Deciphering Digital Disruption

The phrase digital disruption is everywhere these days, cropping up in headlines, articles, speeches, and book titles. But when I speak to senior leadership of various companies, it becomes clear that even they are not sure what digital disruption means for them or what it requires them to do. I can sum it up in two words: listen and engage.

The Internet generally and social networks in particular have given customers a way to access information about products and prices and compare, shop, and buy without much involvement from brands. When the authors of The Cluetrain Manifesto said, "Markets are conversations," they could easily have been referring to the kinds of customer exchanges happening over social networks. Customers are talking to other customers and making purchase decisions in the marketplace—whether at their computers or walking through stores.

Customers can search for a product, look at product reviews, compare products, and consult with other people like themselves. And while this last point is crucial, it's even more so when you consider the 1-9-90 rule, which describes the ratio governing how people engage in social networks: 1 percent post, 9 percent respond to posts, and the majority of people, 90 percent, lurk and read what the 1 percent and 9 percent have posted. What's key here is that 90 percent: the majority of any customer base.

So let's say that 90 percent of your customers see negative comments made by that 10 percent—you're a suitcase manufacturer and the handles are falling off; you’re an airline and your flights are often delayed or canceled. Of course, there will always be some product defects or service delays. But what customers want to know is that you care. One way to show you care and express genuine concern and a desire to make things right is to respond in social channels. Why? In part because of the 1-9-90 rule.

If your customers are posting that your product or service is a #fail and you are not responding, that leaves a poor impression—not just on the customer lodging the complaint but on the 90 percent following along. They may interpret your not taking part in the conversation as a sign you don’t care, you don’t have your customers' backs. If you don’t believe such digital engagement is important, note that 52 percent of the Fortune 500 firms back in 2000, near the dawn of the digital era, today no longer exist.

What's true about companies involved in social media is that they are more successful than those that aren't. Why? Customers buy from them because it's not just a product or service they want; they want peace of mind. And customer service is now a CEO-level conversation; a study by McKinsey showed that improving customer service means a 30 to 50 percent hike in business. Why? Because that 90 percent who are lurking are making buying decisions based on what "people like themselves" are saying about your company, products, and services.

So this is what digital disruption means: We must change how we do business now. Social media and digital engagement provide companies with everything they need to know about their company—what's working, what's not working, what would be better if only x were done. But that company has to actually listen to what customers are saying, engage those customers to show that it cares, and then take steps to incorporate their feedback into its various departments to make its products and services better—which reinforces to customers the idea that it is there for them.

It all comes back to what I call the "Witness Factor," which describes the idea that with social media, customer feedback is now public, and like cave paintings, it's permanent—for millions of people to see, forever. And it's up to companies to decide if the Witness Factor is going to drive them to create a digital disruption strategy. Those that do will win. Those that do not, well, let's just say I would not be surprised if many of them aren't around in five years.

Natalie Petouhoff, Ph.D., is vice president and principal analyst at Constellation Research. She can be reached via Twitter @Dr.Natalie or at www.DrNatalieNews.com.