Let’s go back to our life styles a few years back, to hire a taxi either we had to go to a taxi stand or had to call a few taxi vendors to figure out which car would be available for what hiring price based on the requirement such as local or outstation travel, car size as per number of passengers etc.
If required options were not available with a vendor, then he asked for some time to check for options with his contacts to get back. Similarly, to buy a specific apparel or book, we had to travel to specific markets, shopping malls, stores and then based on crowd, choices and cash availability, we used to wait to close the transaction.
Let’s come back to our current lifestyles, taxis as per the requirement can be called through Uber and Ola, shopping as per the choice can be done through Amazon, Flipkart and Paytm.
When these online companies were in the market creation phase, a lot of transition from previous lifestyle to the new life style happened because of discounts and offers, but slowly customers started realizing the convenience coming through these options and started becoming habitual to digital options over brick and mortar options. The key reason behind this convenience is that the digital businesses have changed the economics of distance and distribution and have converted scarcity into abundance by connecting supply and demand.
Closure of Brick and Mortar Businesses
This shift of customer preference towards digital businesses is slowly leading to Consolidation, Closures and Contractions of brick and mortar businesses because of slowdown in traffic. If we take a few popular examples from the US, evolution of digital giants such as Amazon and Netflix has played a major role in extinction of brick and mortar giants such as Borders and Blockbuster.
Become Digital or Partner with Digital Businesses
If businesses are not ‘born digital’, they have to adapt fast to ‘become digital’ else they will gradually die. If businesses are not able to become digital by their own then they are partnering with born digital businesses.
For example, many offline sellers have been collaborating with online marketplaces. But only collaboration would not help. Offline sellers would also need to digitalize their businesses up to an extent. If an order comes from online marketplace and an offline seller has to search for the item for a whole day in his warehouse, then he will not be able to compete with other efficient sellers, selling on the same or similar online marketplaces, and have automated processes and digitized inventory records.
Difference between Digitization and Digitalization
Before moving further, it is important to understand the difference between Digitization and Digitalization. According to Gartner, digitization is the process of changing from analogue to digital form. For example, conversion of audio cassette tape into CDs.
According to Gartner, Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business. For example distribution of music through iTunes.
If businesses are not born digital, then to sustain their existence, they would need to travel the journey of becoming digital. A few of the world’s largest brick and mortar companies such as Starbucks, Walmart, Domino’s pizza etc. have embarked this journey and have seen this positive outcomes.
Many Retailers using Offline Channels and Mobile Apps
Many retailers are reaching out to customers through both offline channels such as stores and online channels such as mobile Apps and websites, and applying analytics on captured data to gain actionable insights about their customers’ behaviour and preferences.
For instance, Walmart is actively using customer data to personalize the shopping experience, offer more relevant offers, coupons, and product recommendations. Domino’s has significantly added to its overall operational efficiency by automating a number of routine tasks.Starbucks’ mobile app coupled with the loyalty program gives it an avenue to up sell, pitch and market to customers.
The journey of becoming digital looks promising, but it is not easy. Businesses are run by people and to change the businesses, people have to change by keeping a few of the below points in mind:
- Adaptation is the Key to Survival: People running established and successful organizations have to realize that their past successes and existing resources would not help them to sustain their growth. They need to have the mind set of making themselves and their organizations adaptable to the digital shift. To emphasize this point, would like to share a saying from Charles Darwin - ‘It is not the biggest, the brightest or the best that will survive, but those who adapt the quickest’.
- Don’t take Your Customer for Granted: Today’s customers have experienced digital technologies and their convenience through usage of Uber, Amazon and Google etc. Customers’ expectations have changed and if companies would just look at their competitors, they might not get the sense of urgency as every player in every industry would not be moving at the same pace in terms of actions, but if companies look at customers, they would realize that customers have already moved ahead in terms of their expectations. To emphasize this point, would like to share a saying from Jeff Bezos - ‘We are not competitor obsessed, we are customer obsessed. We start with the customer and we work backwards’.
- Embrace Technology as a Business Accelerator: Technology wave is invading each and every industry and businesses are running at the intersection of technology capability and business logic. It has become important for leaders and their teams to develop their understanding on how intersection with technology can increase business productivity. To emphasize this point, would like to share a saying from Jack Dorsey - ‘Technology to me does two things: it increases the velocity of communication and increases the number of people who can participate. That’s it. That’s really all technology for our entire history has ever done’.
- Develop Insights Through Prototyping: Prototyping is one of the best ways to learn what is working and what needs to be improved to scale up the business. Prototyping means limited launches, feedback collection from teams and customersand relaunch with more mature product versions. To emphasize this point, would like to share a saying from Jack Welch – ‘An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage’.
- Articulate Your Aspiration: Companies move slowly either when their leaders’ visions are not clear or their teams’ actions are not fast enough to catch up with leaders’ visions. To move fast, leaders have to articulate their aspirations and inspire their teams to put in the necessary efforts. Without clear understanding of vision, teams’ efforts would be fragmented with lack of purpose and direction leading to slow organizational movement. To emphasize this point, would like to share a saying from Reed Hastings - ‘Companies rarely die from moving too fast, and they frequently die from moving too slowly’.
It is important to realize that future is not just the extension of past, it is different. If businesses run the way, they have been running for ages they could die gradually because their competitors would be either ‘born digital’ companies or would have ‘become digital’.
(Views expressed are author's personal and don't necessarily represent any company's opinions.)