Let’s go back to the future in 2008. We were still yet to see the advent of companies like Airbnb and Uber, let alone self-strapping Nike shoes and hovering skateboards. The future that we expected to see isn’t the future that we’ve found ourselves in. So, the question is; what changed in last 10 years that led to this shift in our technical landscape? The answer is the exponential increase of processing power, communication bandwidth and storage capacity, and the innovation that it has unlocked. To put in perspective in the most simple way – your handheld smartphone has more processing power than laptops from 10 years ago.
How did we get here?
Digital Transformation is not something new and has been around for more than 50 years. One of the popular early examples is the downfall of traditional Swiss watches, replaced by digital cousins from Casio. More recently, we’ve seen bookstores replaced by Kindle and there are many more examples. This trend is now leading to what we refer as fourth industrial revelation, led and accelerated by Artificial Intelligence, Machine Learning, Big Data and Robotics. Many incumbents across many industries have been shaken and have had to realign their value proposition in the face of a completely new business model, like UBER and Airbnb. Needless to say, digital transformation is and will continue to be disruptive to business. However it also creates an opportunity for new business, new markets and new innovation.
It’s safe to say that disruption is a natural product of market economies. There are several different types that can all be associated with a tech example:
· Technological – digital watches
· Architectural – Sony Walkman
· Consumer-side – iPhone
· Business Model – Airbnb
· New Market – Automobiles
· Low-end – Nintendo Wii
· Value chain – Gumtree
How can we use a digital driven strategy to keep innovating?
Technology is evolving quickly and phrases like Big Data, Cloud, IoT, Augmented Reality, Artificial Intelligence, Blockchain are ubiquitous. Throw the ever growing importance of cyber security into the mix, and how do we possibly decide on our digital strategy? There are many paths a business can take when building a digital first strategy, but don’t get caught up in the buzz around these new technologies without properly considering what your customer really want and need, your commercial operations and your unique competitive advantage. Businesses need to aim for the right digital mix to achieve both higher operational efficiency and better customer experience. There are many ways to do this but here are two key suggestions.
Digitise the core: Possibly every business strives for both higher operational efficiency and better customer experience. In many cases, digital transformation holds the key to achieving this. Businesses need to have an end-to-end approach to digitisation and rethink how value is delivered to the end user. For example, consider the online shopping experience at Woolworths or Coles. When launched, this was a completely new channel for the supermarket giants. The customer is in control of every step in the process, from filling their shopping cart to the delivery, not unlike shopping in the bricks and mortar store, but in the background, operations and logistics had to be completely transformed to deliver on the new digital sales channel. Efficiency no doubt had to be remastered to ensure this line of business was profitable. To achieve the strategic digital goals, an organisation has to have an empathetic understanding of the problem they are trying to solve, identify new solutions, launch scaled down version of the product/service and test the prototype in real life conditions to see the impact on the customer experience along the whole journey.
New digital growth: Innovators are always trying to disrupt, and the incumbents have no option but to find new digital growth. The challenge for established businesses is not only managing core business, but also simultaneously building these new ventures. The challenge here is to maintain ambidexterity and be careful to not fall into one of these two traps: the success trap (pure exploitation) or the perpetual search trap (pure exploration).
This leads to the another important question, how can businesses avoid these traps to find the right mix for them? You should consider:
· Switching (continuous adjustments of resource allocation depending on how the environment evolves)
· Create separate units to serve separate objectives.
· Rely on a company’s ecosystem and consider acquisitions, partnerships and incubation.
The phrase digital transformation means many things to many people and it has far reaching impacts in every business. The key is to understand what it means for your business and how you can use it to positively influence your customer journey and business operations. Finally, remember that for any digital transformation to be successful, your organisation as a whole, as well as every person within, need to change how they think and function to be truly digital ready.