More connected customers will want more connected companies

Digital transformation has taken root

Digital transformation has been a central preoccupation of organizations across sectors in recent years. From technology re-platforming to the management and interpretation of customer data and seamless service ecosystems, a major disruption has taken place in the way large organizations are structured, operate and go to market.

In parallel, ubiquitous smartphone and mobile Internet penetration, the rise of the Internet of Things, automation and the quantified self have fundamentally changed customer expectations. A new consumption mainstream is emerging around constantly connected customers with high expectations of personalized, geo-located and spontaneous purchase and service from brands across categories. And increasingly, this is as true for B2B as it is for B2C organizations.

Since its inception in 2014, the FutureBrand Index has demonstrated that technology pioneers leading this change – from Google to Apple, Samsung and Microsoft – have enjoyed the strongest perceptions among global opinion formers. This continues to be the case in 2016, but with an interesting new twist. 

A focus shift from technology to consumer services

For the first time, technology is slowing down and we are seeing some of the perception increases in the consumer services category – up 10% in 2016 – together with some significant performance improvement for specific consumer goods firms.

When we examine the companies leading this category shift, they have in common a degree of maturity in the connected economy and are showing evidence of leading, or at least rapidly adapting to, new customer behaviours and drivers of choice. The first and most obvious of these is Amazon. The global e-commerce giant has shown one of the most significant Top 100 increases in perception strength over three years (from 30th position in 2014 to 8th in 2016) in parallel with major service innovations and market expansion – not least the extension of Amazon Prime into video, music and storage, but also through Prime Now and Amazon Fresh.

Not only does this represent a move into new areas like grocery, it also attends to an increasing customer appetite for same day (or even same hour) geo-located delivery – a disruption affecting retailers across categories in the US, UK and elsewhere. It is small wonder that ‘innovation’ and ‘consistency’ are among Amazon’s most strongly perceived attributes in this year’s research. Four consecutive quarters of profitability for the business also indicate that this is converting into commercial success.

New customer experiences are more mainstream 

But this is not just a story about Internet pioneers leading change ahead of their brick and mortar cousins. Arguably, more established organizations are also getting the credit for major transformations in their operating approach. Home Depot (up 8 places) has a clearly articulated strategy for ‘interconnected retail’ – joining up physical store, mobile and web – to build on nearly $4bn in web sales in 2014 and annual growth of $1bn in that channel alone. Just as with Amazon, Home Depot performs most strongly in the ‘Innovation’ attribute this year. The same is true for other high performing organizations in the consumer services category like Inditex (up 4 places), who recently announced a transfer of focus from in-store to online sales for Zara. And arguably, Walt Disney (4th overall) – which has consistently topped our rankings over three years – is the original customer experience pioneer, seamlessly joining up its entertainment, parks and other properties around the world. No surprise that it continually leads the rankings on ‘pleasure’, but also performs strongly in ‘consistency’ and ‘story’. 

Consumer goods companies have caught up

To support this trend, consumer goods organizations with strong evidence of digital transformation have also shown significant increases in their rankings. If media, content and services organizations were the first to be disrupted by the growth of the Internet at the turn of the millennium, there is no question that the transformation has now affected categories with more tangible products like food, beauty, luxury and apparel. However, there are indications that this shift has started to mature for organizations like L’Oreal who recently appointed their first Chief Digital Officer, and saw e-commerce sales top €1bn in 2015. L’Oreal’s CEO is on record talking about digital and beauty being the ‘perfect mix’ in a category increasingly driven by personalization and social sharing. The organization is working on wearable electronics that transmit data from the body and enjoyed millions of downloads of its ‘Make Up Genius’ virtual make up application developed by its ‘Tech Incubator’ in San Francisco. It is perhaps little surprise that L’Oreal has moved up 13 places in the Index this year and a majority of those surveyed feel it will be ‘moving ahead’ in three years time. 

The luxury category has seen significant changes in consumer behaviour in the connected economy with more research and purchase happening through digital channels, and forecasts of online sales in the category hitting $30bn by 2019. LVMH has adapted to reflect this change, including the creation of more direct-to-consumer e-commerce activity on brands like Fendi, a focus on customer data and the high profile appointment of a senior Apple executive to lead its digital growth. At a corporate level, it is also making investments in pure-play digital properties like fashion shopping aggregator Lyst, and supporting the growth of start-ups through sponsorship of VIVA Technology Paris. LVMH moved up ten places to 19th position this year and, like L’Oreal, is strongly anticipated to be ‘moving ahead’ in three years time. 

However, it is perhaps Nike that provides the most compelling evidence for more ‘connected’ consumer goods organizations driving stronger perceptions in the experience economy. Nike is arguably over a decade into its digital transformation following the launch of the Nike Plus ecosystem in 2006. Successive years of innovation to build digital services and community around apparel and footwear in categories like running, football and now fitness, have yielded strong dividends, not least in terms of exceeding $1bn in ecommerce sales in 2015. Nike can now legitimately lay claim to delivering one of the most connected consumer product brand experiences and its recent appointment of a new Chief Digital Officer further strengthens CEO Mike Parker’s commitment to create future growth by ‘serving the athlete personally every day’.  

Drivers of a 'future brand' are shifting to experience

At the heart of this rise of consumer services perception is a subtle trend towards new drivers of ‘future brands’ in 2016. Whilst they still strongly correlate to success in our Index, last year’s leading drivers like ‘purpose’ and ‘thought leadership’ are flat or slightly in decline, making way for an increase in more tangible attributes like resource management, seamlessness and consistency. This is further evidence that organizational perception strength is increasingly driven by real-world connections with customers in a global economy that has been transformed by digital technology. More ‘connected’ experiences of the kind provided by Amazon, L’Oreal or Nike are not only evidence that more traditional sectors have caught up with the technology pioneers, but also that changing their customer experience is translating into stronger perceptions. However, it is perhaps no coincidence that leaders like Amazon and Nike are also driven by very powerful statements of organizational purpose that they are clearly converting into customer experience – to be the world’s most customer-centric company and to help make everybody an athlete respectively – showing the vital need for a strong perceived link between ‘why’ an organization is here and ‘what’ it delivers in practice.

In both cases, this means qualification as a ‘future brand’ for the first time, which should yield concomitant competitive advantages in terms of relationships with customers, employees and shareholders. 

On this evidence, it seems clear that digital transformation, and the connected customer experiences it enables are no longer the preserve of technology pioneers. Trends in our Index suggest that consumer services and goods companies are beginning to catch up, and make mainstream the advantages of more seamless journeys, products and services in everyday consumption. For those that are more mature in this transformation, there is a correlative increase in perception strength in our research. We expect this to accelerate over the coming three years as other organizations across the Top 100 begin to reach parity with their peers. For those that fall behind, or have yet to begin their transformation, we anticipate a correlative weakening of perception that could have long term implications for their commercial success.   

Click here to find out more about this year’s trends