How Digital Innovation Transforms Businesses
Updated: Aug 15, 2018
In Part 1 of our series on Digital Innovation, we defined what is Digital Innovation and why it’s needed in today’s businesses. In Part 2 we go into how Digital Innovation can help you transform your business.
Firstly, we will look at the main ways Digital Innovation can transform businesses, with examples of companies that have done so successfully. Next, we will go into specifics as to how Digital Innovation & Transformation adds tremendous value to businesses.
Ways in Which Digital Innovation Transforms Businesses
There are three main ways we see Digital Innovation transforming businesses:
Improving and enhancing traditional business processes
Revolutionizing existing business models
Disrupting conventional business operations and industries
Improving and Enhancing Traditional Business Processes
The first and probably most basic way Digital Innovation transforms businesses is by helping to improve and enhance the way the business currently operates and its processes. With this first approach it isn’t so much about being disruptive, but more so making better what already exists.
For instance, a retail company that decides to create a mobile app to make shopping on the go more convenient for its customers. It could also take the form of a company deciding to digitize its loan application process using a software, so applicants can apply online without having to come into the physical office of the company.
These improvements don’t take away from how business is already done by the companies, it just makes it easier for everyone involved in the process, from employees to customers.
The best example of this in recent times is a regional bank that decided on a complete Digital Innovation and Transformation strategy. They decided to digitize their complete business process and operations. One of the first things they did was to create an app that can be accessed on smartphones or tablets. This app would be used for their account opening process.
The challenge they had was the long lines with their customers coming into the bank to do various transactions. The app improved the bank’s processes in three ways:
It significantly reduced the number of customers coming in, which reduced operational costs, and made it more convenient for customers
If customers did come in, it reduced the time taken to open an account or perform other transactions
It improved the bank’s productivity as more transactions processed in a day meant more revenues generated for that day
This small shift helped to significantly improve the overall customer experience.
As a result of this overall Digital Innovation throughout their entire operations and business process, they saw record profits of close to $20 Billion in 2017.
Revolutionizing Existing Business Models
The next way Digital Innovation can transform businesses is by changing an already existing business model, that is to say how a business is structured and operated in its entirety, targets its audience, and makes a profit.
To really understand how Digital Innovation can transform an existing business model let's look at a retail company that decided to go one step above simply incorporating a mobile app.
Previously, the company could only assess purchases made on their website to determine sales volumes for that week or month. There was very little insight into customer behaviour, and why their customers even decided to purchase from them in the first place. There was no big data to give valuable insight and make better business decisions to grow the company's revenue, through improving product quality or the customer experience.
They decided to integrate Application Program Interface (API) across their e-commerce website. This allowed the company to gain a full view of their customers' buying behaviours and interaction with each product.
This included which products were viewed on the website, how many times it was view, which items were clicked on the most, which were added to shopping cart, which were purchased immediately after adding to the shopping cart and which were not. The most important of all was understanding why customers made these decisions throughout the entire buying process.
Consequently, it allowed the company to become more agile in its market research and product development. They no longer second guessed what was to be done. They understood not just what products were purchased, but how the buying process flowed from start to end.
From the customers end the experience was more seamless and faster. They could log into their account and check their information from one central location. Also, they could select a product and add it to the shopping cart from their mobile phone while on the go, then complete the transaction on their desktop when they got home.
Using Digital Innovation & Transformation the company turned data into real insights, and was able to create a better customer experience that is more tailored and personalized to the customer and their buyer’s journey.
Disrupting Conventional Business Operations & Industries
From time to time you will find that Digital Innovation completely disrupts an entire industry.
If we are to talk about businesses that have disrupted an entire industry, then the name Amazon has to be in that conversation. Amazon is the truest example of a company that employs Digital Innovation and Digital Transformation to its competitive advantage.
The company started as an online store selling books, and very quickly through Digital Innovation completely revolutionized the retail industry. How it did so was by making shopping online easier and more convenient for customers. Customers no longer had to travel to a physical brick and mortar location to purchase an item they wanted. It could be ordered online, and delivered directly to their doorstep. Also, it reduced the time taken for items to be delivered.
What is amazing about this digital disruption is that Amazon doesn’t manufacture any products. Through technology, it simply facilitates and connects the manufacturers and retailers with the end user. It’s simply the digitized ‘middle-man’ of retail.
This caused several retail stores to be closed down over the last five years, as now there was no need for brick and mortar locations. Amazon single-handedly disrupted an entire industry and continues to do so. Just recently it announced their ‘cashierless’ stores.
According to an article by the New York Post, “The Seattle store, known as Amazon Go, relies on cameras and sensors to track what shoppers remove from the shelves, and what they put back. Cash registers and checkout lines become superfluous — customers are billed after leaving the store using credit cards on file”.
In a sense it uses technology to track what customers put in their shopping carts and bill them automatically when they walk out, eliminating the need for human cashiers.
Companies need to be more digitally innovative or risk being disrupted. Below is a graph from a study conducted by Ernst & Young that shows how different industry risk disruption through the Digital Innovation.
7 Benefits of Digital Innovation That Creates Business Transformation
Now that we've gone into the three ways Digital Innovation can transform businesses, let's talk about seven ways it creates value and benefits businesses:
Increased Efficiency and Productivity- it allows businesses to do more with less time and resources, thus maximizing dollar spend and company output
Reduced Operational Costs- since less resources and time are needed to carry out the same tasks, this means it requires less operational dollars for personnel, training, or equipment
Organic Growth- by making the business more efficient, productive, and reducing costs, the business can grow organically through identifying new opportunities for growth and new product development within its existing model, instead of through mergers or acquisitions
Better Data Analysis- through implementing digital as a part of their growth strategies it allows businesses to track and measure everything. Business strategies are no longer dependent on guess work or opinions, but big data that quantifies why a certain strategic path should be taken
Product Delivery is Faster and Cost Effective- as Amazon showed us by employing Digital Innovation product delivery to an end-user or consumer can be significantly increased which improves customer satisfaction. Delivery costs also decreases which benefits the business
Creates New Revenue Streams- businesses can create new products and services to create new revenue streams to capitalize on new markets that were previously out of reach
Creates New Markets- it allows businesses to create entirely new markets that were nonexistent. A great example of this is what Facebook did globalizing media and communication online, creating new opportunities for people worldwide
This goes to show the power of Digital Innovation & Transformation in enhancing and revolutionizing business operations, processes, models, and even disrupting industries.
It has many benefits, key of which are making businesses more efficient and productive, reduces costs which increases profits, and improves the overall customer experience, which drives customer loyalty.
This is the future, and this is the power of Digital Innovation. For businesses who refuse to see and use technology to their advantage, they will quickly see themselves being taken over and going out of business from new competitors who do.
EY (The Digitisation of Everything)