5 ways to ready your business for the next wave of digital transformation

OPINION / 6th December 2016

The rapid pace of digital transformation has caught many established businesses off guard. We’ve seen the demise of big names such as Kodak, Blockbuster and Nokia. But decline isn’t inevitable. Not every company will die and be replaced by a digital start-up. Encyclopaedia Britannica is just one example of how a business can adapt and survive.

In 2012, after 244 years in print, Encyclopaedia Britannica announced it was to stop publishing its print edition. Just 12 years earlier, and at its prime, the encyclopaedia sold 120,000 print editions worldwide. By 1996 that figure plummeted to 40,000, and by 2010, to 8,100.  Yet halting the publication of printed copies, which began in Edinburgh in 1768, was not the end of the business. Despite having to compete with the likes of Google search and Wikipedia, it was the start of something new.

Encyclopaedia Britannica has become an online, subscription based educational resource, which now serves more than 100 million people around the globe. President of Britannica Encyclopaedia Jorge Cauz said: “To me, the most important message is that the printed edition was not what made Britannica.”

Columbia Business School’s faculty director of Digital Marketing and Digital Business Strategy David L Rogers says this is a good example of how a business can transform and evolve. The globally-recognised leader on brands and digital business strategy said at this year’s Brite conference that: “Digital transformation is not fundamentally about changing your technology. It’s about strategy, leadership and new ways of thinking. Any business, no matter how many years it’s been around, no matter what industry, can adapt.”

In his latest book, ‘The Digital Transformation Playbook’, he sets out five ways businesses can change to prepare themselves for the next wave of digital transformation. Here we’ve abridged his ideas.

1.     Harness customer networks

Customers are no longer passive targets. They are not receptive to the old-fashioned model of communication, where businesses broadcast their messages and ignore the public’s response. The advancement of social networks means consumers are part of a dynamic network, where they can now make or break your brand. In this network, they take part in forums, leave comments online, use Twitter to air their views and write blogs or vlogs about their experiences with your business or brand. As a result, modern businesses are being forced to engage with consumers in a new, deeper, more personal way.

Take PepsiCo as an example. It has rethought the role of its customer relationships. Communication used to come solely from the business, but now some of its best communications come from its customers. PepsiCo has eschewed traditional ad agencies and invited customers to create their own funny thirty-second ads to promote the Doritos brand, the best of which were aired during the Super Bowl. PepsiCo even asked Doritos fans to vote for new flavours on social channels using the specially created hashtag #DoUsAFlavour.

2.     Build platforms, not just products

Competition is no longer about being better than similar businesses. Rogers cites the example of the Hilton Hotel Group, which now has to compete not just with the likes of Marriott or Intercontinental, but also Airbnb. What started out as three college graduates trying to rent out their rooms to make a little extra money, has turned into a multi-billion-dollar business. It has one million listings, 40 million guest stays per year, and only employs a few hundred people, yet its revenue rivals that of the traditional hoteliers, and doesn’t have the expense of staff or bricks and mortar costs. Rogers puts its success down to using a platform model of business, and says eight out 10 of the most valuable businesses in the world now operate this way.

The platform model brings two distinct types of people together – in Airbnb’s case, hosts with homes to rent and travellers looking for somewhere to stay. Airbnb’s staff focus on building a web interface and mobile app that make it as easy and frictionless as possible for a host to offer lodgings or for a traveller to book a place to stay. Its success comes from building trust between the two parties – which is based on mutual ratings and reviews, verified by detailed user IDs, plus links to social networks. Such is its popularity that during the 2014 World Cup, when 600,000 people descended on Brazil, 25% stayed in an Airbnb rental.

3.     Turn data into a digital asset

Data is taking centre stage. Rather than using it to improve operations and profit margins, it should be viewed as a strategic asset. Businesses need to embrace their data and use it more holistically to create new opportunities that didn’t exist before, says Rogers. He cites Las Vegas–based Caesar’s Entertainment, one of the largest casino groups in America, as an example of how to use data to improve both customer experience and brand loyalty.

Caesar’s casino encourages its customers to use a loyalty card system to pay for food and entertainment while they are staying on their premises. This allows the owners to have a complete view of their customers, in real time. It uses loyalty card data to detect patterns of behaviour. Say, for example, a regular customer is having a bad day at the gaming table. Management can push out a message in real-time, to a service person on the floor, who is given a discretionary budget to cheer the losing customer up, by offering a free steak dinner or show tickets. The aim is to ensure the customer doesn’t leave the casino feeling the day has been complete waste, providing them with a boost and an incentive to come back again.

4. Innovate by experimentation

In the past, innovation was based on senior, experienced leaders taking large bets based on their intuition. It was a top-down process. Innovation would take time, and be a huge cost to the business, especially if it failed. But says Rogers in a digital world innovation is more flexible, continuous and experimental, and likely to come from the grass roots. Innovation is about embracing continual learning. Rogers said: “With the rise of digital A/B testing constant experimentation has become the norm for more and more products and services and communication channels. It has become fashionable to take the stance of a Silicon Valley start-up and assert that the product is never finished and that every new innovation should be release as a beta ready for continuous evolution.”

Google operates its search engine in this way. Every time you search, Google presents you with results and measures which ones you click on and how quickly. Changes occur in the primary listings, in the ads shown and in the auto complete guesses it makes when you start typing. Google is innovating through small iterations on a daily basis based on what it learns about you as a user. It is constantly experimenting and testing new ideas (about how to group listings etc.) measuring customer responses and iterating on its findings.

5.     Adapt your value proposition to a changing environment

A business’ value proposition can no longer be static, nor defined by the industry that it’s in. It must be dynamic, and continuously adapted to evolve to keep abreast of the market. Business leaders must not view tech as a hurdle or obstacle, but as an opportunity. Instead of them thinking how can tech be applied to my current business, its more about them thinking how can tech create new opportunities for the next stage in my business or enterprise.

A major ongoing example of value proposition adaptation can be seen in the New York Times, which was founded in 1851. Many feared it would become obsolete in the digital age. Ad revenues dropped dramatically as readers turned to free digital start-up publishers like BuzzFeed and Vox, who were more adept at generating viral sharing in social media. Yet in recent years the NYT has rethought journalism and its value proposition. It’s introduced new digital formats and innovative ways of reporting the news. Its very first virtual reality film, called Displaced about the 60 million people who are driven from their homes due to war, was sent for free to every NYT subscriber along with a Google Cardboard. It had a record number of readers engage with the piece and won international acclaim plus two awards from the Cannes Lions festival in France. 

Andy Farmer Andy Farmer Executive Director, Strategy Andy Farmer