Ray Wang of Constellation Research: Companies Unable to Connect IoT to Customer Experience Will Lose


Last week’s conversation featuring Esteban Kolsky’s ExCom 2016 presentation on why customer service won’t exist in ten years sparked some very interesting conversations. Another presentation from the conference also captured people’s attention.  So below is an edited transcript from Constellation Research founder Ray Wang’s presentation on how Internet of Things (IoT) will shape the way customer’s engage with companies.   

As with Esteban’s presentation, to get the full impact click on the YouTube video below, or on the embedded SoundCloud player for the audio version.

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Small Business Trends: The Importance of IoT to Customer Experience?

Ray Wang: This is important to your business because the IoT is really about providing context clues that make things more relevant to you. And by doing that it allows you to improve your customer experience and build better digital business models.

And as we move to these digital business models it’s a winner takes all market. Think about the top three companies in every one of your industries, they’re controlling 40 to 70 percent of almost everything. It’s winner takes all and it’s moving very quickly. There is no in between.

The way to describe what’s happening in the marketplace is this is a post-sale, on-demand, attention economy. Post-sale being everything after the sale is more important. There’s a whole trail of revenue after that sale. There’s a whole different way of servicing those companies. And it’s On-Demand because I’m buying smaller and smaller slices of a product, a service, an insight and even that experience. And once you realize that then you start realizing that if you’re not capturing my attention or saving me time I’m not interested; I’m completely lost. I don’t care. And that’s kind of where we’re headed.

Small Business Trends: How does this impact CRM?

Ray Wang: We’ve got to move beyond where we are in CRM. Traditional CRM, it’s capturing things, it’s organizing stuff. It’s transactions — that is important. But the problem is we’ve built a lot of these things disconnected. And because they’re disconnected we treat things disconnected. The experiences are siloed. The information is all in different places and it’s even worse since we’ve been in the cloud. We’ve got different clouds all over the place. We’ve got to connect it with different pieces of data. We’ve got different types of experiences. We’ve got different types of channels. And so that’s creating a lot of this issue. Now when you look at where CRM was before, there were different places and buckets; sales, service, marketing.

But at the end of the day we actually think there’s only two metrics that matter — conversion rate optimization, and click through rates. Because the future actually ties around commerce. If the focus is on commerce then that brings life to our marketing program. If the focus is on commerce that brings life to what you do on service and support. If the focus is on commerce, now I actually understand what I’m trying to drive to in a sale. And so we actually think that we are moving to campaign-to-commerce. And when you understand that it’s campaign-to-commerce you start looking at metrics differently. You start thinking about your CRM programs in a way that is different because what we’re really trying to do is convert to happy customers.

And what we’re trying to do is simplify that as we get to this level personalization. And so this is why we say number this is about conversion rate optimization and click through rates. It doesn’t matter what system you’re in.

Small Business Trends: How does CX fit into this?

Ray Wang: We know customer experiences are the way that we make that transition. And so one of the important things is mass personalization is scale. Does that sound like an oxymoron? Mass personalization at scale. But what we’re trying to do here is get to certain things that allow us to do that.

Channel Ubiquity. I don’t care what channel I’m in but you do have to know what channel someone else is in if you’re trying to service a customer. When we think about settings and environments the reason we think about that is because in an IoT world we start realizing that I’m standing in a building, I’m in a retail environment. I’m in line at a store, I’m waiting to actually experience a ride. The settings and environments change things. If my setting is a day in the life of an office I actually look at things very differently. So you start realizing what happens if I wake up in the morning and I realize that all my systems, my house, my car, my calendar are all connected? Something strange happens. It might say ‘hey there’s traffic and we’re going to be 30 minutes late. Would you like to cancel your first meeting?’ That’s a very interesting question.

Then you get to the building. And the building sees who you are. It says OK you’ve been through this building five times so there’s no need for a pass. We’ll get you right on. You walk into the elevator. Your office is on the seventh floor, so the elevator asks if you would like to go to the seventh floor. By the way your boss is on the tenth floor. You can actually sneak in a 15 minute meeting. You want to get to the tenth instead? Or oh by the way there’s doughnuts on the fourth floor. What do you want to do you – take the doughnuts or go see your boss? So it’s stuff like that.

That’s a setting! Was that mobile? No. Was that a sensor? No. Was I looking at something in person? Did I flip a kiosk? No. We’re talking about settings and scenes and that becomes very important when you’re designing these kind of experiences.

Small Business Trends: What context clues are most important?

Ray Wang: There are four context clues that are most important. It’s your role and your identity. It’s the time. It’s the location and it’s weather. You get those four down you’re pretty much can do almost everything that you need to do.

Now this context — why do we want that? We wanted to be more relevant right. We want to get the data. But we want the data to give us context. We can actually get to insights and the more insights we have the more recommendations I can make over time. A great example of this is “choose your own adventure journey”. How many people remember Choose Your Own Adventure books. So on page 1 Go to page 50 come back to page 30. Go back to page 27. Whoops — the end.

Customers don’t want funnels. Customers don’t want on-boarding journeys. Customers don’t want to be force fit into a process – into a journey experience. In fact they want to choose their own adventure.  We know there are certain things that people are going to do but they never do in the order you want them to.

Small Business Trends: How does context guide IoT into creating self-directed journeys?

Ray Wang: There are different types of journeys out there. There are ad hoc things that just happen. There’s proscribe; we’re going to make you do it this way for compliance. There is guided journeys, and there is self-learning as people move around. Ultimately we’re going to get to the intention driven concept.

How do we get that information. How do we get to the context. That’s what makes it so exciting because what IoT is doing is allowing us to get different sensors and add to all the different types of signals we’re getting. So in today’s world mobile’s more than a device it’s about doing things in motion. Social is about changing the verbs that we connect to. Cloud is our ability to actually bring all of us together in one place; This is a compute power, this is the storage. Big data takes on information processes and gives us recommendations and IoT is a way to get the context right.

And so you take example like Uber. It’s mobile; you sit where you are. They see where you’re going. Wonderful. It’s social; You rate the driver. You ever wonder why you don’t get picked up? They rate you. It’s also big data. What happens when it rains with Uber, to your price? You get surge pricing.

And it’s IoT because it’s tracking the driver, the movements, the routes; it’s trying to figure out what are common routes at 4:00 p.m. what happens. And people are buying that data to understand traffic patterns. Pizza companies are trying to figure out ‘hey maybe we don’t need drivers we’ll just hop it onto the next Uber’. So we’re seeing these type of different business models actually merge and that’s what makes this interesting because business models are being created using these technologies to take you there.

Small Business Trends: Any final thoughts?

Ray Wang: IoT is the beginning of the next wave of these technologies which are actually helping us improve customer experience and helping them improve personalization. So we want to take IoT to create these brand new experiences; we want to take IoT to drive this personalization.

Now here’s the thing. When everyone talks about that we are talking about sensors is this thing that’s connected it’s measuring our great then they’re talking about platforms like hardware and software systems and connections.

But the value of IoT is not that the value is how do we sell and broker this different type of information. How do we access different types of information to create an offer to Judy who might want to get coffee right. That’s the kind of stuff that we’re starting to think about.

Here’s another great example, who’s been to Disney World? Have you seen the magic band? It’s pretty cool. It opens your room. It allows you to pay for things. It allows you to skip lines. It also tracks you inside the park. ‘Oh my God. All these people went to Tomorrow Land and we’ve got to staff that differently. Hey the bathrooms are completely packed in Fantasyland. We need more staffing’. And they’re tracking to see what’s going on within the park. It’s a pretty cool thing. It cost them a billion dollars to put this thing in there.

Right now the powerful thing about what they did here is they raised your ticket prices and you didn’t complain. You’re paying a lot. I mean think about why you do Disney. It’s fun. OK. It’s magical. It’s for the family. Wholesome. And so when you put that together right they’re basically trying to get to a better customer experience because you’re using that data. In fact what they’re actually doing is they charge you more money so they can track you like a gerbil so they can sell more crap to you and you love it. It’s beautiful. And that’s an example of how you take IoT and customer experience together.

Now they have all this data and they can broker that data in the insights. Now why is that important? Because what we’re doing with IoT is we’re transforming experiences not only reactively but proactively. And there are a bunch of insight-based business models that are here and these insight based business models change things.

Who uses Waze? So imagine you’re traveling. You’re in Florida you’re traveling around Orlando, you’re lost. And your car is connected to the Internet. And you know that you’re down to two gallons of gas. Would you pay a dollar to find the nearest gas station – to get that on an app? Track down the nearest gas stations.

They’re probably about 50 gas stations that are really excited to figure out who’s down to three gallons of gas right and they’re willing to pay $200-$300 a month to just track down drivers who are down to three gallons of gas and offer them a hot dog and a coke and fill up.

Insight Brokering is also important. People want to know how much water did you use, how much power did you consume. How many connections are you actually doing. How many leads do you generate. People want that information and they’re going to sell that and connect that to different people.

And the last piece, really, is insight networks where they take all this information to create different sets of business models and that happens today in ad networks if you see what happens.

This stuff is happening so fast. Digital Darwinism is unkind to those who wait. Companies who don’t see these business model shifts like taking IoT and bringing it back to customer experience aren’t going to be around. There is a study by Richard Foster, a professor of management at Yale. The average age of a company when S&P 500 started in 1958 was about 64 years. Today it’s about 15. It’s going to be 12 by 2020. That’s a 4-5x compression. These companies are going to go on our business.

You don’t want to be one of those. And this is why it’s so important.

This is part of the One-on-One Interview series with thought leaders. The transcript has been edited for publication. If it’s an audio or video interview, click on the embedded player above, or subscribe via iTunes or via Stitcher.


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