If you haven't realized already, companies in most industries are operating in ether these days. Take financial services, high-tech, retail, healthcare payors, media, and I could go on, most of these traditional industries have been reduced to bits and bytes and 0s and 1s. Why? Digitization is an undeniable fact that is pervading most industries. Still not convinced, look at the following data points
- According to the e-marketer, US ecommerce sales is expected to almost double from $225B in 2012 to $435B in 2017; the implication is that product search, discovery, purchase payment processing, customer services and much of the retail value chain is now digital
- We are increasingly driving towards a cash-less society. The transaction volume of P2P (Peer 2 Peer) is increasing at CAGR of 87%; Mobile wallet volumes could potentially reach 150+% in the next few years
- Advertising giants Omnicom OMC +1.24% and Publicis PUB.FR +1.51% merged today to form a $35B giant - but not big enough to take on Google the $50B online advertising giant or fast growing Facebook that keeps growing their share of the pie
- Even in a more traditional, mature industry such as Insurance, companies such as eSurance, Geico and Progressive are recording double digit or high single digit growth taking market share from agency based insurers. In other words, the entire insurance value chain is now digital.
If you are still not convinced, think about how many times you called the 1800 number of your service provider (phone, tv, insurance, bank, anything..) recently for any kind of assistance. Most of us have internalized it to use self-help over the internet through search and discovery process. Bottomline, most business models are increasingly digital in nature end-to-end.
So why are companies still treading water when it comes to digitizing their enterprise? I am not sure. Time and again, when I look at budget forecast of large corporations, their technology spend increases by a marginal amount, while they still spend a lot of money on maintaining their traditional operations infrastructure such as call centers, back office processing capabilities, risk management and front office facilities.
It is time for executives to realize that their business model has morphed significantly to the age of digital and they need to catch up. So what does digitization for the enterprise look like? To make this simple, think of 4 areas that enterprises need to think about:
- Digital channels - Digital platforms are the growth channels. Everything from mobile, tablets, web, to wearable devices is where customers will be identified, engaged and transacted. Spend less on digital channels at your own peril
- Extreme Automation - The first wave of productivity improvements happened in the 1990's and 2000's with process automation and ERP and software package. Technologies have evolved since then. Compared to the past when less than 30% of your processes could be automated, current technologies and lean based innovation can automate up to 80% of your processes - what I call Extreme Automation! This reduces the cost to serve and delivers higher quality of service.
- Realtime Interconnectivity - If your organization isn't operating real-time, it is missing a lot. For example, online ads are no longer inventory based. They are customized for that particular user based on their browsing behavior in less than milliseconds and the customized ad delivered for that user. Can companies do this for their products - to offer it for a segment of one? Of course. The opportunities are limitless when bit and bytes flows freely across the enterprise - and this includes customer, product, mfg, operations, machines, sensors and a multitude of interconnected stakeholders
- Digital Assets - If everything is digital, then companies would be remiss not to make the best use of their digital assets. A payment company has customer purchasing behavior as its assets, a car mfg has telematics and driver usage information as its asset. Every company has digital assets that is useful for them and potentially others in the ecosystem.
The above describes the business operating model of the future for most industries, unless yours is in the business of supplying people. This is exactly how startups of today think, build their business and disrupt traditional markets. If your company does not get it, you should be ready to get surprised by the next innovative disruptor in your space.