Customer-Centric AI: the Major Paradigm Shift in AI Governance (Part 1)
Why be a customer-centric AI company
This is part of All Things AI Governance Newsletter but now you will receive my essays separately. My entire substack runs on my enthusiasm and your feedback! Comment, DM, or email me with any feedback and ideas.
In part 1 of this essay series, we will discuss the WHY question: why customer centricity is decisive for AI product development.
Customers today are more selective, aware, and empowered than ever before. They expect personalized experiences, seamless interactions, and solutions catering to their individual needs. As AI increasingly integrates into critical aspects of life, such as healthcare, education, and finance, customers are even more discerning in these pivotal areas. Therefore, businesses must prioritize customer centricity not only to meet but exceed these heightened expectations.
Moreover, research consistently demonstrates the correlation between customer-centricity and business success. Customer-centric businesses outperform their counterparts (product or revenue-centric companies) in terms of profitability, customer satisfaction, and long-term loyalty. By placing the customer at the center of AI development efforts, you can drive sustainable growth, mitigate risks, and differentiate your brand in competitive markets. The success of AI initiatives hinges not only on technical prowess but also on a deep understanding of customer needs, preferences, and expectations.
Gartner defines customer centricity as “the ability of people in an organization to understand customers' situations, perceptions, and expectations. Customer centricity demands that the customer is the focal point of all decisions related to delivering products, services, and experiences to create customer satisfaction, loyalty, and advocacy.”
The WHY Question Answered
All the reasons why your organization should be customer-centric while developing and/or deploying AI technologies:
Increasing selectivity and awareness among customers (in general, not only in the context of AI): Today the world is highly connected which allows customers to have access to a wealth of information and options at their fingertips. They are more discerning about the products and services they choose, seeking experiences that align with their values, preferences, and expectations. Already in 2014, Deloitte’s study (” The Growing Power of Consumers”) found that customers have become more and more selective, making their purchasing decisions based on the experiences of other customers, exchanging their own experiences with others, and stopping doing business with companies if their expectations are not met. Only 1 in 26 customers complains, the rest just leave. A more recent Deloitte study (from 2022) found that 88% of companies view customer experience as their biggest competitive advantage. These trends mean that knowing your customers better and adapting to their needs has become a precondition for product optimization and customer satisfaction.
AI’s impact on critical life aspects: AI technologies are increasingly integrated into critical aspects of people's lives, including healthcare, education, finance, and career choices. As AI influences these crucial areas, users become even more selective and cautious about the solutions they trust. Whether it's a recommendation for a career path, a financial decision, or a healthcare diagnosis, customers expect AI-driven services to be accurate, reliable, and tailored to their individual needs. According to Forbes, about 60% of Americans wouldn’t trust AI to make critical life decisions and according to a MITRE-Harris survey, trust in AI technologies has declined between 2022 and 2023 after the release of consumer AI technologies. Only 39% of adults believe that today’s AI technologies are safe and secure. Hence, prioritizing customer centricity ensures that AI models are designed with empathy, transparency, and accountability, earning users' trust and confidence in these pivotal life decisions. This not only enhances customer satisfaction but also fosters loyalty and advocacy, driving long-term success.
Enhanced Profitability: Customer-centric businesses consistently outperform their counterparts that are solely product or revenue-centric. By placing the customer at the heart of AI development, you can create personalized experiences that drive customer engagement, retention, and lifetime value. Accenture research found that companies that view customer service as a value center achieve revenue growth 3.5 times greater compared to those viewing it as a cost center. According to Capgemini's study, customers would purchase 55% more products if their interactions with AI are perceived ethical; if perceived unethical, 34% would stop interacting with the company. Understanding customer needs and preferences enables your organization to develop AI models that anticipate and fulfill their desires more effectively, leading to higher sales, reduced churn, and increased profitability over time. Moreover, satisfied customers are more likely to become brand advocates, attracting new customers through positive word-of-mouth and referrals, further boosting revenue and market share.
Mitigating Risk and Regulatory Compliance: Prioritizing customer centricity in AI development helps you mitigate risks associated with data privacy, security breaches, and regulatory compliance. By understanding and respecting customer values, privacy preferences, or desirable degree of personalization, you can build trust and credibility, reducing the likelihood of data breaches or legal penalties. Moreover, customer-centric AI models are designed to prioritize fairness, transparency, and accountability, aligning with emerging regulatory frameworks such as GDPR, CCPA, the EU AI Act, and ethical guidelines for AI development. This not only safeguards your company's reputation but also enhances customer trust and loyalty in an increasingly regulated environment.
Driving Innovation and Differentiation: Customer-centric AI development encourages companies to continuously innovate and differentiate themselves in the market. By closely listening to customer feedback, analyzing behavior patterns, and anticipating future needs, you can identify new opportunities for product and service innovation. AI-driven insights enable you to personalize offerings, tailor marketing strategies, and optimize the customer journey, creating unique value propositions that set them apart from competitors. As a result, you are better positioned to adapt to changing market dynamics, capitalize on emerging trends, and maintain a competitive edge in the long run.
Augmented decision-making capabilities: It is difficult to make life-altering decisions on behalf of others - career, diet, finance, health - how to best guide internal governance structure in the organization to make these decisions for hundreds and thousands of your customers and optimize for everyone’s needs? You probably already provide personalized services but it does not seem enough and it is becoming increasingly difficult to create additional value with more personalization. This goes back to our 2nd point, algorithms are already altering critical aspects of customers’ lives which are far more complex and nuanced: at the end of the day, no matter how much data you collect about the customer, the customer themselves is the only person who has the full-scale view of their own personality, needs, context and preferences. This leads us to the question: Rather than relying solely on internal expertise and algorithms, why not leverage the collective wisdom and insights of customers themselves? By inviting customers to participate in the co-creation of algorithms and policy documents, your organization can harness diverse perspectives, preferences, and priorities to inform more holistic and inclusive decision-making. This approach not only enhances transparency and accountability but also fosters a sense of ownership and trust among customers, as they become active collaborators in shaping the very policies and algorithms that impact their lives. Moreover, by involving customers in the decision-making process from inception to implementation, you can ensure that your solutions are not only personalized but also resonant with the evolving needs and values of your diverse customer base.
In reflection, the journey towards customer-centric AI is not merely a strategic imperative, but a shift towards empowerment, collaboration, and shared value. It's a new paradigm where businesses transcend the traditional boundaries of personalization, forging deeper connections with their customers and co-creating experiences that resonate at a profound level.
In part 2 we will discuss the HOW question. Stay tuned!
Ana Chubinidze is the founder/CEO of AdalanAI, building a novel approach to AI Governance.
email: ana.chubinidze@adalanai.com