The Digital Edge

August 30, 2018

 

The Digital Edge: How Technology Will Support Growth for Small and Medium Businesses

Every business owner is now aware that digital technologies are reshaping the landscape of how we do business. How to make sense of it all and how to leverage these technologies for your own business is not very clear though. Computerization and automation reduced costs, increased scale and transformed operational practices, but it did little to drive growth. This is about to change as a new set of digital technologies transform the revenue generating front-end of the business.

 

Digital technologies such as mobile, social media, AI, smartphones, big data, blockchain, predictive analytics, and cloud, among others are fundamentally different than the preceding IT-based technologies. Newer technologies touch the customers directly and create a source of digital difference that directly impacts value and revenue.  We call that source a digital edge.

 

Digital Edge follows the digital adoption all around your business

The density of mobiles, apps, digital businesses and digital communications, participants from even semi-literate and illiterate populace creates opportunities for digital value that simply were not possible even 24 months ago.  Digital density has reached a tipping point with more than a billion people on Facebook, 5.6 billion mobile devices and more than $20.4 trillion dollars of business or 14% of all economic activity transacted across digital resources (source: Gartner).  The challenge is not to see what is possible, but to determine what is profitable with digital technology.

 

Stop feeling digital and start being digital

Being Digital, by Nicholas Negroponte, was published in 1996 at the start of the eCommerce revolution.  It described how the future rested in shifting ‘atoms’ to ‘bits’ or transforming the physical into the digital.  Today, many companies ‘feel’ digital as they use computers, automate processes, have websites and portals, maybe even ERP and data warehouses.  A study of more than 2,200 companies indicated that digital technology supports an average 58% of business processes in larger firms.

However, feeling digital is not the same as being digital. A digital edge is different than digital automation.

 

A digital edge exists where digital information and physical resources combine in new ways to create value and revenue.  Businesses seeking a digital edge transform processes, business models and the customer experience by exploiting the pervasive digital connections between systems, people, places, and things. Any company large or small, old or new can use this digital technology to create a winning edge for its business and perhaps, its industry.

 

Digital edge case study -Retail

Consider a boutique eyewear retail firm in Pune. With online and offline competitors flying in thick, the industry growing at 12.5% CAGR, the eyewear retailer was facing challenges to even stay flat on revenues month on month. By establishing a clear positioning and creating completely new services for niche customers the retailer took a fighting stand. Using facial recognition technology to build an out of the world in-store customer experience. Try-on systems with high fashion product portfolio established a leadership in customer offerings which the larger players could not follow easily. Micro segmentation of customers which were inaccessible to larger competitors were identified. Customer journeys mapped online and executed with precision pulled in erstwhile inaccessible customers- geographically and segment wise.

 

Creating a digital edge

To create a digital edge, business owners must think in new ways about the relationship between the digital and physical worlds by defining the following:

 

Identify digital value by defining a clear digital outcome, like out-of-the-world in-store customer experience. Outcomes provide the way to focus on what is digitally profitable rather than what is digitally possible. Can we charge a premium, or radically reduce cost by using this technology?

 

Select the right type of digital edge.  Design the right combination of digital and physical resources.  Consider whether your organization needs digital technology to further automate operations for scale, augment the customer experience, accompany its people and processes or find new sources of revenue by abstracting digital information. Just like different blends of coffee, different mixes of digital and physical resources create different capabilities and outcomes.

 

Become a digital organization by creating new sources of customer value that lead to addressable company revenue.  Avoid copying companies seeking revenue through advertising or offering ‘freemiums.’  These digital marketing schemes are appealing on the surface but they are dead ends for established companies with paying customers and successful products.

 

If digitizing the business were as simple as selling virtual copies of physical products, then every business would be a digital business. Focus on digital technology as a strategic resource helping redefine the core of the business, not just cost saving measure.

 

Digital value requires creating something new, different and valuable to customers and the company. The only way to create something different is to start with the outcome and ask: How can we make this happen? Stop, Look and Listen for the combinations of digital and physical resources that lead to digital value.  Then Start, Test and Build digital capability from the inside out, levering what you have with what you need to create the new capability.  This approach concentrates on working with customer, digital and physical realities to realise value now rather than trying to use technology to overcome current company limitations.

 

(Source: Gartner Digital Business Report)

 

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