Any crisis can have a severe impact on a business – but some organizations are better prepared than others. Thanks to the early adoption of digital transformation, some companies have already enhanced their agility, allowing better, faster, and smarter reactions. Do we need a crisis to react, to wake up?
Opportunity with transformation is huge. For better or worse, the latest shift to digital was a wake-up call for many businesses around the globe. Businesses though are taking a different response depending on where they are and the situation they are facing.
·Companies with a focus on priorities and immediate return on investment are seeking ready to use solutions with plug and play options.
Businesses trying to survive and restructure are implementing different digitalization projects in support of back function processes, enabling efficient governance and decision making.
·Disruptors and companies in good financial condition, having the ambition to turn around, will want to evolve and capture the full business opportunities available and exit as winners.
What Does Your Business Need right now and what does it need for the future?
A business able to turn around will be successful going forward and those organizations that are quicker to change will have the advantage. But it should not be a “once in a lifetime” project. Company culture plays a critical role while evaluating, refining, and building something from the ground up, that will eventually develop into a great idea and scale a great business. This means transforming at the core, and taking what we do today, and leveraging technology to do it better, faster, cheaper, more effectively.
“The challenge we face isn’t about trying to survive until things stabilize, but rather about learning to thrive in constant chaos. That happens only when we accept that change is no longer a project and build a well-thought-out reinvention system that works.” Nadya Zhexembayeva
For many years, businesses have been investing in digital technologies to make them more efficient, more productive, more flexible, and more connected. And while organizations understand the need for digital transformation, there’s no doubt we are facing the urgent need to accelerate these digital deployments. There is always someone somewhere who is doing it better. If we have an organization that is open to change this organization is going to spur innovation and develop better. Not just to survive, but to thrive in the new conditions.
Though a lot of companies are struggling with transformation. It is particularly difficult for the legacy companies that have operated in a certain way for many years and are now trying to become more agile. In their effort to execute they have overlayed a new matrix organization on the existing one which results in more bosses, more and bigger meetings, every decision taking longer, and action becoming more complex. Which emphasizes the importance of a simple plan - where are we going and how are we are getting there, reach an alignment around a common understanding, and after everyone pulling together.
The potential impact of digital
Companies must be ambitious about the potential and the objectives they want to achieve. It is important to identify the type of impact that digital strategies and initiatives may have and frame investment discussions accordingly. This way business leaders can more meaningfully compare digital initiatives and strategies against other investments.
There can be some overlap, but digital initiatives typically fall into one of the two categories.
The first category is the application of digital tools and technologies to fundamentally disrupt the industry. This means a major improvement of a business model or opening up a new business, which can also cannibalize the company’s core strengths.
The second (less dramatic but still critical) category is when companies use digital to simply do the things they already do, only better. Why? To provide value to customers, to improve customer experience, develop new sources of revenue, and to enable better decision making.
Let us see few principles where technology can support our efforts:
New business models
The use of digital tools and technologies can change entire business models or create entirely new businesses.
Probably we all remember how the internet has changed the way we research and purchase airline tickets and book hotel rooms, when traditional travel agents became unnecessary — one of the original cases of industry reinvention.
The introduction of video-streaming services has disrupted the economics of traditional broadcast and cable TV channels. And the rise of cloud computing has not only reshaped how companies are transforming, but has also entirely disrupted two other industries - manufacturers of mainframe and server computers, and businesses that provide data centers.
Cost reduction
Reducing costs is more of a necessity today than a matter of decision. It is still the most common result of operations optimization. Businesses though still too often resort to traditional layoffs, which may generate only 2% savings and is certainly less than the socio-economic problem the company creates.
On the other hand, the proper use of digital tools increases productivity and represents a profitable alternative to the classic cost reduction. Savings in this case are defined as an investment in future growth and considered a lever to provide a market advantage. Of course, it is necessary to identify processes with a high ROI and those with a lower contribution to the business - to automate these and thus achieve more with a lower investment. At the same time, using digital tools to enable faster response, accelerated decision-making, a better understanding of customers by reviewing market developments.
Improved customer experience
Consumers have benefited tremendously from digital innovations, particularly through the buying experience.
A customer can buy a clothing item in a physical store or online, to be shipped to the buyer’s home or a local store, or any one of thousands of pickup points. If a local store doesn’t have the right size for in-store shoppers, customers can order it on the spot and have it delivered to their homes. A customer who decides to return an item can return it to any store or mail it back, regardless of how it was purchased. Consumers can also track in real-time the progress of shipments heading their way.
Using digitization to improve the customer experience can add value to the business in a variety of ways. In some cases, it can also lead to cost reduction. An electricity-distribution company fully redesigned its customer interfaces in a “digital-first” way that made a priority of customers’ online interactions. As a result, customer satisfaction rose 25%, employee satisfaction increased by 10 %, and customer-service costs decreased by 40%.
It is critical to think through the competitive lens while investing in digital to gain a superior customer experience. In many situations, customers have come to expect an improved customer experience and are unwilling to pay extra for it. Providing omnichannel services can be expensive for retailers: - the cost to ship online orders often makes these sales unprofitable, especially as shipping is expected to be free and fast (same day, in some cases). Meanwhile, in-store sales may be declining as a result of the omnichannel services, leading to lower margins, as some costs are fixed.
New sources of revenue
This is one of the areas where there is less activity but a lot of opportunities. New technologies can redefine products and services as well as blur the boundaries between individual market segments and create new competitors.
Digital initiatives make it possible to create new opportunities by offering new values. We often see the contribution as a new trend or a new idea in an individual segment -if everyone benefits from it, the competition resistance is minimal.
Less often, we come across an example like retailer Amazon - they launched AWS as a provider of cloud and infrastructure solutions in a completely new market - the IT segment. AWS isn’t just a new sales channel it’s a completely separate company that today generates 60% of Amazon’s annual earnings.
Technology helps us understand the facts and make better decisions. Some executives are using advanced analytics to make better decisions about a broad range of business activities. Doing so can generate additional revenues, reduce costs, or both.
It is important to focus on identifying which decisions create the most value for the organizations and then apply advanced analytics toward those discussions. The ultimate goal is to gain better insights and even prescriptive answers on how to operate. seek to understand the competitive implications of digital technologies, to be more successful and competitive, to be able to extract new opportunities.
The success of digital transformations boils down to the buy-in and commitment of the people that make it happen. It depends on dedication, and support, flexibility with implementation, and clear communication. Ultimately the people play a key role in digital transformation success.