Domino’s is not an internet company. It’s not web2.0, or social. The product serves one of the oldest needs in the book. The business model depends on humans for both creation and delivery. Yet, the company can claim to be a digitally transformed company. Some 60% of Domino’s UK revenues comes from digital platforms. Of which about 20% comes from mobile devices. This is not to say that everything about Domino’s digital experience is perfect. I personally find the mobile app difficult to order from. But the numbers don’t lie, Domino’s have clearly made giant strides here.
You might argue whether just changing the sales/ order process is good enough for being called a digital transformation. This is why the tired cliche of the blind men and elephant is still valid when one tries to define digital transformation. Recently, I was in a room with colleagues trying to create a single phrase for defining digital transformation and very quickly you could see how each of us was struggling with the limitations or connotations of each phrase. Should it include just customer engagement? Or supply chain as well? Does it matter if the transformation doesn’t explicitly lead to better financial performance, in the short term? What magnitude of change actually qualifies as “transformation”? And why does your business need to transform, anyway?
Rather than the semantics of the phrase itself, I find it more instructive to focus on the causes and effects of this transformation.
The world wide web has been around for about 20 years now, so it’s safe to say that the web itself is not the source of transformation, except for Rip Van Winkle companies who may have been asleep for a couple of decades. Domino’s is successful because it’s already made that transition. So what’s the new challenge? I think there are six actually six!
6 Forces of Digital Transformation
The device switch is a first and important one. The PC market declined over 10% year on year in 2013. The mobile phone market grew 6%, while the smart phone market grew over 50%. In Q2, 2013, 76 million PCs were shipped world wide, compared to 432m smart phones and almost double that number of mobile phones, worldwide. Clearly there is a massive shift in the devices people are using, to access information and services. Mobile devices require a different user experience, have a different set of use cases, form factors, operating systems and constraints. This itself requires a significant rethink of how you deliver your digital services.
Even as mobile devices take over from PC’s as the preferred environment, connectivity is changing too. We are now in a world where WiFi is ubiquitous, 3G is also on the verge of being usurped by 4G networks in many parts of the world. The number of internet connected devices surpassed the world’s population in 2010. Fibre to the home is available for millions of clients across the US and UK and Google threatens to reach 8 million households with fibre by 2022. Yet, arguably more important is the availability of the internet outside the house. The mobile internet. As this creates entirely new behaviour patterns.
One such behaviour for example is the “always addressable consumer” (Forrester), which refers to the way in which consumers are always connected and hence reachable, by service providers. But everywhere you look, there are new behaviours, which are becoming mainstream. Checking your bank account on your mobile phone before you shop, checking Facebook first thing in the morning, along with news, checking twitter as a reliable source of breaking news, or comparison shopping using your mobile phone from inside a retail store (otherwise known as showrooming). And it’s increasingly clear that companies have to start equipping themselves for these new behaviours, of customers, employees and all other stakeholders. TruZign tries to take advantage of this by enabling 3 factor authentication for e-commerce transactions using a mobile phone.
One of the biggest changes in the influences of behaviour over the past few years is the role played by social platforms. By providing a ready access to the opinion of crowds, or of our friends and families, we are now making choices in very different ways. I was recently warned off an airline by an overwhelming majority of about 25 responses to a question I posed on Facebook. We are increasingly hearing about how people turn their TV on in response to something they read on a social media platform. People are increasingly exploring platforms like “Kickstarter” rather than a bank loan, to start a business.
Lest we forget, it’s not just people connected to the internet, but machines connecting directly and sharing actionable data, which is happening all around us. Sensors and smart appliances are exponentially increasing the number of connected devices as well as the volume of data. The energy industry is set to be transformed over the next 5 years through a combination of smart grids, smart appliances and the use of sensors through out the supply and consumption chains. Healthcare, too, is likely to look very different over the next decade thanks to the emergence of digital healthcare, and the evolution of streams of medicine such as pharmacogenomics.
All this connectivity, behaviour change and new data is meaningless if it stays as anecdotes, as there are always counter-examples, and individual perceptions about what works or doesn’t. Yet, as our work on Code Halo’s shows, the reason why Blockbuster stumbled while Netflix grows, or why Amazon sprints while Borders stutters, is the ability to make sense of all this new data. Analytics is not new, but the ability to make sense of this deluge of data in a way that is bigger, faster and more meaningful than before is arguably the biggest trigger for digital transformation, as it seeks to reshape how decisions are actually made in your business.
In sum therefore, we have new devices, new connectivity, new behaviours, social influences, machine to machine and internet of things, and finally analytics, as some of the key drivers of digital transformation. They may collectively influence your business in different ways, depending on your industry, business model, legacy challenges, and your vision. There may well be other factors, such as regulatory change and step changes in computing itself, and the whole sale move of computing and data infrastructure to the cloud, which could be additional influences.
Next up: how to deal with digital transformation.