Would you turn over your family to some third party to act as an intermediary if you really cared for them? How about renting them back to get to know them better? Sounds pretty absurd right? But that is what most major brands (and small businesses) have done the world over with their 1.6 billion customers. And the costs of getting them back are only rising.
How did we get here you asked? Our discussions with most CEOs give some insight into this question:
• Authors: “How do you interact with your customers?”
• CEO: “We got over 57,000 thousand ‘likes’ on Facebook.”
• Authors: “Not bad. But what do you know about them and their wants and needs?“
CEO: “Not much …”
• Authors: “And how have you turned those ‘likes’ into anything tangible for your company?”
• CEO: “We haven’t really. Should we have?”
• Authors: “Yes, according to research, your customers want to co-create your future and theirs as they are doing with many of today’s billion dollar startups like Uber, Lending Club, and Airbnb”
• CEO: “I didn’t know that. OMG, how do I get them back?”
The bad news first: You will get disrupted if you do not co-create with your customers
Emerging peer-to-peer exchanges and shared economic (network based) business models are forcing a complete reset of how companies think about, act with, and relate to their customers, according to recent Gartner Research. This changed environment has already put a few old ‘closed’ companies like Kodak and Borders out of business, while open innovation pioneers like P&G and shared networks like today’s fast growth startups are showing impressive results from leveraging open networks.
According to recent research by OpenMatters and Wharton Business School, companies that share insights and economics and co-create with their network of customers, employees, investors, retailers, and suppliers are worth 2-4 times more than companies with other business models.
The result: Incumbent organizations are being forced to open up and build customer networks so the Alibaba’s and Esty’s of this world don’t eat them alive.
Put another way, the COO of Danone, Berard Hours, said “On the Internet, a brand needs to be a [real] person. It’s not only [having] a relationship with a product [that matters to customers’].”
Now for the good news: Your customers will actually help you to succeed
A recent study by Forrester Research says that the majority of customers want interaction with your company as a real “person,” not to be carted over to Facebook — only 16 percent of customers want that. Additional research over the last few years has shown that consumers actually want to be involved and want an interactive relationship with brands, confirmed by a 2014 study by PR giant Edelman Group.
But how does a company achieve having a relationship with a customer when it spends so much time focusing on its products or services and has outsourced its customers to Facebook and Twitter?
We, your customers, are already there – seeking to co-create every company’s future for us and them. For example, we are already sharing our opinions on Yelp and TripAdvisor, helping design advertising for Danone yogurt, creating new Nike shoes that have our own branding on them, and designing the future doors to our homes on Jen-Weld. P&G and others have partnered successfully with their customers for R&D innovation purposes, and many small companies use crowdfunding to finance their new products from their customers wallets (including real estate development and ownership). We, the customers, are just waiting around for the smart companies to wake up to our request to be involved and participate in our collective future.
MyStarbucksidea.com is a great example of how to build a co-creative relationship with consumers. The crowdsourcing platform lets 150,000+ customers initiate and vote on coffee ideas. Starbucks gets free R&D and focus-group work done, and customers get to share in their own coffee futures.
Your future: Share and share alike with your customers
As in any other industry, we see a massive switch to the digital world that will be mobile-first and where people share in their future and that of their brands. Traditional strategy is out, and brands have to find a way to become “like a person” on the Internet, sharing their future economics with their customers, employees, and partners – or risk losing to new, network based, shared economy startups with multibillion-dollar valuations. Thinking in terms of Maslow’s hierarchy of needs, companies that fulfill the self-actualization and self-mastery needs of their stakeholders’ will master this new digital world.
There are many software tools out there to help you implement this new customer co-creative approach, but the important first step is to change your mindset about your customers. They are more than Facebook likes that you need to rent back. They are the core of your future innovation and economics.
If Einstein had an MBA, he would have applied his famous formula for business: E=mc2. As in, the value of an enterprise equals the masses of your customers multiplied by the velocity of their contributions, squared. So don’t skip on customer co-creation and shared economics. Your future is dependent on you taking back your customers and making them your co-creative partners. Anything less will only spell trouble for you and your team.
Barry Libert is an angel investor, digital board member, and senior fellow at Wharton.
Simon Schneider is the CEO of Zyncd, a peer-to-peer expert networks for sharing ideas.