By Professor Avijit Raychaudhuri
Digitalization across industries has enabled a simultaneous proliferation in products and increasing commoditization of products. As a result, the distinction between product and service companies are continuously getting blurred. Companies belonging to primarily product-oriented industries are differentiating themselves by offering suites of associated services, often through business models using XaaS, or “anything-as-a-service”. Case in point: the Net Zero Buildings as a Service offering by Johnson Controls!
The ubiquitous servicization has profoundly impacted customers (consumer or otherwise) who often interact with various providers throughout any purchase, from conception all the way to materialization. For example, a consumer’s decision to try out a new restaurant in person might depend not only on finding relevant reviews on Zomato or Google but also on finding suitable conveyance options through Ola or Uber.
The increasing ease with which customers can choose among providers for fulfilling most steps in their purchase journeys is gradually decoupling customers from their usual providers, thereby reducing the significance of traditional customer loyalty. In turn, dynamic network-oriented couplings are emerging among companies whose offerings put together facilitate disparate steps in the purchase journeys of diverse categories of customers. The notion of customer loyalty is thus transcending into the scope defined by the agile boundaries of such networks. The unique aspect about these networks is that the constituent companies might not necessarily be contractually related but are virtually (and digitally) connected through their combined customer bases. Thereby, these networks potentially act as support systems for their constituents.
I call these networks “digitally enabled customer-centric ecosystems” (henceforth: “DEC ecosystems”). Although they need not be geographically confined, the best instance of such an ecosystem is perhaps the one which has been facilitated in China by Alibaba, JD.com, and Tencent. I believe that the future will belong to those companies (both incumbents and startups) which will participate in DEC ecosystems by design rather than by happenstance. Such ecosystems naturally provide immense potential for companies to experience network growth without hyper consolidation across verticals. Therefore, in addition to market share, companies should focus on their “DEC ecosystem reach”, which is the extent to which they can make money from the network of customer bases.
Ironically, the key to fostering DEC ecosystems is also the key challenge – sharing of data. For such ecosystems to thrive, disparate companies catering to diverse customer bases need to strategically share proprietary data. Let us take an example of a hypothetical apparel brand which uses analytics tools to predict the demand for apparels for the upcoming sales period. However, the brand might also benefit from current information regarding streaming of songs on Spotify! If the genres of songs could indicate the moods of listeners, a temporary hike in streaming of a certain genre of songs could imply an impending correlated hike in sales of apparels bearing designs which reflect that mood.
Several challenges exist regarding sharing of proprietary data within DEC ecosystems. What data can be shared by the constituents of DEC ecosystems without colluding? What access levels might be provided by one company to the other constituents? Should such strategic data sharing be time-bound? Most importantly, how would companies monetize strategic data sharing without impinging on customer rights and privacy? Furthermore, how will data security be ensured in such fluid ecosystems?
Despite the challenges, DEC ecosystems will certainly define the future business landscape. Therefore, I believe that the next phase of the digital revolution in business will witness the development of innovative and technology-based tactical solutions for enabling strategic data sharing among disparate companies, thereby transforming the way they compete. This will also make the jobs of regulators like the Competition Commission of India even more involved, as they will have to look for potential conflicts among not only vertical competitors but also among constituents of DEC ecosystems.
In India, industry bodies should take a three-pronged approach for promoting and fostering DEC ecosystems. First, they should work with policy think tanks like the NITI Aayog to develop frameworks for constituents of DEC ecosystems to strategically share data without resorting to either collusion or breach of customer privacy. Second, they should work with the central and state governments for developing incentives for companies to position their offerings as pathways for customers to fulfil all their consumption requirements within DEC ecosystems. Finally, they should sponsor extensive research into understanding the interplay among DEC ecosystems and existing systems such as Aadhaar, UPI, and ONDC.
The ongoing digital revolution has already given the world consumer-friendly offerings like WeChat, a super-app. India has its own aspiring super-app in the form of TATA Neu. However, in a culturally diverse country such as India, chasing customer loyalty at scale for all their needs would be a futile exercise in the long run. Rather, it would be in the best interest of both industry and the governments to proactively foster DEC ecosystems for helping companies thrive in the quickly transforming business landscape.
– Professor Avijit Raychaudhuri is a faculty member of Supply Chain & Operations Management at the Indian Institute of Management Udaipur. He was the founding Chairperson of the Doctoral Program Committee at IIM Udaipur. He is passionate about solving business problems using digital technologies and analytical methods, and in general about a wide gamut of issues related to global supply chain management and strategy, interface of operations and marketing, and corporate sustainability.