Improving processes and customer offerings – that’s the ‘digital’ action
Often the “digital” falls on the CIO only, sometimes a Digital Chief is appointed, a “innovation lab” is started and the topic “digital” is emphasized at management conferences, while at large business continues as usual. But don’t worry, it’s a good start.
Most if not all board members and senior execs at companies are perfectly aware of the importance of ‘digital’, while some have challenges addressing the topic, its relevance and what’s next. Not least considering current priorities, competence gaps and cultural challenges.
A majority of companies have refreshed their web-sites and apps to offer an up to date modern online user experience (graphic design, downloading functionalities, contact and purchase functionalities, etc). The traditional static web pages with a few pages with info texts, some press releases and a list of telephone numbers and mail addresses is, for lack of better words, stone age and appeal to increasingly few. Lack of various downloading functionalities, lack of white papers and lack of semi-automated contact and purchase functionalities limit sales to the company’s own physical sales force activities with the likelihood that potential prospects in their research phase will be gradually drawn to competitors owing to their online experience and services offered.
Quite many companies have also started to work more actively than before with frequent updates of the actual content of their web sites and apps. Simply to make prospects wanting to revisit more often, to link to different online forums and media channels as a marketing effort and as a general way to establish authority with potential customers during their search and research phases. But ‘digital’ is much more than the visual surface, marketing and pre-sale information offering. And what about ‘Internet of Things’? This is where most companies struggle.
Let’s end the debate over whether we are in a tech bubble or not and if tech will undergo the same burst as “dot com” did in 2000, or real estate in early 1990 and banking in 2008. On the financial markets, yes tech as an investment asset is likely to adjust a bit, maybe 2017-2018, maybe later. In the real world on the demand side however new technologies like the internet have already created a previously unseen transparency and globalization with changed customer behaviors and expectations, being with individuals as well as corporates. That is ‘digital’, and will not be reversed.
Amongst individual’s, today’s 20-, 30- and 40-something will not only dominate the customer scene but also become the senior-most decision makers not long from now. These huge populations of people have dramatically different expectations and behaviors in terms of transparency and speed and are only a fingertip away from extensive global knowledge databases as well as alternative service and product providers. Google, YouTube, Twitter, LinkedIn Pulse amongst many, are as natural as the morning paper and all books in the world used to be. Only so much more accessible and so much more of up to date with current information, alternative information, debates, insights and recommendations. Sales persons no longer have an upper hand on prospective customers in terms on knowhow. That is ‘digital’, democratizing knowhow.
Equally scary, through the internet customers have become increasingly used to service, free advices, low prices and massive variations of gods and services. That is also ‘digital’.
On the supply side on the other hand, business models, old habits and the-way-we-do-things are progressively being in need for adjustments to these new customer behaviors and not least expectations. But also adjusted in order to make much needed efficiency improvements of processes and services.
As a consequence, in quite many instances mature businesses gradually see themselves being commoditized by supply expansion, end-to-end process improvements and standardizations. In a never ending story, pressure is now build for increasingly focused business models, lean processes and attractive, easily understood and user-friendly customer offerings with more and more points for great service (to be able to distinguish from alternative but similar local and global vendors and suppliers).
In particular local and regional full-house suppliers will find themselves struggling with new competition from global but easily accessible giants with obvious scale advantages, while at the same time being pitched by smaller but specialized local vendors.
All industries are effected and need to revisit and optimize their business models, their internal efficiency, their end-to-end process automation or semi-automation, and their attention to customer interaction (accessibility, speed, free content sharing, improved service level), to name a few. Some industries more than others because they did not change much the last 25 years, like banking, while some relatively less because they have already been under tremendous change pressure, like the travel industry. This emphasis on change is also ‘digital’.
Importantly, the next big wave of innovation won’t be new on-demand services, video streaming or mobile service channels but productivity gains.
Below is a rough list of industries going through business model changes, exemplifying what ‘digital’ has meant to those industries. The ‘travel industry’ is currently the most transformed industry amongst the examples while ‘banking’ would be the least transformed industry, relative each other:
- Travel and hotel industry – from seasonal printed catalogues and sales branches to 90% online, consolidated, commoditized, price pressured and with loyalty and conceptualization being important distinguishers.
- Telecom – from large state owned voice-over-cooper infrastructure utilities to (too) early adopters of internet content, back to (data-traffic fiber) infrastructure focusing on continued price pressure and cost and operational efficiency improvements. Some are now re-trying content partnerships to add value on top of the core carrier business.
- Entertainment industry – from pre-decided television offers to interactive online film, documentary and gaming experiences. From football and ice-hockey to Counter-Strike and League of Legends (with the later finals having more viewers last year than the NBA Championship peaks).
- Airlines – many years of massive efficiency improvements owing to low-fare competitors that has limited overhead staff functions and no legacy IT, offering superior processes and prices. Still in transition with a long list of past road bumps but increasingly recovering from years of challenges.
- Media – still in transformation struggling with decreasing television viewers, decreasing printed newspaper subscribers and challenges to charge for online news and to consolidate the businesses. Will remain in a business redevelopment phase for still some time.
- Manufacturing – early transformation with substantial engineering, manufacturing and logistics efficiency gains to be monetized. Yet to capitalize and commercialize on the usage of machinery data to optimize supply and delivery chain logistics, life-cycle maintenance and after-market offerings.
- Banking – very early transformation phase with mobile transaction tools and digital customer experiences gradually being introduced while traditional physical relationship banking is gradually being redesigned. Have yet to capitalize on retailification and massive internal efficiency improvement potentials (product and process standardization, redesigned transaction ledgers, scoring models, data management, fund management robots, etc).
These examples points to the depth of ‘digital’ being much more than the task for the IT-organization only. Having said that, some companies have started off their continues learning process by assigning the digital development agenda to the CIO or to a single product head or similar. As with any large change process a senior advocate for change makes sense and pave the way for others.
There are many roads to Rome. Each industry and each company needs to address ‘digital’ in a way suitable to their particular challenge.
Starting off with the surface is most common, i.e. modernizing the web pages and apps. Its visible, its shows the lead, its simple and its pays off quickly.
The large potential however lies in process improvements which may not be deemed ‘digital’ by some but is really at the core of the digital economy. Mapping, standardization and to the extent possible automating as many processes as possible has multiple advantages. It is an absolute necessity if to improve customer experience, should that be lead times, re-use of previous data, accessibility or online conversation ratios. It also gives more rational work flows and hence substantial cost saving potentials.
Focusing on process improvements does put the finger on gods and services offered. It is not uncommon to realize there might be too many variations of similar products. If being able to standardize platforms, modules, base products, and base prices certain perceived tailor-made customer offerings can still be made based on standard products and processes, while at the same time gaining the benefits of slimmer, faster and more cost efficient products and processes.
Moving on, ‘digital’ also concern areas that are sometimes deemed autonomous from change. That could be anything from simple login data-ware houses for board and management team materials, instead of the usual e-mailing and printing, to larger processes such as the sales process. All companies have a customer record and most companies have some kind of hot-lead-list of potential new contracts. With larger customer basis or larger sales organizations however new updated, digital and sometimes cloud-based Customer Relationship System offers enhanced sales and sales management efficiency.
Again, ‘digital’ is much more than the new IT-tools for the sales organization. The tools enable an improved work methodology whether that be a more efficient marketing and sales or a more efficient product development process.
With regards to the later, manufacturing industries can move engineering, material sourcing and manufacturing closer to each other with a little bit of help with digital tools and a bit more of help with improved work methodology.
To software development new work methodologies like scrum team, working in small multi-discipline teams with short two-week “sprints” and very clear milestone deliveries, are increasingly common although not really having to do with ‘digital’. Its rather a positive effect of ‘digitals’ search for increased efficiency, process improvements and continues learning.
Look at the examples given in this post as a tool box. Entering the road of digitalization is not one or two initiatives but rather a structured way to obtain multiple improvements, often around processes but also customer interfaces. Where to start depends on available key resources, business cases and simply by starting making decisions and gradually move forward and learn and involve down the road.
To almost every incumbent business there will be no big bang but rather an evolutionary process of change supported by new digital technologies that will aid the standardization and automation of processes and gradually make it possible to offer faster, cheaper and more accessible gods and services. Old will not leave immediately to make room for new. There will be a balance between ongoing business practice and new better ways of doing business.
Looking at the larger picture, some digital technologies and new ways of offering services do have the potential to disrupt entire businesses, leaving stranded businesses behind. In the grand scale of corporate businesses however, these holy grail of global disruptors are several but not many at any given point in time. There will be time to adjust, in particular if having already started to walk down the road of digitalization.
Thank you for reading. Please feel free to like, comment, share, tweet, email, etc. Hopefully the Pareto principle, also known as the 80-20 rule, will apply. I.e. 80% agree and 20% will give a constructive challenge.