Digital, digital, digital. Are you tired of the word yet? Or, perhaps, are you simply weary of having it overused and under-explained?

In this installment of “What the Leading Brand Thinkers Really Think” – our series in which we try to drill down past the packaged “thought leadership” of leading brand consultants and examine what today’s essential thinking is, or isn’t – we take a look at digital not as a mechanism, but as a mindset. Today’s lens: the various reports, conferences, and perspectives of the Vivaldi Group, led by our interviewee Erich Joachimsthaler, its CEO.

Brandingmag: Digital is such a broad topic. I know that you have invested in addressing it in a number of different ways, including your Digital Darwinism Summit, and your various digitally-related reports, such as your recent study on social currency. But I’d like to back up a bit and explore some of the thinking in “Bridging the CMO/CIO Gap,” which you produced in conjunction with SAP.

It raises five key issues, the first being new methods to understand customers and their use of technology. Since we often hear marketers dismiss digital insights gathering as merely “shiny new objects” for consumer research, can you share what you see as the most profitable or even transformative ways that digital is helping us understand customers?

erich_joachimsthalerErich Joachimsthaler: Let me give you a good example. We work with a platform that is part mobile diary, part social network, and part community, with which we can actually track the daily life of consumers and interact with a large group in real time. The participants engage with each other, and we map how consumers really live and buy and shop.

Bm: So this is an ongoing, real time tracking of consumer behaviors?

EJ: Yes. For instance, we run this for a client in Colombia – Alqueria – which is one of the largest dairy companies, similar to Nestle. We track how people live in four or five parts of Columbia, and each part is very different. If you know Bogota, it’s not like, say, Medellin in terms of how people live their daily lives.

And unlike doing a one-off study or conducting a typical online survey with a panel of consumers, this platform provides a rich source of data that only digital could deliver.

“This provides a rich source of data that only digital could deliver.”

Bm: Why do you say “only digital”?

EJ: When I say “only digital,” I’m looking at it in the broader context. I also mean mobile, social, people engaging with each other in the online community. The fact that we can track via GPS where people actually have been means this is not simply reported data from a survey — this reflects actual behaviors in peoples’ daily lives.

Bm: So you’re looking to get beyond opinions to validated behaviors.

EJ: It’s not just the validation that is interesting. It is really understanding what we call the episodes or moments of daily life. What happens at a particular moment? It’s important to understand the context.

In my book Hidden in Plain Sight, I talk about context driving consumption behaviors. For example, I drink a Heineken at home with my wife, but I love to drink Budweiser when I go to Yankee stadium. So context drives preference and liking and consumption.

Bm: You suggest there might be some sort of co-creative aspect to this. What kind of willful input, if any, does a consumer have via this digital mode?

EJ: We track where people go, at what time of day, when they go shopping, when they actually spend time at home, and so on. This is the sort of data that is tracked without consumer input; it’s merely on their GPS devices or using geo-fencing for particular stores.

But then consumers may take photos of products on the shelf. Maybe they snap a shot when they serve breakfast. And, of course, they also talk to each other during those months of the journey. They may say, “Hey, I just had a problem over here with serving up these dishes because the recipe didn’t work for me.”

All of that information offers us a new way of observing consumers at scale. This is not an ethnographic study that you do with ten consumers. This is at the massive scale of 200 or even 2000 consumers, so we can do deep dive ethnographies and draw out much more quantitative insights. Ten ethnographies are still just ten anecdotes. It’s not data.

“Ten ethnographies are still just ten anecdotes. It’s not data.”

Bm: Your report also speaks to the second point, which is how digital creates new business models and ideas on how to generate sales. Do you have any favorite examples of this?

EJ: Yes, absolutely. What’s important is that business models need to be distinguished between demand side models and how you create new value on the supply side. These are two different things, and we always forget the supply side and how do you really capture the value.

A good example is the car industry. Almost every large car company today knows that consumers no longer want a car, they want somebody to sell them mobility. Everyone is experimenting with additional services, specifically mobility services, often times associated with the electric car.

Think about BMW and its i Division; it has a small car called the i3, and a larger car, the i8.

The point about these electric vehicles is not the cars themselves, even though they are amazingly beautiful (especially the i8, with its wing-style doors). The most beautiful part is that they are connected devices, like your mobile phone, connected to the cloud, wherever the car goes.

When you think of the business model here, you think of a future where the car is actually sold at cost, much as you buy a mobile phone today. BMW or other car companies make the money on the services that they sell over the months and years of usage of that car.

There are services such as DriveNow or ParkAtMyHouse, which are like Airbnb, but offered in a car. Now you can park at another person’s garage instead of in public parking, at a much cheaper rate. The service automatically identifies your car as you drive into Munich and tells you what private car garages are available for the day or for that weekend, so you can actually park share.

Bm: Essentially, if you pursue the automotive example, it’s a shift from being a heavy manufacturer to almost a service provider.

EJ: Just as the TELCO industry today is in the business of making money on your usage of the mobile phone.

Bm: You also speak in terms of agility and speed in this report. How are those two factors really paying off via digital?

“Digital is driven by “speed, scope and scale.”

EJ: To me there are three things, three “S”s: speed, scope, and scale — and digital enables businesses in all three dimensions.

Again, a good example is Uber. Uber in just a few years entered 60 countries, more than 365 cities, all in a relatively short period of time.

There is no competitive advantage for Uber relative to Lyft and many other services, except that they have those three “S”s figured out, and they serve consumers from a digital enterprise mindset.

I just mentioned speed – look at how quickly they were able to scale up. Where they have not been quick to scale up, let’s say in India, Uber has real difficulties, because competitors have been able to establish themselves.

As to scope, it’s about the brand portfolio and how quickly you can expand beyond just a one offering. Uber is able to expand their portfolio simply by adding another option in the app. Uber Angel, for instance, is a service in Columbia where, when you have been drinking too much in a bar, an Uber driver will come and drive your car home.

And in terms of speed, that ease of operation and expansion allows Uber to test new portfolio services like Uber Angel in one country and then quickly launch them in others if they work. This is all made available to consumers without advertising – Uber simply adds an option on their phone app.

Bm: Your fourth point touches on employees and company leadership. How does digital affect them?

EJ: Well, in order to understand how digital impacts employees, you have to understand the three waves of digital transformation over the last 30 or 40 years. Right now we are at the brink of that third wave, one that is profound, very different from the others, and that has more impact on employees and employer branding than ever before.

I am old enough to remember the first wave — something that I experienced as a child. That first wave of technology brought the digitization of companies and it was called EDP, or electronic data processing. Companies usually had air-conditioned basement rooms with banks of big computers that looked like they were straight out of Star Trek.

Bm: A room full of IBM 360s.

EJ: Exactly. I would walk by my father’s company and ask, “What are these people down there doing?” He would say, “Erich this is the future. You need to learn programming.” So I learned Pascal 60 (it used to be called COBOL). So the first wave of technology enabled companies to manage and process data.

“You have to understand the three waves of digital transformation over the last 30 or 40 years.”

The second wave came around 1995, brought to us by the Internet and the e-commerce world of eBay, Google, and the like. This created more efficiency, productivity, prosperity, and growth for companies – it was obviously an even bigger revolution than the first, and it lived on for 15 or 20 years.

Now we are in a new wave. While the first and second waves enabled companies, this third wave is different in that it is enabling people.

Consumers, in my opinion, are almost like businesses now, efficiently managing their lives. I use the iPhone in order to efficiently go from point A to point B. I use Uber or I call a taxi service or I determine how close the subway is. I use Google maps when I can walk, and so forth. Likewise, employees are all becoming very powerful processors, much more empowered than in the past — and that radically changes the relationship between employees and employers, and the way you build brands

Bm: You spoke before about how the digital ethnographic deep dive was allowing brands to track every movement, which obviously raises privacy issues. Do you believe that consumers are going to continue the trend of accepting the tradeoff of lost privacy for functional empowerment, or will they start cutting off companies’ digital access?

EJ: I actually bet that consumers will allow much more collection of data. Consumers understand very well the tradeoff between the value they get and the privacy they give up.

The problem is that today we talk in terms of Big Data – but you don’t need Big Data. You simply need to be smart about what data you truly need.

“You don’t need Big Data. You simply need to be smart about what data you truly need.”

I can give you a good example. Think of the order-and-pay application from Starbucks, a wonderful digital “device.” Starbucks doesn’t store all of my data about my life and my browsing, etc. They don’t need to. The only information they need to know – which I voluntarily give to them – is my preferred coffee fix.

I store this on their app voluntarily, so what’s the problem with that? I also store which location I usually go to, so when I walk down Broadway and I’m about 400 yards away, Starbucks knows that I’m close by. The barista prepares my perfect coffee on the chance that I might walk in and actually pick it up.

It always tickles me when people are standing 10, 20, 50 deep on a Starbucks line waiting their turn, and I simply walk in and pick up my cup of coffee. I don’t even have to talk to the barista or pick up my iPhone to pay because it’s automatically been charged to my Starbucks card.

I gladly allow Starbucks to have my location data close to the geo-fence of the store. They’re using that, along with predictive analytics, to transform my experience.

This requires very little data, but very smartly used. That’s where the key lies. Consumers don’t have a problem with privacy in this respect. But they do have a problem when you start aggregating data that you shouldn’t. As marketers working with consumer data, we must assume a level of responsibility for respecting consumer privacy.

Bm: The last of the five points in your CMO-CIO report mentions needing a new corporate mindset to bridge the gap between the digital and the human. What will that take?

EJ: There’s a real problem today in that many companies still look at the world from their existing mindset, in terms of their existing capabilities, market position, hierarchical structures, and so forth. They may recognize that we face major digital trends, but digital is just one of many major trends, like globalization, or the schism between rich and poor.

They respond to those trends by pursuing numerous projects, saying “We need to become an enabled digital enterprise!” So they chase after studying customer journeys or creating better customer experiences or building new digital business models to capture new consumers. All of those are incremental efforts that really don’t allow a company to grow into the future.

What a digital mindset requires is to re-imagine an entire market, and in this regard, the most important thing to remember is that the one aspect of our digital world that changes faster than technology is customer expectations. Customer expectations are so rapidly changing that most companies pursuing either digital transformation or digitizing the enterprise or customer experience projects will never reach where customers are.

“What a digital mindset requires is to re-imagine an entire market.”

Jack Welch once said if the outside of a company changes faster than the inside, the end is near. Most companies are facing that reality today.

Bm: So, thinking of those larger trends, would you say that companies now need to not only meet service expectations, but also life expectations for consumers?

EJ: Exactly. Customers want us to enable them. They want us to help them manage their lives, save time, live healthier. It’s no longer enough to just provide products or services or experiences. In fact, the whole idea of creating the “wow” experience is a lousy concept, because it doesn’t ultimately meet the customer’s expectations.

Bm: So the whole paradigm of looking at people as customers — is that irrelevant now? Is that inherently too transactional if we need to connect to people as human beings on a more essential level?

EJ: Looking at people as customers is an outmoded notion. You need to look at people as humans. Today, one of the hardest topics in customer experience is customer journey mapping. Everybody maps a customer journey, whether they still map the funnel or they map several loops, a customer decision journey or whatever other methodology they use.

But 95% of a person’s day is not lived on that journey, so you’re really only studying the 5% when people are in a buying mode. That’s not where the action lies.

Bm: So what is normally called a customer journey is perhaps more accurately called a buyer journey?

EJ: I agree with that.

Bm: The question that raises for me is, whereas CMOs often speak of needing to be the voice of the customer, do they actually need to understand and reflect a new perspective, the voice of the human?

EJ: They need to think in human terms. We have, in this last few years of the digital revolution, all ended up looking at consumers with the idea of “What are the triggers to get somebody into the next stage?”, “What is our conversion rate?” I think that’s all wrong. It’s tactical thinking about sales, rather than thinking about consumers as humans and how we connect.

“Think in human terms.”

In the old days of positioning we assumed that by understanding some demographic, psychographic or social-economic factors about a set of consumers we could perfectly position our product for a “target” market. There is no target market right now. That old military analogy is totally obsolete today. But we’ve allowed ourselves to fall into that same old trap with our thinking about conversion triggers and customer decision journeys – just getting the consumer to the sale.

Bm: You’re describing a deeply engrained business belief system – what’s it going to take to change it?

EJ: Again, we need to understand that digital information is about the reimagining of entire new markets. That’s where creativity comes in. You have to be a lot more creative than mapping with perfect precision how a customer goes through one journey or another. That’s all just tactics.

We need to go back to strategy. Strategy is understanding where you compete and how you compete. We need to understand how consumers as humans live, work, and play. How they divide their 1440 minutes. We all live from midnight to midnight.

Then, once we have understood that market and that opportunity space, we have to think about how we add value in the life of consumers, rather than how we can add value into a product by adding functions and features. That’s not imagination about the marketplace. That’s just imagining your balance sheet or income statement or your sales funnel – it’s not about how consumers live their lives and demand new value.

Bm: It sounds like digital transformation or Darwinism or whatever you choose to call it is going to require an evolution far beyond just digital technology.

EJ: That is the case. We can endlessly discuss technologies, IoT, and such. But at the end of the day we can more reasonably see the future by studying how consumers adopt a technology and make it a useful part of their lives.

Bm: Thank you Erich.

EJ: Thank you.

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