We already see that companies following a purely offline model are extremely vulnerable to disruption. Without a way to interact with customers and monitor changes in their needs, they risk being overtaken by more agile competitors.
So, the best thing you can do now is to embrace changes and use this crisis as a force for digital business transformation.
Let’s get started!
What is digital transformation and why should you care?
In practice, this means using technology to:
- Optimize internal workflows and business processes;
- Build new products to better solve customer needs, or
- Drive value out of collecting and analyzing data.
Each of these approaches can provide massive benefits, yet the most successful companies combine all three to dominate their markets.
Even before the outbreak, 85% of C-level executives admitted they had only 2 years to integrate digital technologies before getting overtaken by competitors.
And while larger enterprises dabbled in all sorts of digital endeavors, most SMBs thought that a simple landing page was enough to lead a successful offline business.
Now we see this isn’t true.
As consumers are forced to stay at home, their phones and the Internet became the only way to interact with businesses. And while some large enterprises have enough resources to wait out the crisis, smaller businesses have to act immediately or they will lose touch with customers forever.
The current crisis is, of course, unique but many industries went through similar changes on a smaller scale.
Some time ago people stopped reading newspapers. Book sales dropped significantly. Yet the publishing industry managed to adapt to a new reality.
Business Perspectives was a small publishing house specializing in academic writing.
As the industry went through a massive shift, printed journals could neither attract renowned scientists nor reach beyond a small local audience.
After publishing a catalog of articles in PDF format, the company needed a modern e-commerce solution to monetize traffic.
Using their website as a blueprint, we translated the reading and purchasing of scientific journals into a 100% digital experience. Now users can pay for the whole journal, buy individual articles, or rent them for a lower price.
Since the launch, more than 450,000 articles have been downloaded from the platform.
Yet, this growth revealed another problem.
Publishing a scientific article takes a lot of effort. Before reaching the wider audience, a manuscript has to go through a complex 8-step review process. At each stage, it can be rejected or returned to the author for revisions. This required lots of manual actions and a ton of emails between authors, editors, and reviewers.
To deal with this problem, we designed an internal system that automated most repetitive tasks. The system reduced the number of human mistakes and drastically cut the review time.
As a result, more than 2,000 manuscripts have been published since the system’s launch.
Digital transformation: 7 key aspects
Transformation isn’t just about technology. Adapting to the crisis requires a complex approach that affects all aspects of your business.
1. Business model
Many organizations engage in all kinds of digital projects without touching the underlying business structure.
As a result, they are just as vulnerable to disruption as non-digital companies.
The very first thing you should consider before transforming your business are your values and strategy.
When faced with the threat of disruption, companies can either:
- Retreat/become super-niche.
- Block disruptive threats.
- Try to win the disruptor’s market; or
- Disrupt their own business model and create new markets.
Netflix is a great example of the last strategy.
They started as a humble DVD-by-mail company. By ditching physical stores, Netflix offered entertainment at a lower price than its main competitor, Blockbuster.
Netflix doubled down on online services by expanding into streaming and building sophisticated machine learning algorithms to power its recommendation engine.
This self-disruption changed both the ways we consume media (binge-watching) and how we approach storytelling (multi-season epics instead of self-contained episodes).
Netflix was at the very heart of disruption – the digital media – and became stronger than ever before.
Its value has risen 1300 times since Netflix CEO wanted to sell his company to Blockbuster for measly $50 million.
Innovative business models emerge when customers get tired of the “old way” and somebody finds a way to satisfy this yearning with new technologies. Those companies that capitalize on the current changes in customer needs will carve out a permanent niche in the post-crisis world.
Companies that only start transformation efforts will have to reevaluate every internal and external process to find inefficiencies. Tedious manual tasks, duplicate steps in workflows, or vulnerabilities in supply chains can all become a critical handicap.
2. Customer journey
Like never before, you need to be closer to your customers.
People are getting used to digital-first, interconnected products, and constant improvements to their functionality. Now, it’s typical to provide a seamless experience across a range of self-service channels: mobile apps, websites, and social media.
Digitizing a customer journey may be as simple as building an online storefront for a mom-and-pop shop or as complex as making a cloud-based sustainability reporting tool.
For example, some perfume companies still sell their products via paper catalogs and physical stores. Here comes Sephora, which earns more than billion USD annually by focusing on the mobile experience. Users get access to events, book meetings with Sephora assistants, receive ultra-targeted GPS-activated offers, and purchase online – no need to call or commute to get what you want.
Understanding the needs of your customers is crucial for crafting a satisfying experience.
Users who benefit from all these extra perks are much less likely to leave for a competitor. As pointed out by Tom Tunguz, building an ecosystem around your product is one of the best ways to defend your position on the market.
And data is the thing that allows you to gain a deeper insight into your customers and make educated strategic decisions.
Aside from the systematic use of analytics to better understand your customers, a company should establish a culture that relies on data to continually experiment with your products and strategy as explained in the following paragraphs.
According to Eric Ries, most features on most products are simply dead weight. This happens because we make assumptions about our customers and then take big risks by building products we think they need.
Instead, he advises to make small, incremental changes to your products and base all further improvements on the data you gather from their usage.
This way, you can decrease risks when building new features and spend your efforts in a much more efficient way.
The first step to breaking data silos can be adopting a company-wide CRM to store customer information.
When data becomes more abundant, you can start leveraging predictive analytics to make all kinds of forecasts, from changes in demand to individual workloads.
In one of our projects, we developed an IoT solution to help municipal enterprises track energy & heating consumption. The system takes into account a variety of factors like historic heat consumption, weather forecasts, and standard consumption rates to predict optimal settings for heating systems.
As a result, clients can “dial down their thermostat” and save a ton of money on heating.
Later on, data itself can become a valuable asset that you can exchange with other companies to forge new partnerships, acquire more distribution channels, or increase revenues.
This is called the API economy, a market that’s expected to reach $5.1 billion by 2023.
For example, around 60% of eBay sales are made with the help of an API that allows customers to buy goods from other websites. And about half of Salesforce revenue is generated by an API that allows companies to customize their own CRM systems.
Even Amazon became a company we know today by forcing all of its internal teams to communicate via APIs. Despite the initial confusion, this allowed the tech giant to innovate with unprecedented agility.
Many established companies are now weighed down by inefficient workflows and bulky legacy systems. This greatly limits opportunities for growth.
One of our clients is a leading recruiting company in Western Europe. They used a 12-year old system to manage interviews and job candidates. The solution had a pretty outdated UI and could no longer meet the company’s needs.
HR managers had to manually look through dozens of recruitment platforms to find job applicants and keep their profiles updated.
To solve these issues, we designed a new solution that allowed our client to stay on top of the competition.
Using a semantic search engine, recruiters can now enter a single query in the search bar and get instantly matched with hundreds of candidates that satisfy employer requirements (e.g. skills, location, desired salary).
Workflow automation eliminated repetitive manual actions allowing recruiters to spend up to 80% of their time on strategic efforts. Message the candidate, send a CV, get feedback, assign an interview, and do a follow-up call, all in one app.
However, there is one caveat.
Many companies pursue cool tech that solves non-existent needs, so your innovation focus should be on finding ways to better serve your customers and create more value for your company.
From the very start, it’s important to establish clear goals and KPIs that will navigate your company and allow measurement of the success of transformation efforts.
Finding new ways to satisfy user needs will likely require you to transform your organization structure.
The ability to rapidly adapt to emerging threats requires great agility. Yet, most organizations follow a more traditional approach where they draw long-term plans that define where they want to be and how to get there.
Such companies are too slow to adapt to changing technologies and are ill-prepared for the uncertain times.
The IT industry has for many years used an approach called Agile development to fight uncertainty in challenging projects. It allows nimble teams to work in small iterations (1-4 weeks) to plan, build, and test a piece of functionality that’s ready to be released to the public.
The feedback received after the release is then used to adjust plans for the next iterations and better satisfy user needs.
A similar approach is now adopted by many marketing teams and even helped Elon Musk disrupt the entire spaceflight industry.
You too can apply Agile principles to your work. Plan quarterly, work iteratively, and adopt a more flexible approach to management.
The three key components to becoming agile as an organization are:
- Being aware of trends and user needs;
- Basing decisions on hard data; and
- Making fast adjustments to your plans.
This can be distilled down to monitoring the current situation and following your vision as a pointer in the right direction and not as a plan or a roadmap.
This requires a shift in culture where individuals are encouraged to think like entrepreneurs and work as one team.
6. HR & Corporate culture
Most transformation efforts fail at the execution phase. The reasons are many, from the lack of technical skills to rigid corporate culture. The existing structures, processes, and employees might’ve made your company into the one it is now, yet they aren’t necessarily sufficient to take it to the next level.
“Change the culture by empowering people to figure out solutions and make decisions without having to ask for approval (ask them “what would you do if your boss died?”).” – Frank Vivier, chief transformation officer of Richemont Group.
Digital transformation will require hiring specialists you currently lack and training the personnel to take full advantage of the new systems.
But with enough investment in digital culture, your employees can become your greatest asset driving the business transformation.
Marketing is how potential customers find out about your company and understand whether your products can solve their needs.
At this point, there’s a great temptation to slash your marketing budget to survive the crisis.
Yet, this can be a dangerous strategy.
Companies that cut spending during a crisis often lose their competitive advantages.
After all, according to BrandZ analysis, strong brands recovered 9x faster in the aftermath of the 2008 recession.
Embracing digital transformation may affect your marketing strategy and tactics in many ways. From shifting to new channels (e.g. outdoor advertising to mobile and social media), adopting an Agile mindset of rapid experiments, or keeping track of each customer via a CRM to automating most of your marketing activities.
The options here are limitless, just remember to grow your marketing instead of stopping it.
After each crisis, the world becomes quite different from what we are used to. And every time, businesses accept the new norm and become innovative to thrive again.
Companies that get closer to customers and disrupt their existing business model will come out of the crisis stronger and more resilient than before. We hope your company is one of those, and wish you luck on your journey to business transformation.
Drop us a line if you need expert help with it!