For much of the time that software has been “eating the world,” new and established firms alike have been focused on technological solutions to the problems faced by individual users—a profitable formula that Amazon famously described as “customer obsession.”
But the world is changing, and so is the nature of change itself. Today, societal issues including income inequality, racial injustice, gender bias, environmental degradation, and the coronavirus pandemic are defining and driving disruption. This shift has significant implications for innovation and growth, starting with the types of problems that successful firms will seek to solve in the first place.
By and large, technology-led innovation understands customers primarily as users—that is, as individual people seeking solutions to highly specific problems.
In this paradigm, innovative firms that use technology to offer better solutions to more users can enjoy remarkable growth, while firms that are unable to do so often stumble. In solving the user problem of how to watch movies at home, for example, streaming services such as Netflix and Disney+ have succeeded and are thriving, while their predecessors—the videocassette rental stores—have almost entirely disappeared.
Startup and tech ecosystems have led the way with this approach, creating some of the world’s most valuable companies. Seeing this fast-growing competition, incumbents and non-tech companies across many sectors have also been deeply influenced, embarking on transformation initiatives to become more user-focused and tech-driven.
Today, however, the tech toolkit of seeing and serving customers as individual users is proving to be too narrow. Customers must also be understood as citizens, with additional problems to be solved that are aligned with their needs as members of society.
These problems differ from the ones addressed by the customer-as-user mindset in three important ways:
- They are collective and public, not individual and private. Think sustainability, gender parity, and racial equity.
- They are systemic and not reducible to single product solutions. By extension, progress against them often depends on companies acting in concert with each other and with the public sector.
- They are driven by unpredictable societal factors, not predictable product adoption curves. Sexual harassment and inequities in criminal justice, for example, are longstanding social ills, but the #MeToo and #BlackLivesMatter movements have galvanized large numbers of people to urgently seek solutions at all levels of society, business, and government.
The rising relevance of these problems is being fueled by a major, inexorable demographic shift: In America, more than half of the nation’s citizens now are millennials or younger. These Americans—166 million of them—represent the majority of tomorrow’s business customers and workforce. They are the future of growth, and they have different values. They are more racially diverse than previous generations. They hold politically progressive views on immigration reform, criminal justice, environmental protection, the role of government, and the importance of diversity. And, importantly, they expect companies to be a part of the broader social and economic change they desire. This new expectation has growing implications for business success in the 21st century.
Firms traditionally have not viewed their customers as citizens seeking to live in a better society, nor have they made that goal a central element of their profit models and growth strategies. Instead, they largely have left positive social outcomes to the public sector, nonprofits, or corporate social responsibility efforts managed away from the core business.
Addressing society’s new demands doesn’t mean abandoning technological solutions that address the needs of customers as users, nor does it mean neglecting one’s core businesses in order to engage in costly and unprofitable do-gooding. On the contrary, it means expanding the set of problems companies seek to solve—and the means by which they solve them—in order to create innovative and profitable goods and services that meet the unfulfilled demands of modern customers.
The ability of companies to create positive social outcomes will be a competitive advantage. To get there, companies will need new toolkits to help them identify problems and develop solutions. Product development teams, for example, will need to understand the drivers of societal well-being and learn how to position and price offerings that advance social progress. (Sustainability initiatives that emphasize measuring environmental impact are a model for this way of doing business.)
We already know that customers who want a safer, fairer, and less discriminatory world are eager to support companies that share their values—and are willing to pay for products that uphold those values, especially when they fulfill their individual desires. Tesla’s electric luxury cars, for example, are powerful, attractive, and better for the environment than gas-burning alternatives. The company has the largest market cap of any carmaker. Similarly, the film Black Panther celebrated Black culture and diversity, and was a highly entertaining superhero adventure; in 2018, it was the top-grossing movie in America.
Because the business world is only beginning to catch up to 21st-century customers, profitable ventures that produce positive social outcomes remain outliers for now. But for innovative first-movers, an untapped market awaits.