Digital Innovation for Businesses
5 Steps to adapt more digital technologies into your business
Business change is accelerating
Technology has become an integral part of everyday life, both personal and professional. Users and consumers are shifting more of their daily activities to digital thanks to the boom of mobile computing and connectivity. Technology and the mobile phone in particular, have made it easier for consumers to research, find, compare and purchase products and services at a time that suits them best.
Fundamentally, technology offers a range of benefits to business:
- Connectivity: to your customers, no matter where they are physically
- Speed: to be able to communicate with your customers in real time
- Affordable software: for you to be able to interact and transact with your customers
- Affordable devices: that your customers can use to interact and transact with your business
- Cheap storage: enables you to gather, access, analyse and act on information to better interact and transact with your customers.
Digital adoption and digital transformation
The term digital adoption refers to a business reaching a state in which its people can reach the capability of using digital tools to their fullest extent. For example, imagine if you only used your smartphone to make calls. You've "adopted" this digital device, but you're not utilizing it anywhere near its full capabilities.
Digital transformation, on the other hand, refers to the efforts needed to rewire the entirety of operations across a business -- in accordance with the constantly evolving digital world. In order for this to work, a successful approach to digital adoption is crucial.
Where do Australian business sit on the adoption of digital technologies?
Australia has been ranked 16th out of 141 separate economies in the Global Competitiveness Report 2019 of the World Economic Forum (down from 15th), showing that digital adoption is one of the country’s significant weaknesses.
PwC recently noted that small business use of mobile and internet technology is currently limiting their ability to reach their full digital potential. Small businesses and the economy generally, can realise significant benefits by embracing mobile and internet technologies to transform their operations. PwC modelling estimates $49.2 billion of untapped economic potential. Whilst all regions and industries have much to gain, PwC modelling estimates that 53% of this benefit can be realised in rural and regional Australia.
How does digital adoption help my business?
On a positive note, digital adoption efforts pay off, as proven by the IDG’s State of Digital Business Transformation study in which it’s mentioned that businesses that adopt a digital-first strategy increase their revenue on average by 34%.
It’s also important to note that online businesses and ecommerce is booming worldwide. Last year, Australians spent a total of A$28.6 billion on online shopping. As of January 2019, online shopping is responsible for 10% of Australia’s total retail sales and 80.8% of people in Australia are shopping online. So if you don’t have a digital strategy you are missing out on a big chunk of revenue.
So where does the revenue growth come from?
To understand why digital adoption helps you achieve revenue growth, let’s look at the forces that impact competition within an industry.
Porters five forces model refers to a framework based on the competitive analysis of an industry, introduced by Harvard Business School Prof. Michael E. Porter in 1980. The model determines that the intensity of competition in any industry is a mix of five competitive factors operating in different areas of the whole market. These 5 forces consist of:
- Barriers to entry for new entrants
- Competition amongst existing businesses
- Bargaining power of customers
- Bargaining power of suppliers
- Threat from substitutes
Technology changes have impacted these key forces across most industries as follows:
- Barriers to entry: Technology has provided a barrier to entry for many years. Early computers and software were expensive to the extent that only larger businesses with more capital could afford them. Additionally, a physical presence to sell products also required large capital investment and created a barrier to many businesses. These two key barriers have been significantly reduced and, in many ways, eliminated:
- Technology is cheap: Cloud Computing has meant that any business can access key business software (e.g. XERO) and storage and computer processing power (Amazon Web Services) at an affordable price. You can now rent what you need rather than outlaying large amounts of capital upfront. Therefore, the cost of technology is no longer a barrier.
- Customers can be accessed globally: The internet, social media platforms, website platforms and shopping platforms mean that anyone can market to, transact with and deliver to anyone, anywhere in the world. Therefore, having multiple sites in no longer an advantage or a barrier to entry into a market.
- Competition amongst existing businesses. With lower barriers, more businesses can offer competing products and services in more markets which creates more competition in the industry. This has created more competition in many industries, but also the opportunity to offer products and services in different ways.
- Bargaining power of customers: 84% of customers today expect personalisation. Generic offerings designed to suit everyone are no longer accepted by customers. This has subsequently enabled a significant shift in bargaining power of customers across most industries. Personalisation can only be cost effectively offered at scale through technology, but because technology is cheap, those businesses that adopt digital processes to become more customer-centric and focus on the experience of the customer can compete against much larger businesses that are constrained by the cost of their physical processes and facilities.
- Bargaining power of suppliers: Technology has enabled more efficient supply chains and more direct communication between businesses and manufacturers, meaning that some suppliers can be by-passed, thus reducing the power of suppliers and purchasing costs.
- Threat from substitutes: 76 % of customers report that it’s easier than ever to take their business elsewhere. Technology has not only enabled more options (and competition) but also made it easier to take their business elsewhere. This ease of switching by customers means that you can enter new markets and gain customers quickly.
Ultimately, digital adoption makes it is easier for your business to enter new markets, communicate and transact with your customers and win new customers. This will bring you an increase in revenues.
Ok, so I need to adopt more digital in my business but how do I do that?
To take advantage of these technology changes and adopt more of them in your business model, you will need to do the following:
- A growth mindset. This is a topic on its own but in summary it’s the difference between “I can learn how to do that” and “I can only do what I have learnt”. You need to learn about technology and the frameworks to be able to review and innovate your business.
- Be customer centric. A “customer first” approach is what sets the great businesses apart from the good ones. Put your customer in the middle of your business model and build your business around providing value to your customer. Remember that customers expect a level of personalisation, a great experience and can easily take their business elsewhere.
- Experimentation. This helps reduce the risk of investing time, effort and money into a product or service before checking if your customers actually want it. Learn how to experiment and quickly work out what your customer sees value in or not, without investing a lot of time and money first.
- Move fast and break things: Build, test, get feedback and improve or pivot to a different solution at pace. The initial solution doesn’t have to be perfect, just good enough to determine whether it will be valuable to your customer. Learn about prototyping and creating minimum viable products to test. But do it fast. If you take too long, your competition will get their first.
- Think BIG. Technology enables you to scale in a way that a physical view of your business may stop you. Your customers can be anywhere in the world. Remember technology will let you connect with them quickly and economically and at a lower cost base than physical expansion.