Important opinion piece in Knowledge@Wharton, which reaffirms our view that most traditional organisations still do not “get” the digital transformation which is under way – as discussed in our “Quiet Revolution” report.
For many of us, Google, Apple, Facebook and Amazon (the GAFA four), feel as essential as the air we breathe. It’s hard to imagine our lives — working, socializing, shopping and entertaining — without them.
They are outstanding in the intimacy that they create with their customers. They make a strong effort to understand the unique characteristics and preferences of each customer and use the insights that they gain to serve the customer better. Further, they see each customer as a complete personality with needs around different facets such as work, play, socializing and self. They serve these needs wholly — and this, in turn, encourages more sharing and openness from their customers.
In short, these four companies are building a long-term, holistic and generous relationship with their customers. It’s almost as if they love us — not like our parents or spouses, of course, but by way of “unselfish, loyal and benevolent concern for the good of another.” And the result? In 2014, Google’s revenue was up 19% year over year, Amazon’s sales were up 20% year over year, Facebook’s revenue was up 58% year over year and Apple’s revenue was up 7%, ending the year with their best-ever quarter.
Traditional brands are trying to join the game and gain that essential-as-air quality. But they find it difficult to move beyond a transactional relationship. Usually, we only see and hear from them when they want something from us. These companies are very focused on whether or not customers are loyal to them, but they rarely consider how loyal they are to their customers. Their actions often seem self-serving; soliciting Facebook “likes” to promote themselves. This short-sighted approach stems from a common view that customers don’t have much to offer beyond what’s in their wallets.
Most established firms remain hesitant when it comes to this type of customer equality and mutuality. Our research on the business models of the S&P 500 Index companies (based on data from 1972 to 2013) indicates that at present more than 80% of companies employ older business models where customers are valued only for their dollars and not for their assets, insights and contributions. If your organization can break ranks and adopt this new way of thinking and acting, you will see that the more you share with your customers and the more you understand them, the more they will love you.