Publish date June 6, 2019
Are you a leader still working through if digital technology is suitable for your business? Or has your company already embarked into a digital journey and is not yet yielding positive results? You are not alone!! Despite the seeming ubiquity of digital technology, a McKinsey survey (i) revealed, on average, industries are less than 40 percent digitized.
The disruptive nature of Industry 4.0 is luring business leaders to go down the digital path. However, most have either little guidance to determine the right course of action or do not understand the potential value add of digital technologies to their business. Especially, if you are a small and medium-sized business, your apprehensions for a digital investment is entirely plausible, given the massive financial blow even a small set back can bring to your business. Digitization offers level playing ground for all businesses regardless of the size – large, medium or small if executed strategically, enabling SMEs to compete and reach markets that were previously dominated by the larger players.
The status quo is no longer an option. Traditional business models are struggling to survive under the demands of the digital economy and even facing the risk of extinction. You must reinvent or perish to brave the storm of disruption. It is wise to embark into the path being cognizant of the common pitfalls, rather than make an investment unwary and unprepared. An insightful investment can certainly prove to be a game changer, complementing your business growth, and not seeing it reduced to a mere investment.
Averting common pitfalls:
Digital transformation is often mistakenly conceived as a one-off initiative or a quick fix to a certain gap. What many leaders do not fathom is that it concurs with the rule of ‘survival of the fittest’ calling for a holistic rather than a discrete approach. True digital transformation is a foundational change of organizational culture and mindset, positively subverting traditional approaches, toward a state of enhanced technological readiness. Lack of clarity, short-term goals, and resistance to change have often posed a threat to digital success. Averting the following pitfalls will not only ensure you survive in the digital economy, but it will also lead you to a successful digital future.
Leaders often misconstrue digital transformation as addressing daily operational challenges. For example, approaches such as using CRM, or social media platforms, or creating an app, or even modernizing IT using digitized technology are just business processes. They do accelerate performance. However, implementing such processes without a preconceived strategy is bound to create operational silos and standalone projects, pulling the organization down towards the path of failure.
A comprehensive strategy should be built by taking a more in-depth look into your business inefficiencies, determining your digital destination in addressing the loopholes, and using digital technology as a catalyst in serving your strategy. Technology can only aid a well-designed strategy that is aligned with your overall business goal; and not vice versa.
Digital technologies have created a paradigm shift in customer behavior. Today’s ever-connected customers expect hyper-personalization, instant gratification, seamless cross-channel experiences, and 24/7 access. They form the core of any business strategy.
Overlooking or having a fragmented view of the changing customer landscape can be disastrous to your digital success. Irrespective of whether you are a B2B or a B2C company, customers should stay as the center of your corporate strategy. The right digital tools will support you to not only amass critical customer information, but also segment your audiences, excel in your customer service endeavors, drive product and service innovation based on customer needs, and deliver a personalized customer experience thereby fostering brand loyalty within your customers.
The importance of building a strong digital culture is often underrated in the quest to technology adaptation, leading to short-term successes and long-term disasters. Technology development requires an inclusive top-down and bottom-up understanding from both the leadership as well as employees to propel innovation, implement effective processes, and drive transformation successfully. Lack of understanding of digital trends, perceiving technology as a threat, and even the lack of initiatives to nurture talent jeopardizes the whole transformation efforts.
For an SME it is easier to leverage the smaller teams to entrust and coordinate transformation across individual functions, departments, and business units, review the rate of success periodically, perceive digital threats and opportunities sooner, and identify future investment to scale.
Data is at the heart of digital technologies converting volumes of information into perceptive insights. However, amassing huge volumes of data and trying to interpret which information is relevant for your business can often be overwhelming, leading to skipping or ignoring some valuable insights. Again, having a robust digital strategy can help you derive valuable insights directly in alignment with your overarching goals without getting lost in the data deluge.
Another common myth is that digitalization demands a complete overhaul which involves huge investments at once. If you are an SME, let this not deter you. While it certainly is true that an isolated upgrade cannot be termed as digitalization, but it does not require an overnight revamp. It is a gradual evolution of digital maturity and not a revolution. As a leader, you should phase out the evolution into a series of milestones investing enough time to test waters by conducting market research and taking a well-informed decision. Strategic small steps will help you evaluate what reaps maximum ROI for your business and move towards a digital future.
One of the flip sides of digital technologies is the increased susceptibility to cyber threats, thereby risking severe financial losses and damaging reputations. However, instead of getting dissuaded, you should rather concentrate on processes to minimize risk. Integrating security infrastructure as a natural part of the design in your IT landscape, embracing frequent monitoring that will help you de-risk your IT environment.
Successful cases of digital investment acting as a game changer:
Now that you already know how you can thrive rather than just survive the pressures of the digital economy let’s lend some wisdom from a McKinsey research on the most successful models adopted by digital natives.
A McKinsey (i) survey observes that 49% of companies focus their investments in marketing and distribution machinery, followed by 21% on products and services, 14% processes, 13% ecosystem and only 2% on the supply chain.
It is no surprise that customers form the center of digital strategy forcing businesses to reimagine their archaic marketing and distribution model to increase customer touchpoints and improve the quality and frequency of interactions with customers. Incumbents such as Cisco, IBM, GE, and Dell are routinely remodeling their sales and marketing strategy by leveraging the power of digital tools and listening to their customer. New entrants like Uber, Netflix are regularly building and redefining their business models through their innate understanding of the behavior and preferences of digital customers.
Again, digital legends are constantly reinventing their product and service offerings, creating new market segments, and developing an agile business model to keep up with the ever-evolving customer requirements. For instance, from being launched as a standard on-demand car hire app, Uber revolutionized the car hire industry by creating a shared economic model for drivers to enlist their car and extending their service through ride sharing model with UberPool and now UberFreight (to connect truckers). Today, the company is further exploring the segment of autonomous vehicles with its subsidiary, Otto, by leveraging digital technologies like artificial intelligence and augmented reality. Another recent example is of Facebook. The social media giant is today venturing into the whole new banking system with its new cryptocurrency-based payment network to ease credit transfer for its customer base.
McKinsey suggests that investments in ecosystem and supply chain dimensions are relatively less but holds huge potential for devising successful business strategies. Airbnb and Uber (previously mentioned) serve as great examples here demonstrating the power of tapping previously inaccessible sources of supply (sharing rides or rooms, respectively) and bringing them to market. Most recently, Airbnb spawned a whole ecosystem of startups filling gaps that Airbnb and the others can’t or don’t address.
We have seen cloud frontrunner Amazon web service leveraged its developer ecosystem to build its $26 billion cloud business, now followed by Google, Apple, and Microsoft. Netflix, the video streaming network is yet another great example of leveraging its creative ecosystem to emerge as “best original programming” according to a Morgan Stanley report giving HBO, Amazon Prime Videos and Hulu a run for their money. Netflix transformed its whole business model from video rental to content-streaming platform by opening-up its application programming interface (API) to partners.
In all the above cases, the biggest differentiator for the digital legends is a bold, tightly integrated digital strategy. Whether through the creation of new digital businesses or by reinventing the core of current organizational approaches, they built an agile business model through assessment of external opportunities and internal capacities. Very few organizations, especially an SME, are likely to have all the capabilities within their boundaries and should be open for strategic partnerships with industry veterans.
Its time you assess your in-house as well as external capacities and devise your digital investment strategy by following the guidelines stated above. I can vouch it will pay off. If you need further assistance, YASH Technologies, with its comprehensive suite of digital service, is well positioned to aid your transformation journey.
Eddie O’ Neill Managing Director – YASH Technologies UK