Transcript 0:00 [upbeat music] Welcome back to The Peggy Smedley Show, the podcasting voice of IoT and digital transformation. Hello, listeners. Um, welcome back to The Peggy Smedley Show. 0:14 My next guest is a professor at the Wharton School. He co-directs the Penn Mack Institute for Innovation Management and holds a faculty appointment in Penn's Perelman School of Medicine. 0:26 He also co-authored A Connected Strategy: Building Continuous Customer Relationships for Competitive Advantage. 0:33 Please welcome Christian Terwiesch, Professor of Operations and Information Management at the Wharton School at the University of Pennsylvania. Christian, welcome to the show. Thanks for having me. 0:46 Well, I'm delighted to have you. So let's talk about so many things that are going on today. 0:50 I guess I'm curious about what does today's dramatic rise, I think when we think about digital connectivity a-and so many things, I, I'm curious what it means for businesses and how they should interact with customers. 1:04 I think cu-customers today are thinking differently and they have to react differently, but I'm so curious what your thoughts are on it. 1:12 Well, if you think about the old days, it was very much the expectation from a customer that you as a customer, you would express what you want, and then the firm delivers exactly what you wanted, when you wanted, and where you want it. 1:23 And that's really hard. I mean, let's be honest about it. But in this new world of connectivity, new forms of customer experiences are possible and often desired by our customers. 1:34 It's not just responding to what the customers want, but to figure out what they want and need, sometimes even to help themselves realizing what they want and need. 1:44 And that's a really good point because most customers today, shape, size, color, you have to be able to think and know that almost just what you described even before the customer. 1:54 So how does a business, how does a manufacturer, how does a retailer know and stay connected and have that type of customer relationship? What does it actually look like? I mean, how do you respond? How do you react? 2:08 I mean, there's a lot of questions there I'm, I'm throwing at you. Yeah. 2:12 So we find it helpful to distinguish between different types of connected relationships that consumers can have with firms, be they manufacturers, service providers, or retailers. 2:21 We call the one type connect-- respond to desire. 2:24 With respond to desire, if you think about how you order an Uber or a Lyft, you stand there, you know exactly where you wanna go, you want a car right now, and you press a button of an app. 2:34 Uh, there is what we call a curated offering, where companies basically help the consumer to figure out what they want, right? They give them advice. 2:42 If you think about what we love about Amazon, think about what we love about Netflix, you don't tell Netflix what exactly you would wanna watch. You just say like, "Netflix, entertain me," and Netflix helps you out. 2:54 Then there's what we say called coach behavior. With coach behavior, you give even more responsibility to the firm. 3:00 If you think about healthcare, if you think about your diet, you say like, "Nike, kind of you manage my fitness," and then Nike starts saying, "Christian, it's time to exercise. Get up." 3:10 My Apple Watch vibrates and says like, "Christian, you've been sitting too long." 3:15 And then in the extreme cases, what we call automated execution, where you basically trust the firm so much that the firm does the work for you. 3:22 If you think about your retirement savings, your investment account, your investment company might be managing your portfolios, rebalancing your portfolios or harvesting losses, even without you doing anything. 3:33 And so there's this continuum of continuous relationships between the firm and the, uh, the consumer that we call connected strategy. So how do these companies now develop? 3:45 Do you wanna build a connected s-- one of these connected strategies? 3:48 So does a firm have to figure out what's the best relationship then to have with the customer, and how do they go about building that connected strategy you just described? 4:00 It really starts with understanding your customer, right? 4:03 The customer, when they buy something from you, again, it doesn't matter whether you're a product provider or a service provider, they're the end-- at the end of a very long journey, right? 4:12 They have to become aware of the need. They have to think about how do I fulfill the need. They have to look around and find basically the provider that helps them. They have to order. They have to arrange financing. 4:24 And at the end of that, uh, you know, if everything goes well for you as a firm, the customer says, "I wanna do business with you." 4:31 Uh, what firms need to understand is how they can touch the customer early on in this customer journey. And for that, they have to really figure out where does the customer have the most pain points. 4:40 It's not always that late in the game when it comes to price and shipping. It's really very early on helping the customer figure out what is it that they want and what is it that they need. 4:52 Is it hard in today's so many fluid environments, so many floods of information to actually be able to narrow in on where a customer has the most pain points? 5:03 Because does even the customer know what their biggest pain points are? You just described sometimes they don't even know. I like your question a lot. I think that is really good insight. 5:12 We live in this time of big data and data analytics, and all of that is important, and it clearly has its part in the connected strategy. 5:20 But I found oftentimes in my work that these pain points, you really find through small data. 5:25 You find by just really interviewing customers, observing customers, spending time kind of with customers, with patients in their homes, and that this, this small data oftentimes gives you the insight. 5:38 The big data comes at a later s- uh, point in the journey. But, uh, just on this design thinking is a big buzzword these days. 5:45 Really understanding your customers is so critical to design the right journeys for them.Is there a time period when you understand your customer? Because I think we're always-- We, we want things instantaneously. 5:58 We've become a society that wants things fast. But getting to know your customer sometimes doesn't happen overnight. It takes getting to know them, but sometimes getting to know them, you've already lost the customer. 6:09 So is there a, an, a way to get that strategy and really study a customer so it's not too long, it's not too quick, but a right balance of being able to gather that right key data strategically? 6:24 It's an iterative process, right? So we say the journey, we think about the journey that we just discussed here in terms of three Rs. There's the recognition part, recognize the customer, the need. 6:35 The customer or the firm has to turn this into some form of request for a product or, or a service. Then there is, uh, the respond. The firm has to respond with the delivery of that product or service. 6:46 So we have recognize, request, respond, and then the fourth R is repeat. 6:51 And if we do this over and over, through that repetition, we get better at understanding the customer, we get better at understanding the market, and that's how we build those deep relationships and also how we develop ourselves a competitive advantage that gives us as a firm an edge over our rivals. 7:10 Are there things that are... You just described that recognition, respond, and repeat. 7:14 Are there things in similar customers that are repeatable and that you can actually say, "I don't have to," I, I use the expression, you know, "reinvent the wheel" for one customer to another, that you can repeat with each different customer? 7:29 'Cause some customers are unique, others are not. So there are two types of learning that you have to think about when it comes to this repetition, right? I wanna understand, I wanna learn about you, Peggy. 7:40 I wanna basically make sure that I figure out your preferences, but with all due respect, uh, I mean, there are many other folks who have similar kind of profiles and consumer data like you. 7:50 And as I learn about this population, this market segment as a whole, I can start adjusting my assortment, my product line, my portfolios of offerings of services. 8:00 And that allows me to basically again be able to get a competitive edge over my competitors. 8:04 So Netflix learns about you and your viewing preferences, but Netflix is also uniquely positioned to produce new content because they've learned about so many other people like you, and again, that gives them an intelligence that provides them with a competitive edge over the others. 8:21 When we look to the future, how is it going to change? We've got about a minute left. How is the market gonna change as we continue to study our customers? 8:29 Well, I, I, I know as a scholar and as a researcher of the field of innovation that forecasting is a very dangerous kind of field to enter. [chuckles] It will be more connected, I have no doubt. 8:39 I do think that we will see a variety of these connected relationships explode. We do not believe that there's a one-size-fits-all, that it's everything is gonna go automated. 8:47 We're gonna see a variety of assortment and assortment of relationships going from the respond to re-desire, where the customer's in control, all the way to the automatic execution, where the firm is in control. 9:00 Christian Terwiesch, Professor of Operations and Information Management at the Wharton School at the University of Pennsylvania, thank you so much. Where can our listeners go to learn more about what you're doing? 9:09 Well, we launched a book called Connected Strategy. 9:11 We also have a website, connectedstrategy.com, where we have books, podcasts, interviews that we had with leading executives in the field to help, that helped us write the book, really. 9:21 We have examples from the book, worksheets, and lots of more i-i-information for people that are interested. All right. Christian, thank you so much. All right, listeners, we're out of time. 9:30 Remember, we are broadcast live every Tuesday at twelve PM Central. Tweet at us @ConnectWMAG. Remember, this is The Peggy Smedley Show, the podcasting voice of IoT and digital transformation. 9:42 And remember, with great technology comes great responsibility. 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