There's an apocryphal quote often attributed to Charles Deull, Commissioner of the Patent and Trademark Office in 1899, " Everything that can be invented has been invented."
While we don't want to believe it we actually behave as though it were true by failing to appreciate the enormity of new and disruptive ways of doing business. The result is that we often discount the biggest innovations by not even being open to their possibility. Inevitably when we look back we realize that myriad new opportunities where there, right in front of us, and yet we just didn't see them.
So, how do you spot these opportunities? It's actually fairly easy once you do something far more important; spot the underlying tsunami trend that threatens to swamp old ways of doing business.
As I look forward to 2017 there's one overwhelming trend that I see as having the potential to create entirely new ways of thinking about how we do business. It's the emergence of behavioral business spurred by the advent of sensors and hyperconnectivity.
News flash; our actual behaviors are vastly different from our perceived behaviors. Which is why companies have been steadily moving away from focus groups. In fact, the founder of the modern focus group, psychoanalyst Ernst Dichter, who immigrated to the US in 1938 from Vienna, once said, "You would be amazed to find how we mislead ourselves, when we attempt to explain why we behave the way we do."
Behavioral business relies on actual data about our behavior, captured through our digital footprints on the Internet, sensors in our homes, automobiles, and mobile devices, all of which provide the basis for understanding how we behave in real time. When you consider that we each interact with roughly 250 individual sensors on a daily basis, it's easy to appreciate how detailed and insightful these behavioral metrics can be.
"...behavioral business creates entirely new economic models that threaten nearly every incumbent who fails to embrace them."
For example, why conduct a focus group to ask me about my driving experience and behavior when you can use the sensors in my automobile to tell you exactly how I use it? Being hyperconnected means that we hyperexposed, sharing the most intimate details about ourselves through our digital interactions.
I call this Uberization because, as with Uber and cab companies, the innovative threat is nearly invisible until it's too late to do anything about it. Behavioral business creates entirely new economic models that threaten nearly every incumbent who fails to embrace them.
The Outcome Economy
One of the most profound effects of behavioral business is the ability to sell products as experiences and services rather than as devices. Stick with me for a minute as I explain that because it's going to rock your world in ways you can't even begin to imagine
Joe Barkai, author of The Outcome Economy, describes the behavioral era we are entering as one where companies create value not just by selling products, but by delivering meaningful and quantifiable business outcomes. In his book he explains how "Rolls-Royce's no longer sells aircraft engines but rather assumes the responsibility for "time-on-wing." Airlines do not buy engines; they pay for engine availability or, you might even say, for lift power."
Here's an example that's much closer to home. When you buy a mattress for $550-$5000 you will use that mattress for 10-20 years while it's useful life is only 5-10 years. In an outcome economy the manufacturer doesn't sell mattresses but rather the outcome of great sleep by charging a fee based on how well you slept? The quality of sleep (your behavior) is measured by sensors built into the mattress?
"The real opportunity is to use behavior to project forward beyond the patterns of the past."
Far fetched? Only because you're accustomed to buying a mattress as a device and not an outcome. We're already seeing the foundation for this being poured in the automobile insurance industry with onboard sensors that will be used to determine risk based on driving patterns. Imagine that someday you pay for car insurance by the ride based on your behavior rather than by the month or year.
According to Barkai, the outcome economy is being driven primarily by the advent of connected devices and the IoT (Internet of Things). Connected sensors give products the ability to communicate real-time behavior in order to provide irrefutable insight about how products are used and are performing.
But there's much more to this than just the sort of analytics that have traditionally been associated with what is called "Big Data." The real opportunity is to use behavior to project forward beyond the patterns of the past.
See if this sounds familiar. You call customer support and an automated attendant asks you to enter your account number before transferring you to a live rep. What's the first thing that the rep will ask you? Why "What's your account number?" of course! I'm always amazed by how companies that I am very loyal to hardly know me. In today's world my digital journey with many of these companies include numerous online, web, mobile, and in-store interactions. This provides an incredible amount of information through which to understand my behaviors and my preferences, but, more importantly, predicting my future behaviors.
Mapping the behavioral breadcrumbs that I leave behind will be the digital equivalent of a gold-rush for the coming decade. A diverse set of companies, from IBM to Thunderhead, are offering new tools that can map customer journeys and use them to make decisions that provide a highly personalized understanding of each customer's current and future behavior.
Journey maps use hard data to understand some of the most basic behaviors of consumers, thereby creating a data driven business model that responds to the real rather than the perceived needs of customers. Other players, such as Moveable Ink, use the context of the customer's interactions, for example recent buying behavior and even current location and weather, to determine what your likely next steps will be. Google is doing something similar, albeit much more basic, with Now, it's predictive search.
All of this opens up the door to what is the ultimate play for every brand that is going to thrive going forward, the emergence of the Loyal Brand.
It used to be that brands evoked a cult-like response from consumers. We called it "brand loyalty." But what has been evolving is the exact opposite; I call it a "Loyal Brand." A loyal brand is one that understands my behaviors and their context well enough to be able to respect my preferences, anticipate them, and make meaningful recommendations.
Many online retailers have been trying to do this for a while with recommendations based on past purchases or searches. For example, Amazon recommending a book based on what others have purchased along with items that you have also purchased.
Is it any wonder that Amazon wants to provide everything from your books to your groceries? It's all about understanding you in ways you don't even understand yourself!
However, a loyal brand goes much further to create a personalized connection with you. This applies to online experiences but it can also apply offline. For example, identifying who I am the minute I step into a store or a hotel and then personalizing my experience based on my past purchases and preferences.
Yes, I know, behavioral business may sound a bit far-fetched, even creepy, but ignoring this trend will be like subscribing to the quote I started this article with and ignoring the tsunami of innovation ahead; good luck with that, it's not going to work out any better today than it would have in 1899.
On the other hand, if you learn to surf the behavioral tsunami the payback will likely be one of the largest of the century.