Customer Centricity : The Personalized Economy

Shoshana Zuboff is the coauthor of The Support Economy: Why Corporations Are Failing Individuals and the Next Episode of Capitalism ( Viking 2003 ) and a professor at the Harvard Business School. E-mail her at zuboff_maxmin@thesupporteconomy.com.


This article was originally published on the CIO Magazine website on 1st April 2005 

A quarter-century ago, MIS directors complained of not having a seat at the strategy table. The CIO's role eventually emerged-a technology visionary and bridge to a gleaming future. Has that dream died? In recent meetings, I have been surprised by the old familiar refrains-the lack of strategic clout, the difficulty of sustaining board-level interest. At one elite gathering, there was a palpable sigh of relief when a CIO proclaimed, "It's our job to build the sewers."

I guess he's right. According to the latest figures, 75 percent of the typical IT budget is spent on legacy systems. Instead of redefining their industries, too many CIOs became prisoners of the status quo-buried in mandates for cost reduction and compliance. But while they were trapped in the sewers, all hell broke loose above ground. These same 25 years have seen a tectonic shift in the foundations of capitalism, a shift that has left our businesses badly out of sync with the people who depend on it for consumption and employment. Today's companies remain rooted in a business logic invented a century ago to mass-manufacture goods for a then-new population of people with very little stuff who wanted more. The 20th-century corporation required a strict inward focus in order to manage the new complexity of economies of scale. It emphasized the concentration of resources, command and control, cost and efficiency. This "managerial capitalism" produced epic wealth for many decades, because mass consumers wanted exactly what companies were skilled at giving them: cheap goods.

But yesterday's mass society has given way to a new society of individuals-people who are more educated, informed, experienced, traveled and connected than earlier generations. They are shaping a profound change in the nature of consumption: It's no longer about the quantity of stuff, but rather about the quality of life. A growing body of data suggests that the new consumer is in search of something that isn't even available yet: advocacy and assistance in the daily work of negotiating an ever more complex life. Toasters and mortgages are necessary, but no longer sufficient. For example, it's easy to find a competitively priced health insurance policy but difficult (impossible?) to find an insurance company that will really be there when you need it-no tricks, no strings. Patients can get access to a range of medical specialists, but there's no one to shepherd them through the system-find, sort, integrate and explain critical information-and advocate on their behalf. We can pick from among comparably priced and equally uncomfortable airline flights, but there's no one who will take responsibility for managing a complicated travel schedule, transportation and lodging, needs that arise on the trip and the requirements of your household while you are gone. Just to change my flight today-same airline, same day, two hours earlier and a plane that was nearly empty-I paid a penalty fee of $150. When consumers are routinely punished for their intricate lives, it's no wonder these fragmented transactions no longer yield significant margins.

A Perfect Storm

Today there is a growing chasm between consumers' needs and the business organizations they depend upon. Too often people must confront a wall of cluelessness and indifference-a commercial world still fitted out for the old mass order. This chasm can be seen each time someone spends the evening checking her phone bill for bogus charges, finds his routine insurance claim rejected or spends hours on the phone trying to fix a malfunctioning new computer. The chasm is expressed in these brutal facts. Only 4 percent of U.S. adults say they trust their HMO; 7 percent, their health insurer; 11 percent, their life insurer; 12 percent, their telco. And the numbers don't get much better. Seventy-four percent say corporate America's reputation is "not good" or "terrible," and 83 percent say that big companies have too much power, according to recent polls.

There's a centuries-old pattern here: A business model has hit its stride, and its success produces rigidity and resistance to change. But society continues to evolve. People move on, taking a potential marketplace of unfulfilled needs with them. In the mainstream economy, businesses can no longer extract high margins for their products and services. This leaves everyone to fight over a shrinking pie in a downward spiral of cost reduction and commoditization. These are precisely the conditions that have driven so many CIOs into the sewers.But there is good news too. Capitalism is a book of many chapters. In the past, these downward spirals set the stage for new competitors to emerge with business models that reconnect with people, releasing the economic value concealed in their unmet needs. The last time this occurred was a century ago. Then, a growing mass of people was hungry for goods, but products were in short supply and expensive, still produced in custom workshops and small factories. Henry Ford was among the first pioneers to perceive the yearnings of these new mass consumers, and he invented a whole new approach-mass production-to meet their needs. Ford's economic revolution, like others before it, arose from a perfect storm of three converging forces: new markets of unmet needs, technologies capable of meeting those needs and a new enterprise logic that linked people and technologies in a new pattern. Today, we find ourselves in the gathering winds of just such a storm. We have new markets of individuals whose very alienation and mistrust is the opportunity for vast innovation and immense wealth creation. We have the kinds of technologies that can meet these new needs-a digital medium that can handle the complexity of individualized support. This will become the ultimate purpose of the many exciting new technical developments: wireless mobile networks, on-demand computing, peer-to-peer and media convergence just to name a few. Don't assume that the race between telco, satellite and cable companies to wire the home is simply an opportunity to funnel more gadgets and entertainment into each living room. This will be the interactive medium through which individualized support bundles-including home health care, education, travel, financial services, product acquisition and much more-will be piped to each family and each person at a price they can afford.

Finally, we are just beginning to see the emergence of that third force, a new enterprise logic of "distributed capitalism" that knits technologies and people together in a wholly new pattern. It shifts the game from the adversarial transaction economics of mass production to a new advocacy-based relationship economics capable of reigniting long-term prosperity and growth. What are some of its hallmarks?

The Consumer Is Queen

Business is conducted from the inside out. Business processes are organized from the point of view of the individual consumer and aligned with the individual's interests. Forget about what niche you're in, or even what industry. The new enterprise asks, "Who will want us to support them, and what do they need?" Then figure out whom you need to collaborate with to make it happen. Wholly new "support networks" will cluster around individuals, families and virtual communities with the sole purpose of supporting their aims.

The new model emphasizes the distribution, rather than the concentration, of assets-people, information, authority, technology and so on. Economic value is now understood as distributed in the unmet needs of each individual: It is lodged in their hearts and minds, living rooms and kitchens. Value is "realized" in relationships of advocacy and trust. It's no longer adequate to think that value can be "created" inside factories or offices.

When wealth creation depends upon authentic relationships of trust and advocacy, there's no more room for adversarial behavior that ekes out a profit at the expense of consumers, employees or suppliers. In a support network, all behavior is aligned with the interests of the individual who pays. More alignment means more cash, more profit and more well-being distributed throughout the network. eBay is an example of one small step through this looking glass. It realized previously hidden economic value by listening to and aligning itself with the needs of its members. It learned through trial and error how to engineer trust. Riding this inside-out distributed value-based logic from its inception in 1996, it posted gross sales of $70 billion last year. But eBay has addressed itself to just one tiny slice of consumer needs and in one very limited format. Imagine hundreds of eBays using a variety of means and methods, able to link and coordinate support across the widest possible spectrum from health care to house repairs-all on the consumer's terms.

History teaches that the enterprises that move decisively to reconnect with an alienated population get rich first. But, like the thousands of companies that derided the new disciplines of mass production a century ago, there will be many that cling to current practices, determined to ride out the tide. They are unlikely to survive the next decades. CIOs with their unique expertise in distributed processing and digital platforms have the potential to help define the new enterprise logic. We need the CIO that was imagined a quarter-century ago, even more so now. It's time for the CIO who stands on the shoulders of technology to become the champion of the individual. But don't forget to bring your coat. It can't be done from the sewers.


© Copyright Shoshana Zuboff, 2005

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