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What Amazon Pharmacy Means for Organizations Looking for Post-COVID Growth Moves

This latest disruption is potentially enormous. It also exposes plenty of behavioral white spaces.

Amazon just announced its online pharmacy, news the healthcare world has long expected. And while much will be said about what Amazon Pharmacy means for the $1.2 trillion prescription drug business, we believe there’s something even bigger going on here. And it offers lessons to every company seeking growth in the post-COVID-19 world.

Amazon is proving once again that digital transformation isn’t just about technology. It’s about moving at “the speed of digital” and giving customers what they need. The e-commerce giant is merely acting on a template for growth that works in every industry and for every brand: When people begin to start moving through their lives differently, it creates upheaval, revealing new pockets of need. And the space between these changed behaviors offers abundant growth opportunities for every business willing to study them closely and act. We call these pockets of new opportunity behavioral white spaces.

Amazon’s timing offers an important lesson. This move has been brewing for years, even before its acquisition of PillPack in 2018. The company’s value proposition–getting people what they need, fast–made pharmacy an obvious extension. Who wouldn’t like to get routine prescriptions filled online, as quickly and seamlessly as every other Amazon Prime purchase?

But while it had been laying the groundwork for years, COVID-19 changed the way the world views healthcare. Consumers have always been eager for digital solutions to staying healthy and making their lives more convenient. The pandemic is clarifying, crystallizing and augmenting these new preferences, creating the perfect moment for Amazon’s launch.

Assessing the new playing field

Growth strategists should look beyond the inevitable “Amazon set to crush yet another industry” headlines. First, we are not sure it will prove to be true. Secondly, the news is more significant than that, highlighting an equal-opportunity growth moment. While there are multiple moves available, the best choices will differ depending on each company’s purpose and value proposition. Amazon is just following the universal rules of innovation and customer-centricity: What are the new customer needs, and how can we meet them in new and better ways?

There are many ways to win within today’s environment. Other companies have capitalized on the need for home care and the benefits and convenience of home delivery. Take Express Scripts Pharmacy as an example which relaunched its enhanced digital experience and consumer-centric brand earlier this summer. Unlike Amazon or new entrants in the pharmacy space, they’re building upon their deep clinical expertise, legacy in practicing pharmacy, ease and convenience of home delivery, coupled with 24/7 access to specially trained pharmacists.

“The space between these changed behaviors offers abundant growth opportunities for every business willing to study them closely and act.”

Express Scripts Pharmacy used key insights to understand that for many consumers, particularly those with multiple chronic conditions, pharmacist expertise matters more than convenience. And it’s worth pointing out that Americans have enormous trust and respect for their pharmacists, with Gallup reporting they are just behind nurses and doctors.

That’s just two players attacking the space from two different angles. There are certainly many other moves still available.

One way to analyze potential growth moves is to think about three different roles organizations can play as consumers continue to speed through these rapid changes in both needs and expectations. We like to use the “transformers, creators and invaders” framework when thinking about industry disruption. Healthcare provides some stellar examples.

Express Scripts Pharmacy is a transformer. It’s an example of a company reinventing itself and its offerings, using experience-first initiatives to reach its customers in new–and better–ways. Companies, like Teladoc, Oscar and Higi, are creators. And then there are invaders, like Amazon, moving from one category to another.


FINAL THOUGHTS

Whether one’s ambition is to be a transformer, creator or invader, the lesson is the same: For enterprises prepared to meet the moment, dive into these behavioral white spaces and listen to consumers, the opportunities for uncommon growth are there for the taking.

Wondering what behavioral white spaces are opening up for your organization and how to map out the best growth opportunities in the post-pandemic world? Contact us today.

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Digital Transformation in Southeast Asia: Three Key Aspects that Accelerate Growth

Our research shows that optimism, commitment and ambition are powering major regional gains.

With the backdrop of the COVID-19 crisis, there is more pressure for digital transformation to accelerate in many organizations. In our latest global study, Altimeter, a Prophet company surveyed more than 600 key executives, including 100 in Southeast Asia (SEA) across Singapore, Indonesia and Vietnam, about how they are pursuing digital transformation and the impact of the pandemic.

Our study reveals interesting differences between digital transformation efforts and sentiment in Southeast Asia versus the rest of the world. (Download the full SEA report here)

There are three distinct aspects that made Southeast Asia companies’ digital transformation journey stand out.

1. Optimism: Accelerating Digital Transformation Amid COVID-19 Crisis

While the rest of the world is becoming more risk-averse amid the crisis, SEA expresses optimism about the future. In fact, a significantly higher number of companies have accelerated their digital transformation initiatives and are focused on growth.

Figure 1: Digital Transformation Initiatives Shifted Amidst COVID-19
“How have your digital transformation initiatives shifted because of the spread of COVID-19”

Similar to the rest of the world, SEA companies have seen or are anticipating drop-offs of revenue as a result of COVID-19; however, the impact is less significant. Thanks to the massive and quick preventive measures enacted by the government at an early stage, Vietnam is suffering the least financially during COVID-19. Specifically, 27 percent of respondents stated that they have seen no impact on revenue or don’t anticipate any future impact, followed by Indonesia (15%) and Singapore (13%)

Figure 2: The Impact of COVID-19 on Financial Performance
“What impact has COVID-19 had on your financial performance?”

Vietnam’s commitment to transform digitally had already started before the pandemic with the launch of the National Public Service Portal and Resolution for Industry 4.0. It accelerated during the COVID-19 outbreak when offline economic activities slowed down because of strong government policies. In June 2020, the country launched a National Digital Transformation Roadmap to further advance digital transformation around three key pillars i.e. e-government, e-economy and e-society. The Singapore government also launched similar initiatives offering subsidies and grants to help companies embark or accelerate its digital transformation programs.

“While the rest of the world is becoming more risk-averse amid the crisis, SEA expresses optimism about the future.”

2. Commitment: Focused Executive Sponsorship to Carry out Change

There is stronger executive sponsorship on digital transformation in SEA. Here, digital transformation is primarily driven by the CEO (30% in SEA vs. 25% in rest of the world), and twice as likely to be owned by the CDO (27% in SEA vs. 13% in rest of the world) or Board of Directors (14% in SEA vs. 6% in rest of the world).

Figure 3: Executive Sponsorship for Digital Transformation
“Which executive officially owns or sponsors the digital transformation initiative”

Leaders in SEA not only sponsor digital transformation in spirit, but understand its importance and follow through with frequent and visible support. Seventy-two percent of the executives in SEA see digital transformation as one of their top three business priorities. Thirty-four percent say digital transformation is constantly connected to higher business strategy and a top priority (vs. 23% in the rest of the world).

Figure 4: Nature of Executive Leadership
“Which of these statements best describes the nature of executive leadership in your organization”

With strong leadership, digital transformation is optimistically embraced throughout organizations in SEA. When asked about their sentiment towards digital transformation, SEA companies appear to be more optimistic across multiple aspects — stronger culture, engaged workforce and stronger prospects. Leadership’s confidence in digital transformation is stronger than other global countries, with 90 percent leadership support vs. 76 percent in the rest of the world.

Figure 5: Overall Sentiment Towards Digital Transformation
“Please indicate how much you agree with each of the following statements, from 1 (strongly disagree) to 5 (strongly agree), T2B%”

3. Ambition: Investing in Technologies to Drive Exponential Growth

Comprising some of the world’s fastest-growing markets, digital transformation in SEA is about efficient market expansion and customer acquisition supported by agile and flexible operations, innovation and technologies.

The SEA market is highly diverse in terms of language, culture and behavior. Digital transformation ensures that the technology and data are in place to better support operations (48% in SEA vs. 32% in rest of the world), and allow agility and flexibility to quickly capture opportunities (36% in SEA vs. 30% in the rest of the world). With a more positive market outlook, SEA companies are less concerned about ‘playing defense’ with initiatives like creating a culture to handle disruption (8% in SEA vs. 15% in the rest of the world).

Figure 6: Top Drivers of Digital Transformation
“What are the key drivers of digital transformation within your organization?”

Thanks to higher proliferation of mobile devices and more affordable networks, internet users in SEA had exceeded 300M by 2019. In order to meet the growing demand of this community, technology investments in SEA are more about connectivity and social & consumer platforms.

E-commerce and ride-hailing are the most promising sectors in SEA, supported by investments from China and U.S. tech giants e.g. Alibaba, Tencent, Didi and Amazon. Relevant technologies are receiving higher attention than the rest of the world. Forty percent of respondents selected IoT as their investment priority (vs. 29% in the rest of the world), 26 percent selected e-commerce platform (vs. 19% in the rest of world), and 21 percent selected AR/VR (vs. 14% in the rest of world).

Figure 7: Prioritized Technology Investments
“What are your top priorities for technology investments in 2020”

While global companies are still at the testing or infancy stage of using AI, it is increasingly implemented on a regular basis and adopted in SEA. The majority of the respondents are leveraging AI extensively in driving new products, business models and customer experiences, much higher than the global (29% in SEA vs. 19% in rest of the world).

Figure 8: Use of Artificial Intelligence Within Organization
“To what extent do you use artificial intelligence (including machine learning, computer vision, natural language process, robotics, or deep learning) within your organization”

One major source of momentum is the booming of fintech and digital banking, the biggest adopters who use AI technology to enable mobile payment and fast lending services.

From a country perspective, Singapore is taking a substantial lead in AI development and adoption, fuelled by investments from the government on both software and physical infrastructure e.g., joint-innovation on intelligent robots, increased data storage capacity, open data and open government platforms, as well as high-speed network and advanced IT security.  Other countries such as the Philippines, Malaysia, Vietnam and Indonesia are lagging, but gradually catching up.

However, SEA is still catching up on developing more modern tech infrastructure e.g. cloud and cybersecurity (see Figure 7).


FINAL THOUGHTS

Regardless of financial challenges, COVID-19 has in fact presented more opportunities for companies in Southeast Asia to accelerate their digital transformation agendas. As the fourth largest trading and consuming region in the world, with one of the largest young and digitally savvy segments, companies in SEA should keep investing in building new digital capabilities and technologies to stay competitive, while conveying a strong strategic vision and executive leadership. Last but not least, it is important to increase efforts on modernizing IT infrastructure to catch up with other leading markets in the world.

Download the full PDF report, or get in touch to learn more about how to accelerate your digital transformation in SEA to drive uncommon growth.

REPORT

Reclaiming Interest: A Transformation Playbook for the Insurance Industry

Learn to transform your organization from the inside-out, adding the capabilities and talent needed right now.

While insurance companies have made much progress in reinventing themselves for today’s customers, the results are clear: there’s still some way to go. As many turn their attention toward planning and formulating their strategies for the year ahead, this playbook from our Financial Services practice outlines the different levers to pull in order to speed up digital transformation efforts and customer experience initiatives.

In this playbook you will learn:

  • How insurers can transform their organizations from the inside out by effecting culture change and equipping the business with the right talent and capabilities to succeed in 2021.
  • How a customer-centric approach can help your business, how to get started and how to measure you efforts.
  • What the state of transformation is in the industry today and the reasons to hit the gas now.

Download the full report below.

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Digital Transformation in China: Opportunities for Growth

Our research shows that while CEOs are great transformation leaders, they are less skillful communicators.

At the end of 2020, global companies know that digital transformation is a critical piece of moving their businesses forward. With the challenges brought by COVID-19 and other geopolitical factors, new opportunities and industry patterns have emerged. It is now imperative for companies in China to seize these opportunities and accelerate their digital transformation agendas.

“It is now imperative for companies in China to seize these opportunities and accelerate their digital transformation agendas.”

In our new report “The 2020 State of Digital Transformation,” Altimeter, a Prophet company. surveyed more than 600 executives, including 100 in China, about how they are pursuing digital transformation. The research revealed some distinct regional differences and highlighted the opportunities for companies in China to achieve uncommon growth. (Download the full China report here)

The State of Digital Transformation in China: Understanding the Driving Force

Digital transformation is a firm-wide agenda that requires a clear vision and commitment communicated from the top.

In China, digital transformation initiatives are mostly sponsored by the CEO, CMO and CIO/CTO. Together, these roles provide sponsorship for digital transformation in 83 percent of the Chinese companies. That differs from other regions, where a broader mix of leadership is typically in charge, including the Chief Digital or Chief Innovation Officer, as well as the Board of Directors.

Figure 1: Executive Sponsorship of Digital Transformation

“Which executive officially owns or sponsors the digital transformation initiative?”

Most notably, significantly more CEOs and CMOs in China are ultimately responsible for digital transformation, at 37 percent and 13 percent respectively, compared to 24 percent and 2 percent in the rest of the world.

But there’s a problem. While CEOs lead the charge and appreciate the strategic importance of digital transformation, they often fail to communicate those transformation initiatives are considered a top priority. And they don’t provide enough visible follow-through and strategic guidance.

Figure 2: How Digital Transformation is Driven by Leadership

“Which of these statements best describes the nature of executive leadership in your organization?”

Because they fail to articulate the vision adequately and don’t actively promote it, mixed signals can lead to confusion for employees and customers. Just 46 percent of the respondents in China say their executive leadership has made digital transformation a top-three priority, compared to 61 percent in the rest of the world. And 22 percent say their executive leadership doesn’t see digital transformation as a focus.

Top drivers of transformation in China: Building a more resilient and high-performance culture and operation.

The events of 2020 have changed the way the world looks at digital transformation. Instead of focusing on external drivers, such as finding new markets and customers, they are more driven by internal needs to focus on their operations.

Figure 3: The Top Drivers of Digital Transformation

“What are the key drivers of digital transformation within your organization? Select up to three.”

Chinese companies say that developing a better culture, with more collaboration and innovation, is now the leading digital transformation driver. It was named by 30 percent of Chinese executives, compared to 22 percent in the rest of the world. That is closely followed by increasing productivity (29%) and working in a more agile, flexible way (28%).

Companies here are also more sharply focused on building resilience to keep up with change and global disruption. Some 21 percent of Chinese executives say they are looking for an increased ability to comply with new regulatory standards, compared to 14 percent of the rest of the world. And 20 percent hope to become more resilient to disruption, versus 16 percent. Notably, more believe they can actively create a culture capable of handling that disruption, at 20 percent, versus 12 percent in other regions.

Advance the Transformation: Opportunities for Building Strength

We observed some distinct characteristics of how companies approach digital transformation and identified three opportunity areas they should focus on to move faster toward transformation goals:

Lean into the future by pursuing multiple technologies

Figure 4: Prioritized Technology Investments

“What are your top priorities for technology investments in 2020? Select up to five.”

Around the world, companies are heavily investing in the same five technologies: Cybersecurity, Cloud, Machine Learning and Artificial Intelligence, 5G and Internet of Things.

Although Chinese companies are investing in these technologies too, they are also more diversified, putting their eggs in far more baskets.

Continuing to invest in emerging technology – and hiring the talent that can best help leverage it – will build competitive advantages and enhance agility, enabling companies to move quickly into new directions.

Integrate more, collaborate better

Chinese companies are also behind other regions in their ability to get employees to collaborate.

Figure 5: Employee Collaboration and Engagement

“Which of these statements best describes how your organization is transforming employee collaboration and engagement?”

In China, just 24 percent of the respondents say their employees are connected throughout the organization, versus 32 percent in the rest of the world. And 38 percent of Chinese companies say that while workers frequently use employee platforms, digital engagement is still limited when working beyond the project team, compared to 27 percent of the rest of the world.

Figure 6: Success Metrics Across Functions

“How do you currently measure success across marketing, sales and service teams?”

Moreover, less than half (44%) of Chinese executives say their companies have aligned customer and revenue KPIs across marketing, sales and service teams. Yet 67 percent of those in the rest of the world have achieved this. As the report emphasizes, unifying metrics is an essential requirement for digital maturity.

Our experience substantiates that. While Chinese companies seem especially skillful at building and deploying highly effective project teams, they need broader collaboration across different functions to achieve maximum impact.

Double down on data

Chinese companies trail other regions in leveraging data as a core strategic component.

Figure 7: The Use of Data

“To what extent do you have clean and accessible data, clear processes, and organizational support for and discipline around data science in your organization?”

Only 38 percent say their company has succeeded in making data analytics a central capability, compared to more than half (51%) for the rest of the world. That means 62 percent still have the opportunity to expand and build their data capabilities.


FINAL THOUGHTS

Beyond digitizing marketing and sales, digital maturity is also about strengthening organizational operations and driving innovation to increase revenue. That requires a new kind of leadership. CEOs and other leaders must become cheerleaders for digital progress.

Digital leaders can’t afford to lose sight of the need to invest in digital transformation, even when budgets tighten. While no one can predict future moments of opportunity, they will continue to come, creating digital leaders’ chances to further outperform digital laggards.

Download the full PDF report, or get in touch to learn more about how to advance your digital transformation in China to grow better.

REPORT

The State of Digital Transformation in China: 2020 Report

CEOs here are more likely to have oversight of transformation. But they are worse at communicating about it.

Advancing Digital Transformation to Grow Better in China

With the challenges brought by COVID-19 and other geopolitical factors, new opportunities and industry patterns have emerged. It is now imperative for companies in China to seize these opportunities and accelerate their digital transformation agenda.

In our new report The 2020 State of Digital Transformation, Altimeter, a Prophet company, surveyed more than 600 executives, including 100 in China, about how they are pursuing digital transformation. The research revealed some distinct regional differences and highlighted the opportunities for companies in China to achieve uncommon growth.

What you will learn in this report:

  • Significantly more Chinese CEOs understand they are ultimately responsible for digital transformation compared to the rest of the world.
  • Yet CEOs in China often fail to communicate transformation as a top priority and don’t provide enough strategic guidance.
  • The top drivers of digital transformation in China are to build a more resilient and high-performance culture and operation.
  • Compliance concerns, resistance to change and budget are the top three challenges of digital transformation.
  • While the rest of the world is committed to five main technologies, Chinese companies are more diversified by placing smaller bets in more types of tech.
  • There is still much work to be done for Chinese companies to allow better collaboration across all departments and functions.
  • Chinese companies still trail other regions in making data use a core strategic component.

Download the full report below.

Download Advancing Digital Transformation to Grow Better in China

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Thank you for your interest in Altimeter’s research!

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Five DTC Growth Moves to Optimize Your Investments

These 10 real-world examples will show you how to optimize your investments in the rapidly shifting direct-to-consumer landscape.

For the right investors, the rapidly shifting direct-to-consumer (DTC) landscape presents plenty of possibilities. Many of these digital natives are just one cash infusion away from dominating their category–as long as they make the right strategic DTC growth moves.

“We find companies that have the potential for market disruptive growth and profitability, and the positioning to generate the most likely–and fastest–returns on investment.”

The pandemic-fueled surge in all things e-commerce is pushing many to record sales, with business booming at companies like Peloton, Quip and HelloFresh. But not all DTC companies have the same growth potential, and there have been plenty of notable flame-outs. In our work for funds looking to make DTC investments, whether it’s in due diligence or consulting on the use of funds post-transaction, we’re intent on optimizing investment. We find companies that have the potential for market disruptive growth and profitability, and the positioning to generate the most likely–and fastest–returns on investment.

Beyond assessing fundamentals, including how well possible targets have penetrated their customer base, brand staying power and competitive moats, we zero in on potential, based on specific growth moves. We’ve seen that companies with the ability to lean into these five strategies have the best chance to achieve uncommon growth.

We look for companies that are ….

1. Continually Tapping Unmet Needs

The most successful DTC brands started with an unmet need, filling some area of behavioral white space. Millennials, for example, wanted to start investing but felt ignored. Companies like E-Trade and Charles Schwab seemed like their parents’ tools. Robinhood, with its “investing for everyone” credo, stepped in to draw millions of new stock-market investors, with impressive (and occasionally controversial) results.

Lemonade

Our favorite example is Lemonade, which has used behavioral nudges and machine thinking to become the most disruptive force in homeowners, renters, condo and now pet insurance. In return for signing the honesty pledge, customers get transparent prices and lightning-fast service. While many Gen X and older customers may not have heard of it, young people love it. “I just bought insurance on Lemonade,” one of my young associates told me the other day. “And the user experience was freaking awesome.” Has anyone ever said that about insurance until Lemonade came along?


2. Ending Churn Through Customer Obsession

Given the massive spending needed to acquire customers, the strongest brands are those that maximize that investment. Strong retention requires a shift in focus from product obsession (the natural starting point for so many DTC companies) to true customer obsession.

Stitch Fix

Stitch Fix is continually updating its offer, finding new ways to please existing customers and new customers to please. Its core offer is a fashion fix with five carefully curated choices, and millions love how the personalization gets more accurate over time. But many don’t want to shop this way. So it recently introduced Direct Buy, enabling old and new customers to dive deep into single categories, boosting incremental sales.


3. Uncovering Value Through Deep Customer Analytics

The fastest-growing companies are those that do the most with their data.

Looking closely at questions of price elasticity, for example, can make all the difference in expansion, particularly in new territories. And while this has long been the promise of DTC companies, the reality is that the more data they collect, the less likely they are to use it. IDC estimates that about 90% of what businesses collect is “dark data,” and never used at all–let alone effectively.

Canoo

So we pay close attention to those that dig into data in every channel. Canoo, for example, is so expert at harnessing tech and innovation insights that it’s poised to launch its electric vehicles after 19 months, not five years. And based on analytics, it’s confident that higher-end consumers will love its subscription-only model, with as little as a one-month commitment.

MeUndies

Another data-savvy company is MeUndies, which has used what it’s learned from social media to sell more than 10 million pairs of underpants. Even rarer for DTC companies, it’s been profitable for three years.


4. Finding New Adjacencies

While many DTC brands build their business on a single product, they eventually need to expand to keep growing, either geographically or by adding new categories. This is a moment when many need more cash, new investors or the ability to acquire or partner with other companies.

Casper

Broadening offers while maintaining category credibility often comes down to the right messaging and positioning. Casper, for example, launched in 2014 and quickly became successful. But as competitors piled on, it’s needed to find new ways to expand. With a promise to become “the Nike of sleep,” it now sells pillows, sheets and weighted blankets. But more importantly, it positions itself as the expert on sleep wellness.

Airbnb

Similarly, Airbnb recognized that it could find growth by moving beyond lodging and selling experiences that make people want to travel. From sushi tours of downtown Tokyo to paddleboarding with sea lions, these adventures are adding millions in revenue. (When COVID-19 struck, they also provided a quick pivot to virtual experiences.)


5. Partnering Strategically to Scale the Ecosystem

Headspace and Spotify

Finding partners is a way to access new customers and stay relevant. Headspace, the popular meditation app, has increased its influence exponentially by partnering with Nike, Spotify and the NBA.

Everlane and Nordstrom

Retail is an obvious choice and can be a game-changer. Even non-digital consumers can discover brands like Native, Harry’s, Barkbox and Quip at Target, for instance, or find Everlane and Birdies at Nordstrom.

Alo and Animal Crossing

Others leverage pop culture. Alo, a yoga company, and Tatcha Beauty teamed up with Animal Crossing for product launches within the popular video game.

Allbirds and Adidas

The partnerships that we believe spark the most growth are those that combine scale and purpose. Allbirds, which has built its impressive valuation on sustainable fashion sneakers, recently partnered with Adidas, which has been trying to increase visibility for sustainability efforts. Interestingly, this unlikely partnership with competitive brands introduced a collaboration that pairs Allbirds’ innovative approach to materials with Adidas’ marketing and manufacturing might, and is set to produce the world’s first carbon-neutral performance shoe next year.



FINAL THOUGHTS

As they sift through DTC companies, investors should look for potential targets that can make some (or all) of these five growth moves. These are the nimble brands that can unlock the fastest returns for investors and find exceptional growth for themselves.

Prophet is obsessed with helping clients win with their customers and unlock uncommon growth in this digital age. Contact us to learn more about what we are doing in all things direct-to-consumer.

REPORT

Slingshot Your Organization Towards a More Resilient Future

To change quickly and build resiliency, organizations need to prioritize higher-impact cultural shifts.

Rarely have organizations been forced to tackle volatility in so many areas all at once until the global coronavirus pandemic, demanding many to evolve in ways they hadn’t previously considered plausible, or possible to accomplish in such short timeframes. With the right approach, however, the gravity of the current situation can become an opportunity, a slingshot to accelerate transformation and speed an organization’s course to a more resilient future.

From witnessing the lightspeed changes being made in organizations around the world over the past few months, the latest report from our Organization & Culture expertsThe Slingshot Effect – lays out the specific shifts organizations need to make now. With the right processes, commitment, workforce and mindset, others can learn how to ‘slingshot’ their organizations’ transformation, build the flexibility to thrive on change and the agility to respond to any future shocks faster.

In this report you will learn:

  • Why taking a human-centered approach remains a key element in any successful transformation
  • How to determine the most relevant shift in order to build resilience where your organization needs it most
  • Where to prioritize action and guidance on what to do next
  • Examples of how other companies are moving forward

Download the report below.

Download The Slingshot Effect: Accelerating Your Organization’s Journey to a Resilient World

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Customer-Centricity: Closing the Gap Between Digital and Human

As bots get better, brands are challenging their assumptions about effective machine communication.

The past few months have made it more apparent than ever that shifting to more virtual offerings and seamless interfaces are now the main way for businesses to survive and thrive in our online post-COVID world. These changes – accelerated but not triggered by the pandemic – have fundamentally validated one of Prophet’s core convictions: customer-centricity shouldn’t be determined by what companies think is technically feasible. It has to start with us human beings, putting the real needs of people at the center of every decision. It is clearly digitally driven, but at the core, customer-centricity is always a deeply human endeavor.

For too many companies for too long, the strategy has followed what is technically feasible instead of the other way around. But for the few that have been focused on a people-first approach, having their strategy informed from what humans need first before shifting to what is possible on the back end, the success is apparent.

“It is clearly digitally driven, but at the core, customer-centricity is always a deeply human endeavor.”

Companies like Amazon or Netflix – two highly relevant brands and businesses everyone would agree – are heralded as paragons of the digital age but these brands have become the powerhouses they are because they are human-focused. While there are billions of dollars of tech investments behind each, their unwavering focus on their customer and delivering an experience for them that is fast, simple and incredibly gratifying drives what they do and their bottom line.

Of course, for companies in manufacturing, life sciences or financial services, reinventing themselves as digital entities is more complicated than for say a company with a digitally native business model and their failures often show a similar pattern – namely that their strategies demonstrate a lack of clear thinking from the customer’s standpoint. They’re preoccupied with their products, their sales and their success. But now it’s time to look at everything through the lens of the customer, this is where it should start. Success starts with knowing the buyer. What is then required is a holistic view of the digital landscape with technical feasibilities assessed early on. That is how you bridge the often missed gap between a customer-centric digital strategy and a human-focused one.

Faux humans: The rise of bots

The reason we have opened our doors in such large numbers to tools like Siri and Alexa comes down to convenience, ease of use and the fact you speak to them as you would a human. They are customizable, often adapt to your preferences and deliver an experience you can consistently count on. And companies are eager to take advantage.

One of our favorite examples of the successful use of artificial-intelligence-driven empathy comes from the global insurance company, AXA. To help it successfully grow its business in Asia, AXA had the desire to develop a new digital customer engagement proposition, one that humanized the experience and provided a consistent customer journey and brand experience across the region. Emma was born – AXA’s first humanized user interface, which has become the core of the brand’s new digital customer experience, handling everything from claims to servicing, health content to symptom checks and helping individuals find the solutions and content most relevant to their needs. She’s not just efficient and accurate. She’s a friendly embodiment of a brand committed to assisting people as they strive for financial wellness, whilst successfully bridging the gap between digital engagement and financial advisor partners.

And recognizing the massive gap in helping people deal with the mental-health challenges posed by the pandemic, AXA expanded Emma’s skills to deftly field calls about mental-health questions. That’s a high-risk undertaking, but initial tests show customers don’t just appreciate the effort, they’re using the service extensively.

Challenge definitions: What does it mean to be human?

It’s easy to make assumptions, and companies often mistakenly believe they know everything there is to know about their customers. That’s seldom true, especially in a period of such massive upheaval. It’s critical that companies take this time to go deep as they gather insights, with an entirely rededicated sense of empathy and rigorous analytics. For us, that typically means finding out which drivers are the most essential, right now, for customers and prospects. What makes one brand relevant to them and another forgettable? Are they looking for inspiration or efficiency? Do they feel the brand is available to them when and where they need it? Do they sense it meshes with their own values?

With each new wave of technological development, the digital age shifts shapes and speeds up. And it’s vital that leaders focus on the potential of emerging technology. It’s critical that companies do not let themselves fall behind in efforts to continue to be as connected, nimble and data-driven as can be. They need to continually ask: What tools do we have? How digital is our go-to-market approach? How automated is our production?

But too often, we have seen companies spend tens of millions – and sometimes hundreds of millions – in tech investments before understanding how these initiatives might help customers and eventually drive growth. The critical decisions must always balance both: What do your customers need most right now and what is your company capable of providing?


FINAL THOUGHTS

Digital investments, like any other use of capital, should only be made when companies are clear on how they will serve the largest purpose. Addressing just the digital possibilities in a siloed view is a surefire way for a business to fall short in today’s reality. It is the combination of instilling a human-focused process with digital capabilities and prowess that sets up a business for customer-centric success.

If you’d like to learn more about how a customer-centric strategy can improve the growth of your business then reach out today. 

REPORT

2021 Growth Acceleration Playbook

To achieve uncommon growth, double down on cultural changes to equip your teams for the future.

For most business leaders, this is a pivotal time. The decisions being made are dictating whether you survive or thrive in these uncertain times and there is enormous pressure on leaders to step up and provide the structure, guidance and clear communication that people are looking for.

This playbook brings together some of the latest thinking from our experts to help with those decisions, from how to double down on your company culture and equip your teams for the future way of working, to understanding the new needs of your customer and making the digital go-to-market shift. It provides some actionable ideas to get your business back on track now as we move out of this crisis and for the growth opportunities beyond.

Download The Slingshot Effect: Accelerating Your Organization’s Journey to a Resilient World

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David Aaker on COVID-19 & Its Implications for Brands

As consumers value the basics more, companies promising simplicity and reliability have a new advantage.

Branding expert David Aaker recently launched his 17th book, Owning Game-Changing Subcategories: Uncommon Growth in a Digital Age. Associate Partner Bernhard Schaar from Prophet’s Berlin office spoke to Prophet Vice Chairman David Aaker to discuss the background of his new book, his perspectives on COVID-19 and its implications for brands and branding.

Bernhard Schaar: Your latest book, “Owning Game-Changing Subcategories: Uncommon Growth in the Digital Age,” explores why growth is so important for companies. Could you explain briefly why that is and what you mean by the term “uncommon growth”?

David Aaker: Growth is healthy because it brings benefits to different stakeholders. For customers, it generates reassurance and credibility and often energy and excitement as well. For organizations, it represents momentum—growth creates growth. For employees, it represents opportunity, pride in the organization and even meaning in work-life—the absence of growth can be discouraging or even depressing and job-threatening.

Uncommon growth is growth that is substantially higher than the expected growth year-to-year. It is out of the ordinary.

BS: What are the key learnings you would like readers to get from your book?

DA: I would highlight four main learnings.

  • First, real growth comes from new subcategory creation defined by attributes that customers view as “must haves”, not from a “my brand is better than your brand” strategy. Competing only on incremental improvements is no longer enough.
  • Second, to grow you need to become the exemplar brand of the subcategory, to position, scale and build barriers.
  • Third, brand communities are an important way for customers to become involved in the subcategory and bond with the brand and others who share a common interest and/or activity.
  • Fourth, digital has put subcategory creation on steroids, with the rapid acceleration of e-commerce, social media, live streaming, O2O and Internet of Things (IoT).

BS: Let’s talk about each of these to better understand your perspective. What do you mean with subcategories and why are they important for growth?

DA: A key element to successful subcategory competition that is ignored in most innovation and strategy books is branding. I wanted to introduce brand into the arena of strategic innovation and market disruption. An exemplar brand has three jobs in addition to refining and testing the “must haves”:

  1. It needs to position the subcategory, making the “must haves” visible.
  2. It needs to be scaled to create the momentum of fast growth,
  3. It needs to create barriers, one way of doing that is storytelling – which, by the way, was treated in my previous book “Signature Stories” in great detail.

BS: You mentioned branded communities as one of the key insights of your book. What role do they play in helping brands to own a subcategory?

DA: Branded communities are groups of people that bond because of shared involvement in some activity or interest area connected to a brand. Brand communities create or enhance brand relationships, add energy and involvement, provide credibility and build barriers to competitors. It is hard to draw a customer away from a brand community they are engaged in to another. Nike, for example, has built a strong brand community of sports lovers who share the same passion and aspirations. It has been built in part by integrating its digital platforms to connect and engage. Its agility and creativity was shown when it rapidly launched its virtual workout classes via their Nike Training Club app.

BS: What has been the impact of digital on the creation of new subcategories?

DA: Creating new subcategories has always been, with rare exceptions, the only path to real growth. But the arrival of digital in the last two decades has put subcategory creation on steroids. They are now more frequent, they grow much faster and they have more upside, by a big margin. In the digital era, a huge number of subcategories have been generated or enabled by:

  • The Internet of Things (IoT) has created smart homes with products like the NEXT thermostat and forced manufacturers like Bosch to adapt by adding digital features to their product portfolio. Other technological advances such as GPS, which has enabled Uber and the expanded Internet, made the iPhone and thousands more products possible.
  • E-commerce. Entrepreneurs no longer face the barrier of getting into retail or creating a salesforce. Brands like AirBnB globally, or fashion brands like Zalando, or digital pioneers like eBay and online automotive retailer Mobile Dealer have enjoyed almost instant distribution and access to markets.
  • Social media. For some that are skilled and lucky in using social media and websites it can replace months of planning and a huge media budget with fast and sometimes very inexpensive communication. Dollar Shave Club started with a video that cost $5000 and attracted 12,000 members in two days starting a firm that was sold four years later for one billion dollars.

BS: What recommendations do you have for brand executives to achieve uncommon growth through owning game-changing subcategories?

DA: In the start-up world, this thinking is fundamental to their business – they are doing exactly that already. But large established firms need to prepare for this new reality by keeping up with technological development, adapting their distribution to include e-commerce and becoming good at communication in the digital age. Strategically, there needs to be a realization that the best path to growth is now owning new subcategories that change the customer experience or brand relationship.

BS: Your book was written pre-COVID-19 but as we are moving towards a New Normal, we can see changes happening and priorities shifting both on the consumer and brand side. What is your point of view on this? How have consumers and their expectations changed?

DAa: There are a host of changes in behavior caused by the crisis – among others, people are valuing the basics more. The search for simplicity and reliability is more pronounced. More fundamentally, peoples’ values and acknowledging what is really important to them have changed. Social contacts, trust, authenticity, higher purpose and keeping safe have all been dialed up. Some of these changes will represent opportunities for new ways of serving customers.

BS: What is keeping brands from doing this? What can, for example, companies do to create and own more of these game-changing subcategories you highlight?

DA: This is probably an organizational issue. Much of what we, at Prophet, talk about in management culture and digital transformation applies. The basic problem is that established businesses within big firms are generating strong profits and have financial and political control over budgets and strategies. They are really adept at operations, making incremental improvements in offerings and marketing and showing positive return for those improvements. They are also good at pointing out flaws in strategies that have not been fully developed and tested. As a result, moonshots get killed or starved.

“Uncommon growth is growth that is substantially higher than the expected growth year-to-year. It is out of the ordinary.”

A good way to move ahead is to protect the future efforts by creating a new subcategory and giving a separate budget, and perhaps even a separate organization, that physically is separated from the core organization. A flat organizational structure can also help. Additionally, a firm can work on its culture and decision-making process to allow the innovation around new subcategories to live or even thrive. The measurement of people needs to reflect a risky mission and should not be mainly geared to running the existing business well. Game-changing subcategories don’t create themselves; you need to find and promote them.

BS: Do you have any final thoughts you would like to share?

DA: In regular times, and even more so in challenging times such as today, those brands that disrupt the marketplace by creating new subcategories that are anchored on a set of “must haves” and effective exemplar brands are the ones that will continue to achieve uncommon growth. If a loyal brand community can be developed, then success will be assured.


FINAL THOUGHTS

In the future, the successful brands, in my view, will often be those that are agile and flexible, have employed digital effectively, are truly empathic and have a higher purpose and find ways to connect with customers in a meaningful and involving way.

Want to interview Dave or feature him on your next podcast? Please connect with David Aaker directly.

Explore how David Aaker and Prophet can help your business create game-changing brands that resonate with both your customers and employees.

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The Four Pathways to Cultural Change and Business Transformation in China

Our research illuminates the change mechanisms with the most impact, both within China and beyond.

As organizations build resilience amid world-altering shifts, transformation is increasingly relevant. Yet change is challenging, and leaders are often unsure where to start–or where to go next.

For transformations to succeed, the importance of an organization’s culture is beyond question. That said, cultural transformation is often the most significant challenge to take on. Prophet’s 2020 global research based on nearly 500 global transformation leaders, “Catalysts in Action: Applying the Cultural Levers of Transformation,” identifies four pathways of cultural change intended to help companies focus.

“For transformations to succeed, the importance of an organization’s culture is beyond question.”

In this article, we discuss some of the main differences we see between companies in China and the rest of the world, with observations that can help spark uncommon growth.

In many ways, businesses in China approach transformation differently. Compared to other regions, they are more willing to embrace change, and this by a high margin. The Alibaba Group epitomizes this attitude, making “Change is the only constant” one of its core values.

Q: Which of the following best characterize the most recent significant transformation project that you have been involved with in the last two years?

More companies in China are embarking on cultural transformation to keep up with changes internally and to maintain a competitive edge externally. Ping An has started an enterprise-wide digital transformation over the last few years by embracing a culture of innovation and by encouraging to fail often and fast. ByteDance has implemented a bottom-up approach to objectives and results that encourages more transparency and an entrepreneurial spirit. Haier has made employee management and culture central to Haier’s strategy, with hundreds of internal micro companies yielding far better and faster innovations and deeper understanding of local consumers needs around the world. So, we want to understand how business leaders can accelerate growth through cultural transformation.

Proven pathways of change indicate where to start–or where to go next–in transformation. Prophet’s research identifies four pathways of cultural change: Defining, Directing, Enabling and Motivating. All paths are relevant at varying points in time. But it is important to determine which is most relevant to your company right now.

1. Defining the transformation: Don’t overlook middle management.

Consider this the “control tower” for all other pathways. It is where the company solidifies its business and brand strategy, purpose and values. The C-suite is seen as most critical to–and most responsible for–driving the transformation. But this cannot be at the expense of empowering managers, who must serve as key change agents.

This is a regional weakness in China, with only 17 percent of business-unit leaders and middle management given adequate responsibility. While companies in China are more willing to communicate the change widely across the entire organization (46 percent of Chinese companies actively engage most employees, versus 19 percent in rest of the world), decision-making is still led by C-level leaders. And managers are less empowered to drive change.

Q: What level of leadership is most responsible for driving transformation in your organization?

One of the few companies in China that realizes the importance of driving transformation from the bottom up is footwear manufacturer Belle International. A key component of its success has been decentralizing data and using digital as a tool to empower retail managers, giving them more freedom to lead their teams. “I’ve always believed that the vitality of the end market comes from the energy of each store manager and staff,” says Liang Li, executive director, in an interview with Harvard Business Review.

How to accelerate transformation: Find ways to involve BU leaders and middle managers more, creating meaningful roles. They are the connective tissue between the overarching transformation objectives, the marketplace and the day-to-day work of employees.

2. Directing the Transformation: Empowered TMOs yield impact.

This pathway requires taking a holistic view of all the governance, processes, roles, systems and tools needed to enable an operating model that makes transformation real. One way companies do this is by creating transformation management offices (TMOs). Those that have done this have a clear advantage. And those that have given these TMOs the most oversight and influence over decisions are the most successful.

This is an area where companies in China are leading in the way, both in setting up these TMOs and in giving them more oversight. With clear results: 76 percent of companies in China that have established empowered TMOs, are reporting very positive impact.

Q: Which of these best describe the impact that your organization’s transformation management office (TMO) has had?

How to accelerate transformation: A first step toward changing this is establishing a TMO. And if one already exists, make sure its scope is more than just project management. TMOs should be allowed to shape strategy, break down functional silos and coordinate vital initiatives on the transformation roadmap.

3. Enabling the Transformation: Build the capabilities and leadership needed.

This pathway is where organizations identify, source and build capabilities required for employees to thrive. And it is essential if organizations want to succeed in the Digital Age. The current talent landscape demands a compelling employee value proposition (EVP), but this is no longer enough. Companies must take a strategic approach, reimagining where and how they will find the talent needed to power their ambitions.

Although 90 percent of companies in China say that they have aligned talent systems in service of the transformation, there are still some gaps. While China does well-developing employees’ technical skills, it lags when it comes to nurturing the leadership expertise required for transformation. Globally, this leadership upskilling is prioritized by 48 percent of companies and just 35 percent of those in China.

Q: What training topics have been of the greatest need to enable your organization’s transformation?

How to accelerate transformation: Continually assess enhanced capabilities and develop ways to both re-skill existing talent across seniority levels, as well as source new hires through a more strategic approach to workforce planning.

4. Motivating the Transformation: The only failure is failure to learn.

To bring organizational change to life, leaders must behave differently. They must embody the transformation, creating trust among employees as they adopt new ways of working. Stories, rituals and symbols help build belief among employees and connect their day-to-day work to the organization’s new direction. Most organizations rightly celebrate success stories, while failures are less likely to be shared and understood. Focus on levers that create safe spaces and mechanisms for employees to talk about what is working and what isn’t.

This is yet another area where companies in China excel. Despite a directive leadership style, China has embraced a “fail fast and learn” approach that promotes experimentation, with 58 percent of Chinese leaders saying their corporate culture tolerates failure, compared to just 32 percent in the rest of the world.

Q: Which of the following best characterizes the way your organization responds to failure during your recent transformation?

And leaders in China are far more likely, at 79 percent, to encourage experimentation in executing alternative initiatives relative to plan compared to the rest of the world, at 44 percent.

“Risk-taking is strongly encouraged, and failure isn’t stigmatized,” says Jessica Tan, deputy CEO of Ping An in an interview with McKinsey. “What I’ve found is that with each new success, you become more confident in your abilities and your instincts to try the next big thing.”

How to accelerate transformation: Bring teams and divisions together by encouraging the “fail fast and learn” mindset to develop a systematic approach to test-and-learn thinking. The more employees can see these efforts, the better they will understand the transformation process.

Many businesses in China have already made a good start on cultural transformation and recognize its importance in driving growth. Companies in China should continue to pursue those initiatives while shoring up their efforts to teach invaluable leadership skills. But they can’t neglect to take a holistic view to make sure they are setting all aspects of the enterprise up for future success. That means making sure they know how to….

  1. Define transformation: Set a powerful ambition and align with leadership, at all levels, on their role in achieving it
  2. Direct transformation: Establish and empower transformation management offices to optimize operating models
  3. Enable transformation: Match talent strategy to transformation goals, and elevate employees through future-state capability planning
  4. Motivate transformation: Develop culture programs and training to reinforce employee behaviors

References:

  1. Ngai, Joe. Building a tech-enabled ecosystem: An interview with Ping An’s Jessica Tan. McKinsey Quarterly, December 2018
  2. Yuhao, Liu. 别跟字节跳动讲管理 [Don’t Talk Management with ByteDance]. https://www.huxiu.com/article/344321.html. March 13, 2020
  3. Zhen, Wang. 海尔裂变:2000亿公司创业的样本 [Haier’s Fission: A Case Study of How a 200 Billion Company Creates Startups]. https://www.yicai.com/news/5284427.html. May 14, 2017
  4. 百丽国际:让数字化赋能离客户最近的人 [Belle International: Let Digital Empower Those Who Are Closest to the Customers]. Harvard Business Review, January 25, 2019

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Rethink Luxury – 7 Actions for Luxury Brands to Accelerate Growth Post-COVID-19

Today’s success stories are using direct-to-consumer thinking, surprising partnerships and new data strategies.

How digital transformation and COVID-19 are forcing the luxury industry to accelerate its transformation efforts and shift toward a new set of values and behaviors.

Building Resilience in Luxury is Both a Marathon and a Sprint

Luxury brands have long been masterful in building strong customer loyalty – many have even built a legacy through loyalty – offering more than just products, the values they embody differentiate them from their competitors and help customers to identify more closely with them while also establishing that elusive emotional bond.

And with COVID-19 putting an abrupt halt on many non-essential sales, the luxury industry should prepare itself by anticipating the societal and economic shifts that may well affect consumer sentiment and behavior. Particularly, if customers start to favor more sustainable and responsible consumption.

Now, more than ever, a luxury icon – like any other brand – needs to adapt, stay curious and constantly be looking for ways to exceed the expectations of its customers. In order to steer that effort, we put together seven actions luxury brands should take now to protect and accelerate their growth:

1. Revisit the Core

How relevant is your core DNA? Does it still evoke the same desire it once did? Have you stayed true to it and ensured your purpose – your reason for being – still resonates and holds strong in the modern age? Think of the stories you are telling, the themes that you associate yourself with. After a longer period of success, a unique heritage often gets cluttered by opportunistic moves and messages. Focus on what makes you strong and let go of the unnecessary noise. And it is not about a new logo, go deeper, find your guiding star, the differentiating quality that guided your previous success.

2. Define and Listen to Your Audience

This should actually be pretty easy because it is by definition a very limited amount of people, right? Unfortunately, the importance of product and service design still sits higher than market insights for luxury brands, lagging behind the approach taken by the FMCG industry with leading brands like P&G and Unilever placing higher importance on qualitative and quantitative customer insights.

Remember, what you offer is exclusive yet attainable and attractive to your target audiences – a group of individuals with unique and specific needs and expectations. Imagine their dreams, think in their context. What is driving those individuals or cohorts? You might apply your very own micro-segmentation, leaving standard sociodemographic or maturity segmentations behind. Take regional specifics into account and make sure that it’s not just a gut feel, but rooted in evidence. When have you last discussed and agreed on two to three core personas to inform your actions? Be sure to install the right antenna for market developments. Do not only try to envision future needs, look left and right to learn from the best. In the end, it is the combination of creative potential and insights that leads to the new edge.

3. Think Direct to Consumer (DTC) First

Luxury brands cater to a select number of clients, so why leave the relationship to intermediaries? Even if those third parties are meticulously curated, you will never be able to collect the entire customer feedback if you are not dealing directly with those individuals. Only that direct response assures you have your finger on the pulse of the market, both to adapt the products but also the service that complements the overall experience. Of course, you want to increase reach, but new business models allow for direct interaction even from afar. Imagine what you can do with the increased intelligence. E-commerce still has a way to go in luxury having been discussed for years and implemented rather hesitantly because of concerns in translating the authentic luxury experience in the digital realm. But concepts and technologies are developing fast and the traditional role of partners and channels are blurring. Accept that going DTC is a joint endeavor and will not be perfect from the start.

The fastest-growing brands like Chrono24, Chronext (watch platforms) or Tesla and Polestar in the electric mobility space are eliminating the middle man. Richemont was pioneering e-commerce with NET-A-PORTER and MR PORTER and they learned their way through, now also partnering with Alibaba’s Luxury Pavilion –  further pushing its Asian exposure. In the midst of the COVID-19 crisis, even Patek Philippe has allowed their authorized dealers to offer their watches online. Watches & Wonders, the Geneva watch fair with a strong Richemont backing, swapped to a virtual-only conference in just a few weeks. Everybody accepted it wasn’t perfect, yet still, it was a blast.

4. Curate the Experience

To provide luxury at scale, you need to tell memorable stories and be able to duplicate experience standards. Selecting and developing the right context and platforms has become as important as curating the living ecosystem. Doing all that without clearly defined experience principles? Impossible. Navigating through the ever-increasing stack of platforms? Necessary! For example, the meticulously curated Las Vegas resort The Cosmopolitan seamlessly integrates stories, guests, platforms and social media to continuously learn and adapt to changing needs and trends. Also, the auction houses like Phillips and Sotheby’s are masters in curation. The sale of the Rolex Paul Newman Daytona was a benchmark example of curation, storytelling, partnership and as a result, was also a game-changer for the whole auction industry.

Pick your core relationship platform – this might very likely be your website – impart your DNA and focus on your audience by constantly refining the platform. Again, make sure you understand every single move of your audience. There are plenty of tools out there to help you understand and optimize. And remember, the most successful luxury brands are not necessarily the most advanced in digital technologies, but they learned to curate an exceptional experience across platforms and channels. They tell the best stories and those stories can live in all formats.

5. Combine Intuition with Hard Data

For centuries, those in the know were able to better serve the needs of the demanding. That has not changed. Nowadays, each and every individual is expecting nothing less than a perfect personalized experience. Data collection has gone way beyond retailers with transaction and credit card data. Loyalty programs and search behaviors are now used to complement the data set and social media is increasingly used to contextualize this data. Despite a reluctance or even allergic reaction, to giving away more intimate data, luxury clients expect you to understand and anticipate what they want, tailoring offers and solutions that will seduce them and lock them into your own proprietary ecosystem. Having the right data strategy in place to combine demographic, transactional and behavioral data has become as necessary as having a content strategy. Leveraging your expertise and intuition with a new set of quality data allows you to anticipate the upcoming moves and outmaneuver the competition.

“Having the right data strategy in place to combine demographic, transactional and behavioral data has become as necessary as having a content strategy.”

The hospitality and travel industry has a longstanding experience with their loyalty programs like Bonvoy by Marriott or Miles & More by Lufthansa. They combine guest insights with agile processes to come up with unique propositions that increase loyalty way beyond awards. Similar to the FMCG brands on customer insights, the luxury industry can learn a lot from the Amazons in the West and the Alibabas in the East when it comes to collecting and using data. Imagine where Rolex, Patek Philippe or Audemars Piguet could go if they leveraged their already rich data set that they collected with their product and client register by enhancing the data quality and using the insights to have a deeper, more direct interaction with their loyal following.

6. Grow with the Right Partners

Partnering along the brand experience has become another high-performance discipline. Originally something that goes back to the Fifties and Sixties, when luxury distributors like Asprey, Cairelli, Tiffany or Beyer were double signing with Rolex, Patek and the likes, new technologies and new consumer generations are supercharging partnerships. Dealers, ambassadors, authorities, celebrities, influencers, brand partners and many more specialized partners are involved to deliver that high-end curated experience. And it’s not just about the next transaction, it’s about creating stories and experiences that you would simply not be able to deliver on your own. It is now widely accepted to collaborate along any step of the experience chain, from comms to product to after-sales and, of course, also in the wider ecosystem of any brand experience. Your customers don’t care whether you do everything by yourself, they just expect the perfect experience from your brand. Lately, fueled by social media, the trend of co-branding has again proved to be a successful way to expand into new segments or reposition your core, like Louis Vuitton with Supreme, Caran d’Ache with Paul Smith or Rimowa with OFF-WHITE. Collaborate with the best.

7. Be bold, stay focused and stick to your plan

Your marketing budget is limited, so be focused. Stick to who you are and whom you are catering for. What is the content that inspires your demanding clientele? Where do they indulge, how do they escape and feel good? Where do you touch them, what are the right messages? Besides extreme value creation, it is also about the right voice and tone at the right time – always like ‘a first date’. Have a clear plan, stick to it, be creative, surprise! And remember, you got rid of a lot of clutter in the first place, do not add any unnecessary noise now. You cannot and you do not want to please everybody. Stay focused.

It was a brave decision by the Swiss watch brand Breitling to reposition and also to step out of the traditional watches & jewelry fairs. Investing more in its own innovative global experience platforms. Launching a new collection via webcasts was obviously also a lucky decision, now that everybody struggles to go virtual at high speed.

The car industry is struggling a bit here. New electric vehicle concepts for example are only very slowly getting traction. BMW, a bold inventor with the presentation of the i3 series concept at IAA in 2011 was not really able to sustain the momentum and stay ahead of the competition, Tesla was.


FINAL THOUGHTS

Get serious about taking a stand and nurture the new luxury. Conspicuous consumption goes out of favor and we’re witnessing a call for a new, silent, meaningful and humble approach to luxury. We saw that trend growing long before COVID, but the crisis has definitely served as an accelerator. Purpose and experience rather than prestige and status are set to take precedent. Removing consumer guilt, living ethically and leaving a positive mark instead of excessive consumption.

But again, always link your activities to your customers’ needs and expectations. Your targets are shifting too, increasingly from emerging markets, female and younger audiences. What will the increasing dominance of Chinese consumers mean for your value proposition?

Now is the right time to pause, re-adjust, focus and then accelerate with a refined proposition. In the end, it is about creating something that we have not imagined before. Something luxuriously new.

Our experts are happy to share more insights on how the current situation impacts the luxury sector and what businesses need to do next. Reach out today!

This article was co-authored by Roland Ott, an expert in Luxury Brand Management. He was part of the successful growth teams at the Richemont Maisons IWC Schaffhausen and Roger Dubuis and the relaunch of Carl F. Bucherer in Brand, Marketing & Communications Management. He is an Alumni of the University of St. Gallen and the Stanford Graduate School of Business.

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