According to Forrester chief executives and boards have become increasingly aware that making incremental changes to the business may not go far enough.
“Doing too little or going too slowly may place their firms at risk as they compete in a customer-led, digitally driven market,” Forrester warns in its "2017 predictions: dynamics that will shape the future in the age of the customer" report.
Forrester says virtually all competitive markets are on the move:
• Banks try to innovate before digital banks become formidable competitors;
• Big-branded retailers confront the digital threat with store closings and amped-up omnichannel and mobile efforts;
• Manufacturers get serious about their digital business; relationship-driven investment firms try to adapt to the encroachment of tech titans; and
• Utility companies — yes, utility companies — launch customer experience (CX) initiatives to influence consumption habits and change their operations.
Forrester emphasises that the customer is the “fundamental driver” of these changes — “Adventurous, experimental, and downright fickle behaviour, once thought of as “Millennials being Millennials” — has gone mainstream,” says the analyst firm about the customers of today.
According to Forrester, in 2017, leaders will devolve operational controls downward to individual brands and divisions to get closer to their customers.
“This will be a balancing act so as not to fragment the business or destroy margins,” Forrester cautions, while predicting that one-third of companies in the B2C space will begin changing their business structure “to get closer to the customer and effectively compete on the basis of experiences”.
“These companies will move from functional-siloed organisations that prioritise efficiency and control to customer-driven matrix structures that also leverage shared functions to protect margin”, Forrester notes.
According to Forrester, there has not been a time when technology has had a more profound impact on customer experience and revenue performance.
“By the sheer force of nature, this places CIOs and technology front and centre. Having the CIO grab the brass ring and lead the business technology agenda is not easy.
"They have too little political capital, technology is already present within marketing and the business lines, and tepid growth prospects will slow tech spending growth to 1.4%,” says Forrester.
“Those pressures are real, but in this moment when technology is in the spotlight, it begs these questions: If not now, when? If not for this reason, why else? And if not the CIO, who?.” Forrester asks.
Forrester says that in 2017, more and more CIOs will take a lead position in shaping the digital strategy of firms “to confront competitive risk and address the personal risk of being boxed in by a chief digital officer or chief data officer”.
“The key to this strategy is to more aggressively shift budgets from traditional IT spend to those technologies that directly or indirectly connect to customer experiences,” Forrest suggests.
Forrester also says that today’s business environment places a premium on three leadership dimensions:
• Understanding and personalising engagement with customers.
• Running a digital business.
• Knowing what’s needed to win in a customer-led, digital-centric market.
The analyst firm says these are different leadership priorities than in the past and that many business heads built their career on an “inside-out approach — the ability to control the business and persistently drive efficiency. But those traits are insufficient in today’s outside-in, customer-led marke”.
“CEOs have had a knack for hanging onto incumbent leaders because they have been successful, know the P&L, and have built up political capital. However, CEOs must decide whether honouring the past or competing for the future is the best strategy.”
On the transitioning of roles, Forrester says CEOs will come to terms with the deep-rooted changes necessary to win in a customer-led and digital-centric market.
But, it says these changes must be durable.
“Creating new titles like chief data officer, chief digital officer, and chief customer officer makes sense in one light — but they cover up gaps in the existing leadership team (notably the CMO and CIO).
“Gap-filler roles also create a governance mess, introduce unnecessary complexity, and avoid the real task at hand of putting in place the right leaders with the right skills.
“In 2017, CEOs will continue to strengthen and normalise their leadership teams, and temporal roles will either fall out of fashion or be calibrated (down) to drive the key digital, data/analytic, and customer programs.”
And, Forrester forecasts that transitional roles like chief data officer, chief digital officer, and chief customer officer will continue to get reintegrated into traditional roles.
On security, Forrester cites its predictions this year that cybersecurity would be a major issue in the US presidential election and that “an executive would step down due to a breach”.
“Both came true. And it will get worse.”
Forrester warns that targeted espionage, ransomware, denial of service, privacy breaches, and more will escalate in 2017, and the impact of those events will be significant. It says:
• A Fortune 1000 company will fail because of a cyberbreach.
• Healthcare breaches will become as common as retail breaches.
• More than 500,000 internet-of-things devices will be compromised.
• Within 100 days, the new US president will face a major cybercrisis.
• National security risks will drive agencies to expand surveillance technologies, creating legal and ethical conflicts between governments and people.
“Your customers are more aware of, wary of, and frustrated with security and privacy risk, and you will increasingly gain or lose affinity based on how much they trust your company,” Forrester concludes.