Your Existing Offerings Just Won’t Cut It

The previous article in this series described a key paradigm shift now underway in global business: the drive to enhance total societal impact, not simply generate profits for shareholders. In this article, we explore a second shift my BCG colleagues and I uncovered and described in our book Beyond Great: the revolution in customer offerings.

This revolution has three dimensions to it, and the first is what we call servitization. Traditionally, firms sought to compete by selling better products and services. Today, thanks to Internet of Things (IoT) technologies and digital connectivity, companies increasingly vie with one another to sell services and outcomes that are either purely digital or woven into physical products.

Consumer services like Netflix or Spotify are well known for their digital services in video and music, respectively, but global industrial companies like Philips, Schneider Electric, and Caterpillar are also servitizing their offerings, as is the tractor manufacturer John Deere and car manufacturers like GM and Tesla. Connected cars let you shop from the display on your dashboard, summon help, and even drive for you. Connected industrial machinery comes with the capacity to spot maintenance issues before they happen. And connected farm tractors help farmers understand their fields better so that they can farm more effectively and increase yields.

The second facet of the ongoing revolution in customer offerings is personalization. Isn’t it great to wake up in the morning, head over to your neighbourhood Starbucks, and order your favorite coffee beverage? It’s even better when the Starbucks app on your smartphone recommends a selection of products you might like and offers you personalized incentives to make a purchase.

Starbucks makes recommendations based on a range of data it collects, not just about past purchases but also about what time it happens to be or what weather you’re experiencing in your local area. If you’re in Delhi sweating in the sweltering heat, your app might suggest an iced beverage—quite different from the hot beverage the app might suggest in frostier climes.

Other consumer companies aggressively pursuing personalization include the carmaker Tesla, which allows drivers to customize many elements of the driving experience, and the cosmetics brand L’Oreal, which sells a system that allows you to craft personalized mixes of cosmetics products at home.

A third facet of the revolution in customer offerings concerns the way in which companies are targeting customers. Firms have long segmented customers geographically, assuming that national boundaries reflected important differences in consumer tastes and behavior. Today, thanks to the profusion of data, companies like Netflix, the streaming music company Spotify, and the videogame company Niantic are targeting discrete “taste communities” that run across national borders. What matters, companies increasingly realize, isn’t where people live, but what they like and how they see the world. Using data flows, companies can segment consumers in exciting new ways that might bear little relation to their physical locations. And they can seamlessly serve these consumers across geographic boundaries as well.

Revolutionizing your offerings in the ways I’ve described means undergoing a fundamental mindset shift. If you’ve traditionally sold a particular kind of product or service, it’s your job now to reimagine it for the digital world in ways that will add value for customers while also generating profits. You’ll need to understand your customers more deeply than ever before as well as the value they glean throughout the process of purchasing, consuming, and discarding your offerings.

If you haven’t started reimagining your existing products and services, don’t delay. The leading-edge companies we studied have gained tremendous advantage by pioneering new, “killer” offerings. They’re tapping into new profit pools that will drive their success in the years to come. Your firm must do the same.