4 Examples of Digital Transformation’s Role in Strategic Growth
E-commerce, social media and branded communities are all intensifying the pace of innovation.
A second big idea in David Aaker’s new book, Owning Game-Changing Subcategories: Uncommon Growth in a Digital Age is digital’s role in the dramatic increase in subcategory competition.
Digital transformation is on the minds of most marketing executives. Digital’s purpose is often assumed to be tactical in nature–generating customer leads, data analytics or making the customer experience more efficient. But digital has a key role in strategic growth as well.
The Owning Game-Changing Subcategory book posits that the only way to grow is to create “must-have” subcategories, become the exemplar brand, and build barriers. That has always been true. But in the last decade or two, digital has put subcategory creation on steroids.
“In the last decade or two, digital has put subcategory creation on steroids.”
The frequency of new subcategories emerging has increased by an order of magnitude. A firm that might have seen a new subcategory every half-decade might now see one every year or every quarter. Digital is without question the driver of strategic growth and market dynamics. Let’s take a look at four ways in which digital has emerged to play this role:
Digital technology in the form of sensors, microcomputers, voice recognition, smartphones, cloud computing, analytics and much more provides new avenues to “must-haves.” Artificial Intelligence (AI) has unleashed new or changed capabilities throughout the value chain. The Internet of Things (IoT) has created smart cars, smart appliances, smart hotels and so on. Nest Thermometer, for example, created a new subcategory by using AI and IoT to control the temperature of homes, offices and industrial buildings.
E-commerce has provided fast, inexpensive market access that bypasses the cost of storefront retailers and personal sales teams. Nearly every product arena has a subcategory created by brands like Dollar Shave Club, Warby Parker, or Casper Mattresses that brought products to market via e-commerce. Even Amazon has developed its own subcategory with a host of digital-enabled “must-haves” surrounding its e-commerce model.
Social Media and Websites
These tools enable communication with reach and impact that is more effective and budget-friendly than traditional advertising or event marketing. Dollar Shave Club shot out of the gate with a two-minute video that went viral largely because of its humor, establishing a customer base in a matter of weeks. There was no advertising creative that required specialists and no media budget involving TV and magazines. The Dollar Shave Club experience has been replicated by many of the successful new subcategory entrants.
Brand communities are groups of people that bond because of shared involvement or even passion in some activity, goal or interest area connected to a brand, and are enabled by digital. This provides a high level of involvement and social benefits resulting in loyalty to the subcategory and its exemplar brand. The Sephora Beauty Insiders community, for example, is a magnet for people to gather and exchange information about skincare and beauty.