Reasons to invest in a digital strategy
In October 2001 Apple announced a music device that could store 1000 songs and was portable enough to carry in your pocket. 15 years have passed since the launch of the iPod and the world looks very different today.
Consumer mobile devices now provide computing capabilities, biometric authentication, and a window into your bank account which allows you to perform transactions, check your email, the weather, watch a movie and interact with your favourite social network.
The amount of personal information a modern mobile device contains is staggering. The proliferation of mobile devices is hard to ignore, even more so in the South African context where most people experience the Internet for the first time on a mobile phone.
Many say that the world is changing at a rapid pace. The reality is that the world has already changed, driven by significant advances in technology and this only seems to be the beginning. As the saying goes, “the best is yet to come”. Never before has technology been so pervasive and progressively integrated into our daily lives. The face of consumerism is changing in tandem as customers adapt to new technologies at a faster pace which in turn has had influence on consumer behaviour.
These advancements and changing of consumer purchasing behaviours are demanding the attention of businesses. Terms such as the cloud, artificial intelligence, analytics, bimodal IT, robotics, the internet of things and user experience are becoming the norm in business language, although the business implications of these new technologies are not always fully understood or appreciated.
It is not surprising therefore that we are considered to be entering a new era; a digital age and its impact may very well be as significant as the industrial revolution. All of these emerging technologies present incredible opportunities for progressive businesses and a detriment for companies that fail to prepare adequately for the digital economy.
Introspection is needed for organisations to position themselves better. This means that they should be questioning the status quo to ensure that they can defend their business and remain competitive in this digital world. Organisations are compelled to take a fresh look at how they approach technology and whether their existing capabilities are agile and efficient enough to warrant or support a digital focus in their business strategy. What we understand to be modern society today would have been considered science fiction years ago. The world has made significant advances technologically in a short span of time, yet most traditional businesses still find it difficult to justify the case for transforming their organisations to do business in a digital era. The investment is for the future and this becomes challenging when everything is fine right now and profits are good.
Consumers are becoming digital natives
How does one grow a business in an increasingly connected landscape where companies are struggling to keep up with rapidly evolving consumer preferences who expect service on their desired channel? Consumers are becoming digital natives and are much more comfortable to adopt new technologies.
Businesses are underestimating the pace at which these digital technologies are influencing consumer behaviour and expectations. The problem that organisations face is that transforming into a digital company takes time and commitment, and may take a few years to achieve.
It is not simply a matter of purchasing the latest technologies; it requires a very clear strategic focus.
Consumers are spreading their attention across a multitude of devices and channels making the purchasing process much more complex. Unlike laptops and tablets, cellphones are truly mobile and usually on the customers at all times. It provides the capability to stay connected socially and share experiences in real time. Customers are empowered and becoming more discerning in their purchases. Customers have a choice of platforms such as social media to voice publicly their perception of a company or product or use these platforms to crowdsource opinion on potential purchases.
A company’s offering can be compared online and purchase decisions made before being in contact with the specified business. Technology has changed how customers experience a brand and consumers are more comfortable to switch suppliers. Organisations need to develop more customer-centric digital strategies with the intention to build meaningful customer relationships in a world where information and public opinion flows freely.
There is also an argument for making existing customers’ lives easier and improving existing processes. It is more difficult to sell to a new customer than to an existing one. Marketing Metrics sums this up by stating that there is a 60% to 70% probability of converting an existing customer which pales in comparison to the 5% to 20% conversion probability for a new customer acquisition. People are more responsive to whom they know and trust.
A change in market dynamics
Established organisations are facing increased competitive and regulatory pressures. Competitors are stepping in where established organisations are not meeting their client expectations. Kodak is a good example of a traditional business considered by many to be too large to fail. They were unable to keep up with the disruptive nature of technology.
Companies will find it increasingly difficult to differentiate their businesses. Competitive advantages are short-lived and are becoming a cost of doing business. Traditional businesses are challenged by new technology savvy market entrants with no legacy constraints or technical debt. They are adopting the latest digital technologies and agile methodologies to deliver value to customers in a way that most established organisations are unable to do.
This allows competitors who understand how to leverage digital technology to take their business away at a fraction of the cost. Traditional businesses are being challenged by talent shortages, shrinking budgets, increasing legislation and legacy architecture. This impacts their ability to support business goals adequately and match the agility of their competitors. Competitors founded on new market dynamics can create or duplicate products and offerings in a shorter space of time with less investment. Barriers to entry are being eroded by technological advances that allow innovative competitors to leapfrog their more established counterparts. Uber is an excellent example of a company that leverages technology to disrupt the transportation industry globally and this has prompted regulators to revisit legislation.
Organisations have the opportunity to embrace new technologies and differentiate themselves or run the risk of falling behind. There is a need for businesses to consider how digital technologies are enabling and informing new business opportunities and the need for fresh thinking. This should form part of the overall strategy. Companies can take a phased approach to what technologies are required.
In my next article, I will discuss crucial steps for consideration when pursuing a digital strategy.