Most companies today believe they are digital but are they really? A recent worldwide survey conducted by Harvard Business Review of 2000 companies found that the ROI is less than 10% for incumbent digital initiatives.
However when it came to the high performers certain characteristics stood out in their Digital Strategy. While the mediocre performers had adopted a defensive strategy, it went without saying that those firms which embraced a bold vision and had a higher risk appetite fared better. In other words companies with an offensive digital strategy saw a higher ROI and higher levels of customer satisfaction.
Looking at the data there are 6 different strategies which are employed by a broad swathe of organisations albeit with different flavors but the core ingredients remain the same. Let’s look at these 6 strategies :
Rather than retreat to a corner or be secretive about their strategy, these high performers have created a new platform which in turn has spawned a new ecosystem where customers and suppliers can meet and interact digitally. The network effect comes into play here and a case in point is Accor Hotels which has an open online booking platform.
2)Tapping into newer supply sources
A novel digital strategy that H&M has undertaken is to allow its customers to sell used and branded products to each other directly via an online platform. A similar recycling strategy is in place at the furniture giant IKEA enabled by digital solutions.
Some companies are using digital technologies to create new products and services. Several examples come to mind from Alexa to Google Home to P&G’s Oral B toothbrush with Bluetooth enabled digital guidance. As the data collected by these new gadgets reaches a threshold, companies resort to identifying patterns in the data and using machine learning algorithms to predict usage patterns and provide better services to customers
Some 60% of companies are using digital technology to rebundle and customize their services to better serve customers. A great example would be the Paywall introduced by the NY Times. The Times aims to create an $800 million digital business by 2020 and recent trends show a spike in online subscriptions. People seem to be gravitating to the personalized content model
Many firms have resorted to digital distribution since online retailing is fast eclipsing traditional business models. This distribution model refers not just to online retailing but also the sale of digital goods. The online music industry led by giants like Spotify and iTunes is a case in point. The last few years have seen the rise and rise of companies such as Netflix which have resorted to distributing digital content directly to the customer. The eBook publishing industry is another example with steady growth in the number of eBook customers.
Digitization reduces the overall cost of operation and though the costs due to disruption may be high in the beginning the long term benefits are substantial. On demand cloud computing and Automation are two examples where most companies are investing their funds today. However taking up digitization only to cut costs is akin to riding a bicycle only because walking takes more time. There are several other benefits which accrue from Automation or Cloud computing just as bicycling has other benefits some of which may not be quantifiable.
In summary, companies embarking on a bold strategy and playing offense are starting to see spectacular results while those going digital just because they have to are being defensive and may need to rethink their Digital Strategy