‘Businesses under attack not by competitors, but from customers’

It will be a 'year of action', according to Forrester analysts as they weigh in on the trends to prepare for in 2017.

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Organisations need to take a hard look at their structure, talent, culture, processes, technology, and business metrics to understand how deep the changes need to be to compete and win in the age of the customer.

Businesses today are under attack, but it’s not by their competitors. They are under attack from their customers.

Three years ago, Forrester identified a major shift in the market, ushering in the age of the customer. Power has shifted away from companies and towards digitally savvy, technology-empowered customers who now decide winners and losers.

Success in the age of the customer requires a fundamental reset of day-to-day operations — it requires a new operating model that aligns to a customer-obsessed approach.

Customer obsession requires harnessing every employee, every customer data point, and every policy in the organisation.

Eventually, companies will have to assess and address six key operational levers — technology, structure, culture, talent, metrics, and processes — derived from the four principles of customer obsession: customer-led, insights-driven, fast, and connected.

Done well, customer obsession promises to help your organisation win, serve, and retain customers with exceptional and differentiated customer experiences.

To help organisations navigate their progress in their customer-obsessed journeys, Forrester has predicted the following key trends for 2017:

Prediction: 80 per cent of 'digital transformations' will seriously miss the mark

Companies in Asia Pacific understand this new environment and have started leveraging digital technologies to better engage and serve their empowered customers. Sixty-five per cent of business and technology decision makers we recently surveyed in Asia Pacific say they are currently undergoing a digital transformation. However, most of the investments remain tactical in scope and cosmetic in nature: 85 per cent of respondents expect to spend less than Singapore $15 million on their transformation!

Being customer obsessed requires much more than a refreshed user experience on a mobile app. It requires an operational reboot. In 2017, we expect companies will move from tactical, short-term initiatives to broader and deeper functional transformation programs. However, very few of them will actually take the necessary steps to launch end-to-end, multi-year transformational programs that will drive meaningful business outcomes in terms of improved customer experience, business agility, and long term, sustainable competitive advantages.

In 2017, consumers will spend 90 per cent of their time on just five apps.

Customer-obsessed principle: From customer aware to customer led

Prediction: Leading digital businesses will build automated conversational interfaces

In 2017, leading digital businesses across Asia Pacific will build capabilities to support conversational interfaces. This happens as experience fragments will begin to take on monolithic apps to offer more convenient mobile experiences as ecosystems — like Apple iMessage, Facebook Messenger, and WeChat — offer convenient access to services increasingly through conversational interfaces.

Domino’s Pizza already offers a conversational interface for customers to quickly and easily order their favourite super supremes complete with seasoned wings by just texting a pizza emoji. Through Domino’s data engine, the company is able to expedite the pizza ordering process by letting customers order the same pizzas based on their past purchases.

While chatbots are already in existence, they aren’t ready to replace apps or humans. Chatbots should help organisations solve a business challenge or existing customer pain point or to bring new sources of value. Regardless of channel, there isn’t new, magical chatbot technology. Enterprises should consider how chatbots fit into their existing portfolio of experience—both new and existing. Failure to do so will lead to a failure in deploying the chatbots.

Prediction: Gamification will enrich enterprise digital experiences

The Pokémon GO phenomena washed across the globe like a tsunami and while the pace at which it subsided was almost as sudden as its inundation, the customer experience (CX) learnings that it has left behind are invaluable. In particular, the game’s success revealed key elements that any company can borrow to create their own powerfully engaging multi-sensory experiences.

The Engagement Alliance defines gamification as "the process of using game mechanics and game thinking in non-gaming contexts to engage users and to solve problems”.

At the enterprise level, gamification was a hit for a while in social media applications, but few brands have been able to link the relevancy to their external-facing CX and marketing applications. We see this changing in 2017.

Financial services firms, like Prudential, travel firms like TripAdvisor and automobile manufacturers like Tesla, are leading the way by gamifying very mundane tasks such as client onboarding or personal planning to create compelling and wildly engaging user experiences in the digital space. Naturally, gamified customer experiences stimulate parts of the brain businesses can't afford to ignore.

Forrester sees design thinking as a key principle to drive customer-centric transformation, and this will accelerate in 2017.

Prediction: E-commerce will accelerate the destruction of old world analogue retail

With the explosive growth of e-commerce in Asia Pacific, old world retail will struggle as growing numbers of customers increasingly buy through digital channels.

High profile store closings in North America from dominant retailers like Walmart and Macy’s foreshadow shifts that will start taking place in Asia Pacific in 2017. Already, high profile malls and shopping districts regionally are seeing their traffic and sales drop. In the future, physical spaces that are not strategically aligned with a company’s core brand ambitions and don’t otherwise compliment a digital offering are a liability.

In spite of the retail changes, physical store spaces will continue to play a vital role in the shopping experience when complementary to digital shopping experiences. Going forward, flawlessly integrated physical and digital experiences with seamless handoffs from one stage to the next will become the consumer’s default expectation. Although there will remain a lasting and important role for physical store space, its very nature will need to change and less of it will be needed from 2017 onward.

Customer-obsessed principle: From data rich to insights driven

Prediction: Only 20 per cent of organisations will have successful IoT and AI projects backed by Systems of Insight (SoI)

Internet of things (IoT) and artificial intelligence (AI) are hot topics in the market these days.

In 2016, we have witnessed many proof of concepts and pilots across vertical sectors and company sizes, but very few successful projects.

In 2017, we expect less than 20 per cent of companies in Asia will be able to move from the proof of concept stage to the production stage. Why? Most of them lack the required data and analytics processes and skills.

A strong data infrastructure and data analytics capabilities are indeed required to allow companies to move from the massive amount of data created by IoT systems to producing relevant insights and move these insights into relevant actions. As for AI, companies will need access to clean, properly structured data - which will also require investments in what Forrester calls systems of insights: the business discipline and technology to harness insights and consistently turn data into action.

Asia Pacific firms will have to assign executive responsibilities and large corporate budgets to make data and insights a coordinated and strategic enterprise initiative before they can reap the benefits of emerging technologies like IoT and AI.

Companies across industries and regions are feeling the consequences of a customer-centric market that moves fast. For some, it represents an existential threat to their very survival; for most, it represents immediate and possibly prolonged revenue risk.

Predictions: Companies will operationalise and measure emotion to drive loyalty

Despite emotion being the biggest driver in determining how customers perceive their interactions with a brand, our interviews showed that the more progressive businesses are now starting to embrace emotions in their CX measurement programs. Forrester data clearly shows that emotion has the biggest impact on loyalty - more than effectiveness or ease. Meanwhile, negative or neutral emotions erode loyalty.

Most CX professionals are only starting to delve into how familiar tools like surveys and text analysis can be used to help measure emotions. Fewer still have explored the quickly evolving landscape of advanced emotion measurement tools — like facial coding or neurophysiological measurement — and how to apply them to CX measurement.

However, in 2017, we will see companies, like Starwood or United Airlines, revisit their customer journey maps to identify, design, and measure specific emotions they intend to evoke. They will also prioritise the prevention of negative or neutral emotions. While measuring emotions is hard, organisations that develop a measurement program that accurately appraises the emotional interactions along their existing customer journeys will see CX-fueled business success.

Customer-obsessed principle: From perfect to fast

Prediction: Cloud and automation will start to dissolve the back office

We have seen a lot of interest in technologies like Robotic Process Automation (RPA) in the past 12 months. The maturity of the solutions and the related ROI figures make this technology compelling for a number of organisations both at the technology and operational management level.

After successful pilots in 2016, we expect firms in Asia Pacific to start looking more systematically at their business processes and assess how technologies like cloud and automation can bring more agility into their operations. As these companies move beyond tactical digital initiatives, they will start the hard work of transforming their operating model to further enhance their digital products, services, and customer engagement. Manual processes will be replaced by straight-through processes enabling firms to respond faster to rapidly changing customer expectations.

Prediction: Mobile innovators will in-source more than outsource for agility

In 2017, organisations that are true mobile innovators will increasingly insource more than outsource for agility. Since the introduction of the Apple App Store in 2008, enterprises have struggled to mature their mobile efforts to match customer expectations. Many lack the organisation, budget, talent, metrics, culture, processes, and technology to keep pace. As a result, most firms outsourced their mobile projects to third parties in an attempt to keep up with nimble, disruptive startups. Things are different now. Mobile has become so mission-critical to the business that leading firms across Asia Pacific will get serious about evolving their sophistication through in-house capabilities.

Firms will hire more mobile headcount as mobile becomes essential to their business. For mobile innovators, digital teams will be more cross-functional consisting of tight alignment among product owners, developers, and back-end services team. Scarce talent such as product managers, developers, scrum masters, data analysts and design-thinking consultants will still require staff augmentation from service providers as firms wean themselves from full-project outsourcing. Firms will collect data and customer feedback on a more frequent basis to make iterations to their products and solutions.

Customer-obsessed principle: From siloed to connected

Prediction: Consumers will spend 90 per cent of their time on just five apps

In 2017, consumers will spend 90 per cent of their time on just five apps. Many organisations will not be able to ignore the power of borrowing mobile moments — going to the platforms that their customers already use — and organisations will begin to go to where their customers are.

These are early examples of borrowing mobile moments that are for a single use case — for payments. We expect leading companies across Asia Pacific to explore richer experiences as shown by the app integration of Fandango into iMessage where consumers are able to not only find out about latest showtimes, watch trailers, buy movie tickets but also share them with their friends on iMessage.

Prediction: Leading Asia Pacific companies will scale the design thinking mindset

Companies must transform themselves from "inside-out" to "outside-in" organisations that shape innovation around the demands and expectations of their users — it's the only way forward in the age of the customer. Forrester sees design thinking as a key principle to drive customer-centric transformation, and this will accelerate in 2017.

Design thinking is not a silver bullet that will solve all of the challenges of digital transformation initiatives. But applied in a systematic and disciplined way, these principles help change the mindset of technology and business leaders to place the customer at the center of the innovation agenda.

In 2016, 17 per cent of companies in Asia Pacific adopted methodologies like design thinking and customer journey mapping to reengineer how they operate. In 2017, we predict that this will double, with more companies becoming design-led.

Forrester advises that organisations take a hard look at their structure, talent, culture, processes, technology, and business metrics to understand how deep the changes need to be to compete and win in the age of the customer.

This is a market where increasing customer expectations and declining tolerance for even mediocre experiences force the hand of leaders, mainstream companies, and laggards alike.

This report was written for CIO New Zealand by Forrester analysts Dane Anderson, Frederic Giron, Ryan Hart and Zhi Ying Ng.