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Creating Sustainable Competitive Advantage through Digital Experience Design
Creating Sustainable Competitive Advantage through Digital Experience Design
To what extent is the value we are delivering through digital helping us to differentiate our business?
There is nothing more satisfying to a UX designer, a head of digital strategy or an innovation lead than identifying a problem, conceiving of a solution and shipping that solution into the world to effect change and realize business growth. Taking a step back to consider these individual contributions in the context of the entire business and brand brings about the realization that every action builds upon experience. Over the last ten years we (agencies and academics alike) have been very busy chopping and dicing experience. We give it different names and flavors, build brand equity models to interpret and measure the effects of experience on business value and assign specific practices to ‘experience’ that work at the level of improving user interfaces to making customers feel warm and fuzzy when they enter a store. The dialogue around experience is all for the greater good assuming the work gets done, even if a little self-indulgent at times.
One of the paradoxes of experience is that despite our attempts to manage, enhance, and (re)define our businesses through it, we cannot control it in its totality. This is simply because experience is contingent on its subjects: us living, breathing, experiencing humans. Businesses arrange for the possibility of experience to take place (or ‘unfold’ with us for fans of Heidegger), and the subject co-creates the outcome. Human-centric design already acknowledges this and should account for the moods, feelings and predispositions a consumer brings to the table.
Every business touchpoint (and its respective features) comprises a part of the totality of an experience of a brand. Taken collectively, brand experience embodies the vision, truths and character of a business.: digital initiatives (or lack thereof) have far-reaching implications on a business’ overall competitiveness and differentiation. Numerous studies have been published that support our intuitive understanding that innovative brands command a higher premium: that digital initiatives done right create a sort of halo effect on the overall business (Wrigley, Straker 2016).
At the lofty scale of the totality of a business we have to shift focus a little and ask questions that enter less regularly into the vernacular of the teams driving change on the frontline:
- To what extent is the value we are delivering through digital helping us to differentiate our business?
- Is the output something our business can really own? What are we doing to make it truly defendable?
- Are we building things that bring the business’ vision to life, or are we simply caught up in a cycle of identifying and fixing problems in the user journey?
- Are we building for the existing business or bridging to a future state?
Digital experience is not to be conceived as something that coexists alongside brand experience in the same way brand experience is inseparable from competitive strategy and business planning. This is a false division. Many of the difficulties brands face now are far more complex than they once were and can only be comprehended with a perspective that scales from the organization to the ground. Remember the days when digital mastery was having a website, a CRM and a social presence? The challenge for auto is relevance – turning the car into a mobility ecosystem. The challenge for luxury is giving customers a reason to build and sustain a relationship with the brand, and not a marketplace or illegitimate intermediary. The challenge for B2B brands is to treat customers like humans and consider that the set of behaviors that go into a B2B purchase journey are fundamentally the same, just complicated by additional layers of complexity which need to be teased away or ameliorated.
Digital has a legacy of being sidelined or viewed as a step towards achieving a greater level of operational efficiency. But digital is fundamental to brand, manifesting at different levels of abstraction. Launching piecemeal digital projects can be a good way to kickstart a broader transformation. It can also put you in a cycle of futility – building out touchpoints and initiatives that don’t connect, like so many small islands that could collectively support the emergence of a rich culture.
Digital for Competitive Advantage:
A Reductionist View + Digital for Cost Leadership
At the extremes of digital strategy we get two broad directions: the reduction of costs, and the increase of revenues. These map to classic competitive theory which suggests three generic business strategies: scale-driven cost leadership, differentiation and focus. Michael Porter conceived of these generic strategies over the course of the 70s and 80s which coincides with both the proliferation of enterprise computing and advancement of business process rationalization (with a focus on supply chains). There was little obvious use for digital on the front-end and personal computing was in its infancy.
During this period, branding theory shifted from being an esoteric branch of academia we call semiotics into a system or toolbox that brands could use to purposefully articulate meaning through symbols, words and visual systems. The 90’s saw branding become an essential part of the mainstream business lexicon, bringing about a rich body of theory including contributions from notable authors Aaker and Keller who helped to define the fundamentals of brand strategy (as distinct from advertising) and models for brand equity measurement. Such models helped to legitimized branding as a rational practice (or we daresay, a science).
With the advent of branding business leaders saw there was more to strategy than cutting costs, yet digital remained under the purview of the first generation of IT practitioners – something that lived back-of-house and had limited scope to power brand experience. As of 2019 there are few doubts as to the potential for digital experiences to enable enduring brand differentiation. There are no digital leaders that do not also have distinctive, aspirational brands; across fashion (Burberry), Cosmetics (Sephora), platform-based marketplaces (Alibaba), auto (Nio), B2B industries including construction (Cemex, Caterpillar) and many others.
Scale-driven cost leadership involves innovating best practices that increase the maximum value a business can realize at a given cost. Strategic business consulting was more or less founded (or at least bankrolled) by projects that focused on getting businesses to a gold-standard of efficiency in their give markets. The theoretical model of choice was the productivity frontier – a model that simply illustrated the frontier of operational excellence in a given market. Being a leader in a market meant operating from the edge of this frontier while continuously pushing the envelope.
It might surprise readers to know that the world’s first ‘business computer’ was innovated by a British tea company. J.Lyons & Co. is an example of a business that lived and breathed continuous delivery, self-disrupting to improve internal operations. In the early 1930’s the business had already applied novel technologies of the time to reduce clerical work. A streamlined invoicing system called “Recordak” improved the reliability of business records and reduced paperwork by capturing orders on microfilm. In a sense J.Lyons did analogue transformation better than many businesses attempting digital transformation in the 21st century.
Investment into building a business computer was approved by the board in 1949 and the result was the Leo I computer, a machine that automated basic computational tasks. For example, manual payroll calculations were reduced from 8 minutes to 1.5 seconds which is an efficiency gain of some 32,000%. This and subsequent investments in early enterprise computing put Lyons well ahead of its competitors in terms or operational excellence. But as a business case the story doesn’t end so well for Lyons, which diversified wildly and was eventually bought out at the height of its debt burden. Analysts claim it was a good case of operational strategy existing in isolation of a more general business strategy and vision of the future.
The savings made through the effective implementation of digital best practices provide a buffer against demand or supply-side pressures that impact bottom line. But what these tools don’t provide – at least not by default – is meaningful differentiation in a competitive market. With the exception of businesses that invest heavily in fundamental research to create new markets, any business can buy a tool or copy a best practice. We’re all chasing silver bullets.
Having said this, another interesting point we can draw from Lyons’ history relates to brand experience. As it turns out, Lyons operated a chain of cafes (called Cornerhouses). In 1924 (before the super tea computer) a decision was made to modernize the look of the waitresses. A staff competition was held to name the waitresses (they settled on Nippy, plural Nippies) and their outfits were modernized (safe for work). Soon after they became a household name and drew in a loyal customer base consisting of many a man: indeed some 800-900 marriages took place per year by 1939.
Innovation in brand experience took place more or less in line with innovations to the business’ operations. But the two did not inform one-another. Lyons’ fall from grace was attributed to two things: massive, unwieldy capex expenditures in tech, and the dilution of its brand through knee-jerk investments into other verticals including ice cream (Lyons Maid), Dunkin' Donuts and hotels. There is a good book on the history of J. Lyons & Co by Peter Bird entitled The First Food Empire. Lyons was inevitably broken down and parceled off to such companies as Nestle which bought its ice cream business and RHM which bought Lyons cakes.
Digital as a Channel
Some 40 years of accumulated advertising expertise proved that our brains were vulnerable vessels that could be manipulated at will by the far reaching tentacular forces of corporations within media, cityscapes and children’s playsets. With the emergence of branding as a distinct practice, businesses found themselves with a rich toolset for crafting strategies that focused on building differentiation. The open Internet offered an exciting new canvas (or information superhighway to use the buzz of the day) for brand expression and businesses began to invest in web-based experiences.
At this point digital strategy on the front-end was more or less a question of ‘do you have a website and is it discoverable?’ Traditional marketing techniques such as direct mail were digitized with email services and search became an essential discipline for the marketing team. Social was the next big digital opportunity space. An Adage feature published in 2006 covering social network MySpace acknowledged that social platforms served as permanent touchpoints that link to a brand. A year later Facebook introduced Facebook pages, the official presence of brands (much like WeChat public accounts). Personal computing and Internet diffusion opened new channels to reach consumers, and digital strategy was more or less concerned with adopting these channels to ensure marketing content got out at the right place at the right time.
In this sense ‘doing digital’ was equivalent to an extension of the communications strategy, and digital experience was more or less what you published. This same pattern applies to China however local equivalents to Western social platforms emerged a little later, with 人人(Renren) formerly 校内 (Xiaonei) launching a WAP mobile version of the original site in 2008 (an evolution of old school desktop BBS forums) and Weibo launching in 2009 (for reference Twitter launched in 2006). You could also argue that desktop websites never reached the same level of importance to brands as in Western markets as there was very little Internet penetration and by the time people started to get connected in meaningful numbers ecommerce was a mature enough concept to sideline showcase websites and omnibrand ecommerce sites were still pretty expensive and complicated to develop vs. just sticking your wares on Taobao. There is a very interesting case on Decathlon’s path to growth in China – the ecommerce team used a two-pronged strategy that drew on Taobao and .cn sites but of course they faced great difficulty driving traffic to the .cn (a problem brands still face now, though exacerbated by the scale of competing marketplaces).
The monetization of the Internet through online payments and ecommerce changed the game in this respect as it shifted the focus from communications to doing business. Prior to this, digital strategy rarely made it into boardroom discussions. It was viewed as a concern of the IT team, or an extension of the business’ marketing functions. Businesses hired digital savvy talent to run their digital channels and invested in enterprise infra upgrades, but few really questioned how digital could be used as a strategic lever to build differentiation. As of 2019 we are still struggling with this question, and this struggle is symptomatic of treating digital as the bastard child of IT.
Digital for Differentiation
Digital is fundamental to experience as experience is fundamental to brand. Your encounter with a brand, the exchange of value that takes place and the way your relationship with it is enacted, is mediated by digital channels which are to a greater or lesser extent designed to express the brand. Businesses that fail to define strong digital strategies risk being undermined whether they pursue cost leadership or differentiating competitive strategies.
Given this point, we can unpack digital experience into three levels:
1. User Experience - how the features, content and affordances of a (digital) touchpoint work to deliver value in a moment of need. This value can be the answer to a question, a successful transaction, and anything in-between - it also extends to offline environments as per the Lyons’ case. You can debate that UX is all-encompassing but when talking about UX with clients we are often addressing touchpoint usability and performance. We have Google Analytics data suggesting a drop-off point, and plan to optimize a very specific feature that plays a small but important part in the overall journey.
2. Customer Experience (Journey) - how different brand touchpoints interoperate to drive users along a given experience path. This includes the emotions the brand projects at each key step and the mechanisms that serve to onboard and convert users along a funnel.
- The click & collect process, from discovering the service is available to making the purchase and then collecting the item
- Taking a user through a rich car configuration experience and driving the completion of online down-payments
- Ensuring a customer enquiry that was fulfilled by your bot is visible to sales reps in an offline context to enhance the interaction
Click & collect is a staple of any omnichannel retail strategy. A luxury brand can invest in new online inventory management capabilities to allow for pickup and mixed cart configurations that split between home delivery and store pickup (handbag straight home, better try the shoes first), and that will make you competitive as a retailer at the level of operational efficiency and ‘seamless’ experience. But when the customer gets to the store, what happens? Ignoring last-mile mobility challenges (parking, getting to the store etc.) are click and collect customers recognized by staff? Which area of the store are they taken to? What is the atmosphere like? Is there a waiting time? What does the customer do while they wait? How do they display proof of purchase? Are the goods pre-packaged or out on display ready to try on?
Addressing these points involves looking at the broader purchase journey:
- The customer discovers the availability of the service because it is effectively communicated on the website and within the checkout flow
- The stores are rearticulated to allow for dedicated pick-up points that are comfortable and experiential (not a dark back-of-house corner with the ayi’s mop leaning on the wall).
- Staff are briefed on how to meet, greet and deal with customers picking up their goods.
- The purchased goods are placed in a changing room so the customer can have a hands-on moment before departing the store.
A tech vendor sells a solution – a smart mirror, a Saas omnichannel suite with centralized ERP, POS and RFID integration, a chatbot. Let’s say you invest in SAP C/4HANA (which I can’t even pronounce) – SAP isn’t going to tell you how to build storytelling into product discovery or to make sure your click & collect area doesn’t look like a venue for a cage fight. The essence of differentiation is brand + technology, not the tool itself.
3. Brand experience - the logic and guidelines that are applied to articulate highly differentiated experiences across the totality of the journey come from a mix of pre-existing assets (your brand book and design system) and the collective knowledge and experience of your teams. All that is needed is an additional step to purposefully decode the brand and apply it to your digital touchpoints.
But also the logic and guidelines that are applied to articulate highly differentiated experiences across the totality of the journey come from a mix of pre-existing assets (your brand book and design system) and the collective knowledge and experience of your teams. All that is needed is an additional step to purposefully decode the brand and apply it to your digital touchpoints.
Infusing Brand in your Digital Experience
Naturally, niche service providers have emerged to fill this new space, some even leaning on ‘big data’ to help clients define the flavor of brand emotion they want to bring into a certain part of the experience journey. But you don’t need ‘a big data’ to get the process started internally. Begin by asking some high-level questions:
- What is the essence of a digital experience for our brand? How do we distill the brand DNA into our toolsets and channels?
- What are the emotions we want people to feel across the entire journey and at what level of intensity?
- Where are the flashpoints, peaks of anticipation and emotional burnout occurring?
- Which assets can we draw on – the things we already have within the heritage of the brand that can be embedded into our touchpoints?
Answering these questions requires 2 steps:
1. Understand the "essence" of the brand and how it applies to digital experience – this is MADJOR focus
A mix of research approaches will establish if there is a gap between your own team’s interpretation of the brand (our brand should make people feel a sense of high prestige, technological savviness and control) and customers’ own interpretations (when I drive my car I feel excited, fun and free). The role of the Digital strategist encompass the ability to translate the essence of the brand into Digital experience principles that will be the cornerstone for the creative orchestration of the experience.
2. Get immersed in the environment and look for emergent cues as to what people are feeling and experiencing - UX testing and shopper research are key here.
Running focus groups with consumers can be considered in some cases, but emotions are hard to characterize and define (especially in retrospect).
Emotions are fleeting and hard to capture unless you take a more ethnographic approach and run through the steps yourself. There are a lot of things to be aware of – how does the broader environment influence expectations, set the tone for the experience and influence the customer’s frame of mind? You can go to a self-checkout kiosk and watch as customers flounder haplessly the moment something goes wrong. But let’s say you are an Italian luxury brand that goes the extra mile to build experience in stores to maximize dwell time. You want people to lounge, have an espresso, take time to imagine and explore. Recreating the same experience in an ecommerce marketplace is hard because that app is launched under the conditions of a very specific mindset and context: I have a spare minute, I’m going to flick through a campaign page and see if something interesting pops up. It’s a roulette, not a boutique. At the CX level you need to be critical and have a clear idea of what the marketplace store’s purpose is. Don’t try to turn a volume sales-driver into an Italian boutique. The middle layer of CX is the rational that sits between UX decisions and brand, it is the journey with the brand.
Digital brand experience is a critical lever to achieving sustainable, enduring competitive advantage. It complements operational excellence. It is the essence of differentiation. At its best it draws on the ingenuity of the entire organization, the full range of its digital capacities and where available, the cache of tangible assets that make up its heritage. It’s very difficult to copy! Your competitor can buy the same tool, but they can’t buy the interwoven activities and business processes that give colour to its application.
Digital brand experience requires reflection, conversations, purposeful planning – it doesn’t ‘emerge’ once your new CRM is launched. It doesn’t need to be expensive, and it’s never too early or late to start thinking about how you can enhance your brand across the end-to-end customer journey. You don’t need to be a Lyons’ with a super computer, you don’t need a SAP Hybris. Bring the team together and reflect on what you already have in place within your organization.