Operationalising digital transformation

There are important lessons to be learned from the Internet revolution.

The rules governing the operations of entire industries such as music and advertising have been rewritten, and Internet-enabled business models such as cloud computing have experienced tremendous growth.

What the Internet and now digital disruption is bringing to the global marketplace is a renewed commitment to innovation and to remain agile.

To survive this change, many organisations have embarked on digital transformation initiatives with some success. The goal is to become a significant force in the new digital economy, protect their market shares, and act as a buffer against upstarts that are surely to challenge their dominance.

A key strategy in this endeavour is the need to develop end-to-end digital engagement and comprehensive digital operating models that address suppliers and employees just as much as customers. They must decide whether they can enhance or transform their existing models, or whether they need to invent a new model. Either way, to compete and transform digitally, organisations will have to operationalise their efforts by first shifting their mindsets.

Loss of control over the customer relationship

New digital channels and devices have given consumers greater access to information, more communication and collaboration.

Information aggregation and price comparison have evolved.

Today’s consumer has real-time access to competitive pricing information simply by scanning a product barcode into their mobile phone and reading this information through an application.  In this way, price transparency is increasing as consumers can compare the prices of products on the move, placing power firmly in their hand.

Need to engage digitally with suppliers and employees

In the digital era, information can flow in directions that companies cannot anticipate.

So, suppliers and partners must look for ways to engage digitally with each other. There is a need for greater focus on security but there is also a lot to be gained from new ways of collaboration and knowledge sharing. For example, companies are increasingly looking to integrate e-procurement into their supplier relationships to reduce manual processes and improve invoice tracking, or develop secure portals for real-time collaborative forecasting with suppliers to better manage inventory.

Commoditisation and competition

Consumers want choice but don’t want to spend too much maintaining the relationships needed to keep it. At the same time, companies are continually seeking ways to retain and develop increased share of wallet through deeper customer relationships. Consequently, consumers are choosing to invest their total acquisition with a smaller set of brands.

To reduce the impact, many companies are shifting their focus from products to services as a way of differentiating themselves. They are creating new information asymmetries, which make it more difficult for customers to directly compare providers. Successful responses to the commoditisation threat include increased personalisation, wrapping a service around a product, and a re-bundling of products to realise price advantages.

The failure of many bricks and mortar business models to adapt to the threat of Amazon is a stark reminder that the digital era is treacherous if one is not prepared. To be successful now requires no less than the creation of enhanced or new business models, new operating models, new ways of interacting with consumers, and new ways of selling.

Here are three key areas to address in successfully operationalising transformation for enterprises:

Enhance traditional business models

Companies can evaluate existing operating models to enhance services digitally by extending manual services. For example, customers can be encouraged to use self-service channels including customer service through social media. Payment models can adopt more subscription-based approaches including a pay-as-you-go model. Hardware offerings can be integrated with services to engender long-term customer loyalty.

Digital business models

Transform existing models and shift to a digital operation, offering entirely new services that cannot be provided manually. For example, travel agencies leveraging online vacation planning services for a small fee to frequent travellers. Another approach is to offer existing services through new digital channels such as a florist allowing for purchases via Facebook to increase customer convenience.

Invent new models

A completely new revenue generating operational model or new digital engagement model between consumers and the business. For example, companies can offer customers the convenience of using digital currencies to purchase products and services instantly to save on exchange rates. This will create customer loyalty and new revenue streams as such services will likely encourage more customer spending.

Organisations need a structured approach to the challenge of connecting with key audiences in the way that they increasingly expect. They must understand the threats and opportunities that the digital world presents to their business.

It is important to not over-complicate the topic; the primary objective should be a clear understanding of what digital means for the business and the strategies to adopt the right operating model. With that understanding, it becomes possible to create a prioritised action plan to ensure success and longevity in the digital world.

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