Digital Business: How Technology Will Support Growth

Historically, IT automated, integrated and re-engineered operational processes.  That reduced costs, increased scale and transformed operational practices, but it did little to drive growth. This is about to change as a new set of digital technologies transform the revenue generating front-end of the business.

Digital technologies such as mobile, social media, smartphones, big data, predictive analytics, and cloud, among others are fundamentally different than the preceding IT-based technologies.  Newer technologies touch the customers directly and in that interaction create a source of digital difference that matters to value and revenue.  We call that source a digital edge.

Digital possibility follows digital density

The density of connections, context, and communications flowing across digital technologies create opportunities for digital value that simply were not possible even 24 months ago.  Digital density has reached a tipping point with more than a billion people on Facebook, 5.6 billion mobile devices and more than $20.4 trillion dollars of business or 14% of all economic activity transacted across digital resources.  The challenge is not to see what is possible, but to determine what is profitable with digital technology.

Stop feeling digital and start being digital

Being Digital, by Nicholas Negroponte, was published in 1996 at the start of the ecommerce revolution.  It described how the future rested in shifting ‘atoms’ to ‘bits’ or transforming the physical into the digital.  Today, most companies ‘feel’ digital as they have automated processes, computers, information and data warehouses.  A study of more than 2,200 companies indicated that digital technology supports an average 58% of their business processes.

However, feeling digital is not the same as being digital. 

Those same firms saw an average of only 27% of their revenue involve digital technology.  Technology drives growth when it closes the gap between back office automation that feels digital and how an enterprise amplifies digital and physical resources to become a digital competitor.

A digital edge is different than digital automation 

A digital edge exists where digital information and physical resources combine in new ways to create value and revenue.  Enterprises seeking a digital edge transform processes, business models and the customer experience by exploiting the pervasive digital connections between systems, people, places, and things. Any company large or small, old or new can use this digital technology to create a winning edge for its business and perhaps, its industry.

Consider Royal Caribbean and its Oasis-class ships. The Oasis-class is the world’s largest cruise ship with more than 5,000 passengers. If a ship this size feels too big, the passenger experience is diminished. Therefore, Royal Caribbean established a goal of eliminating lines and used digital technology to achieve it. Each Oasis-class ship utilizes shape recognition cameras, smart cards, 900 wireless access points and other digital technologies to eliminate lines in experiences ranging from dining and onboard activities to excursions. By tackling the paradox of eliminating lines on the world’s largest cruise ship, Royal Caribbean delivers an experience as grand as the ship itself while keeping these ships operating at capacity.

United Stationers, a multi-billion dollar wholesaler of office and janitorial supplies, has created a B2B digital edge by combining information and technology based services with its supply chain.  This gives United Stationers the ability to link dynamically with their local and regional customers to compete more effectively in the marketplace and creating a growing multi-billion dollar revenue stream.

Creating a digital edge

To create a digital edge, executives must think in new ways about the relationship between the digital and physical worlds by defining the following:

Identify digital value by defining a clear digital outcome, like eliminating lines on a cruise ship or giving customers ‘Tiffany service at a Target price.’  Outcomes provide the way to focus on what is digitally profitable rather than what is digitally possible.

Select the right type of digital edge.  Design the right combination of digital and physical resources.  Consider whether your organization needs digital technology to further automate operations for scale, augment the customer experience, accompany its people and processes or find new sources of revenue by abstracting digital information. Just like different blends of coffee, different mixes of digital and physical resources create different capabilities and outcomes.

Become a digital organization by creating new sources of customer value that lead to addressable company revenue.  Avoid copying companies seeking revenue through advertising or offering ‘freemiums.’  These digital marketing schemes are appealing on the surface but they are dead ends for established companies with paying customers and successful products.

 If digitizing the business were as simple as selling virtual copies of physical products, then every business would be a digital business.  Our study of more than 20 digital leaders found a path to becoming a digital organization based on treating digital technology as a strategic resource rather than an IT operational cost.

Digital value requires creating something new, different and valuable to customers and the company. The only way to create something different is to start with the outcome and ask: How can we make this happen? Stop, Look and Listen for the combinations of digital and physical resources that lead to digital value.  Then Start, Test and Build digital capability from the inside out, levering what you have with what you need to create the new capability.  This approach concentrates on working with customer, digital and physical realities to realize value now rather than trying to use technology to overcome current company limitations.