Covid-19 has impacted different aspects of everyone's lives across the globe. Businesses experienced one common impact from the Covid-19 pandemic - the push to accelerate their digital transformation journey. According to a 2021 IDC report, by 2023 more than 500 million digital applications and services will be developed and taken to market — an explosion of apps in just two years that equals the number developed over the previous 40. The pace of change is unparalleled.
Yet, despite huge investment in digital infrastructure across the globe, many businesses still lack the ability to connect products to measurable business outcomes, specifically how digital products contribute to their bottom line. Siloed teams, lack of insight and visibility of behavioral data is only exacerbating this problem for digital-first organizations, who are essentially operating with a blind spot.
This needs to change for businesses to optimize their services and remain competitive and successful in a time when brands are fighting for customer mindshare. In an increasingly competitive digital landscape, businesses can either disrupt or be disrupted. The next generation of successful companies will be those that understand their customers and use these insights to adapt and transform experiences from the place value is created: the digital product.
In this article, I will discuss the importance for businesses to connect their digital product innovation to business outcome - only then can businesses truly answer the strategic question, ‘how do our digital products drive our business?’
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The rapid adoption of digital fuelled by Covid-19
Going digital was the solution to problems created by the new Covid-19 economy - services that were traditionally conducted in person were replaced by digital products, services and customer experiences. Take grocery shopping for example - an activity that was previously conducted by physically visiting shops swiftly migrated online during the pandemic. Previous attempts to digitize groceries had largely been unsuccessful - but the pandemic forced both grocers and consumers to rethink.
In fact, 2020 online grocery sales exceeded IGD’s pre-Covid-19 forecast for 2024 topping £18bn. And now, online shopping is only continuing to grow, even as many countries have opened up physical stores and gatherings, demonstrating that consumers' attitudes have been permanently altered. Research firm Neilsen confirmed that while UK online grocery shopping growth was lower in April 2021 compared to previous month, it still experienced 25% growth.
Online shopping is simply one example - McKinsey’s Global Survey of executives revealed that adoption of digital channels are years ahead when compared to previous surveys and are even more developed in Asia. Survey respondents were three times likelier to say that 80% of customer interactions were digital during 2020 than before Covid-19.
As a result of this mass shift to digital, IDC predicts that companies are investing around $6.8 trillion on digital transformation to reinvent their business. However, the process of digital transformation is no easy feat and despite mass investment many businesses are still struggling to see ROI. This is because there is still a huge blind spot internally: many don't know how these digital transformation efforts result in business outcomes. Instead, they are guessing on what they should build next, and very few are truly connected to what their customers are actually doing. Businesses need to be arming their product teams with the right information so that can actually make a tangible business impact.
Disrupt or be disrupted - understanding user behavior is key to product optimization
Change needs to be made from the top down when it comes to digital optimization. Overall, the way businesses measure success and impact needs to be transformed as the focus is being placed in the wrong areas. Investments are currently being made into siloed tools like web reporting and net promoter scores, which are all designed to measure product success almost entirely on ad clicks, site traffic and survey feedback. This misses the most important measure of success - the users.
User behavioral data - the way a customer interacts with digital products - is the ultimate source of truth when it comes to making the connection between product value and optimal business outcomes. In order to become a disrupter rather than be disrupted, businesses need to see and understand customer behavior, predict and analyze which actions lead to business outcomes and finally adapt each experience to maximize the impact for the business. However, this can only be effective if teams across the board work collaboratively, as siloes hinder the dissemination of information to the teams that need it the most: the product managers.
Of course, speed is also a critical factor - we all know that customer behavior changes and adapts at a rapid rate. Only by giving full teams visibility and understanding of customer behavior in real-time, as well as being able to quickly identify key sentiments and anticipate what is next, is the only way the unknown becomes a business advantage and not a threat.
Technological advancement in machine learning technology has made it possible to analyze and gather insight from trillions of data points in real-time, something that never would have been possible manually. Businesses need to make sure they are aware of and utilizing these technologies as part of digital optimization. Small changes can result in huge business impact - for example meditation app Calm was able to improve customer retention by threefold by making one a change to its in-app daily reminders.
A behavioral data-focused strategy will drive faster growth through improved engagement, retention and conversion by tailoring digital experiences to customers’ unique needs. In turn, this personalization aspect is critical to market differentiation. Consumers interact with hundreds of digital products and the difference between retaining and losing a user can be as simple as understanding their needs. As well as this, delivering a tailored experience to users also creates brand advocates. This can also be done without locking technical resources into personalization projects with undefined end dates and uncertain impact.
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The future is digital
Becoming a digitally optimized business is a priority - both for digitally born companies, such as neo-banks, and industries that are digitally transforming such as the automotive sector. What is clear is that there is no time to rest - if a company doesn't respond and iterates quickly, another will take advantage to dominate the market. Technology innovations have made it easier than ever before to connect digital products to business outcomes and knowing what investments drive impact. It unifies every team across the organization with common data and visibility, and brings together a new depth of customer understanding with the speed of action required to adapt experiences in the moment.
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Daniel Bailey, VP of EMEA, Amplitude