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Business schools teach that high barriers to entry in an industry can create better price elasticity, which leads to the ability to generate better margins. To many business experts, this is “Business 101.” I’ve observed some leaders still practice this methodology to help them scale their companies and, in turn, make large investments in infrastructure so they can repeat tasks over and over in the most efficient, cost-effective way possible.
These types of large investments create a scale of repetitive activities that drives a model for consistency in how you build your product, which removes variability and provides a predictable experience. This has led to significant success for many organizations. Think of McDonald’s: The positive experience is that you get exactly what you expect, with little to no variation, regardless of where you are in the country (or even the world). You know exactly what a burger and fries at McDonald’s tastes like and how it will be delivered, and you get exactly that experience — nothing more, nothing less.
However, in today’s economy, I believe building a successful company is less about high barriers to entry and more about pragmatism and flexibility. I’ve found that many organizations now focus on customer experience, but it can be difficult to predict how their customers will want to engage with their business. These brands simply know their consumers want a positive, seamless experience. And a “customer” could be the end consumer of your product or service, a supplier or an employee.
The New Normal: Frictionless Experiences
In a Harvard Business Review article, the author discusses the importance of offering a “frictionless” customer experience. One anecdote caught my eye:
“I’m a true believer in low friction. I woke up this morning on my Purple mattress. I put on my Warby-Parker eyeglasses, picked up my phone and played Spotify. I made my way to my bathroom and shaved with my Dollar Shave Club razor. I reached into my closet and put on my new outfit from Trunk Club, and then I got in my Lyft and came to work.”
What do all six of these companies have in common? They are all in mostly commoditized businesses and are all growing at a rapid rate while making premium margins. None of these organizations has a high barrier to entry. And none of these companies has a traditional business model; they are all focused on providing a positive customer experience and a low-friction buying process.
Consider Frederick Taylor, nicknamed the father of scientific management, and Henry Ford, founder of Ford Motor Company, who were both famous for their efficiency. Although their methods played a large role in transforming manufacturing and how we view efficiency, they weren’t necessarily able to offer much adaptability. From my perspective, a quote famously attributed to Henry Ford sums it up well: “You can have any color Model T you want, as long as it is black.”
But I believe you must offer both efficiency and adaptability to consumers in this modern era of customer-obsessed experiences. Look at the automotive industry today: It can take months to receive a car if you’ve custom-ordered it, but you could likely purchase a standard, non-custom version of that same car in just a few hours. The automotive assembly line is a great example of efficiency, but not adaptability.
Since the pursuit of efficiency can limit flexibility and resilience, I’ve seen that many organizations tend to focus on one or the other. But I believe this can no longer be an either/or conversation. Companies should consider embracing this new business model and identify areas of efficiency as much as possible to focus efforts on customer experience.
Use innovative technology that makes it easy to focus on your customers.
An example of how organizations are using new technology to free up time for prioritizing customers is via process automation. By automating some of their more mundane roles, they can reposition workers to instead focus on user experience. As the co-founder of an automation company, I always suggest that you look at your organization and break down the processes into two buckets: core and differentiated.
Core processes are activities that are necessary to run your business, but they do not explain why you are in business. Accounts payable (AP) is a great example of core processes. You must be efficient in AP to be a successful business, but you are not in business because you wanted an outstanding AP process. Core processes are typically looked at as “overhead” and must be as efficient as possible. Automation helps improve efficiency by executing these processes flawlessly.
Differentiated processes are the activities of why you are in business. These processes are how you engage with your employees and customers. They could be a unique sales or manufacturing process or anything that makes people want to do business with you. More than ever, I’ve seen that organizations are making these areas the emphasis of the organization and how to best provide that “frictionless” customer experience, regardless of who you consider your customer.
To encourage this frictionless customer experience, I believe the first step is to simply engage with your customers on their terms. More traditional business models are often open for business and available from 8 a.m. to 5 p.m. But in today’s model, I believe companies must engage when their customers want to engage (and therefore be available 24/7 via phone, text, email or even social media).
Innovation and improvement can happen anywhere in an organization, and you cannot look at your organization in a binary way of either efficient or flexible. Activities need to be identified for both efficiency and adaptability. How your customers engage with you today might not be how they engage tomorrow.
May 13, 2019 at 08:03AM
Forbes – Entrepreneurs