How to Get Started Now
In 2015, IDC predicted that within three years the top 30% of companies in all industries would be seriously challenged by an innovative competitor.Today, only two years later, this seems conservative as Tesla, Uber, and others overtake the automotive industry, Amazon dominates retail globally and born-digital startups penetrate all traditional markets.
For business leaders, the question is no longer whether to implement a digital strategy but when and how to do so. With the rapid pace change, the best time is while traditional business continues to be strong and can support investment in small alternative offerings or business models.
For example, in the early 2000’s, Netflix invested 15% of returns from their highly profitable DVD delivery business into pilots of video streaming service. Two years later, when Apple and Amazon entered the Video on Demand market, Netflix was prepared to retain and even increase the loyalty and satisfaction of their customer base through DVD or streaming options.
Keys to success when starting a digitalization initiative are:
- Leadership recognition and commitment to change, evolve and expand into digital future
- Understanding of customer needs today and in the future through workshops, focus groups and data analysis
- Clear definition of the initial target market for new digital offerings
- Dedicated (autonomous) team focused on design, prototype, and product development as well as user adoption
- Customer experience, feedback and loyalty in initial then future target market segments.
Start Small to Dominate
While digitalization gives access to a broad range of customers, the most effective approach is to start with a well-defined pilot project that addresses the specific needs of a small ‘homogeneous’ target audience. This increases the success of customer adoption and minimizes the challenge of managing global customer expectations and priorities.
In 2006, when Adobe’s Creative Suites was the standard for creative agencies and marketing departments, the ‘as a service’ model was tested with some small business/home office users, who previously could not afford expensive perpetual licenses. By selecting this unaddressed market, Adobe was able to freely test options, gain feedback and delight a new set of customers – without impact on their traditional customer base.
Benefits of Focus on Underserved Market
For many business leaders the greatest obstacle to digitalization is their concern that by offering new digital options, they will disrupt their current revenues. By defining, understanding and then addressing the needs of an underserved market, companies are able to:
- Enhance not cannibalize their market position.
- Experiment freely allowing for possible failure – without damage to market image or expectations
- Generate incremental market share and revenue from a new market segment
While the market definition can be by company size, type of location as in the case of Adobe, leaders of B2C organizations might look to a particular population demographics (age, profession, education level or location) for digital dominance.
In 2010, DNB, Norway’s largest financial institution, recognized that the younger generation (age 18-30) were not interested in the bank’s traditional banking, lending, corporate and real estate investment services.
In focus groups and interviews, millennials confirmed they were most interested in easy ways to manage their money including options to ‘pay on the go’ from their mobile phone. To address this need in Oslo market, DnB established an internal autonomous team to design, develop, pilot and gain customer feedback from a mobile/peer to peer payment service called ViPPs. Two years, later ViPPs is now the leader in mobile payment – used not only by young consumers but a large percentage of the Norwegian population for retail, online, peer to peer or business banking transactions.
Digitalization: Now or Later
Across all industries today, customers demand and have access to a range of digital services. To maximize continued successful growth, business leaders should:
- Commit to exploration and development of new services and business models
- Understand customer needs and future directions
- Identify underserved market segments in which new digital offerings can be explored
- Build the team to design, develop, pilot and gain feedback on digital solutions
- Continually enhance customer experience, adoption, and value
Timing is everything – by investing today’s returns in development of new digital offerings and revenue streams, your company can maximize tomorrow’s results in current and new markets.