Technology is rapidly changing the landscape of business. Currently, consumers and employees alike carry small computers in their pockets via smartphones that are more capable than the computer that put a man on the moon. Yet business is failing in digital strategy.
If asked, almost every CEO will say digital transformation is necessary. Yet most do not realize what that means for both their business and for the future of their industries. Digital strategy requires precise understanding and movement to be successful. Below we spell out the five ways companies are failing in their digital strategy, and how they might need to wake up and change.
Lack of definition
While some businesses will respond digital transformation means upgrading what their IT department does, others will answer digitizing sales or marketing. Yet neither definition covers the full extent of digital. Digital means the nearly instant, free, and seamless ability to connect people, devices, and objects all around the world.
By 2025, 20 billion devices will be connected. That is more than twice the world population. Almost three times, in fact. Over the last two years, devices have produced over 90 percent of all data every produced.
Lacking awareness of the mass capacity of the transformation occurring will cause businesses to not connect digital strategy to their business, leaving them adrift with in the technology disruption.
Misunderstanding digital economics
The new realities of digital competition does not reflect what most of us learned in business school. While disruption is always dangerous, in all the forms it occurs, digital disruption is occurring far faster than traditional disruption.
Economic rent, profit earned in excess of a company’s cost of capital, is becoming non-existent in a digital landscape. Digital is creating value for customers as they are allowed to pick and choose only services they want. Customers can avoid profit creating bundles of products and services. Digital strategy requires learning how to compete, create value for customers, and capture the tiny amount of profit that is left.
No longer is the strategy of maintain shares amongst your competitors a successful objective. Unless you are a market leader. Digital is driving a winner-takes-all economic landscape. While disruptors like this have been seen through out history, as producers peak and then drop off sharply, digital is causing this to occur rapidly and frequently.
Typical strategy is to watch competitors as the leaders work through bugs of a new strategy before adopting. The pace of digital no longer allows successful companies to sit and learn the lessons of their competitors. Due to rapid acceleration of disruption, first movers and superfast followers are rewarded. Tesla is a great example, as 4 years ago incumbent auto makers could have bought the car maker for $4 billion. No one took the offer, and in the last two years they have spent $20 billion on R&D to catch up.
Ecosystems in digital strategy
It is now possible to offer the best quality at the lowest price. Improbably business models have become a reality as Uber provides taxi services without owning cars and AirBnB offers lodging without owning condos or hotels.
Industry boundaries are blurring, and there is no sign for this to slow down. Digital ecosystems will account for more than $60 trillion in revenue by 2025, or more than 30 percent of global corporate revenues. Digital strategy that realizes today’s competitor could be tomorrow’s successful bedfellow means opportunities can be maximized.
While digital and technology does not appear to fit seamless into every sector, all businesses should take note. The most successful businesses are crossing all industries as they revolutionize customer value. Amazon and Whole Foods is a prime example.
Focusing on digital natives as markers
While it’s easy to look at digital natives, such as Amazon, as an index marker for digitization, doing so will fail to provide an accurate picture of the threat to your company. Incumbent companies that have a strong digital strategy can become downright dangerous. Businesses cannot transform incrementally as incumbents begin to move offensively. In fact, incumbents maximizing on a digital strategy command an average 20 percent of the market share, compared to 5 percent by digital natives.
This is particularly important in B2B classifications. More B2B companies are moving on their digital strategy and digitizing core offerings than B2C enterprises. Internet of Things, robotic process automation, and blockchain are enabling B2B companies to move faster and more efficient than before.
Forgetting core digital strategy
Businesses can get swept up in the disruption, believing creating all new revenue streams using digital means is necessary. While creating new streams is an important aspect, abandoning core business is not the answer. Rather, applying a full digital strategy that incorporates digitizing core business offerings while creating new revenue streams gives the most successful results.
Transforming the core leads to lower costs and more customer satisfaction, strengthen brand recognition. Ultimately, a dual response is needed to change and keep healthy revenue streams.
Overall, the largest piece to any digital strategy is to have an overarching picture of what digital means and how it can apply to your business. Separating digital into small boxes of how business historically operated will cause your business to fall behind. As will comparing yourself only to your incumbent competitors. If everyone is falling behind, you won’t see the threat until it’s too late. Wrapping your hands around your current digital environment is key.
MobileWare is a mobility management service that specializes in mobility, security, and IoT management that can build a platform for you to understand your digital landscape and move forward with a strong digital strategy. Call us today.