Companies must become "Digital". Statements like this and provocative articles covering this topic are published on mass seemingly every day.
The first and most important step is actually knowing what "digitalisation" actually means!
Leading companies are already well on their way into the Digital Age and will likely be among the companies that achieve profits in the highly competitive markets of the future. But what does "digital" mean for a traditional company?
For some executives, it is nothing more than technology, whilst others believe a digital company would redefine customer processes and for a large number of executives, embracing it as a new way to do business.
None of the statements made are really wrong, but none are really to the point. When such heterogeneous statements are discussed, this is an indication that attempts are being made to understand and explain a method, a management concept or the like.
That is why it is important, especially for managers, to first establish a common definition of terms.
To understand what it is all about - in order to be able to develop a clear concept derived from it. This is important in order to understand what impact this has on one's own business model.
The temptation to create a simple, straightforward definition is tempting. However, in terms of a sustainable definition, it is important to recognise that it is less about technology and more about a way to describe and implement (new) processes or new business models.
To illustrate this path a little more concretely, I have outlined three key areas:
There will be companies that identify new business opportunities by reviewing their current processes and realise them in adjacent fields. Other companies will identify gaps in the existing business model and close them.
One example is the buzzword Internet 4.0 or Internet of things, which has the chance to create completely new structures in the cooperation between customer and client. Existing business models can disappear into insignificance (think of Kodak in the analogue film business) or, as an example, efficiency gains can be realised within the framework of new possibilities in the logistics sector through the use of sensors, Big Data analyses and the optimisation of the supply chain (Amazon).
In parallel, digitalisation also means that it is crucial to understand the customer and their behaviour. Especially because he can receive offers from new market participants outside of (or their) previous business model that make it easier for him to redefine his business relationship and destroy their value contribution.
Being digital also means, above all, using new skills and new technology to improve the customer process. To do this, it is important to have basic knowledge in each step of the customer value creation process; regardless of the distribution channel.
In general, the critical element is the supply chain and its low flexibility and speed of delivery to customers. Especially with customer demands on time, packaging and delivery quantity, these are the critical metrics. Here, the evaluation of data and the optimisations of processes that are possible as a result can enable an improvement in customer satisfaction and an increase in the value contribution.
Digitalisation is not optimal when supplying one-off customers. Digitisation is a continuous optimisation process that consists of collected data, customer feedback, product optimisations and services. To realise this, a basic understanding of 4 capabilities is necessary:
Timeliness is number 1 and comes first for all decisions in the customer process. How up-to-date is the data you receive and what is the data quality? In B2B business, this can be data in the context of replenishment logistics, in the service sector it can be data on preventive maintenance and in the consumer sector it can be data on purchasing behaviour and the cancellation or return rate.
This means that a digital company must be able to assess its customer's buying behaviour, evaluate their brand loyalty and offer them suggestions for further items or services related to their product search or purchase. An increasing number of transactions and customers also increases the accuracy of the conclusions that are drawn in order to initiate further actions.
In the B2B sector, this can be information on service so that pending services can be carried out en bloc; in the B2C business, it may be classic purchase recommendations to round off the purchase.
To support cyclical needs of customer requirements (e.g. through a Helpdesk), it is important to automate simple processes and only map difficult processes defined by unique interaction in a personnel-intensive way. These can be counseling sessions, for example. Other processes such as forgetting passwords and recovering them are examples of automation that has succeeded.
Such automation can drastically reduce costs and ensure the capacity of existing staff to interact with the customer and thus generate more revenue.
In order to address the improvement of the buying process, it is important for a digital company to recognise and know how the customer behaves in the buying process. This also makes it possible to offer the customer products or services from the company that they have not previously recognised or obtained as a product or service.
By generating data during the entire buying process and through intelligent evaluation, it is possible to increase customer loyalty, especially in B2B business, because the customer and the buying centre behind it provide this data.
In B2C business, this is an absolute necessity in eCommerce, regardless of Chanel, in order not to lose the customer.
Another important point for a digital company is to ensure that companies are technologically and organisationally set up in such a way that they can incorporate the demands from the market and customer requirements into processes.
It is important to keep two things in mind:
Digital transformation is the buzzword for growth and change hitting every company at the moment. Digitisation and the associated activities are often closely linked to the introduction of a new ERP system. In this context, it is also crucial how an independent ERP consultancy can bring in expertise from realised projects, or whether it only prepares specifications.
Regardless of how companies define this for themselves in their variability, it is crucial to have a clear understanding of what digital means. This allows entrepreneurs and executives to develop ideas on how to keep value creation in the company and generate new business and revenue.