Consumer expectations continue to develop, particularly in terms of more immersive, smooth and engaging digital experiences. These changes are driven and answered by technological advancements, including in such areas as artificial intelligence and the metaverse.
A new analysis by McKinsey and Company points to the power of such developments for retail and consumer-focused businesses. Based on assorted studies and on what some of the big guys are doing, this report offers some basic principles that entrepreneurs and businesses of varying sizes should keep in mind as guideposts, and consider how they might be utilized in their own enterprises.
The authors sum up: “Investing wisely in software across the entire value chain, from initial customer interactions to internal corporate functions, can help consumer packaged goods (CPG) and retail companies meet these rising expectations. And that investment can pay off in the long run. With technology increasingly a competitive differentiator, companies that make software a core part of their organization and harness emerging technologies—such as AI (including generative AI), mixed reality, and robotics—can lay a strong foundation for sustainable growth.”
This analysis gets into assorted estimates of the value likely to be created, including: “Consumer and retail organizations are anchored on many functions where generative AI’s impact is projected to be felt most heavily, including marketing, sales, and customer operations. As a result, the annual productivity impact of generative AIon the sector is projected to be $400 billion to $660 billion, among the highest of all industries.”
This analysis warrants a full read, but here are some of the fundamentals on the six principles offered…
“Build a software- (and customer-) centric culture.” It’s pointed out that “cultural change is the biggest challenge in digital transformations,” and therefore, it requires “explaining how the value proposition and strategy will impact customer experience, growth, and talent—and communicating this perspective consistently across internal and external forums.”
“Drive product management consumer expertise.” The technical and the consumer need to mesh. The authors note that “retail industry product managers need to deeply understand ever-changing consumer habits and preferences, as much of their job is to optimize the digital touchpoint and make the transitions among multiple channels seamless for customers.”
“Upgrade platform architecture and data management.” In essence, the point is to make the technology investments that will serve your consumer engagement best. One “tip” included in this part of the McKinsey analysis is: “Generative AI and foundation models now open many new opportunities for data-centric applications by automating content generation based on data. These models essentially supersede much more of the value chain than traditional, discriminative AI models that are used to predict labels or classifications. For example, companies can leverage marketing data and generative AI to automatically create and deliver hyperpersonalized messages with virtually no incremental costs.”
“Act as a link in the tech and manufacturing ecosystems.” Partner with other entrepreneurs and startups to get what’s needed. That is, “Given the rapid pace of tech innovation, consumer and retail companies often find it beneficial to tap into the ecosystem of tech-forward start-ups and supplier partnerships.”
“Embrace creativity in GTM strategy.” This is essential to the entire point of this subject. That is, how to get creative in terms go-to-market (GTM) strategies. Metaverse examples were served up: “Take the retail apparel industry, where fashion houses and mass retailers alike are expanding physical runway shows and stores into the virtual world with interactive experiences, gamified content, and new ways to generate awareness and monetize merchandise. For example, Gucci launched metaverse fashion exhibits that mirror physical ones, Gap opened in-game storefronts with digital replicas of merchandise and fashion mini-games and has launched virtual dressing rooms, and Tiffany & Co. raised $12.5 million through the instant sellout of its NFT drops in conjunction with new-product launches.” Indeed, “organizations are using tech to add entirely new revenue streams.” So, yes, get creative.
“Develop a deep tech talent bench and modern-technology operating model.” The emphasis here is on hiring tech-focused talent. Of course, this can be hard for small businesses where the bench, by definition, isn’t all that deep in the first place. But this goes back to the culture issue, that is, building a digital, software, customer-centric culture. That culture will attract tech-focused talent.
Entrepreneurs and small businesses can take away valuable insights, or at least reminders, from this analysis, and in turn, can move the needle in the right direction on using technology, including AI and metaverse opportunities, to serve current and future customers well. Indeed, the ultimate point is to open up new opportunities and improve business performance by better serving consumers.
It’s vital to understand that it’s not about using the latest technology because it’s the latest technology. That type of thinking can lead to customer service actually suffering. Instead, again, it’s about utilizing the latest technology to improve customer service and relations, that is, to meet those changing and expanding customer expectations.