How To Select The Right Digital Initiatives For A Long-Term Future
David Banger (main photo) is an adjunct professor, digital advisor and founder of CHANGE lead | Practical Digital. He is the author of the just-released Digital Is Everyone’s Business – A Guide To Transition. In this guest post, the goodly prof offers his expert tips to ensure your organisation’s transformation is heading in the right direction…
Digital is a word like disruption that is potentially spoken to often and not fully understood by many organisations. The threat of disruption is the fuel to many digital endeavours for businesses, frequently resulting in waste due to the lack of assessment and approach taken.
Digital can be incremental within a business through analysis, delivery and iteration. Consider Amazon, founded on the 5th of July 1994, initially began as an online store for books and has evolved. Jeff Bezos, the founder of Amazon in 1997, wrote a company manifesto that is annually republished. Included within it: “Because of our emphasis on long-term we may make decisions and weigh trade-offs differently…from the beginning our focus has been on offering customers compelling value”; and value is not about being the cheapest.
The outcomes of a sustainable digital business are, greater customer intimacy, with the organisation and customer closer and the integration of technologies creating an ecosystem, truly thriving ecosystems become platforms for other organisations, eBay is an example
There are three factors to determine when, what and how to be digital.
Market
Businesses generally have multiple products and services within a market; markets have phases like seasons and these need to be understood. Spring markets can be complemented by content, summer markets potentially extended with content and transaction capability, autumn or fall markets are possibly sustained with offerings that require reduced overheads, such as being solely online. Winter markets may be best ignored. An organisation must understand what stage their market is for a product or service.
Differentiation
How can you differentiate in a world that searchable? The conditions that have enabled differentiation in the past are no longer as dominant in digital. Duncan Simester from MIT identified areas of possible value for an organisation, these include;
- Cost, is this important within your industry, is it a race to the bottom, will this be sustainable?
- Brand, people may have an immediate association with the brand. Still, with everything searchable, customers are prepared to have their requirements or expectations met with a new brand, particularly if references or reviews support it.
- Employees often referred to by organisations as a differentiator, in many organisations, the capability can be copied.
Relationships or partnerships can be a source of differentiation; however, an organisation needs to enter and monitor who will own the relationship with the customer. A traditional business may dominate a market, then partner to create a digital offering. The digital partner is now in the market with access to their partner’s customers, and over time the digital partner may be able to replicate the offering and erode the traditional organisations offering. Partnerships require analysis from a range of perspectives. An example could be an engineering civil construction company partnering with Uber to understand real-time traffic and submitting proposals to authorities to improve infrastructure. Overtime Uber will understand how road infrastructure is proposed, assessed and planned. They may no longer choose to be a partner to the original organisation and move up the value chain – choosing to become an aggregator of information offering solutions to authorities and assessing responses from a range engineering civil construction organisations.
Switching costs; the ease of purchasing (i.e. eBay or a smart phone’s app store) or the effort in switching (i.e. a mortgage) are a source of differentiation. Operating in a market that has several businesses benefiting from switching costs erodes the possibility of new entrants.
Digital endeavours, being contemplated by an organisation, must carefully assess partnerships and switching costs before significant commitment to a partnering relationship or capability investment.
Approach
There are three stages to digital, initially content, followed by a transaction capability and finally the establishment of a platform. Often an organisation will not know what customers value; content iteration is an indication of this. Upon understanding the interaction, it could be possible to create a transaction due to the value associated by customers. This value needs to consider the season of the market and how differentiation is being achieved. If the seasons are early to mid, an investment with a platform is to be considered to sustain and evolve the digital endeavour.
Platforms integrate operational technology (i.e. the creation or fulfilment of a service or product) with customer technology that includes information and transaction capability. An organisation should endeavour to create an employee capability that is restless and curious, always exploring, qualifying and evolving the digital offering.
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