How do you become a digital business? You may discover many different paths to success on your digital journey, and even more opportunities to take a wrong turn along the way. Here are three traps to avoid, inspired by some classic Beatles songs plus a turn of phrase from Taylor Swift. Be sure you never ever get caught in these mistakes as you build your digital business.
What’s a Digital Business?
In Gartner’s recent study, 22 percent of the respondents defined themselves as already being a digital business: one focused on a world where people, businesses and things communicate, interact and even negotiate with one another.
What paths are being taken to build those digital businesses?
A large segment of the Gartner study -- 41 percent -- defined themselves as a digital marketing business, a stage that leverages the Nexus of Forces (social, mobile, cloud and information) to build intimate relationships with their customers that advance their businesses. Cognizant views businesses being reshaped into digital businesses by how customers behave:
"the way we shop, consume entertainment, socialize, learn and do just about everything, every day. It's the digital lives of customers that are changing the rules of engagement and we’re seeing their loyalty grow stronger for the brands that keep pace.”
Based on a survey conducted by Circle Research for Vodafone, machine “behavior” is driving digital business and more importantly digital business returns. The research found that digital Machine-to-Machine (M2M) adoption has increased by more than 80 percent globally in the last year and revealed that nearly all (96 percent) of the America organizations implementing M2M strategies have experienced a return on their investment (ROI) such as greater competitive advantage, customer service and productivity.
For Erik Brynjolfsson, an economist at the Massachusetts Institute of Technology (MIT) and co-author of The Second Machine Age, it is all about artificial intelligence and the pace at which digital technologies are growing in power that will inform the path to digital business.
An interesting article in Tech Republic gives some examples, from Brynjolfsson and others, of what our digital business future might look like. These range from call center operators gradually being replaced by question-answering, automated systems (Think "When Watson Met Siri"), to the declining cost of sensors "driving" automation of transportation and logistics occupations. A new research report from the US Department of Transportation's National Highway Traffic Safety Administration (NHTSA) assessed the readiness of vehicle-to-vehicle (V2V) communications, designed to transmit safety information between autos and warn drivers of imminent crashes. NHTSA estimates that anywhere from 25,000 to 592,000 crashes could be prevented and save roughly 50 to 1,083 lives per year.
In a recent meeting with one of my favorite analysts from ARC Advisory, the conversation turned to the industrial Internet of Things and then on to the subject of consumer impacts. In the digital business world of the future, refrigerators will alert what and when they need to replenish, and grocery shelves will leverage their connected digital supply chain to drive demand response back through to supplier distribution centers and logistics providers. Cars will drive themselves and notify insurance firms and garage services when they break down, negotiate claims and arrange payment and repair.
While we consider just how distant or near a future all this might be, I wish to make it clear I would much prefer to have a chef and a chauffeur. Just an old fashioned girl I guess, but one who does recognize that our collective progress towards digital business is at times exhilarating, at other times disappointing, and at all times inevitable.
So with that as backdrop, here are three common mistakes to avoid as you build your digital business.
Mistake #1: Digital business is just a new kind of psychedelic experience
Gartner states, “Digital business is the creation of new business designs by blurring the digital and physical worlds.” It predicts that by 2020, 75 percent of businesses will be a digital business or will be preparing to become one. Some might say the best way to achieve this blurring is through psychedelic experience -- just listen to the Beatles Lucy in the Sky with Diamonds to be transported to a world of “tangerine trees and marmalade skies.”
As business people we need to be careful that the bright shiny object of “digital” does not blind us on our path forward. Digital innovation and creativity need to stay grounded in and aligned with the strategic direction of the business, with clear context to the parent industry.
As McKinsey states in finding your Digital Sweet Spot, “To capture the value available, organizations will need to assess the value at stake, invest proportionally to that value, and align their business and operating models accordingly.”
Not all industries face the same opportunities or the same threats. The McKinsey study found that industries in the “eye of the digital storm,” like retail banking, property and casualty insurance, and mobile telecommunications that offer virtual rather than physical products and focus on processing and servicing, need to have a strategy for digital that includes omnichannel distribution. McKinsey projects that digital-channel use in these sectors will average 35 percent bottom-line impact, while cost-base potential reductions could average 20 percent.
On the other hand, industry sectors like grocery retail and apparel need a different strategy. For them, digital sales may realize only a 20 percent average bottom-line impact over the next five years. A significant opportunity, but much less than the potential bottom-line impact from digital driven cost reductions, which could average 36 percent.
So as business moves on its digital path, those who forget the basics of good market analysis and business strategy do so at their own peril. Just look back to the dot.com days, when Webvan was founded as an online grocery store, delivering goods (including perishables) to doorsteps across the US. According to C-Net, "Webvan went from being a $1.2 Billion company with 4,500 employees to being liquidated in under two years.” What looks to be a much smarter trend is the birth of gourmet marketplaces like Foodoro with food crafted by artisan producers. A startup with a targeted market aligned with their digital business strategy. Hmmm, I need to look to see if they are selling “tangerine trees and marmalade skies.”
Mistake #2: To find the right path you must look within
The great George Harrison wrote a song called The Inner Light based on a passage from Tao Te Ching “Without going out of my door I can know all things on earth.” He was heavily influenced by the Beatles time in India and his truly inspirational advice might work well for the path to enlightenment. For the path to digital business, I believe this approach could prove to be fatal. Getting outside yourself is critical, look outside your business, to your partners and your customers, and keeping your industry structure and dynamics in mind.
McKinsey notes “The potential impact of digital technology varies widely by industry, but most enterprise leaders share an important challenge: how to get beyond the small share of the prize they are capturing today by looking for impact across the whole value chain."
The Boston Consulting Group perspective, Exploiting Digital Disruption, asserts that because digital technologies enable companies to work more easily across traditional boundaries, it can result in leapfrogging entire links in the value chain. “
The most common example is manufacturers using e-commerce capabilities to bypass wholesalers and distributors by establishing or strengthening direct distribution channels with customers. The risk to traditional wholesalers and distributors is high.”
McKinsey also makes the critical point that
a too-narrow focus on distribution channels means organizations are getting only a small share of the full value that digital transformation can provide. That narrow focus may also be leaving organizations vulnerable to new entrants and agile incumbents that can translate operational improvements across the full value chain, combined with innovative operating models, into better, cheaper, more customized products, faster service, and an improved customer experience. For organizations that can step back and apply their digital investments in such a holistic way, the prize is significant.”
This dynamic is showing itself in the Financial Services industry where new entrants are employing digital business models to disrupt traditional banks and insurance companies. Point approaches or applications fall short as a means to counter this insurgency. What is needed is a digital omnichannel approach integrated with digital marketing, client onboarding and servicing.
As important as it is to take an external view on your digital transformation journey, it is also important to look within to ensure you have the competencies in place to execute on your holistic digital business vision. Perhaps George had it right all along.
Mistake #3: Digital business is all about process. Digital business is all about content
There is a constant and natural tension between those who favor process and those who favor content as THE best path for digitizing business in a meaningful way. Your personal perspective is shaped by professional history, your current role in the organization, and often by the nature of the particular challenge you presently face in building your digital business. Here again, we can learn much from the Beatles song book.
Come Together is the lead song on their Abbey Road album that had some of the last Beatles recording sessions. Recorded in 1969 and originally politically inspired, this song wound up illustrating the clash between Lennon and McCartney that would ultimately lead to the end of the Beatles in 1970. If Team John vs. Team Paul gives us any lesson, then it is perhaps that it is time for Team Process and Team Content to come together to best move the digital business forward.
I’ve written extensively about adaptive case management technology and disciplines that can bring together process and content for your business initiatives. Business processes are essential to digital business as the engines of work activity. They move you forward in your daily job, help propel strategic initiatives, and perhaps most importantly, give you the framework to make and implement good business decisions. Content is equally critical because it represents essential information needed to fuel your business decisions, and as such it is most valuable when properly served and effectively consumed by your business processes. My conclusion then is that process and content together are a powerful means to drive better business results.
Digital business advances are increasingly being used by companies to differentiate and gain
advantage over the competition. If you’re in the Insurance industry, that might mean a focus on
better approaches to managing customers through multiple channels - brokers, agents, online and
more. In Banking, efficient customer on-boarding, new account opening and servicing are
considered critical to success. And, in the supply chain sector, meeting customer and supplier SLAs (service level agreements) can be the singular difference. All of these will require an integrated content and process strategy with technology that comes together to support that approach.
The long and winding road
As in so many disruptive situations, there is no single straight path to success.
To build a digital roadmap for your business, you’ll need to ask where the value is to your enterprise in operating as a digital business. To identify and pursue the value you will need to align to your strategic business initiatives, look to the external forces impacting your vertical industry, and consider the full breadth of digital technologies and methodologies available to you.
While you are doing all that it couldn't hurt to listen to more Beatles for inspiration.