In business, we often ask how we can be more valuable to our customers. But, according to Michael Schrage, research fellow at the MIT Center for Digital Business, there’s another question that we don’t ask often enough: How can we make our customers more valuable to us.
At CDW’s Improving Productivity with Digital Transformation Summit in Colorado Springs this spring, Schrage brought up one of the most dramatic examples of technological disruption in history: the automobile. When Schrage asked the audience what Henry Ford was best known for, members shouted out familiar answers. “The assembly line! The Model T!”
But Schrage had a different answer.
“I believe Ford’s most important innovation was not the mass production of automobiles,” he said. “It was the mass production of driving.”
It wasn’t enough, Schrage explained, for Ford to simply pump out millions of cars; he also had to educate and persuade a buying public that was accustomed to purchasing and utilizing horses and buggy whips. Without millions of new drivers, after all, he would have no one to sell to.
There’s a lesson here, Schrage said, for today’s companies.
“New technology creates new opportunities to create new customers,” he said. “The real challenge companies are facing is, ‘How do you help your organization align the answers between what business are we really in, and who do we want our customers to become?’ That requires you to think about innovation as something beyond what makes our products or our services faster and better.”
Building on Success
The goal for businesses, Schrage said, should be to create “virtuous cycles” between companies and their customers. That is, organizations should use IT tools and data to create more valuable experiences for customers, while also seeking to change customer behavior to align with new business models — behavior that often results in new data, which helps to begin the cycle all over again.
Schrage noted examples of contemporary companies that, much like Henry Ford did more than 100 years ago, have created new customers to engage with their disruptive technologies, and then used the data produced by these customers to improve their products and their companies. Google, for instance, has “cultivated the human capital of its users,” to the point that Schrage told his audience they are all effectively Google employees.
“Everybody in this room works for Google, and they like it,” he said. “Google doesn’t just search; it creates searchers.”
Companies such as Uber, Facebook and Netflix have done similar things, Schrage pointed out. Less than two decades ago, customers simply didn’t exist for ride sharing, social media or streaming video. These companies not only offered new IT solutions, but did so in a way that felt intuitive to users and produced data that helped them make their products better.
The companies that have changed the world in recent decades mostly have one thing in common: They’ve not only brought new technologies into the world but also created a new type of customer.
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