In this post, we’ll take a high‐level look at different factors driving the digital imperative in modern business and how it’s changing the nature of competition and market dynamics.
Recognizing digital business drivers
Digital business is the application of technology to build new operating models, processes, software and systems by leveraging the convergence of people, business and things.
These advances are creating new product and service opportunities as well as transforming business operations, helping companies generate more revenue, gaining greater competitive advantage and achieving higher efficiency.
Competitive advantage in this era of business is based on capturing new opportunities by rapidly adapting to changes in an organization’s market or industry. Those that can achieve this level of agility will leap-frog the competition, while those that can’t will struggle to survive. Thus, digitization – the process of becoming a digital business – needs to be at the top of every business and IT leader’s priority list.
Companies can no longer simply differentiate their products and services along a single dimension such as price, features, quality or support.
Maintaining and increasing competitive advantage in today’s dynamic, global economy is a major challenge for businesses in every industry. Companies can no longer simply differentiate their products and services along a single dimension such as price, features, quality, or support. Except for commodity goods and services, the lowest price doesn’t guarantee a sale, poor quality is never acceptable, and customer service requires far more than a friendly smile.
Instead, perceived value, functional match to requirements, exceptional quality, and total customer experience across all touch points are all important aspects of the new competitive norm.
Additionally, businesses must find innovative and creative new ways to engage, attract and retain their customers.
While it’s well understood that attracting a new customer costs dramatically more than keeping an existing one – as much as ten times more – it’s never been easier for customers to find, research, and move their business to your competitors.
And customers want to deal with businesses that not only provide the highest quality goods and services they need, when they need it, and at a price they’re willing to pay, but also that are socially responsible—with their employees, their partners and suppliers, their communities, and their environment.
In a time when costs are constantly being
evaluated, inefficiency equals waste.
Inefficient business processes and toxic corporate cultures inevitably affect the bottom line (profits), but increasingly impact the top line (sales) as well. In a time when costs are constantly being evaluated, inefficiency equals waste—which no one wants to see or hear about. Everything you do as a business must stand up to public scrutiny. Customers don’t necessarily want to know how the sausage is made, but they also can’t look away from a train wreck.
Today, digitization has three primary drivers, shown below (sources from ZK Research):
Go digital or go home
Market leadership is no longer about having the best product, the lowest price, or even the best people. Becoming a market leader in any industry is now based on being able to capture new opportunities in a rapidly changing market.
This has always been true, but changes in market leadership used to take decades to occur. For example, in the 1980s, big box retailers completely redefined how retail organizations managed inventory. However, it took nearly two decades for their impact – not only to the retail industry but also the entire value chain – to be fully realized.
Becoming a market leader in any industry is now based on being able to capture new opportunities in a rapidly changing market.
Today, natively digital organizations are having a similar impact in fewer than five years. Figure 1‐2 shows that in 1960, businesses remained on the S&P 500 Index, on average, for 50 to 60 years; by the early 1980s, the average was less than 30 years. As this trend is likely to continue, by 2025, businesses can expect to remain on the index for an average of only 15 years, as new market leaders continually emerge.