Significance of Digital Transformation For Traditional Business
In this ever connected digital age, the playbook for doing business has radically changed for traditional businesses. There is a growing number of digital companies who are reshaping the customer interactions, disrupting the business model and continuously improving the efficiency of the operations. These companies use technologies such as cloud, mobile, social medial, IOT and data analytics to evolve and scale at unthinkable speed. Consequently, such companies are posing threat to traditional business who are still used to brick and mortar pace and model of working of the pre digital era. So in order to protect their core business traditional businesses are forced to consider the journey of digital transformation.
Embracing the journey of digital transformation may seem an unnecessary and costly commitment. Many may even feel that lack of familiarity with technology or current IT systems as a reason for not moving forward with being digital. Some may even be confident of their traditional tried and tested method and may not be comfortable with experimenting new paths to a customer or new paths to make revenue. But there is enough data and evidence to suggest that going digital is no more an option but a necessity. Let’s understand why this is so. We will evaluate some of the risks that a traditional business runs into if they don’t take the digital transformation path.
Changing Consumer Behaviour
In the digital era consumer behaviour has undergone a significant change. Today most consumers search about brands and products online; compare features and prices and have access to diverse channels of purchase. Also today there is a new breed of influencers, who are non-celebrities and ordinary people, with large follower base in You Tube, who constantly influence decision of consumers. Moreover, consumers are increasingly becoming aware of new product launches or services through viral and trending subjects. In such a scenario, companies not having a digital presence, would lose their relevance and would find it challenging to compete with modern digital marketers.
Emergence of Digital Based Channels
The new age digital companies are constantly disrupting the way in which products and services are delivered to consumers, value is created for the consumers, and pricing strategies are formulated. All of these make customers follow different consumption pattern through digital intermediaries. For example, consumers are increasingly buying from food delivery services companies rather than walking directly into a restaurant. Similarly, consumers are increasingly purchasing movie tickets from a ticketing platform rather than from the ticket counters. In such scenarios, it is imperative for traditional businesses to keep up by adopting digital capabilities. Such capabilities allow businesses to explore new offerings, combine their physical offerings with digital, and experiment with multiple revenue models.
Central Role of Data and Analytics
The customers of today have access to multiple channels and brands at the tip of their button. So the loyalty of customers is much lesser than what it used to be in the past. The onus on business is even more to retain customer and promote loyalty. Businesses are required to identify emerging trends and opportunities to better respond to the customer needs. They should also have good visibility in customer issues and challenges. Moreover, they should be able to recognise patterns of engagement from multiple channels. In order for all this, data is central. Consumer data helps companies curate content, engage on the right forums and platforms, iterate on what is working and what is not working. Data is very valuable in shaping the knowledge of a company about its consumer. Without a digital approach, companies would miss on capitalising consumer data and struggle to make the right business strategies.
Advent of Millennials
A large part of the workforce today are millennials and soon to join are Gen Z. These generations are digital natives who grew up in a digital world where technological innovations are table stakes rather than novel concepts. These generations, would prefer to work for companies that embrace digital workflows. So if a business is not committed to digital progress then it becomes very difficult to attract and retain top talent especially the fresh blood.
Also, a large part of the current and future consumer base are going to be these digital natives. They are ever connected and relate to the world mostly through their smart phones. They hang out with their friends in social media and learn mostly from you tube. So they expect to engage with brands online. If a business doesn’t have online presence then it will alienate these customers.
Digital is Pivotal to Market Share and Business Growth
In an era when most competitors(existing as well as new) use the digital technology to innovate and build their market, not having a digital presence means losing out on the opportunity to expand and scale. In many cases such innovations paves the way for new business and revenue model and can lead to rapid erosion of market share of a business, if they cannot adapt to these business model quickly.
Also in the new digital landscape, it is extremely difficult to grow business, without digital presence, as traditional customer acquisition channels are expensive and not very efficient. Digital disruptors often prefer a cheaper and effective digital medium and social selling opportunities to build and grow their customer base .
Moreover businesses who don’t embrace a digital culture find it extremely difficult to get insights and feedback about their products and policies and update them frequently. They also struggle to identify the bottlenecks in the operations and optimise the productivity of their workforce. Thus they tend to have more flab compared to their digital counterparts who often build leaner organization to grow their business.