This post is part of the HBR Insight Center Growing the Top Line.
Today it's rare to find a CEO who won't acknowledge the impact digital technology is having on their business. But most executives see the rapidly evolving internet space as just one more issue to be navigated. Few see it as the most important issue to their company's future. And that attitudinal difference — an important thing versus the only thing — is the difference between companies that will survive and thrive in the next five years and those that will not.
Forrester Research predicts that by 2012 half of all consumer purchases will be either transacted online or digitally driven in some way — influenced by search, social media, or emerging digital platforms like location-based services and digitally augmented store environments.
Fifty percent is a number that's symbolic of the rapid change that's happening in our society and economy. Part of this change is the adoption of broadband internet, smart phones, cloud computing, and social media. But the bigger shift is behavioral. The purchasing habits and attitudes of today's teenagers and twenty-somethings are completely different from those exhibited by today's mass market. This younger audience is "post-digital"; they don't remember a world that is pre-internet. They live in an always-connected, never-offline world where everything is digital, everything is social, and everything is mobile and with them all the time. Digital is their first stop for everything: their preferred place to shop, communicate, socialize, research, and be entertained. It's their preferred place for everything.
In a few years, these consumers will start families and become the primary purchasers in our economy. In the workplace, they'll be in positions of power to make buying decisions. Few companies are prepared for this kind of customer.
Most companies are unprepared because winning and servicing this kind of audience requires executives to rethink what drives success in the marketplace. In a digitally driven economy, the preferred way for everyone to interact with a company is through internet technologies, such as a company's website, mobile interface, or Twitter feed. These things all serve to remove friction in the marketplace, making it easier and more efficient for people to make decisions, buy, and get service after the sale.
The result is that companies that compete and win in this new economy are in two businesses: their core business, which sells the products and services the company has always sold, and a new business, what I call the Software Layer — a layer of technology that surrounds the core business and serves as the focal point of interaction with the outside world. The most effective companies run their core business as effectively as they always did, and they also run their Software Layer. To win, they must run their Software Layer as vigorously and effectively as the Googles of the world run their organizations.
How can companies create and manage an effective Software Layer? It starts by focusing on one thing: users, the people who interact with a company's digital footprint. These people can be customers — for example, if I buy from Amazon, I'm using Amazon.com and I'm also a customer purchasing from the company. But they can also be prospects, influencers, potentially employees, members of the media, partners — any stakeholder who interacts with a business. Thinking about users, and what users really want from a company in the digital arena, is the first step to creating interactive experiences that meet user needs. With great digital user experiences, companies can generate more levels of interaction, more engagement, and ultimately more sales. Grow your user base and customers follow. Think about customer as users and they'll be happy to do business with you online.
If you're not sure about what this means for your business, try a simple test: put on your user hat and spend five minutes using Google, Facebook, Netflix, or any other website you love. Now go to your own company's website. If you can't see equal value in it, there's a competitor waiting to steal your users. Now imagine the business you can win if every prospect loves interacting with you online as much as they love buying from Amazon.
So forget about "customer is king" mantras and start thinking about users. By inculcating a user-first attitude throughout the entire organization and really focusing on meeting user needs, companies can have a clear path to profitable revenue growth. Embrace the coming economic shifts and use it to propel your company into a new phase of growth.