Knowledge Capsule

Digital enablement and AI are revolutionizing how companies operate and reshaping the economy. 

At the core of this transformation remains a fundamental principle: the customer is the boss. In this new era, empathy becomes crucial as businesses strive to meet subjective values and deliver hyper-personalized experiences. Consumers demand instant access, precise responses, seamless order fulfillment, and transparency, while resisting intrusive tracking and data monetization.

David Kramer, Founder & Chief Product Officer at Cooperative Computing, joins Hunter Hastings to highlight how AI can enhance creativity while balancing automation and human touch. In this discussion, Kramer shares insights on the digital enablement movement, emphasizing that AI should complement human creativity rather than replace it.

He underscores the need for maintaining a brand’s unique voice amidst the risk of generic content. As AI advances, businesses must adapt, using it to innovate while preserving the essential human element that resonates deeply with audiences. This approach aligns with the shift towards hyper-personalization, where understanding and delivering what each individual wants becomes the new standard, as exemplified by companies like Nike, which serves diverse customer needs with tailored, transparent experiences.

Resources:

Connect with Hunter Hastings on LinkedIn

Cooperative Computing

Connect with David Kramer on LinkedIn

Digital Enablement by Cooperative Computing PDF

Show Notes:

0:00 | Intro: Vision of the Digitally Enabled Firm
01:57 | 5 Key Business Functions: Branding and Marketing
03:15 | Second Key: Sales and Commerce
03:56 | Digitally Enabled Organization: Third and Fourth Key
04:48 | Fifth Key for a Digitally Enabled Organization: Service Delivery Management
07:13 | Human Role: Coding OR Evolving Decisions?
13:13 | Are We Still Customer-Centric?
20:33 | Transition Away From Control
25:01 | Customer in this New Digital Environment
29:39 | Demand for Transparency and Responsiveness
35:34 | Managing Accelerating Digital Change Speed: The Art of Possible
40:47 | Stephen Hawking: Cosmology Depends on the Questions You Ask
45:38 | Is Competition Still Relevant, and Can Large Firms Adapt?
53:52 | Wrap-Up

Knowledge Capsule:

Digital enablement will change the way companies are run, and even change the structure of the economy. But one principle that remains the same, and becomes even more fundamentally important: the customer is the boss, subjective value is the goal, and empathy is the key capability. The customer is the driver of the digitized firm and its business model. The number one capability for the digitally enabled firm is empathy.

The governing factor is what consumers feel is appropriate to meet their needs and desires. They want instant access, fast and accurate personal request response, order completion and delivery, and complete transparency. They don’t want the uneasy feeling of being tracked and surveilled. They don’t want the diversion and interruption caused by sites selling consumer data to third parties to be monetized as digital advertising.

This consumer-led environment will require hyper-personalization: understanding and delivering what each individual wants.

It’s the opposite of mass marketing. Think about a company like Nike. It serves hundreds of millions of consumers. Its business is driven by what those customers want, when they want it, and how they want it. Nike’s customers range from the very best performance athletes who want unrestricted performance at the cutting edge of technology, to sedentary elders who appreciate comfort and stability. How can Nike serve all these customers with equal transparency? Via digitally enabled hyper-personalization. Every individual gets the experience they want when they want it, and how they want it.

The digitally enabled firm

The digitally enabled firm uses digitization (including AI) to know its customers deeply (i.e., through data), fully understand its customers and their individual experiential needs (through deductive analytics), and meet those needs better than anyone in the world (through commercial engagement, operations and fulfillment, service delivery, continuous improvement, and innovation).

For customers in general, whether B2C or B2B, their experiential requirements are going to extend towards instant access and response that is both rapid and accurate. To become an effective consumerized or customer-led company, the digitally enabled firm reviews its capacity in 5 core functions.

1. Branding and Marketing

This is the primary function of the customer-led company simply because the first requirement is to accurately identify, deeply understand, listen to, reach, message, and persuade customers of the firm’s value proposition. Without branding and marketing, there’s no flow of information (and no flow of cash since marketing induces willingness to pay). Branding and marketing incorporate the firm’s value proposition into customers’ daily thought culture, aligning with and complementing their mindset and their perspectives, and shaping the firm’s hyper-personalization capability. This marketing capacity is becoming hyper-automated since it is fueled by digital information flow, instantaneously processed for insights and driving the rapid reaction to generate the high-response relationship the customer seeks and, ultimately, the capacity to anticipate customer desires.

2. Sales and Commerce

Conventional commerce, including e-commerce, will go away as digital assistants become the power behind purchasing and daily life choices. They become dominant sales and commerce engines, to the digitally enabled firm’s advantage in the case where they interact well with customers and integrate into customers’ own systems and lifestyles. The result will be memorable on-demand buying and delivery experiences and frictionless repeat purchases.

3. Order Fulfillment and Operations

Real-time operational data and analytics will enable risk and error avoidance, predictive planning, and the scalable infrastructure required for frictionless operation. Fulfillment and operations provide the means to keep promises and meet expectations, two vitally important commitments in the consumer-led relationship.

4. Customer Engagement

The customer’s experience-in-use is the critical key to value creation, and the digitally-enabled firm will be integrated into this experience, thereby opening up the opportunity for continuous addition of new and supplemental value and ever-strengthening sticky relationships. Continuing engagement after a purchase and after a usage experience is important. Some brands are creating digital online spaces and experiences where customers can participate and engage, such as Gucci’s Vault on Discord. Even when they are not buying or consuming, customers can be digitally engaged with their brands.

5. Service Delivery Management

Process automation ensures delivery excellence and consistency, and customer transparency generates confidence and trust across all channels. Digital integration enables continuous improvement of processes whenever feedback indicates an opportunity. Digitally enabled firms exhibit excellent governance of the service experience.

How do we manage digital organizations of this kind, where decision-making must be near-instant and the accuracy of a millisecond decision is so critical? It’s futile and dangerous to rely on traditional management styles. Leadership and governance will exist, but they’ll change considerably. One result will be the digital CEO, connected to all aspects of all decision-making processes, governing in millisecond transaction times.

The advantage for humans

The thing that humans do very well, better than any AI, and in all likelihood for a long period of time, is understand people through an emotional perspective. And this is where the engine of branding and marketing and all economic activity actually exists. Humans will continue to keep control of their own consumerism in order to grow economic activity so that we enjoy the world that we live in. The human is not only in the loop, but the core of the loop in this regard.

Digital machinery and digital processes can understand feedback loops very well. It can read the clicks and the purchase data and generate the appropriate signals for analysts, but it can never understand the emotional attachment between economic activity and consumer needs. Consider a purchaser buying a red shirt from a shopping site. The AI can record the purchase, align the data with other historical data to generate a pattern, and perhaps draw a pattern recognition inference. Perhaps there’s a trend or a tendency. Perhaps there is a comparison to be made with other shoppers, yielding more inferences. But if the purchaser loves red shirts because his or her grandma bought them a red beanie hat for their 8th birthday and they’ve loved that shade of red ever since because they loved their grandma – AI can’t empathically diagnose that motivation, and probably won’t ever be able to.

But AI can make the purchase frictionless, the delivery faster and more accurate,  and monitor the customer experience and perhaps enhance it in the future, perhaps generating loyalty and relationship stickiness. AI can become self-teaching and self-learning by structuring data and organizing it and running feedback loops. But it doesn’t know what to do with the emotional components of human engagements.

It may be possible to develop triggered models – data models or simulation models that can create signals from the states of emotional and empathic input that come from humans and human interaction, and it will get better at fine-tuning the signals and the models. It is already possible to detect temperature changes (blushing), eye movement, body language and other signals of emotional change.

The direct connection to the customer

The most exciting part of all this is the direct connection of the business model to the customer. Whether in the recording of online purchase data and digital behavior, or the monitoring of eye movements, the connection is direct and the end user directs the flow. AI (what Kramer calls digital sapiens, working alongside homo sapiens) enters the customer’s system and the customer’s life cycle and becomes part of that customer’s life, and part of the customer’s culture. AI makes data-driven decisions, and the data is customer data.

How do firms make the transition?

The first transition step is to conduct a digitization discovery: what is the capacity of the firm to digitize across four dimensions?

1. Digitizing organizational structure – eliminating hierarchy, planning, and command-and-control and substituting digital implementation of job functions wherever appropriate.

2. Methods, procedures and routines – where they have emerged and proven useful, can they be digitized for continuity and consistency? And can we change them digitally when it becomes clear we need to work differently?

3. Systems and technology – how well are IT systems facilitating people, processes and change?

4. Key performance indicators – what are the signals of success and how well are they measured, monitored and distributed for action? The key here is not KPI’s as control mechanisms (which is how they are traditionally used) but as feedback loops: building up an understanding of the current state and the patterns of its dynamics through data, analytics, and the response environment.

A current state of these dimensions is established through discovery, from which a delta is derived: what is required to improve and accelerate:

* To grow revenue.

* To become more operationally efficient.

* To continuously improve the performance of the firm through digitization and data-driven decision-making.

* To develop the cultural identity that best facilitates the collaboration of digital sapiens and home sapiens. There will be a different way of working and different forms of collaboration, and the cultural identity of the firm will be highly relevant to the nature of the adoption of these new ways.

The new customer experience

In the world of e-commerce and digital advertising that has evolved recently, the customer experience has often been undesirable, in that customers are surveilled and tracked by cookies and other software devices, and are urged into transactions by “interrupt and annoy” messages that are unwanted frictions in online engagement. This is evidence of a failure of empathy.

But the new AI approach is to prioritize an understanding of how the customer prefers to interact. After profitability (which is the mandatory gateway – business can’t proceed if it is not profitable), the quality of the customer’s experience in the response environment will be the number one attribute of business operations. Understanding the needs of the individual customer and interacting with those needs in the way that the individual customer likes best is the goal of the digitized capability that we call hyper-personalization.

Digital assistants will become more closely attached to and associated with individuals and will sense our feelings – whether that’s frustration with a process or delight with an experience. Businesses are building the tools for empathic diagnosis, empathic response and instant and dynamic updating. They’ll become highly effective at hyper-personalization.

This is the realization of the dynamic of customers bringing innovation and desirable experiences into being. Through the responsiveness environment, customers will figure out how to generate a desired experience and achieve it through the adaptive dynamics of the digital assistant.

An example of this principle in action is 3D printing, which is the capacity for an individual to self-manufacture. The implementation of individual consumer desire (“I want what I want when I want it and how I want it”) is made materially operational, whether in the form of 3-D printed buildings, machines, or clothes, or food.

Speed of change and the art of possible.

The acceleration of the rate of speed of change has been identified as a challenge for firms, but in the new customer-led digital age, the acceleration is in the hands of the customer. When what customers want is more and more attainable, they will learn to ask systems for what they want and the system will understand enough of what’s available from all potential sources to recommend and bring it to that customer. The system will assemble sub-components into a solution. For example, if a customer wants a mirror with a digital camera in it and an audio source of weather information, powered by DC because they live in Denmark, and that particular configuration is not currently offered, a digital assistant will specify it from available parts and build a personalized sku, deliverable two days from now at a specific price. That’s the art of possible: not what exists now, but what it is possible to assemble quickly.

Asking the right questions

The future lies in getting better at prompting: asking the AI the right questions: Can I do this now? What is possible? The questioner dreams it up, and the system assembles the dream. Then, the organization implements the assembled solution in the firm’s environment and in the marketplace.

Copilot is a good early example of what’s possible – a tool that observes and takes information and comes back to you to say, ‘here are the activities at which the firm is not efficient that could be done much more efficiently.” For example, the AI detects that people are keying-in invoices, and the process could be automated. It provides the art of possible. It could do the same for customers and customer interactions.

Constructing the firm for the new environment

Today’s construct of the firm is:

The empathetic component – how do we create valued experiences for the customer?

The technical component – what do we need from a technical perspective to meet customer expectations?

The financial component – how do we operate profitably and efficiently?

Ask these questions of an AI and, ultimately, the AI will respond with a highly accurate recommendation of what company or brand to build. It has the universe of knowledge at its fingertips, with all customer and buyer data to reveal preferences and trends and desires. The best entrepreneurs will be the ones asking the right questions, while the operation of that business can be left more and more to the AI and the digitized firm. The AI will build a digital CEO that can develop a market analysis and a business plan, perhaps raise capital against that plan, sign up the initial customers, design the products and aesthetics, and the customer experience. Over time, the digital sapiens species footprint will expand, and the homo sapiens species footprint become more specialized and focused. Competition will boil down to building specialized digital CEO’s. The software might be open source and free, and the data proprietary, so the added value is in designing better digital CEO’s from better data sets.

How? By asking better questions. McKinsey, for example, has decades of data and intelligence about good decision-making and what’s associated with it. That could be the input data for building a digital CEO. WPP has data about great marketing campaigns and great marketing agencies and could create great marketing CEO’s. Digital doctors will out-perform non-digital doctors because of the mass of data around medical history, practice, research and so on.

Management will become less and less relevant because digital sapiens can do more and more of it. Entrepreneurship – creatively asking the right questions and imagining the future in a better way than others – will become more and more relevant.