget all of that, we have found corporate conscience, we are now trusted and transparent.”
The next generation of consumers will not be that gullible. In the era of Trusted Commerce which I believe will begin around the year 2020, the probability that an incumbent will survive will be 50% the probability incumbents have today to survive the battlefield of Experience Commerce.