Products and Services

In addition to bringing whole new digitally-enabled products and services to market, the leaders at digital initiatives are far more likely to use their digital connections to customers to seek ways to improve their existing products and services. Some 38% of digital leaders have this capability today vs. 29% of followers. But there’s an even greater disparity between the number of leaders who use their digital connection to monitor how customers are using their offerings, in order to improve the design, engineering or production of those offerings. Nearly half the leaders have this capability today (49%); only 22% of the followers do.

In part, this is because a higher percentage of digital leaders than followers are using four of the fi ve digital technologies that we asked survey participants about, to connect continuously with customers (Exhibit IV-9). For example:

  • 61% of leaders (vs. 46% of followers) use mobile apps to monitor customers
  • 30% of leaders (vs. (15% of followers) have embedded digital sensors or other digital devices in their products, which allow them to monitor how customers are using those products
  • Nearly three times as many leaders (26%, vs. 9% of followers) have created wearable digital devices for customers or other digital devices that can be attached to products owned by customers. For example, U.S. auto insurance giant Progressive Corp. has an electronic device called Snapshot that plugs into a car diagnostic port near the dashboard and monitors driving habits. Customers representing about 10% of the company’s $15 billion in insurance premiums used the device last year.39 Customers who drive short distances, avoid driving during peak times for accidents, and don’t make many hard stops can get discounts on their premiums.

Exhibit IV-10: Leaders are More Likely than Followers to Establish Digital Connections to Customers

Exhibit IV-10 Leaders are More Likely than Followers to Establish Digital

By tracking how customers are using their products, a number of companies are beginning to change a fundamental aspect of any business model: pricing. Auto insurers whose customers permit them to track their driving habits are being offered policies whose premiums are based on actual driving routines – not just past driving behavior.

Having actual and perpetually updated data on their customers’ driving behavior might eventually lead to auto insurers setting their prices based on customer usage; the rate they charged you last month for driving 5,000 miles might indeed go down the next month since you drove only 500 miles. Without a digital connection to customers’ usage of their product, auto insurers would never be able to change their pricing based on current and detailed data on driving behavior.

Our survey confirms that twice as many leaders (36%) as followers (18%) are able to tailor their pricing based on their digitally gained knowledge of customers.

Business Model
Business Processes