OPPORTUNITIES IN DIGITAL AGE

                                              

Digitization often lowers entry barriers, causing long-established boundaries between sectors to tumble. At the same time, the “plug and play” nature of digital assets causes value chains to disaggregate, creating openings for focused, fast-moving competitors. New market entrants often scale up rapidly at lower cost than legacy players can, and returns may grow rapidly as more customers join the network.

Digital capabilities increasingly will determine which companies create or lose value. Those shifts take place in the context of industry evolution, which isn’t monolithic but can follow a well-worn path: new trends emerge and disruptive entrants appear, their products and services embraced by early adopters . Advanced incumbents then begin to adjust to these changes, accelerating the rate of customer adoption until the industry’s level of digitization—among companies but, perhaps more critically, among consumers as well—reaches a tipping point. Eventually, what was once radical is normal, and unprepared incumbents run the risk of becoming the next Blockbuster. Others, which have successfully built new capabilities, become powerful digital players.  The opportunities for the leaders include:

    Enhancing interactions among customers, suppliers, stakeholders, and employees. For many transactions, consumers and businesses increasingly prefer digital channels, which make content universally accessible by mixing media (graphics and video, for example), tailoring messages for context (providing location or demographic information), and adding social connectivity (allowing communities to build around themes and needs, as well as ideas shared among friends). These channels lower the cost of transactions and record them transparently, which can help in resolving disputes.

    Improving management decisions as algorithms crunch big data from social technologies or the Internet of Things. Better decision making helps improve performance across business functions—for example, providing for finer marketing allocations (down to the level of individual consumers) or mitigating operational risks by sensing wear and tear on equipment.

    Enabling new business or operating models, such as peer-to-peer product innovation or customer service. China’s Xiaomi crowdsources features of its new mobile phones rather than investing heavily in R&D, and Telstra crowdsources customer service, so that users support each other to resolve problems without charge. New business or operating models can also disintermediate existing customer–supplier relations—for example, when board-game developers or one-person shops manufacture products using 3-D printers and sell directly to Amazon.

The upshot is that digitization will change industry landscapes as it gives life to new sets of competitors. Some players may consider your capabilities a threat even before you have identified them as competitors. Indeed, the forces at work today will bring immediate challenges, opportunities—or both—to literally all digitally connected businesses.

By Alphonce Bhoke BAPRM 42527