Are You on Digital Time?

Digital speed is infectious.

We originally saw this phenomenon with the quality revolution. Consumers realized that they could have a high-quality car, and before you knew it, they expected high-quality everything: high-quality electronics, high-quality kitchen products, high-quality personal services. Now we're seeing that same infectiousness with respect to speed. Once you know that you can have something tomorrow, you ask, "Why can't I have everything tomorrow?" And, increasingly, the answer is "You can." Whoever delivers what you want the next day is going to win.

Digital speed simplifies complexity.

Let's face it: Both work and life have become much more complex. Digital speed allows you to navigate through that complexity on your own terms. If you want to take control of your own financial services, you can go to the Charles Schwab Web site and do lots of individual transactions quickly and effectively -- and all in one area of the site.

Digital speed shrinks the distance between the information and the decision. It gives you a new ease with which to navigate the multifaceted task of juggling your life. As a result, consumers can shift their desire from simply completing a transaction to getting the most out of each transaction that they do.

There's another unanticipated consequence of digital speed: Consumers option themselves up, not down. They buy more, and what they buy has a higher margin. Often, when consumers are dealing with complexity and choice, they run out of time, they run out of patience, and they run out of trust. They don't believe that salespeople are really interested in helping them. Digital sales takes all that uncertainty away by enabling rapid responses to "what if" questions. Whether they're buying books, computers, appliances, or groceries, people spend more when they sell products to themselves.

Digital speed resegments segmentation.

In the old days, before omnipresent digitization, slowness protected market segments. Consumers who were willing to wait a long time for the best price became one segment. Then you had another segment of consumers who couldn't wait for the best price and who were therefore willing to pay a premium. Now speed and digitization are collapsing existing segments -- one segment can get the best price and next-day delivery; another group gets a good price but receives its order today -- and also creating new, unpredictable segments.

The bigger challenge is to detect emerging segments that require new and different calibrations to measure them. Consumers are creating niches in places that companies never even knew about. Historically, companies simply bundled their offerings and made those bundles available to well-defined market segments. Today consumers are busily unbundling those offerings and finding the best provider for each component of the bundle.

As consumers unbundle these offerings and begin to make their own decisions, another new challenge will emerge: Companies will witness behaviors and choices that they could not have predicted. The templates that companies once used to organize consumer behavior don't work anymore. Income, location, and demographics no longer explain consumer behavior. As consumers buy things faster and assume more control over the buying experience, they'll start displaying new and different behaviors. All of a sudden, past behavior will stop being a good predictor of future behavior. Eventually, in digital sector after digital sector, consumers will begin to resettle into identifiable clusters. But those clusters will look very different from old-style clusters.

Digital speed is about de-averaging competitive advantage.

A company that manages its business through averages is a company waiting to be hammered. Let's say that a vice president reports an 8% return on sales. If I'm his company's competitor, I just lick my chops! And if I'm on his team, I get very worried. What the VP means is that parts of the company had a 30% return on sales and other parts had a minus 20% return on sales -- and that he doesn't know, or doesn't want to talk about, which part is which.

As digital speed fractures markets, customer groups, and distribution channels, averages give you an increasingly inaccurate picture of your business performance. The areas in which you have an advantage become obscured by the areas in which you are disadvantaged. And because you can't tell the difference, you don't know how to respond, how to build on strengths, or how to jettison your weaknesses. You need to de-average everything: the market, competitors, technology, and costs.

Digital speed is all about information. Ultimately, digital competitors must be able to tell the difference between creating valuable information and just creating information. There's money in almost every business situation today: in using a car's own electronics to improve how it's serviced; in managing credit-card transactions; in dealing with maintenance cycles in the airline industry. In any industry, a company that can harness the output of digital information to speed up its operations is going to outperform competitors, create new standards, and make a lot of money.

Alan M. Webber (awebber@fastcompany.com) is a Fast Company founding editor. George Stalk Jr. (stalk.george@bcg.com), a senior vice president of The Boston Consulting Group, established the firm's Toronto office and is responsible for BCG's worldwide Innovation, Marketing, and Communications Group.