The reach of digital transformation into all organizations today is phenomenal. The digital world is infiltrating every business in every sector, and if you have not thought about your digital strategy yet – or are unsure how to go about that process – then you need to dive in and start doing so now.
We have recently launched a series of digital exec-ed programs at Rotterdam School of Management, Erasmus University (RSM) in response to increasing market demand for managers and executives from organizations across all sectors and functions to be better equipped with tech knowledge. There will be four separate programs: Digital Strategy, Digital Analytics, Digital Innovation and Digital Leadership, and participants who complete at least three of the four will gain a diploma in Digital Transformation.
In the Digital Strategy program we start by exploring which sectors and functions are most vulnerable – so far – from the increasing prevalence of IoT, AI, blockchain and other emergent technologies, exploring what they can do and asking as the core strategy questions ‘how will they effect my industry?’ and ‘what can and should I do to prepare and benefit from that?’. From the feedback I receive from participants it is becoming apparent how many less obvious industries are seeing their business models touched by advances in technology.
A question I regularly put to program participants in the banking sector is to get them to describe the difference between a bank and banking. This seemingly simple question highlights the challenge many large financial institutions are currently facing, and the obstacles to them flourishing in the new digital context. When asked to describe a bank, they get fixed on the structure of the organization, how the different parts fit together and how they interact; lending and borrowing; branches and networks; investment and retail banking. When they focus on banking, the mindset is completely different, it focuses on the service side – what the customers need and how that can be best provided.
This is at root the challenge the well-known bank brands often have – and many other long-established sector players too. They are heavily invested in their infrastructure, the branches and networks, and tied to the interplay between their different divisions. Meanwhile the fintech digital upstarts are almost exclusively focused on customer needs. Offering light touch, online interaction to deliver solutions, whether that be lending, credit cards or simple payment methods, through easy to use mobile apps.
Customer-centricity is a core element of new digital business models and working out how they can be best designed. The digital world is much more customer-focused than any previous commercial models have been able to be, as every action and transaction can be recorded and analysed. This ‘big data’ allows digital activities to be scrutinised and iterated so that the design is optimal for the customer. With the right analytics it is quick to identify what elements of the customer experience draw them towards making a purchase and which divert them from it, and also what engages them and makes them return. This puts the customer right at the centre of the transaction, whereas many old-era businesses were structured for the benefit of the operators rather than the clients.
Can you make your current business platform-based? Somewhere they can turn to satisfy their wants and needs in terms of the services you offer. Not all platforms need to aim to be winner-takes-all ones in the way that Amazon or Uber aim to be. Three elements effect this, whether there is a strong network effect, where customers attract more customers; is there a strong ‘multi-homing’ cost, where effort is required to set-up an account and enter other details, if so then a customer is more likely to prefer having a single provider to use; can you differentiate your service sufficiently to make it stop competing directly – mytaxi, that uses existing licensed taxi cabs, for instance, differentiates itself from Uber by promoting the reliability and knowledge of taxi drivers over Uber drivers.
The exciting thing about the digital economy is, as I noted at the outset, how quickly it is spreading to sectors you may not expect it to be operating in. I recently had a program participant from the construction industry who highlighted that 3D-‘printed’ houses were now being created near to RSM. Currently the ‘printing’ takes place in a university lab, but will soon be being done on-site, creating house kits that can be quickly assembled in radically new shapes and designs.
No business, whether it be already significantly disrupted by new technologies: banking, publishing, retail or seemingly detached from it: mining, construction, agriculture, can afford to ignore how digital advances will affect their business models and processes. Digital transformation will impact everyone’s future and we need to think through the implications now.