Forrester’s Tech Predictions 2018 describe the market dynamics that favor those taking aggressive action and create existential risk for those still holding on to what has worked before.
Forrester expects organization’s to:
1. Take control of their destiny as platforms like Amazon and Google drive up disintermediation risk and make some companies unintentional utilities.
2. Shift spend away from acquisition to confront escalating churn.
3. Revitalize customer experience in a market where rewards and punishments are doled out experience by experience.
4. Transition to digital companies while maintaining their corporate identity and soul.
Forrester’s Tech Predictions – CX Hits A Wall
30% of companies will see further declines in CX quality and lose a point of growth.
Customer experience (CX) became the centerpiece of business strategy as companies adjusted to the experience economy. But according to Forrester’s 2017 CX Index™, CX quality plateaued or declined for most industries and companies. Why? CX initiatives tackled low-hanging fruit to put early points on the board, and most CX initiatives had too little clout to force meaningful operational change.
Customers’ expectations will outpace companies’ ability to evolve or invent experiences, and the deferred transformation in 2017 means that
companies can’t adjust fast enough or well enough.
In 2018, 30% of companies will see further declines in CX performance, and those declines will translate into a net loss of a point of growth.
Smart executives will intervene to make CX an internal disruptive force, one that is underpinned by the fundamentals of CX management with customer trust at the core; too many executives will continue to ignore evidence of market disruption and procrastinate until the evidence is overwhelming, putting their firms at risk as we enter 2019.
Forrester’s Tech Predictions – The Digital Crisis
20% of CEOs will fail to act on digital transformation and put their firms at risk.
Digital transformation is not elective surgery. It is the critical response needed to meet rising customer expectations, deliver individualized experiences at scale, and operate at the speed of the market.
The results are sobering: Over 60% of executives believe they are behind in their digital transformation. Lagging results have created a loss of confidence in the CIO, driving up the number of chief digital officers and business units creating their own digital strategies. But that misses the point.
Digital transformation is a CEO issue and an economic question. Digital transformation is expensive – CEOs can’t drive operational savings
fast enough to fund it and are cautious about destroying margins.
In 2018, CEOs must show the political will and, with the CIO and CMO, orchestrate digital transformation across the enterprise. Some CEOs will use their balance sheet to acquire digital assets and buy time. But 20% of CEOs will fail to act: As a result, those firms will be acquired or begin to perish.
Forrester’s Tech Predictions – Talent Widens The Digital Divide
Those organizations that struggle to attract scarce talent will spend up to 20% above market.
The news reports of a digital talent crisis are overblown. Continued use of H-1B, the gig economy bench, and technical training for the existing workforce have strengthened supply for commodity technical skills.
The 2% to 4% growth in wages suggests a relatively balanced market. The real story is the lack of specialized roles like data scientists, information security analysts, high-end software developers, and experience designers that are critical to CX and digital transformation. These professionals want to work for firms further along in their digital transformation effort and with more ambitious strategies. They will work for laggards as a last resort or due to geographic necessity.
Executives at digital leaders have 90% of the talent they need, while those at self-described digital laggards have only 19% of the talent they need. In 2018, talent issues will widen the divide between digital predator and prey – laggards will need to more aggressively set up digital incubation centers in talent hotspots and pay up to 20% above the market rate to change the game.
Forrester’s Tech Predictions – The Empowered Machine
Intelligent agents will directly influence 10% of purchase decisions.
Empowered customers are wreaking havoc on markets, changing the rules and destroying once-sturdy business models. Power has shifted away from institutions to customers. Enter the machine. Platforms and associated intelligent agents will collect preferences, behaviors, transactions, and emotions, creating a rich view of an individual.
Intelligent agents will use that data to increasingly influence consumer options and decisions. This model is not new. It was a longstanding part of advertising logic in a world where brands had greater sway over customer choices. The difference is that this model is based on the emerging, dynamic, and emotional relationship between the intelligent agent and the individual.
In 2018, 10% of purchase decisions will be guided by a platform’s agent and start the real economic impact of empowered machines
Forrester’s Tech Predictions – The Algorithm Wars
25% of brands will lack expertise in the lingua franca of intelligent agents.
The algorithm is foundational to digital platforms like Google and Amazon. It is how platforms make sense of customer preferences, recommend actions, learn, and act. The algorithm is the language of platforms. Yet brands have been slow to understand the lingua franca of platform algorithms, especially when the brand is not part of the customer’s existing preference and the algorithm is choosing whether to introduce that brand to the customer. It is akin to not understanding search
algorithms — but with far greater consequences.
It is one thing to be disintermediated by the platform and its associated intelligent agent; it is another to not understand or have any real
influence on that relationship.
In 2018, CMOs will need to source talent to interpret and influence AI-driven platforms. Twenty-five percent of CMOs will fail, resulting in their brand becoming undifferentiated and silenced in the market.
Forrester’s Tech Predictions – The Intelligent Agent Cocoon
Consumers, representing $24B in spend, will use intelligent agents to escape the noise.
It’s noisy out there: multitasking, endless choices, non-stop ads on any device. The emotional labor of these distractions is converting to fatigue for consumers today.
Current trends like yoga, KonMari, and hygge can be seen as fads. But perhaps they are signals that individuals are withdrawing from clutter in search of simplicity; those individuals will use intelligent agents to filter away the noise of the day. This shift will put a dent in companies’ financials. All told, 1% of the US population, with spend equivalent to $24 billion, will join the AI revolution to cocoon themselves from the noise.
2018 is a starting point. Intelligent agents will continue to strengthen their influence on consumers and pressure brands to engage through the subtle power of conversation.
Forrester’s Tech Predictions – The Advertising Correction
The advertising market will be flat in 2018.
All the signals are clear: customers avoiding ads; the cost of wasted or bad ads; major brands announcing massive cuts in ad spending; and agencies providing downward guidance to Wall Street. This is not an advertising budget crisis but simply changing priorities.
CMOs can’t defend underperforming media spend focused on customer acquisition as churn rates escalate or stand idly by as digital platforms threaten to dis-intermediate their relationship with customers.
Instead of plowing money into traditional ad spending, CMOs will increase spend on:
1. Revitalizing CX to drive affinity and stem churn.
2. Synchronizing loyalty programs to customer expectations.
3. Understanding how to decode digital platform algorithms.
4. Advancing MarTech to deliver individualized experiences at scale.
The result: Ad spend will be flat in 2018 and cause a painful
correction in the agency and AdTech markets.
Forrester’s Tech Predictions – The GDPR Challenge
80% of firms will not fully comply with GDPR.
GDPR challenges how companies balance risk and cost. Full compliance with all aspects of GDPR, including the ePrivacy Directive, is a high and expensive bar to clear. Non- or partial compliance could create extraordinary costs and damage to the brand. Companies are weighing what it means to fully or partially comply.
Forrester predicts that 80% of firms affected by GDPR will not comply with the regulation by May 2018. Of those noncompliant firms, 50% will intentionally not comply — meaning they have weighed the cost and risk and are taking a path that presents the best position for their firms. The other 50% are trying to comply but will fail. This will be a fluid environment; any successful case against a well-known giant will change the risk/cost balance.
The sleeper issue of 2018 will not be compliance but how consumer advocate groups use GDPR to prosecute their agendas by using the regulation’s “right to be forgotten” clause — exhausting companies’ resources and damaging their brands.
Forrester’s Tech Predictions – Open Banking Lays Siege
More than 50% of banks will start becoming an unintentional utility.
The venerable and profitable banking business model is under attack. Changing customer expectations, the onslaught of FinTech, and banks’ inability to deepen the value of customer relationships are to blame. Open banking will put that attack on steroids.
Epitomized by PSD2, open banking lays siege to the banks’ traditional power center: data. Banks will no longer have a monopoly on their treasure trove of customer data — account history that tells the story of life events and transactional data that lays bare the day-to-day minutiae of customers. Most banks have failed to convert this data to strategic advantage. That failure will come home to roost in 2018. Amazon and Google, well-positioned FinTech providers, and challenger banks will exploit access to data, disintermediating or supplanting incumbent banks.
In 2018, more than 50% of banks will fail to exploit open banking, starting down the slow, painful path to becoming an unintentional utility.
Forrester’s Tech Predictions – Retail Experience Harmonization
67% of retailers will be unprepared to exploit intelligent agents.
The retail industry continues to grow, but challenges lie ahead for traditional retailers. Retail has been working in parallel linear tracks: improve store
experiences, transform digitally, and connect the two pieces. Those parallel tracks are hard enough. But that’s not the mandate: The mandate is to leverage physical and digital assets differently.
Retailers will need to consider how to work with intelligent agents that will take a greater share of how customers discover and order; create immersive, dynamic store experiences; use physical stores as logistics nodes for intraday fulfillment; expand the digital catalog to match platforms like Amazon; and harmonize all of this in a graceful, differentiated journey for customers.
Lack of skills, quasi-differentiated brands, and aged operations are hurdles for traditional retailers — but the role of intelligent agents will be the thorniest issue in 2018. Only 33% of retailers understand the disruptive nature of intelligent agents; 67% do not.