Episode three of Commerce Talk with SmartOSC was all about commerce in an era of disruption, and boy is there plenty of disruption to go about these days!
Host Adrian Wakeham, Regional Manager for Australia and New Zealand at SmartOSC, spoke to Jerry Smith, the COO of Ogilvy Group Asia and the CEO of Ogilvy Consulting Asia, to dive into how businesses in the commerce space can thrive in today's era of disruption.
Jerry has spent his career bridging left and right braining thinking and operations and has been at the forefront of some of the biggest changes in marketing in recent times.
A pioneer in internet marketing, he worked and consulted with many leading organizations and technology companies in the 90s who were building the internet. Jerry joined Ogilvy Asia Pacific in 2000 to help develop the OgilvyOne network and has since held a number of local and regional roles in strategy and operations.
You can also check out this Q&A from the episode (edited for clarity and brevity) for insights into surviving and thriving in the era of disruption.
Adrian: How can businesses tell the difference between a temporary disruption caused by the pandemic and something longer-term and permanent?
Jerry: I think disruption is here forever. We are seeing a new generation of consumers that want to do different things. We have new technologies emerging all the time, we have new ways of thinking, new ways of working and I think what's come out of the pandemic is really here to stay. I think some of the things in the behaviors that we see within organizations and the way consumers consume now will become the norm. The pandemic has become the catalyst for change.
Adrian: Is the technology driving these changes in consumer behavior? Or is it the other way around?
Jerry: It’s difficult to unpick them a little bit. But I believe consumers lead the transformation, they find the workaround, they find what suits them. And they enable themselves, whether it's tech enablement, whether that's an ecosystem of partners or things that they do, whether it's on or offline, they drive the transformation.
For many years, things moved slower and it was a bit easier for companies to keep up, but now, keeping up with consumers is really, really tough. Technology is a great enabler for organizations because it provides the speed, and it provides the data and those clock speeds that allow you to get there faster than you would have been able to in the past.
Businesses now need to move away from the “build it and they will come” thinking which has been around for a long time. Now it's much more about seeing what consumers are doing and reacting faster, making sure that you have the systems in place to be able to listen to that and then react fast in an agile manner.
That's what we are referring to I think as a future-ready state and a future-ready state that's truly customer-centric. That’s defined as an organization that can deliver great or superior customer experiences, that think in a modular, agile way use the data that they're able to extract strategically, have an ecosystem of partners who can provide incremental value, and operate efficiently and effectively at the same time.
Adrian: Do you have any observations about how sustainability is disrupting how digital business is being done?
Jerry: Sustainability is very relevant to what's going on in the world. We need to do things differently. We’re on a timeline that means we need to react in a way that will be good for probably the most important stakeholder of all, which is the planet itself.
Sustainability needs to become as pervasive as digital is now. Anybody that's been in this digital transformation space for the last 20 or 30 years, we were always waiting for the world to become digital. Well, it's sort of got there eventually. We don't have that long with sustainability. We really need to change the paradigm and really, really start to think of all the stakeholders in sustainability in how we do things, how we work, how we deliver things, how we sell things, and companies and businesses that aren't able to do this will not be able to compete. Companies without purpose will not succeed in the future.
We're already seeing mechanisms come in that look at how we move from a shareholder value to a stakeholder value. Those stakeholders are beyond just the financial KPIs into things that are creating a better world for the next generation.
Sustainability is one of the elements that intertwines with all of these other disruptors. Without this, we will not fulfill the purpose of the next generation who are pushing this very fast, who are tech-savvy, who will be the next generation of consumers, and will be the next generation in the workplace. And they want different things. They want to work differently. They want to buy differently, and they want to create differently. That is what organizations need to wake up to now.
Adrian: We also want to touch on value extraction. How do you personally describe creating value versus extracting it?
Jerry: Value is created through services, products, channels, experiences, and really, it's the brand. It's extracted from operations, from the efficiencies that are put in place, it's extracted from your customers, or from finding more customers, and eventually ecosystems.
The companies that are future-ready are those that will be able to extract significantly more. I’ve been doing some work with MIT and their research around digital transformation about what we should expect from a company that can get to future-ready. You'll see 26% or more revenue growth from those companies, and probably as much as 20% more profit growth than the average company.
That's because they're able to work more agile and become ecosystem drivers, where they're really extracting more than just efficiencies. They're really giving their consumers the ability to orchestrate the value that they want within an ecosystem. That's why those customers will stay with those brands.
That's really where we really need to see companies move to because, at the moment, I think they're still stuck in drawing the efficiencies out. It's easier to make efficiency gains but you hit a point of diminishing returns eventually.
Adrian: Are there any examples of business models that are great at creating value but very poor at extracting it?
Jerry: The main issue within organizations themselves is that most businesses are siloed and lack cross-functional collaboration. They're not really aligned to the same transformational goals within their own organizations, they have different KPIs, and are often on different timelines. So different parts of the organization move at different speeds and with different goals. That does not move the organization efficiently or effectively towards future-ready. Most are still heavily skewed to designing and selling products through traditional channels and they're not able to adapt to the speed of change that we see at the moment.
Where they're not extracting value is where they're still pushing hard with this “build it and they will come” attitude and taking the easier option of looking at efficiencies rather than actually creating great customer experiences.
Now, the other problem, of course, is if you create a great customer experience, that's quite expensive to do. And if you're not efficient, then that's not helpful either, because you're just burning money.
The advances in technology and the changes brought about since the pandemic have seen a rise in DTC. That is a model that's quite interesting because it gives you the ability to react to changing consumer expectations. Because you have the data, you have a direct relationship with your customers, and you can offer often unique brand experiences if you're future-ready.
Perhaps more importantly, though, DTC provides ownership of that valuable data, and allows you to innovate and personalize an offer based on data-driven strategies around what your consumers really want to do. Most brands still fail to do that well; they are not putting the data to use as well as they could be.
A good example that I like is the KitKat Chocolatory. I think that's really innovative, it creates a really unique experience, it's very personal, you're creating a new product, in real-time, the ability to create on and offline, it could be a gifting experience, it could just be for yourself. There's a bit of craftsmanship in there, there's playfulness in there.
For what is an FMCG product at the end of the day, this is quite a revolutionary concept. It’s a creative delight, insanely high street, you can see it online, you can be involved and send it to friends. It’s very social, and in the whole aspect of it, a really big leap forward for a brand in its ability to bring that to market.
The KitKat Chocolatory is a great example of innovation.
Adrian: I do love that example. What do you see as being the optimum customer-centric state to reach?
Jerry: It's when a company can provide a consumer what they want in the moment. I describe that as when somebody wants to do something. So when they want to go somewhere, when they want to see something when they want to find something, when they want to know something.
That is quite hard to do. You have to pull all the aspects, you have to make sure you've got the technology, even read the data in real-time, you can respond to it in or near real-time, and the consumer has to feel they're getting that interaction.
For me, it’s a simple definition. It's when a company can provide what a consumer wants at the moment when they want to do something.
Adrian: There’s this frontier between brands going direct and others going through their traditional reseller channels. Is that where the battle will be won and lost in terms of who you can be most responsive?
Jerry: It goes back to the ecosystems. All channels have their place. If we are going to be truly customer-centric, we don't want to be all shouting at the consumer when they want to do something. Much of this will be pulled by the consumer, the key to it is having the options available to the consumer when they want to do something and connecting it all so that there is an exchange of value between those parts of the ecosystem.
The marketplaces are important as is your own media and the way your consumers will call other brands into the arena because they value them and they will orchestrate. If they haven't got the solution they want in the moment, they will pull brands in.
We work with telcos who have all the information on what people are doing on their phones. At any moment in time, people are actually drawing utility from four or five apps that are giving them all the things that they want to do in that moment, the answers whether it's searching for something, comparing something, knowing where they're going next, all that stuff. If you're in the gym, you’ve got your video running, you've got your calorie counter. These are things that the consumer has already learned to pull together. The key is to be there and to have something that is of value to the consumer.
Adrian: Data is very much a strategic asset for anyone in the commerce space. Should leaders be investing in hiring more dedicated data analysts? Is it no longer enough just to have marketing types who dip their toes in the data water?
Jerry: The issue that I see in most organizations is that it's mainly seen as a bit of a left-brain exercise, and therefore, what's lacking is the ability to translate that information to something really creative, or innovative, or what the consumer actually wants.
We need to use the data to infuse right-brain thinking, innovate, and create service design. What organizations lack is not the amount of data. It's what they do with the data. It's not purely for reporting and it's not just about insights, it's what you do with data to create that brings real differentiation.
It doesn't need to be tricky and it doesn't need to be complex. It's just having people that can take off the white coat and apply data to a paintbrush.
That's what’s lacking with a lot of the content that's created from the data. Many organizations feel they're doing a good job because they've reached the device. But actually, when you look at the quality of the touch, it's very poor.
There's an opportunity for this renaissance in thinking, in creativity. The technology is there, but unfortunately, I see it being unleashed around efficiency gains, speed gains. A lot of it's not been used yet to really infuse great creativity.
Adrian: Is this happening because at an executive level, for someone is reporting to a board or to shareholders, it’s not as easy to make it clear that great customer experience is a path to greater profitability?
Jerry: A lot of it goes back to how organizations were originally set up and how those departments or functions work within an organization. If we can learn anything from the 30-year transformation to be truly digital, it would be that most of those sat in little pockets in the organization 30 years ago, became a little bit noisier, 20 years ago, started to be a little bit more infused. Then 15 years ago, the social revolution really changed us in the last 10 to 15 years.
We've seen critical mass and now the clock speeds of data and technology provide an organization with the view that if you do something, there is an outcome that can drop to the bottom line. The issue I feel is that it doesn't go far enough yet.
We're still stuck within that efficiency thing. Remember, value is extracted from your customers. We don't do enough from them yet, we’re not creating a really truly customer-centric view yet. We haven't got to ecosystems yet where a lot of value will be driven because the consumers are already in the ecosystem. We just haven't connected it from a brand or from an organizational standpoint.
The key DNA to this is you've got to create great customer experiences, but efficiently, otherwise, you’ll go out of business. At the same time, you've got to bring three main things together around that customer.
And they are: how do you do your marketing differently?
How do you reorganize yourselves? So the organizational transformation, the empowerment, the structural changes that need to happen.
And then how do you put in the technology to be able to do that?
Those three transformations are absolutely entwined and they happen at different moments. Like a cube, they happen at different velocities at different stages.
The key to that is to get a good roadmap that says, “These are the things you do first”, and then you extract some value out of it. And then you reinvest that into one of the other areas or into the same area or whatever. But you’ve got to keep those three things moving. They don't always move at the same time and they're not delivered by the same people.
So that's the key to it, you've got to have a roadmap, you've got to bring the organization together, and you've got to change the way you reach your consumer. No “build it and they will come”, it needs to be much more around trying to get to a place where the consumers are working with you to orchestrate solutions.