There is no doubt that “digital disruption” is the newest digital buzzword. Eight or nine years ago, we heard about “digital strategy” and then it shifted to “digital transformation,” but it seemed only a few industries were dipping their toes in the water. Industries like consumer goods, healthcare, media and travel made efforts to become more digital as their customer base became more tech savvy. And many of these companies realized tangible business benefits by embracing emerging technologies.
Yet, for the most part, companies were slow to act in a significant way toward the development of digital strategies. There was a bit of a waiting game as companies stayed on the sidelines and watched who in their industry would “fail fast” first. Yes, some CIOs, CMOs and other early movers experimented or piloted shifts, but the potential of digital was a novelty in the boardroom – something that perhaps felt inevitable, but still unproven.
Today, virtually all industries, including “old economy” ones such as aviation, chemicals, energy, logistics and manufacturing are not only being disrupted by digital, but forced into digital because of COVID-19. Companies can no longer sit on the sidelines, waiting for the right time to pull the trigger on a digital strategy.
The Digital Disruption
Digital disruption has become widespread, affecting every aspect of business from customer behavior and leadership behaviors to supply chains and marketing department organization. Specifically, we see massive, digital-driven breakthroughs happening across four fronts:
1. Consumers and consumer behavior
Organizing customer data, insights and analytics was listed as the third most important initiative for organizations undergoing digital transformation. Consumers across every demographic, geography and psychographic have become more digital, which has shifted both their expectations and behaviors. More and more offline or physical transactions are shifting online, so the available transactional and behavioral data is growing, building an ever-richer view of the customer. Given the shifts away from in-store shopping, it makes sense that “The 2020 State of Digital Transformation” report revealed retailers to be the most focused on increasing profitable growth from existing customers (36%) and better understanding the customer journey (33%).
2. Product and service innovation
Digital technology has made it possible for companies to rewrite the rules around value creation and drive changes in industry models. Clients across categories, including our client MMRF and AXA, have built deeper customer relationships with digital.
Value proposition principles have been redefined. Not only is what we make new, but so is how we make it, the speed at which we make it, and who we make it. As these elements change, so does the value they can create for the enterprise.
3. Major enterprise processes and capabilities
According to “The State of Digital Transformation” report, the overall top driver of digital transformation today, is to “Increase productivity to streamline operations.” Even for traditional “non-digital” businesses, we’re seeing processes across the enterprise — from marketing and manufacturing to human resources and the back office — become enabled, and even reimagined through technology. Automation frees up heads and hands for new tasks, but also requires new skills and culture building.
That said, while COVID-19 has caused the need for digital transformation, nearly half of respondents (41%) felt their organization’s digital transformations were handicapped due to budget cuts resulting from the pandemic. As businesses attempt to navigate the post-COVID market and world ahead, digital transformation should be at the forefront of their strategy. And how companies evolve their culture and capabilities around digital will be the difference between fast-movers and laggards.
How Industries Can Evolve With a Sound Digital Transformation Strategy
Digital transformation has never been more urgent for businesses.. There are higher expectations from customers, employees and the market. Companies today must have a broader set of solutions that will set them on the path to growth.
A successful digital transformation strategy will help a business become what we call an ‘Evolved Enterprise.’ An Evolved Enterprise possesses a wide and deep view of its customer, reframes a broader ambition and then uses digital to transform key pillars of its business – resulting in faster growth, better performance, larger impact and higher valuation.
A Digital Transformation Strategy Should Focus on These Three Functional Areas:
1. Strategic marketing and customer strategy
Employ digital technologies to enhance the way you build and manage your brand, develop data-driven decision-making and engage your customers.
2. Product and service innovation
Harness digital technologies to develop transformative customer experiences and new products and services (or reimagine existing ones) that will fuel new growth.
3. The enterprise itself
Design new revenue models, create new ecosystems with partners, employ agile and effective processes, and build the culture and capabilities needed to deliver growth in this new era. Transformation on the outside requires evolution on the inside. Altimeter’s 2020 report covers many of these talent and skillset challenges.
These are exciting times. It takes courage and ambition to design a digital transformation strategy with the aim of creating a breakthrough for the customer and your brand. But disruption is not the enemy or the threat. It’s a reality to embrace in order to survive and thrive.