Technology allows many businesses to compete on an international playing field whether they use an eCommerce or full eBusiness model. For many to achieve strategic advantage, they must fully adapt their digital operations to become effective digital enterprises.
Such transformation can take time, significant resources and impact on business operations during the process. A trial and error approach won’t cut it as international competitors loom. Global consulting firm McKinsey has identified 7 traits of successful digital enterprises, they are summarised below:
- Be unreasonably aspirational
- Acquire capabilities
- Ring fence’ and cultivate talent
- Challenge everything
- Be quick and data driven
- Follow the money
- Be obsessed with the customer
1. Be unreasonably aspirational
McKinsey argue that senior managers must sponsor the initiative to start it and keep it going. Driven by a stretching vision that is routed in a strong business case the value of the change must be fully understood and communicated.
For example, Netflix begun as online DVD rental but saw the potential for streaming media based on the changing environment of better broadband and increasing customer expectation for convenience. By the end of 2013, Netflix had more than 40 million streaming subscribers.
2. Acquire capabilities
Having the right talent is critical; business must hire people with great digital skills over extensive industry experience. While some skills can be created from within, it can be quicker and more effective to hire externally but can cost a premium as digitally skilled professionals are in demand.
For example Tesco, the UK grocery retailer, made 3 significant digital acquisitions blinkbox, a video-streaming service; We7, a digital music store; and Mobcast, an e-book platform. These acquisitions enabled Tesco to quickly move into digital media with the talent and resources acquired.
3. ‘Ring fence’ and cultivate talent
This new digital talent must be protected to avoid getting sucked into business as usual operations, remember this is a transformation team.
For example, Walmart had difficulties entering the digital sphere until they established @WalmartLabs, an “idea incubator,” as part of its growing e-commerce division in Silicon Valley—far away from the company’s Bentonville, Arkansas, headquarters. When protected, the team created a unified company-wide e-commerce platform, helped Wal-Mart increase online revenues by 30 percent in 2013, outpacing Amazon’s rate of growth.
4. Challenge everything
For long established business, a fresh way of thinking is required and staff must resist the appeal of returning to old think or practices that work only in in a physical world. Traditional rules of marketing, economics and competition remain relevant but they may be expressed differently and accelerate. We assume an unknown start-up already exists and will have the capability to disrupt our business in the near future.
For example, in 2007, car-rental company Hertz started to deploy self-service kiosks similar to those used by airlines for flight check-in. In 2011, it leapfrogged airlines by moving to dual-screen kiosks—one screen to select rental options via touch screen, a second screen at eye level to communicate with a customer agent using real-time video.
5. Be quick and data driven
The rate of change in many industries is accelerating; companies must continuously examine their value propositions to ensure relevance. Continuous improvement is not a new concept but when matched with continuous questioning it can be a powerful combination when supported by accurate research and data driven insights into customers and competitors.
For example, U.S. Xpress, a US transportation company, collects data in real time from tens of thousands of sources, including in-vehicle sensors and geospatial systems. Using Apache Hadoop, an open-source tool set for data analysis, and real-time business-intelligence tools, U.S. Xpress has been able to extract game-changing insights about its fleet operations, saving the company more than $20 million in fuel consumption in the first year alone.
6. Follow the money
While many companies invest in customer facing solutions, inward facing investments can yield significant in-house efficiencies and process improvements. Such internal improvements are key to ensuring cost control as your business expands.
For example, Starbucks is one of the leaders in customer-experience innovation. Just 35 of Starbucks 100 active IT projects in 2013 were focused on customer- or partner-facing initiatives. One-third of these projects were devoted to improving efficiency and productivity away from the retail stores, and one-third focused on improving resilience and security. In manufacturing, P&G collaborated with the Los Alamos National Laboratory to create statistical methods to streamline processes and increase uptime at its factories, saving more than $1 billion a year.
7. Effective digital enterprises are obsessed with the customer
Long before the term digital marketing became popular, marketing professional knew that customer’s expectations are rising and businesses struggled to keep up. According to oracle, customers are less accepting of bad experiences; one survey found that 89 percent of consumers began doing business with a competitor following a poor customer experience. On the flip side, 86 percent said they were willing to pay more for a better customer experience.
(2011 Customer Experience Impact Report: Getting to the Heart of the Consumer and Brand Relationship, Oracle, 2012, oracle.com).
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For more information on McKinsey and their full report, click here
By Robert Farrell. For more information contact me via Linkedin ie.linkedin.com/in/robertfarrell1/