Digital transformation is the ongoing process of changing the way an organization does business through the adoption and application of technology. The degree to and speed at which a company embraces technology is often the X-factor in its digital transformation. However, knowing where to start can be overwhelming for executives, who must balance the desire to innovate with the pressure to maintain efficiency in core business operations.
From music to mobility, software has enabled consumers to move away from traditional ownership and purchase services based on what and how much they want to consume. This adjustment in buying habits requires a shift in business habits. Understanding what customers truly want leads to solutions that withstand changing markets and the emergence of new competitors.
Read the Case Study
Evolution is nothing new to the music industry. In the late 1970s, cassettes replaced vinyl, and in the 1990s, cassettes made way for CDs. In the early 2000s, the internet ushered in a new era in music delivery with the ability to copy and share files digitally. Consumers, realizing they could download music faster and for free (albeit illegally), turned to file-sharing services like Napster and LimeWire.
Many in the music industry, unable to see beyond the existing business model of CDs, sought to crack down on online piracy with legislation like the Stop Online Piracy Act and Protect IP Act. Spotify, founded in 2006, looked at the problem differently. The company developed a solution for music delivery that would protect artists against online piracy while satisfying the consumer’s need for less expensive, more instantaneous music services at a higher quality than existing illegal streaming sites.
Spotify continues to seek new solutions in service of its stakeholders. The company acquired blockchain startup Mediachain to help with attribution and solve copyright issues by connecting artists and rights holders with the tracks hosted online.
Automotive
Today’s customers demand seamless experiences that regularly evolve in line with technological advancements. Companies must be ready to reinvent their offerings alongside the emergence of new technologies to remain competitive.
Read the Case Study
In February 2007, Netflix celebrated the distribution of its billionth DVD. At the time, the company was known for its DVD-by-mail business, a direct-to-consumer operation that disrupted the traditional box store model. The company’s success could have resulted in Netflix remaining in its existing business model. However, the company recognized the power of technology and leveraged it to deliver a digital business.
Since becoming a pioneer of the content streaming market, Netflix has amassed hundreds of millions of subscribers globally and produces its own shows and movies. The company’s endurance lies in its ability to provide users with hyper-personalized experiences. Netflix uses artificial intelligence (AI) and data to tailor the experience to each subscriber, including recommendations for what to watch next. Its commitment to next-generation technology allows Netflix to continue testing and fine-tuning its user experience, while simultaneously raising the bar for what constitutes a personalized experience.
Rent from store, watch at home
Blockbuster
Entertainment delivered to your doorstep
Netflix
Personalized film recommendations
On demand streaming
$2BN mkt cap
Content creation, designed to match user preferences
$22BN mkt cap
700 original TV shows worldwide
$145BN mkt cap
The rise of digitization has created a need for speed and an expectation of instant customer satisfaction. Customers expect products and services delivered instantaneously, and outdated operating models can’t support these demands.
Read the Case Study
UPS founder Jim Casey coined the term “constructive dissatisfaction” to describe the company’s commitment to continuous improvement. It was this same mindset that led to the development of UPS’ On-Road Integrated Optimization and Navigation (ORION) program.
In 2003, UPS piloted telematics technologies on delivery trucks, gathering data to understand where the company could improve efficiencies. The company pulled this data into an algorithm to solve complex routing problems. In 2016, UPS deployed ORION in the U.S. A year later, the program was saving UPS from $300 to $400 million annually while improving delivery for the end consumer, according to BSR.
In 2017, UPS announced its Enhanced Dynamic Global Execution (EDGE) program, which uses data to construct a detailed sort operating plan that analyzes staffing resources and prioritizes instructions for employees unloading and sorting packages. With this focus on data and intelligence, UPS plans to build the world’s largest and most advanced smart logistics network.
ORION
$70BN mkt cap
EDGE
$86BN mkt cap
Network planning tools
$103BN mkt cap
The speed of digital transformation is widening the gap between bystanders and leaders. Companies that capitalize on advancing technology share several key characteristics that allow them to ride the digital disruption wave.
In the face of rapid technological change, it’s imperative for companies to stay nimble and harness the power of innovation. A successful digital transformation requires more than the adoption of new technology. It requires a new way of thinking that continually strives to enhance the customer experience. The companies who question the power of the customer or underestimate the speed of technological change will be left behind.