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The Next Modern Commerce Disruption: A Blueprint to Win in the Age of Personalization by Brian Solis

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Beyond driving for revenues, modern businesses must consider the human quotient in all they do. This means
a human-centered engagement infrastructure that
builds relationships with customers digitally through meaningful value, connections, and communications. Smart technology engagement platforms combined with customer-first mindsets can re-imagine customer journeys not only to compete for the future, but also relevance
in every moment that matters to customers. That’s the important aspect about the human quotient—it plugs brands into the exact moments that matter to custom- ers. Highly personal touch points are instrumental in guiding the next steps of customers closer to, or further away from, a brand now and forever. These meaningful moments require modern forms of engagement that prioritize one-to-one personalization, context consider- ation, cross-channel communication, and right time/right place/right message delivery at scale. Just because your brand is winning today doesn’t mean that future shock isn’t on the horizon. Plan for it. The clock is ticking.

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The Next Modern Commerce Disruption: A Blueprint to Win in the Age of Personalization by Brian Solis

  1. A Marketer’s Blueprint to Win in the Age of Personalization The Next Modern Commerce Disruption: By: Brian Solis Principal Analyst, Altimeter Group
  2. 2 In 1970, futurist Alvin Toffler wrote Future Shock, a powerful and controversial look at how the speed and volume of change affects individuals and societies. The book and subsequent intellectual movement explored how a majority of social problems are symptoms of “future shock,” where people, populations, industries, and governments experience too much rapid technological change in too brief a time. Businesses once too big to fail have become chapters in the history books of business evolution. This could be part of the reason why only 71 companies remain from the original 1955 Fortune 500 list. Future shock leads to complacency or paralysis, which inhibits progress or even triggers regression. Today that’s exactly what’s happening in retail and other commerce. Strategists seem paralyzed, unable to move quickly or notably enough to stave off disruption. They still sell and market the same old way, while expecting differ- ent outcomes. Almost every major department store, including Macy’s, Kohl’s, Wal-Mart and Sears, have closed hundreds of stores recently, trying to propel themselves out of future shock. In the first quarter of 2017 alone, 19 retail brands including Sears, Macy’s and Staples closed a combined 3,507 stores(1). Introduction But traditional commerce brands are not the only ones in disruption’s path. E-commerce companies disrupt- ing traditional retailers now face disruption from modern commerce companies, such as Dollar Shave Club, Gilt, Uber, Airbnb, and others. Disruption is a constant. Anyone believing modern commerce ends with today’s most popular start-ups and progres- sive brands risks the blows of future shock. What’s new eventually becomes old replaced by the new-new players who inevitably discover different ways to innovate and deliver new value to connected customers. The next innovators are premised on what I call the human quotient. They build on emerging technology trends to offer new service and engagement models, which cater to the ever-changing preferences and expectations of connected customers. At its core, the human quotient serves as the guiding ethos of how a company operates and innovates. Marketing, sales, customer-relationship management, and product development are based on integrating new technologies and services to keep up with people’s changing values, behaviors, and preferences. Beyond driving for revenues, modern businesses must consider the human quotient in all they do. This means a human-centered engagement infrastructure that builds relationships with customers digitally through meaningful value, connections, and communications. Smart technology engagement platforms combined with customer-first mindsets can re-imagine customer journeys not only to compete for the future, but also relevance in every moment that matters to customers. That’s the important aspect about the human quotient—it plugs brands into the exact moments that matter to custom- ers. Highly personal touch points are instrumental in guiding the next steps of customers closer to, or further away from, a brand now and forever. These meaningful moments require modern forms of engagement that prioritize one-to-one personalization, context consider- ation, cross-channel communication, and right time/right place/right message delivery at scale. Just because your brand is winning today doesn’t mean that future shock isn’t on the horizon. Plan for it. The clock is ticking. (1) http://uk.businessinsider.com/the-retail-apocalypse-has-officially-descended-on-america-2017-3
  3. The New Disruptors and the Rise of Modern Commerce The 3 Types of Modern Commerce Disruptors The Original Generation of Modern Commerce Disruptors Even Disruptors Can Be Disrupted Advancing the Marketing Mindset from Automation to Personalization How AI Helps Marketers Humanize Their Brands The Modern Marketing Blueprint: AI Facilitates the Design of Intelligent and Personal Experiences Summary: Disruption Isn’t an Accident 4 6 8 10 13 15 18 21 1 2 3 4 5 6 7 8 Table of Contents
  4. 4 The New Disruptors and the Rise of Modern Commerce CHAPTER 1
  5. 5 What do TOMS Shoes, Warby Parker, Dollar Shave Club, Bonobos, Casper, Poshmark, MeUndies, Birchbox, The Honest Company, Everlane, and others like them share in common? Each in its own right represents a new breed of bold consumer product start-ups that opened new markets and opportunities. As born-digi- tal companies, these start-ups can focus on developing new product, service, and brand models from scratch without the legacy shackles that govern business as usual and traditional commerce. These consum- er-product darlings developed creative and compelling ways to cultivate new customer relationships through innovative and more personal, business-service models. Connected consumers instantly gravitated toward their relatable mission and purpose, and also cleverly targeted product sets, and mobile-first designed apps. News media attention turned them into rock stars. Even leading e-commerce and global consumer packaged goods (CPG) companies were forced to take notice. For example, Dollar Shave Club took on industry giants Schick and Gillette with a creative, modern commerce business model. In just four years, Dollar Shave Club disrupted the traditional shaving market by building a massive brand and strong relationships with connected customers. The company’s hilarious and unconventional promotional video and YouTube marketing strategy was not only edgy, but also incredibly effective in reaching its target audience. Dollar Shave Club’s use of technology is representative of a new genre of digital-first business models, focused services and low prices. But, what is really most important is that, unlike Gillette and Schick, Dollar Shave Club really understood its targeted connected consumer market and curated relevant messages in key channels designed to keep them engaged. For example, with each blade delivery, customers get a copy of Bathroom Minutes magazine. It’s designed to resemble the traditional newspaper comics and includes shaving and life tips and questions and answers. The service blends good products, convenient services, and affordable (cheap) prices. The entertain- ing content delivered in contextually relevant media helped the company rise out of nowhere to generating $150 million in revenue in 2015. A year later, Unilever bought Dollar Shave Club for $1 billion, an estimated (2) https://www.bloomberg.com/news/articles/2016-07-20/why-unilever-really-bought-dollar-shave-club (3) http://money.cnn.com/2016/01/07/technology/gilt-groupe-hudsons-bay-saks/ (4) http://www.collaborativefund.com/blog/how-warby-parker-casper-and-dollar-shave-club-are-inspiring-a-new-generation-of-entrepreneurs/ CHAPTER 1 The New Disruptors and the Rise of Modern Commerce five times more than expected revenue(2) —a testament to the start-up’s innovative marketing and the importance of connected consumers to the future of business. Dollar Shave Club is just one representative of emergent brands that understand connected customers and up-end models of rival traditional players. Other innovative start-ups such as Warby Parker, Bonobos, Casper, Poshmark, MeUndies, Birchbox, and Stitch Fix are building new brands and business models, which are already generating hundreds of millions in revenue at the expense of traditional retailers. In another recent acquisition, Hudson’s Bay Co., owners of Saks Fifth Avenue, also purchased Gilt Groupe for $250 million(3) . Consumer values and new competi- tion are moving too fast for laggard brands. As a result, mergers and acquisitions are at an all-time high(4) .
  6. 6 The 3 Types of Modern Commerce Disruptors CHAPTER 2
  7. 7 Many dominant brands built reputations on giving customers what they could expect—predictability. This created a status quo mindset where the design of products, services, and experiences were largely transactional and good enough for most people. But along the way, customers became connected and as a result, informed, empowered, demanding, and elusive. Now, people expect anything but the status quo. People today want to feel like they matter as customers. They don’t just want generic emails or text messages about sales. They don’t want trendy chatbots to help them buy stuff via Facebook. They don’t just expect great customer service. Customers want to feel valued. Customers want to believe that your company values their time, understands how they communicate, and appreciates their preferences. They want one-to-one personalized, tailored engagement, or at the very least, the semblance of it, at each touch point. This is the human quotient. But even the most modern of modern brands is underesti- mating the human quotient in customer engagement. Like in all things in this world, nothing lasts forever. The barriers to entry are obliterated. The opportunity for new start-ups and entrepreneurs to disrupt traditional markets and reap gainful rewards has never been greater. But with every opportunity, challenges are inherent. The same forces that drive disruption set the stage for anyone to be on the receiving end. Today’s disrup- tors face disruption from next-generation start-ups and eventually the sleeping giants they awaken. CHAPTER 2 The 3 Types of Modern Commerce Disruptors All companies must understand that there will always be 3 basic types of disruptors: • the old (laggards or future-shocked) • the new (disruptors) • the new-new (next-generation disruptors) This is no time for leaders to be paralyzed by future shock. Instead, they must future proof their brands by prioritiz- ing the human quotient, invest in meaningful customer engagement using technology platforms in moments and ways that matter to customers, and continually explore methods and services to deliver new value to customers. The first e-commerce companies that disrupted the incumbent brick-and-mortar structure, serving consumers with lower costs and convenient delivery Brands in the current commerce landscape that aim to get in front of consumers on all channels, but still opt to message through impersonal segmentation Emerging brands that are invested in understanding and developing a deep human connection with every consumer as an audience of one to communicate with them on their terms—the right device, the right time, and the right message
  8. 8 CHAPTER 3 The Original Generation of Modern Commerce Disruptors
  9. 9 Disruptors don’t have to look too far outside of their purview to appreciate what happens when they don’t invest in evolving customer experiences and engagement. Before the rise of Dollar Shave Club, Gilt, and other new e-commerce disruptors, original disruptive companies like Amazon, eBay, Alibaba, and Overstock.com changed the way consumers shop. The global popularity of mobile communication and computing, apps, services, social media, and user reviews creates a marketplace that’s never going to settle and will continue to shift and progress. Amazon is leading the way. Amazon is arguably the industry standard of e-commerce, logistics, and aggres- sive pricing. The Amazon model did more than disrupt traditional retailers and e-tailers around the world. It also forever changed customers’ expectations, prefer- ences, and behaviors. Amazon’s effect on consumer shopping taught it to be intentional in creating innovation strategies to compete and further disrupt. For example, Jeff Bezos and company are aggressively investing in the development of new products and capabilities including artificial intelligence (AI) and voice-interface devices, AI and intelligent bots to facilitate transactions and predict needs and recommend products, Internet of Things (IoT) appliances, mobile payment systems, intelligent retail store models, delivery drones, autonomous warehouse robots and more. Even Amazon continually disrupts itself to stay relevant to modern customers. But at its core, Amazon focuses on engagement platforms, artificial intelligence, and new technologies that help customers make the right decisions…their way. CHAPTER 3 The Original Generation of Modern Commerce Disruptors
  10. 10 Even Disruptors Can Be Disrupted CHAPTER 4
  11. 11 The Customer Experience Impact Report says that 82% of customers stop doing business with companies due to bad customer experiences. According to Forrester, 71% of consumers say inconsistent cross-channel messaging negatively affects the shopping experience. Interestingly, one in 10 said inconsistencies in the brand experience device to device would make them stop interacting with a brand altogether. Meanwhile, 86% of buyers say they will pay more for a better customer experience. Every day, consumers vote with clicks and cash. Along the way, they leave digital breadcrumbs and openly signal the need for more human, relevant, and meaningful experiences. Sophisticated and natively digital brands and new-age marketers get that. But, even though disruptors began with inspired corporate missions and clever business models, their operational and technolog- ical infrastructure ironically are similar to the traditional companies they are disrupting. How companies manage customer journeys is often through silos, each with engagement philosophies and technologies that by design introduce unconvincing, competing, or even disconnected experiences. Without modernizing marketing operations and customer engagement, they, too, are vulnerable to the next wave of disrup- tive companies. It’s only a matter of time. As digital natives, business and technology models and customer-centric campaigns naturally focused on dominant online channels such as mobile, social, and web. They didn’t endure years of costly digital transformation and literacy initiatives to shift business and technology strategies to match the times. Yet, many rising stars make the same mistakes as their incumbent counterparts—they miss opportunities to connect technology and value propositions to digital customers in ways that align with their attention spans and preferences. Disruptors aren’t immune. Experts around the world preach the importance of customer experience and the need to invest in technolo- gies and strategies that better engage customers in each moment in the journey. Customer experience is more than a buzzword. It’s critical for disruptors to recognize the discerning needs of the incredibly savvy consumers they’re chasing and managing. Customer experiences are about connecting with people in ways that are preferred, intuitive, productive, and engaging. Modern marketers get that. But they don’t walk the walk. Modern marketers either underestimate or don’t understand the urgency of delivering integrated, person- alized customer experiences. They miss simple cues for improving relationships before, during, and after transac- tions. They engage new digital platforms but employ old engagement tactics. This mismatch leads to common mistakes with costly consequences, as shown to the right: CHAPTER 4 Even Disruptors Can Be Disrupted 44% of direct mail is never opened 46% of consumers opt out of mobile push notifications More than $280 billion is abandoned in digital shopping carts every year 91% of consumers unsubscribe from emails
  12. 12 These stats shouldn’t surprise. They reflect what happens when business automates traditional market- ing. It may be easy and inexpensive to batch and blast emails and mobile push notifications to wider and wider audiences. But scaling mediocrity means risking disruption. Instead, brands should invest in one-to-one personalization models, which make up for flat conver- sions by increasing volume and reach. Even in the best of cases, it brings the right message to a lot of the wrong people often in the wrong channels at the wrong time. While it may have worked for years, its fading effect is now only accelerating. Consumers have suffered enough heedless experiences. When modern businesses ignore customers’ telltale signals, they show entrepreneurs and investors their weak spot, encouraging their own disruption. A business or brand cannot open new doors without doing new things. Growth is stunted when businesses do not prioritize intelligent, integrated platforms to facilitate one-to-one personalization in the channels, moments, and ways that matter. Relying on intelli- gent, integrated platforms nurture experiences that energize customer acquisition and retention. Automation can be a crutch for lackluster marketing. Intelligent engagement is the remedy. To compete for the future, thwart disruption, and continue to disrupt, successful strategies require a systematic and decisive focus on experience design that puts shifting customer preferences and behaviors at the center of everything. By engaging customers in the moments that matter in the ways that matter, brands evolve from the old way of doing things to become relevant today via new means. Modern commerce brands, however, also relentlessly strive to deliver hyper-personaliza- tion using a combination of next-gen technology and human engagement to further set the bar higher for “new-new” approaches. This transforms the concept of scale from one-to-many to that of engaging an audience of one, where each customer feels unique and valued. Traditional companies lean on old ways of customer engagement via aging communication processes, such as traditional snail mail and batch and blast email. While disruptors also rely on snail mail and email, they also have invested in mobile communications. Even the new still haven’t mastered effective, cross-channel, one-to-one personalized engagement. Often mobile communication is limited to dumb push notifications. Email and mobile are largely fragmented with different platforms and teams for each. Adding to the negative experience, these communications lack dynamic content and AI smarts. New-new disruptors factor in the human quotient. They not only embrace one-to-one personalization, but they have invested in AI platforms and teams to support personalized, right-time, right-place, right-message dynamic engagement in the moments that matter at scale. CHAPTER 4 Even Disruptors Can Be Disrupted
  13. 13 Advancing the Marketing Mindset from Automation to Personalization CHAPTER 5
  14. 14 Every consumer believes that they are an audience of one. Modern marketers must leverage intelligent platforms with customer-centricity to scale one-to-one personalization. The human quotient is the foundation for next genera- tion disruption. It centers the business on one-to-one personalization by learning about customer preferences, behaviors, and context now and over time. By combin- ing those insights with intelligent platforms, brands can genuinely market, message, and engage in the moment that matters for each individual consumer. By design, brands can personalize marketing with the right content, at the right time, on the right channel, on the right device. Ask a successful founder of a natively digital brand the inspiration for taking the bold risk of starting a new company. They might answer, “I see a growing group of people who experience moments that matter differently than other brands realize. It is an opportunity to learn from them to better serve them through the design of relevant new products and services. Because they are so differ- ent, we need to engage them differently. We must be as CHAPTER 5 Advancing the Marketing Mindset from Automation to Personalization innovative with customer engagement and experience design as we are with products and business models.” Modern disruptors systematically put the customer experience at the center of everything. Here are the other strategies they have in common: • Disruptors are data-driven, enabling them to adapt and react to consumer preferences in real time • They use a cross-channel model to engage in the moments, places, and messages that matter • AI-powered systems eliminate the guesswork of segmentation and messaging and use intelligent insights to engage every consumer as an individual, at scale • They follow the digital breadcrumbs consumers willfully leave behind: location, device, intent, and activity
  15. 15 How AI Helps Marketers Humanize Their Brands CHAPTER 6
  16. 16 With the rise of artificial intelligence (AI) and machine learning, modern marketers have access to a new class of AI-enabled, marketing automation platforms that accelerate the implementation of the modern marketing blueprint. AI-powered marketing platforms convert customer data and activities into actionable, personalized insights, which leads to more relevant and personalized cross-channel consumer engage- ment. In addition to modern marketers getting smarter about customer experience and personalization, AI can interpret digital breadcrumbs, replacing manual guesswork with automated decision-making. Specifically, AI-enabled marketing platforms zero in on the moments that matter to consumers through personalized messaging at scale across a variety of channels: email, apps, browser push notifications, web and mobile in-app messaging, and SMS. AI-enabled marketing platforms make campaigns feel less like campaigns and more like conversations, increasing the chances people will engage with the messages that offer mutually beneficial outcomes. CHAPTER 6 How AI Helps Marketers Humanize Their Brands For example, if we compare old-school approaches to new-school capabilities, disruptors and those who want to become disruptors will set the foundation for the development of their modern marketing blueprint. On the next page, we see how marketers can begin to lay this foundation by understanding the 5 Ws of modern marketing and how they should think of each in terms of the old way of marketing vs. the new way of marketing.
  17. Check out our new deals! Check out our new deals! Check out our new deals! 17 v.s. OLD NEW
  18. 18 The Modern Marketing Blueprint: AI Facilitates the Design of Intelligent and Personal Experiences CHAPTER 7
  19. 19 Investing in the human quotient instills a culture of consumer-centricity within modern brands and pushes the company to incessantly innovate as part of its every-day business ethos. With intelligent marketing platforms, businesses will change the game for marketing in how each consumer is engaged as an audience of one at scale. This approach, by default, amplifies signal, reduces noise, and increases accuracy, timing, and use of brand messages. It improves the overall customer experience. Perhaps more importantly, brands earn a value-added, trusted role in empowering customers to easily and intuitively make decisions on their terms. This is the modern marketing blueprint powered by the human quotient and AI. It is designed to help disruptors from becoming disrupted, built upon key relationship-building disciplines that start with understanding and converting those insights into engagement triggers in the moments that matter. This then becomes the architecture for experience design. Marketers align relevant messages with compelling content to engage consumers precisely and personally. CHAPTER 7 The Modern Marketing Blueprint: AI Facilitates the Design of Intelligent and Personal Experiences Future-proofing and disruption as business models starts with building upon four core pillars: listen, learn, create, and implement. Check out the modern marketing blueprint on the next page.
  20. LISTEN LEARN CREATE IMPLEMENT Winning companies are rooted in a consumer-centric approach, keeping a tight pulse on customer experiences. The consumer continuously evolves. Marketers must be mindful of this and keep up in real time. Each customer journey is different. Marketers must engage with each person in the exact way that works best for them. Use the right tools to effectively engage consumers across channels, creating a seamless consumer experience. • Establish your brand as consumer-centric—not app-centric, not mobile- centric, not message-centric. Always evaluate tactics and strategies from the customer’s point of view. • Replace classic demographic segmentation with behavioral segmentation methods, based on what your consumer wants and what they do at the individual level. • Collect data based on consumer interactions with the brand through a variety of channels that represent the journeys they take with the brand. • Watch how the consumer interacts with the brand organically, draw conclusions about their preferences, and use this information to shape messaging. • Determine on which channel the consumer prefers (or doesn’t prefer) to interact with the brand. • Craft an engagement strategy that focuses on the individual. Personalize messaging based on individual preferences for content, channel, and timing. • Develop an efficient, intuitive, and adaptive click path between engage- ment and the desired outcome to maximize business results. • Leverage an AI-powered, marketing automation platform that combines content and context in a cross-channel program (email, app and browser push notifications, web and mobile in-app messaging, SMS, and social media). • Review campaign performance data at a granular level to know how marketing efforts impact business objectives. • Implement process and technology improvements to continuously listen and learn the consumer’s preferences and behaviors, optimize content and path accordingly, and improve customer engagement in real time. THE MODERN MARKETING BLUEPRINT: A “HOW-TO” FOR CONSUMER-FOCUSED MARKETERS 1. 2. 3. 4.
  21. 21 Summary: Disruption Isn’t an Accident CHAPTER 8
  22. 22 Technology and society constantly evolve. Future shock can affect anyone, at any time, in any place. What’s new is only new for so long. The new-new, however, is pervasively imminent because it is rooted by design in the human quotient—always putting custom- ers’ preferences and behaviors front and center. The next generation of Amazons, Ubers, and Dollar Shave Clubs are hatching plans to modernize modern commerce. They will use machine learning, AI, and the human quotient to develop next-generation businesses to become more relevant, human, and engaging. To win in round 3, a company must invest in technology, resources, and models to support one-to-one personalization in the moments that matter at scale. That’s at the core of new-new. All business is personal. In our world of empowered consumers who face too much noise and too many choices, people—individuals—must be at the heart of a brand’s strategy. The only way to earn relevance is to genuinely care and accordingly engage people as the individuals they are. That takes understanding what’s important to them, when, where, and why and in turn, making investments in smart technologies and customer experience strategies to engage them their way. Combined with an AI-powered marketing platform, reaching, engaging, and converting connected consumers sets the foundation for mutually beneficial relationships. The future isn’t written, and this is a call for bold thinking and acts to remain disruptive through the continual creation of new value that matters to people now and as they change. That takes an experience architecture built from a modern marketing blueprint. Whether it’s competing for attention, onboarding, marketing, or building loyalty, one-to-one personal- ization is the only way to compete for the future. The need for perpetual modernization never ends. The pursuit of the new-new future proofs against future shock. The clock is ticking. The time is now to evolve from being the new player to the new-new disruptor. CHAPTER 8 Summary: Disruption Isn’t an Accident
  23. 23 The Author Brian Solis is Principal Analyst and Futurist at Altimeter, the digital analyst group at Prophet. Brian is also a keynote speaker, digital anthropologist, and futurist who studies disruptive technology and its impact on business and society. In his reports, articles, and books, he sets out to humanize technology and its effect on business and society. Brian’s current research explores digital transformation, innovation, experience design, culture 2.0, and “the future of” industries, trends, and behavior. Brian is also an award-winning author of seven best-selling books including X: The Experience When Business Meets Design, What’s the Future of Business (WTF), and The End of Business as Usual. With a loyal online audience of over 600,000 people, his work makes him a sought-after thought leader to leading brands, celebrities, and start-ups. http://www.briansolis.com/ Altimeter is a research and consulting firm owned by Prophet Brand Strategy that helps companies understand and act on technology disruption. It gives business leaders the insight and confidence to help their companies thrive in the face of disruption. In addition to publishing research, Altimeter analysts speak and provide strategy consulting on trends in leadership, digital transformation, social business, data disruption, and content marketing strategy. https://www.prophet.com/thinking/altimeter/ Kahuna is smart marketing automation software that empowers consumer marketers to personalize journeys for millions of consumers in seconds, meeting their expectation of a highly customized experience every time. Using AI technology and a cross-channel approach, we help brands understand and effectively communicate with their customers, leading to superior business outcomes. Kahuna is trusted by Yahoo!, Yelp, Overstock.com, Travelzoo, Dollar Shave Club, and hundreds of other companies. The company was founded in 2012 and has raised $58M in funding from top investors, including Sequoia Capital, Tenaya Capital, and SoftTech VC. https://www.kahuna.com/ About

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