Stop Hacking Your Customers!

GuyFoxHacker
Hacking used to have a negative connotation, as in cheating, abusing, deception; usually circumventing security and/or a program’s intended purpose.  The word carried a violent, threatening connotation. Somewhere down the line, hacking became cool.  Not just the white hat hackers, pointing out the vulnerabilities in an effort to improve.  Suddenly, everything that Silicon Valley favored earned the scrappy, start-uppy “Hack” badge of honor.  Witness “Growth Hacking” which is guerrilla marketing in the digital age. In other words “Our product is really good so we don’t have to buy our publicity”. A nice place to be.  But that quickly was mis-interpreted as outsmarting the market, breaking the rules and manipulating perception. This interpretation tripped us up.  Change, pace and complexity are exploding in business.  Naturally, we want to hack our way through this madness and find the simpler, faster route to success.  There must be a smarter way!  Why not hack our customers… to bits!  It turns out that’s not such a good idea.
The “magical powers” of both marketing and technology have collided in the digital era to create the myth of customer hacking: If you have the right widget, you can expose a customer’s digital persona, which is the same as knowing everything they want.   Find those that want your stuff, even if they don’t realize it, and… jackpot!  The brand is back in control.  A surprising number of marketers believe in this magic hack.  They may not say it but their behavior demonstrates this belief.  They pay huge sums of money to gather 3rd party data and bombard their prospects in the digital world.  Usually they miss the mark and often they alienate their customers and prospects in the process.  The tragic part is, the digital era does provide an excellent opportunity for brands to know their customers.  But many brands are trying to shortcut the process rather than earn the insight through the heavy lifting of customer engagement.
Customer hacking is the act of tricking your customers into a business transaction.  That doesn’t sound like a very effective long-term strategy, does it?  Regardless, this is a beloved marketing practice. Practitioners don’t see it in these terms, of course.  They think that if they can just find out enough about their customers (demographics, likes, tendencies, browsing history, buying patterns and thousands of other characteristics) by whatever means necessary, they can manipulate customers into a business transaction.  They think they can buy customer insight, even steal it without the customer’s full knowledge.  That’s how we get to the corporate espionage culture.  At the center of this mistake is the confusion between data and insight.  Data is easy (if not cheap) to obtain, insight takes considerable, ongoing effort.  I can buy customer data anywhere.  I have to change my corporate culture to effectively build customer insight through an entirely new process and approach, in willing collaboration with my customer. The customer gets to have a meaningful say in the offering and its delivery. The brand has to listen, respond and adapt quickly — sometimes radically.  To engage the customer the brand has to truly embrace the concept of customer respect and collaboration, not look for a new way to exert leverage over the customer.  That’s tough work.  There’s no hack for it.
So if “customer hacking” evokes images of a cheap Halloween slasher movie, good.  We need to stop playing the role of the stupid protagonist in those movies, worse yet the psychopaths!! The villain usually gets what they deserve in the end.

Taking a Run at It

I am not, by any measure, a great athlete.  I wasn’t the last kid picked on the playground either but, you know, good friendships.  I played like a bruising lineman.  Sadly, the game was basketball.  My trophy case is a very old shoe box.  Lots of plastic in there.  Nothing with my name on it.  So when I tell you that at 45 years old I will be running my first full marathon (@FreepMarathon Detroit) next week, note the perspective.  We come from the same planet.
One of my brothers and a close friend are hard-core runners.  Multiple marathons.  Boston.  The whole bit.  About 6 years ago, they mentioned a run they were doing for kicks.  A few miles on Belle Isle, in the Detroit river, on New Years Eve.  I probably hadn’t run a mile in 15 years.  Folks, on the box marked “pain” you’ll see those ingredients.  And I was taking them in doses higher than the recommended daily allowance.  Just four miles, 38 minutes and a chapped face later, I was hallucinating my way across the finish line.  I literally stopped a few feet short to embrace an old friend who had made a special trip to cheer me on.  Or not.  Turns out, me and a stranger in downtown Detroit shared a special moment.  No lasting bonds were formed between us.
That was the beginning though, of the best thing I have done for me since… (fill in appropriate life moments here).  Anyhow, I fell in love with running.  This year, I finally took the plunge.
I won’t wax on about all the great things running brings.  I used to get injured a lot because I am ‘big-boned’, have weird ankles and made all the typical mistakes.  We’ll skip that tedious commentary too.   Running is a metaphor for everything.  The greater truths of life are revealed.  It’s hard and rewarding.  There, I think that covers it.  Supplement with books as necessary.
Now I’ve got my gear right and training sorted.  It’s just a question of getting it done.  I’ve worked for a sub-4 hour time.  It will take my best run.  I am confident.
I’ve done several half marathons now and a bunch of shorter organized runs. I never miss New Year’s Eve on Belle Isle and have run it solo on multiple occasions (cowards).  A big race day is the thrill.  Where else does a grunt like me stand shoulder to shoulder — albeit briefly — in the same event with the elites of the sport?  Thousands of people cheering and smiling and willing everyone to success.  That’s pretty rare.  I’ll take some.
Then it comes down to you and your skimpy gear, grinding and gliding your way to the best you can do that day, whatever it takes.  Like everyone, I went through phases of gadgets that I thought would help me.  Shockingly, there’s no short cut (Just like life!  Ok.  Enough of that.)  You have music, of course.  And while you are still capable of coherent thought you find incredible meaning in all lyrics.  “…every ounce of energy, you try to give awayyayyy, as the sweat pour out your body…”  Yes Bob! Yes! I am with you! You understand me!  We are part of a greater consciousness!  Ok. Easy.  Easy.  Relax.  The medics are staring.
If I am wearing it, it better be light and it better be critical to maximizing this run.  Like all runners, I save my highest scrutiny for the shoes.  I’ve tried them all.  I don’t really care what they look like.  I will render them fashionably undesirable pretty quickly.  They must serve me well.  I am what is affectionately called a “Clydesdale” runner.  I push my shoes hard.  They serve me well.  For me, the only shoe up to the task is made by ASICS: Gel Cumulus for routine training, Gel Nimbus – yes, you can picture the Nimbus2000 carrying me along effortlessly – for the long runs.  I wear them until they are beat, then they get a serious wash and serve as my knock-around shoes.  (For the love of Jim Fixx, I wish I had them on when I stepped on that rusty nail last week.  But if that won’t stop me, and it won’t, nothing will.  All tetanus shots in order.  Thanks.)  And so, my #BRANDLOVE for ASICS – Anime Sana in Corpore Sano (Sound Mind in Sound Body) – though both are a work in progress for me.  The love is earned over years.  On October 19 as I run through Detroit, over the bridge to Canada, down the river, back through the tunnel for the only underwater mile in marathon and around good ol’ Belle Isle again, I know the love will be returned by my ASICS!  Thank you boys!
My ASICS2
So, if I can go sub-4 hrs, it will be an amazing moment for me.  If I can subsequently convince the Boston Athletic Association that I am over 60, I will qualify for that race.  Maybe next time.  Until then, follow along if you like (@TimBWalsh) and we’ll offer each other some encouragement.  Whatever happens, my sincere appreciation to ASICS for making the shoes that make it possible.  No matter what happens on October 19, we’ll be trotting out together many times afterwards.  I love that.

Digital Transformation. Will it be Customer Engagement or Corporate Espionage?

The paradox of the digital era is this: As the power of the individual increases, so too does her vulnerability.  The business response to “digitalization” of our lives is known as Digital Transformation. Even in these early stages of the process, it is clear that some businesses are choosing to acknowledge the power of the individual customer and find ways to engage on more equal terms, while others are exploiting the customer’s vulnerability.  That is a defining choice for any business and many are getting it wrong.

PhoneEye

First of all, what is Digital Transformation?   This is what I think Digital Transformation is, long form. Here’s a net definition: Digital Transformation is part of society’s evolution, enabled by technology, to relationships defined primarily around the individual rather than the organization.  That statement appears simple and innocuous but the implications of this change are profound.  Upheaval is occurring at a level worthy of comparison to the Industrial Revolution.  We don’t view the Industrial Revolution as a change in the way business was done, though that certainly occurred. Like its predecessor, Digital Transformation is a paradigm shift that is visible in every facet of our lives. Organizations — from store-fronts to massive multinationals to sovereign governments — that have failed to understand this change have failed to survive, much less succeed.  If that seems like an overstatement, check out Henry Kissinger’s World Order, which questions the viability of nation-states as a functional model for the future and cites technology as a major contributing factor.

It is not all about digital technology.   As the Industrial Revolution could not have happened without the steam engine, harnessed electricity and mass produced steel, Digital Transformation would not be possible without networks, mobility, micro-chips and a host of other dramatic improvements in tech.  These innovations hinge on much broader societal realities though.  Major advances in health, food production, communication, education, transportation and the global spread of democratic principles have all been critical factors contributing to a radically different global society in just the last 40 years.  With ever-increasing billions of people jamming themselves into cities, we’ve created a crucible from which new technology had to spring and was destined to thrive.  

Digital Darwinism

Hooray Everybody, We’re Digitally Transformed!
What are the implications to business?  The broader societal transformation is cultural, as the business response must be.  Changing corporate culture is as tough as it gets.  This is to say: A shiny new app or a town hall rah-rah session ain’t gonna cut it.  These token steps are very much in vogue as substitutes for transformation.  Grand visions on IT architectures, miracle product design and the much-ballyhooed but vaguely understood “customer experience” are also stand-ins.  All those things may happen as part of an enterprise digital transformation.  They are milestones and artifacts of a bigger process which, by themselves, won’t transform anything.   If you believe in Digital Darwinism — Survival not of the strongest or the smartest but those most adaptable in response to change — then you “naturally” (ahem) recognize that we should start with proper diagnosis of the changes to which we are adapting.

Start by focusing on the rising power and influence of the individual.  The center of gravity for power is descending from major national and multi-national entities to smaller, more localized groups.  Ultimately, this is the continuing rise of the individual, not just the consumer/customer.  But while the business community pays lip-service recognition to the rise of the consumer, two diametrically opposed responses have evolved; one of which embraces the change, the other fights it.  Acknowledging customer power leads down the Customer Engagement path.  Companies still seeking to find new control points over the customer have begun heading down Corporate Espionage route.  As the individual is empowered, the company / customer relationship is being defined as a person to person relationship, based on customer expectations of a ‘normal’ relationship.  Most companies aren’t skilled at interpersonal relationships; some are learning and engaging while many are pursuing the “reality TV” version of a relationship: high drama and lots of deceit.


Trust is the Foundation

Before examining market response to the empowered customer, let’s reset on the broader goal of the company / customer relationship.  Regardless of business model — B2B, B2C, B2B2C or the rising Peer to Peer (sharing) models — the provider, in order to have a sustainable business, must continually generate one foundation emotion with their customer: Trust.  The degree to which trust is established and maintained will determine the long-term value of any relationship.  Continue to provide what the company promises and the customer will continue to reciprocate.  The collective market trust in a company to deliver on its promise is its brand.  To the extent the company is consistent in delivering and exceeding the promise, customer loyalty is created.  Trust and loyalty lead to a sense of shared purpose and community among customers, together with the company.  This engenders collaboration towards a common goal: Improve the offering.  Active collaboration with the customer to improve the offering is a fine definition of Customer Engagement.  

That is a worthy and difficult goal, which takes time and effort to realize.  In other words, it is a true transformation.  But that is not the way the market is going, as a rule, which provides an excellent opportunity for businesses to differentiate themselves.

Die Hard Losers

If old habits die hard, old business models are Bruce Willis.  It has long been a standard business practice to coerce and leverage the customer into action.  Lock-in contracts, monopolistic tendencies, confusing pricing and market manipulation are all examples of business leverage over the customer.  In a brick and mortar world, it was enough to be “the only game in town”, literally.   Any and every possible advantage gets exploited.  Leverage models depend on a customer that doesn’t have choice, access or power for a variety of reasons.  Those limitations are largely removed in the digital world.   There are thousands of start-ups exposing bad business and stealing away customers.  They’re called “disruptive” and “innovative” miracles of the digital era.  For the most part they are simply doing what challenger businesses have always done to incumbent powers — exposing poor business practice (then in turn being quickly exposed themselves). Society’s digital transformation has made that easier.  The empowered customer has made it a very real threat.  Still, a mega-corp seems to stumble and fall every couple of months because they would rather stick with what they know and fail than try to make the hard changes, the transformation, required to be successful in the digital era.

HearNoEvilSpeakNoEvilSeeNoEvil
Monkey See, Monkey Do (No Evil)

In the midst of this chaos, a deceptive option has emerged and been widely embraced.  On the surface it appears to empower the customer by offering desirable services.  In fact it’s a new form of the leverage tactic.  This model is best described as Data Monetization and its pioneers can be understood as big data monopolists.  They monopolize not only the network but the data it generates.  In this model, the provider goes to great lengths to extract as much data as possible about the customer, generally without the customer’s full understanding, then sells the data to 3rd parties for advertising or marketing purposes.  The lack of use awareness makes it a Corporate Espionage play.  Businesses leveraging the data generated in these networks, or trying to emulate their tactics, need to understand the risk.  This has been the basis for wildly successful companies, titans of the digital era.  But the erosion of privacy and user trust in these networks is the severe downside of playing Corporate Espionage.  (Remember, the most effective path for government to invade privacy has been to obtain personal information from big data monopolists.)  These networks consistently leverage their monopolies against users.  You want to be part of this network?  You sacrifice your privacy.  If you don’t like it, leave. That’s tough to do when there is no comparable network.  But how long will that last?  Increasingly, big data monopolists are using this power against their customers (advertisers) as well.  That’s how they make their money and it’s a classic leverage play.

Businesses eager to exploit or emulate big data monopolies need to be extremely careful.  There are two reasons for caution.  First and foremost, the model is based on deception , the antithesis of trust.  Using any and all means to gather data on unsuspecting targets often results in a skewed and inaccurate picture of the customer.  So business tends to miss its mark often.  It also unnerves the customer often, angers them more frequently and, increasingly, provokes them to legal action.  Customers need the courts to exert their power against the monopoly of a proprietary digital network.  But they can and certainly will reject the brand promise of a company exploiting a model based on deception.  Second, a proprietary digital network is controlled by its owner, not its advertisers.  Just as they leverage power over users (i.e. data providers) data monopolists routinely coerce customers (i.e. advertisers).  They will decide who sees what content, when and whether it is suitable to the larger mission of the network.  They will decide what data is available externally.  If for any reason the advertiser’s purposes are at odds with the network’s, the advertiser loses.  The relatively slow adoption of digital proprietary networks as marketing platforms, compared to say, email, can be traced to the fact that email is an open protocol, not a proprietary network.  Email follows the original Internet ethos of Peer-to-Peer , whereas proprietary digital networks are fundamentally monopolies, a model as old as business.  Proprietary digital networks also differ from traditional print and broadcast media because the later are highly regulated regarding access. Proprietary digital networks?  Not so much.  That reality is rapidly changing.  Witness the increasing government regulatory involvement in the digital domain (Net neutrality, privacy, anti-trust suits, etc).  The Data Monetization model will have to change because the empowered individual demands it and governments are acting.  So, seller beware: Exerting leverage via Data Monetization is a dangerous game, with dubious results.


Getting to Good Data

In the digital world, customer data is a critical asset to serving the customer better.  As most businesses have discovered, it’s not about having huge volumes of customer data, that’s easy.  It’s about having good data that can actually be used.  “Good” in two senses of the word.  First, it is accurate.  Second, it has been obtained in the right way.  A happy customer will share their data when you collaborate with them.  It will be accurate, trust will build and the virtuous cycle is enabled.  A deceived, coerced customer will result in “Bad” data, from both perspectives.  Initiate vicious cycle.  The way in which customer data is acquired makes all the difference between a leverage model and an engagement model.  Going forward, the choice of engagement vs espionage will determine success or failure in the digital era.  Open, collaborative exchange of information in the mutual interest of business and customer is the pinnacle of engagement.  Deceptive data monetization is at the other end of the spectrum.  That route is full of errors and recriminations (a word I choose deliberately as regulators move in).  Yes, big data monopolies will continue to be successful, at least for a time.  Do not be confused into thinking that any organization can ride those coattails.  At root are the same priorities that have mattered to customers since long before the digital era began:  Loyalty, Control and most of all Trust.

There was once a model understood as a “Funnel”, where the organization leveraged masses of customers through the AWARENESS – INTEREST – DESIRE – ACTION sequence.  That’s over.  A digitally transformed model recognizes the power of the individual customer with these milestones:  make a PROMISE, establish TRUST, build LOYALTY and foster COLLABORATION towards improvement of the offering.  That is the Customer Engagement path.  Agility and openness are the keys to Engagement. The customer follows whatever sequence they choose, using whatever means are available to them.  Fortunately for business, the digital world makes a true Customer Engagement model possible.  Now business leaders have the hard task of making it real.