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Four strategies for digital transformation
According to Forrester, the global research and consultancy agency, traditional businesses cannot rely on being in the fortune 500 in the near future. They will have to make room for disruptors such as Uber, Amazon and Tesla. If traditional companies want to continue playing a significant role in the new economy, then they will first have to undergo a thorough digital transformation.
Let’s take an extremely traditional company such as a lawn mower manufacturer as an example. In order to survive in the new economy, it can do two things. Make even more sophisticated lawn mowers, such as the increasingly popular self-propelled lawn mower, or change the business model from selling products to for instance subscription based services.
For example, the consumer could purchase, via a digital platform, the maintenance of the lawn instead of buying his own lawn mower. Forrester also has a few ideas about how to digitize successfully. According to the research and consultancy agency, organizations that want to survive must embrace the digital strategy unreservedly and not regard it as something that can be done on the side. It must have the highest priority in order to digitally transform the entire organization.
Forrester’s four transformation strategies.
Digital transformation took center stage during two Forrester 2017 Forums in Chicago, USA and London, UK. Below, I give an overview of the four main strategies that I have picked up from the Forrester presentations. In principle, these strategies can be combined without any problems.
1. Digital Experience– Traditional companies can enhance their services with digital services. A good business-to-consumer example is Lego’s Digital Designer , a computer program that enables children to build and design. A Dutch example is Albert Heijn, which also applies more and more digital elements in its marketing. Consider, for instance, the dinosaur pictures craze last year, allowing children to scan the pictures and with virtual reality glasses have the dinosaurs play a role in their daily lives.
2. Digital Production Process– In the automotive industry we see a shift from standardization to personalization. The production process is no longer as firmly fixed as before. After having ordered a black car, a customer can still change his mind and decide that it should be a red one, because his wife prefers red. The manufacturer gives the consumer the opportunity to follow the production process through a sort of track and trace process and alerts the customers at certain stages. Do you still want a black car? You can still change your mind and choose a red or a white car.
3. Digital Ecosystem– Digitization is not something you do on your own, but by engaging in partnerships with companies that have in-house expertise. A transport company that wants to open a retail shop does not have do this all by itself. This also includes collaborations involving social media to push products or to engage in partnerships with industry partners to jointly go to the market. An example is the car manufacturer Nissan, that works together with software supplier Maps Traffic. Without the fastest updates of the map, the car will still not move, in short, Nissan needs Maps Traffic.
4. Digital Innovation– In order to push the boundaries of innovation an innovation center, in which different disciplines are brought together, is a breeding ground where the digital boundaries can be approached. However, as each country and region is different, it is wise to have such an innovation centerin every major market to be able to innovate within the context of that region and to respond to the requirements of the local market. To remain with an example from the automotive industry: The Garage has aninnovation center in every major city where people of different disciplines come together to generate and develop new ideas.
Law of Accelerating Returns
There are various laws that describe technological growth. One of the best known is the Law of Accelerating Returns. This law describes the non-linear, but exponential rate of technical change through time. One moment you are still comfortably in your curve, and the next moment you are already too late, because of the ‘hockey stick model’ of acceleration. This is extremely urgent. Forrester’s warning is that if you have not yet started the digital transformation, you must do so straight away and you need to realize that you have to switch even faster than you think. In the next blog, I will explain how you can do this by modifying your operational processes.