Is Digital just another trend?

Digital is far more than just another wave of new technologies that will affect one part of the organisation or another. The aggregate effect of social, mobile, analytics and cloud, is that of a new platform with such different characteristics that entire markets will be restructured and every corner of an organisation’s operating model will be affected.

Digital goes much further than simply revenue growth through new products and services or embracing customer centricity. To be competitive amongst the digitally enabled companies of today, an organisation will require a radically lower cost base, a flatter structure and will have learned to behave more like a start-up.

Different market sectors will be affected in different ways at different times. Those with more digitally based products and services will be affected sooner. The media and entertainment sectors felt this over fifteen years ago when Napster, the illegal file sharing business, became the symbol of Digital disruption. Capital or asset intensive sectors such as mining and utilities will be affected more slowly but affected none-the-less.

Today we are dealing with the shift to mobile and embracing big data whilst avoiding the security hazards. But this is just the beginning. Drones, driverless vehicles and the Internet of Things are all on the near horizon. What is clear is that whilst the term ‘Digital’ will fall away over the coming years as our understanding of the challenges and solutions becomes more refined, a new global platform has emerged and it is here to stay.

What is so different about the Digital world we are moving into?

Distribution costs approach zero

Digital products and services can be distributed for a fraction of the cost of traditional delivery methods. Mobile apps can be rolled out for minimal cost and almost instantaneously. Whether a two day old start-up or a 200 year old company, the Digital distribution access and costs are the same.

Levelled playing field

There is a levelled playing field, which presents massive challenges for established players. Improving competitive position and gaining control of pricing through owning distribution is no longer an easy position to maintain once attained. The ease of new market entry massively increases customer choice and creates a real challenge in attracting and retaining customer attention. Differentiation comes through quality of experience. Market leaders focus on each and every customer touchpoint and the experience created in the interaction. For instance, Apple focuses on the ‘out of box’ experience before the Digital experience even begins. In the Digital age, every customer touchpoint counts.

Resource availability is almost limitless

For start-ups, the benefits of this are huge. Previously, new businesses had significant capital costs for things like property and new IT systems. Now, people can collaborate remotely to begin with and high-quality services can be procured via the cloud. Sophisticated line-of-business applications such as CRM, HR and Finance applications that used to take weeks and months to bring online can now be procured in minutes by anyone with a credit card and for just a few pounds per user per month. New types of collaboration tools and platforms allow teams to work more flexibly both in terms of location but also in terms of working patterns. Rather than taking on a worker full time, start-ups can gain access to vital skills and experience by employing workers part time or getting more commodity tasks completed through one of the increasingly capable online freelancer marketplaces. The massive improvements in flexibility in accessing resources not only makes starting up a new business easier but also transforms the approach to product R&D for established businesses. The ability to create and market test a new product for a fraction of the cost lowers the risks and permits a more experimental approach. Now, rapid and frequent customer feedback can be an integral part of the process. In the Digital age, everyone’s a start-up.

Changing the dynamics of markets and competition forever

The new global Digital platform has unique characteristics that have changed the dynamic of markets and competition forever. For most markets, change has already become the new norm. For those being affected by Digital, disruption is going be a constant companion for many years to come, as the current operating models are broken down and formed anew. Some will adapt, some will fail or break apart and new power houses will emerge.

Our next insight will look at how you can realise the potential of Digital within your organisation.

Perspectives

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