Digital Identity of your customers: opportunities and responsibilities
The Future of Digital Identity
Every organization has to contend with numerous digital identities. How organizations manage them can be a strategic differentiator resulting in concrete business benefits. Digital identity management must be at the center of an organization’s data-driven business model. Part 2 of a series: Managing the Digital Identity of Your Customers.
In our Executive Summary on the Future of Digital Identities, we reported that digital identities are becoming the foundation of our rapidly evolving technology-based and data-driven economy and society. Every organization has to deal not only with its own digital identity, but also with the digital identities of its employees, co-workers, customers and other stakeholders—as well as the digital identities of devices and applications.
If an organization gets its digital identity management right, it will lead to:
- Increased efficiency
- More revenue
- Transformational benefits with an enhanced user experience for colleagues
- A differentiating digital journey for customers or citizens.
In this article, we focus on managing the digital identity of your customers. Doing it properly can lead to increased customer loyalty and revenue, as clients favor data-driven businesses offering better digital customer journeys. Other benefits include increased data and privacy protection, owing to a reduction in human errors and more tightly controlled data access rights.
I focus here on private sector organizations serving consumer customers. But the underlying principles of customers’ identity management also apply to government bodies, where customers are mostly citizens or companies, and for B2B organizations, where customers are other businesses.
COVID-19 and customer behavior
The current global health crisis has rapidly and dramatically accelerated a digital transformation, including in customer behavior. Country-specific lockdown measures over longer periods of time have accelerated the adoption of online purchasing. Across industries and countries, customers are embracing digital like never before. Deloitte’s study, the ‘Impact of COVID-19 on consumer behavior’, found that in Germany, between 24-46 percent of consumers (depending on the market segment) expect to continue buying more online, even when stores re-open after current COVID-19 measures are relaxed.
Most organizations did not plan or prepare for this level of online growth; they had to adapt quickly to retain business and customers. With an increase in digital interactions, the volume of customer data held by organizations has also grown. This data availability offers a significant opportunity to use analytics to better understand customers and provide more effective and personalized customer contact and user journeys. But simultaneously, the increase in valuable data has led to an increased risk of cybercrime. Privacy obligations have grown and compliance is a bigger challenge.
COVID-19 has made proper management of your customers’ digital identities even more important. Decisions of organisations and their senior leaders concerning digital identity strategies and operations will help define your customers’ digital experience. As a result, it will determine whether they become customers in the first place, their loyalty level and the likelihood of garnering their recommendations.
With the acceleration of digitization, customer requirements around digital experiences have changed. Why do customers select a specific company for their initial service or product purchases? And what turns them from one-time customers into repeat ones? To a large extent, it’s their digital experience, including the following factors:
- How easy it is to register as a customer.
- How seamless it is to access information of interest.
- How personalized the service is.
- How easy it is to purchase and pay.
- How secure they feel the service is, including how their own personal data is handled.
Your customers’ digital experience is defined by your customers’ identity management, even in a post COVID-19 world. After the lockdowns are lifted, organizations will need to rebalance their online and offline activities. Customers will expect your organization to provide a seamless 'hybrid' experience between their psychical and digital identities.
An example of this so-called hybrid identity is the use of biometric client identification in retail stores. This process involves identifying a client at a store’s entrance and continuously monitoring his purchases, which are then charged automatically into their credit card when on leaving without the need to physically check out. In the future, it is likely that customers will increasingly expect your organization to have a single digital identity for them, one that connects their physical and digital behavior not only within individual organizations, but across multiple organizations and governments.
Benefits of customer identity management
Improving your customer’s digital experience with proper identity management has many benefits, depending on the type of organization and the chosen strategy.
- Brand integrity protection. A responsible organization wants to be known for protecting customer data and privacy. Breaches damage brand integrity, leading organizations to lose the trust of investors and customers.
- Increased sales. By using data to improve user journeys, your customers are likely to be more loyal. Seventy percent of customers are more likely to buy from an organization demonstrating the highest privacy standards.
- Increased operational and cost efficiencies. By creating centralized governance and automating processes, you can reduce manual activities and their associated costs. Examples include validating and registering new customers and automating promotions based on profiles.
- Accelerating value chain transformation for b2b and b2b2c. By properly managing numerous digital identities—both those of employees and customers—it becomes easier to transfer authority. Each person will have their own set of mandates across the value chain, supporting business integration.
- More business control. An increase in security by allowing for real-time automated reports into who has access into which systems and associated data improves governance, privacy and audit compliance.
Improving customer identity management
Which approach will best help you benefit from the digital identity opportunities available? First, you need to define why digital identities are a key strategic component and what the quantitative and qualitative benefits are of managing them properly.
The insights gained will support business leaders deciding to integrate digital identities into their data-driven strategy and operations, allowing for a comprehensive and responsible risk-based approach. This can then be translated into a road map covering people and processes and the decision-making around technology. Experienced change managers, proactive stakeholder managers and a strong focus on effective communication are the prerequisites for the execution of such a road map.
When operating in an international context, it is crucial to understand the different cultures, laws and regulations regarding personal data and data privacy. The implementation of COVID-19 tracking apps has led to an increase in negative sentiment about the collection and use of personal data and how privacy is ensured. This type of monitoring has raised fewer objections in countries where there has been more success in battling the virus. For example, in Singapore, there is less objection to data collection, whereas in Europe and the United States, there continues to be resistance. This difference is reflected in overall sentiment on privacy topics. Creating a consistent single digital identity strategy will significantly increase your ability to adapt to local requirements and support change.
The role of senior leadership
As described in our Executive Summary on the Future of Digital Identities, each member of the senior leadership team plays a different role in developing and implementing a digital identity strategy for customers. The Chief Executive Officer (CEO) is ultimately accountable for the integrity of the organization’s brand, meaning the CEO must lead by example to prove the organization’s ability to protect its customers’ personal data and safeguard their privacy. For the Chief Marketing Officer (CMO) and the Chief Data Officer (CDO), collaboration has never been more important. They should be aligned on how the strategy and operations of digital identity support their wider business requirements. The increase in data will also aid the CMO in understanding the customer and create a consistent hybrid user experience. This can only be done effectively if the CDO monitors how data is gathered, stored and used and if they ensure compliance with privacy laws and regulations.
The Chief Information Officer (CIO) is responsible for the infrastructure surrounding business operations. This includes responsibility for all customer data flows. The CIO and the Chief Security Officer (CSO) must ensure that the customer has a seamless, frictionless and secure digital experience, and they have to provide the CMO with access to all the right customer data analytics.
It’s their joint challenge to align on corporate goals and the overarching business case, while at the same time managing their own interests: the CIO has to achieve the same or more with less budget and resources, while the agendas of the CMO and CSO require investment.
The Chief Privacy Officer (CPO) needs to prevent and contain brand-damaging privacy incidents, as they impact customer trust and loyalty. They should pursue privacy by design, including changes around legacy business processes or systems. To be effective, the privacy officer should be involved in the early phase of each (digital) change process.
Building a better customer experience
Digital identity is all about business benefits and an organization’s ability to leverage digitalization in a responsible way. It is the core of an organization’s data-driven business model and operations, and it encompasses all direct and indirect aspects of the relationship with customers. Each executive board member has a role to play. Start building a better customer experience by improving your customer identity management now.
In our upcoming article, we will elaborate on managing the identities of sophisticated devices and applications within an organization. Watch this space!
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