How will digital transformation impact industries and businesses

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Digital Transformation is not a milestone of innovation anymore.  Nowadays, it is just a process every business has to go through.

At least 40% of all businesses will die in the next 10 years… if they don't figure out how to change their entire company​

John Chambers, Executive Chairman, Cisco System​

No matter what the industry, size, age, or culture is we are already seeing most of the organization is planning or executing digital transformation.  In fact, according to Gartner survey on 15 different industries, 47% of CEOs are being challenged by board of directors to make progress in digital business. and 56% of CEOS claim they are already seeing positive return on their digital investment.  For businesses, the problem is not about “whether or not to execute digital transformation” it is “How to stay on top or become the top in the investment on digital transformaiton”

The impact of digital transformation

As most organizations are seeing the needs to digital transformation, the impact on the industry itself is also significant.  If organization can’t clearly define exactly how that impact will occur, they will have to face significant loss from it.  In this kind of situations, what we commonly see are:

  • Still providing products or services that are significantly less competitive to the market
  • Unable to satisfy the current expectation customers have for their experience
  • Have a slow reaction to market trend compare with the competitors
  • Customer’s feedback aren’t received or have no effect in the whole business process

Below, we define three effects of digital transformation that will produce the outcome above:

Disruption in the Value Chain​

The impact of Digital Transformation significantly disrupt the traditional value chain model.  The relationship of Manufacturers – Distributors – Customers are broken because of it.  The increase of internet speed, digital-enabled mediums or channels, sharp increase in people going online are all driving factors behind it.  It bring customers closer to the manufacturers and increase the engagement for both side.  The traditional value chain where brand has to find distributors to work as a regional sales is being reshaped.

The rise of eCommerce, tech startup in the hospitality industry, SaaS are all great example of disruption in the value chain that is currently taking place.  These businesses not only show really strong presence to customers they also make themselves extremely relevant.

The Impact​

Fast, stems from these businesses have really fast reaction time to customer feedback, market trend, PR crisis.

Those that could not keep up will find themselves offering services or product that are far less competitive or offering those services product at an unattractive price range or quality.  They may be in a situation where their customers don’t think their feedbacks are valued by the brand and continue to try out other products.  There is even a case that PR crisis could not be properly handled due to the complexity of decision process in the organization.

Precise, stems from those businesses are able to analyze huge amount of data and effectively determine the segment that is going to return the highest on the capital spent and develop offer / experience that are most relevant to them.

Those that are not able to reach the same level of precision may find themselves hustling in the market, adjusting pricing, offer or marketing strategy yet unable to extract actionable insight from it.  Spending huge amount of capital without any return.

Hard, stems from the fact that once these businesses define & target their customers, they are able to customized their offer & experience that are most relevant to them.

Those that couldn’t reach as deep won’t be able to from deep & meaningful relationship with their customers.  Let along building the bond & trust with them.  As those transformed competitors are bringing in value that is just fundamentally better than the incumbents, customers are becoming more and more selective and the expectation is getting higher than ever.  Unless the uniqueness of the product is not replaceable, customers will slowly deviate from the brand and eventually abandon it.

The Work​

Business has to take a hard look on all aspects of their value chain and also see from their customers, indirect & direct competitors perspective to determine how they can transform their business model to maintain their advantage in the market.

Overall Increase in Service Value​

The whole world is going through digital transformation.  This also indirectly lead to people become more informed, globalization become more rapid, and market becomes even more transparent.  These factors combined leads to the standardization of products and services.  Standardization of products and services eventually lead to companies are fighting over pricing.  In this muddy arena, brands that really get ahead in the market are those that can fundamentally increase their service value.

Why should I use Ctrip.com instead of Fliggy? Why should I use Hubspot instead of ActiveCampaign? or Why use I go to 7-11 instead of Family Mart?

Service value is not just about the quality of service. The quality of service does matter to a certain extent but the service value is much more. It includes: integration of other services, 3rd party integration, User experience, intuitive design, fluency, customization and brand value.

The Impact​

Nowadays, it’s almost impossible for companies to stay on top of the game simply relying on their advances in technology.  If they can’t figure out a way to increase their service value, competitors are going to take the advantage of it by providing a more integrated, more compact and more relevant service to customers. 

The Work​

Under the circumstances, the best method for company to win the match is to increase not just the broadness of the services offered but also the deepness.  Every now and then they have to think how they can provide a more relevant experience to their customers.  We would even suggest they should use a magnifying glass to take a deep look and monitor KPI like Customer Lifetime Value and Customer Satisfaction to have a clear strategy in optimizing their service value.

Restructure of Business Model​

If a product is the best in the market and has a clear USP (Unique Selling Proposition), companies will surely be able to stay in the top of their game.  But most businesses aren’t so.  The era of Apple is over.  The market now rewards those that can “listen to the customers, turn those feedbacks into input of the next product, clearly define how it is going to be executed, and the product itself still has strong brand personality in it”.

Amazon is the best example in this case.  The founder Jeff Bezos even claim he read every complaint from customers.

The Impact

Those that are not able to generate “Actionable Insight” from customer’s feedback and input those insight into designing next product or strategy will find themselves deviating from their customers further and further.  After all, if competitors are actually listening to the customers and turn those insight into action, they will surely provide better and better service over time and the bond between customers and brand will get strong and stronger as well.  As the relationship builds up, incumbents won’t be able to have a place in the market.

The Work​

To deal with this, organization has to make the process from getting customer’s feedbacks, qualitative feedbacks received by management, and generating actionable insight from it as quick and as smooth as possible.  Below, we have a deeper look into common problems experienced by organization when executing this.

Customer’s feedbacks aren’t heard – This might be the fact that organization do not have an easy channel for customer feedback.  Companies have to adapt a habit of constantly communicating with their customers(can be automated) to a point where customers feel like they are also part of the brand.

Management aren’t receiving feedbacks – As the organization becomes larger and larger but infrastructure is not digitized the communication becomes harder and harder.  Feedbacks collected by regional sales might get stuck at some point in the process.  Or, employees don’t feel psychologically safe when sharing their thoughts(in this case, feedbacks from customers) that are against the direction of current strategy or are inconsistent with the management. 
To solve this, they have to start digitizing their communication methods or start to think how they can create an environment where employees love to share and genuinely want to make the organization better. 

Unable to develop Actionable Insight – As the organization grow, brand become more mature and the business process become more fixed, turning feedback into Actionable Insight will probably be the hardest among it all. Product team has to develop the habit of constantly optimize the product or service from those feedbacks.