‘Digital’ is one of those trendy terms that seems to mean different things to different people depending on the point being made or the corner being fought.
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But its usage also seems to depend on which function you work for. Marketing, for example, tends to apply it to how customers engage with the brand, and the proposition that brand offers to its customers via online channels.
IT, on the other hand, generally uses digital to refer to technology and platforms such as cloud, mobile and big data, which tend to be linked to the internet in various ways and give users access to new products and services.
But what is common to all these definitions is that digital provides more ways for people and businesses to connect and be connected than ever before. This situation has led consumers to become much more vocal and demanding about what they want, giving them more control over their own customer experience.
A third characteristic of digital relates to market disruption. Organisations such as Uber and Airbnb, for instance, have become poster children for the digital age after undercutting incumbents in the taxi and hotel industries, respectively, shaking up these markets in the process.
Meanwhile, as to where the average UK company is in terms of embracing digital transformation, it appears there is still quite a lot of work to be done. According to management consultancy PA Consulting’s Digital Barometer, which looks at how organisations are adapting to the digital age, 78% of the 400 firms questioned classed themselves as somewhere between “digital dabblers” and “digitising today”.
Of that group, 62% were keen to find ways to create new products, services and even business models using digital means. On the downside, though, only 18% said they understood what going down this route would mean for their organisation and less than 30% felt they had the right approach internally to succeed. Legacy technology and a lack of appropriate skills were also seen as a drag on change.
Leap in awareness
But PA Consulting’s Kevin O’Shaughnessy says that over the past 12 to 18 months, he has seen a leap in awareness of the issues, especially at senior levels, and industries such as retail, travel and retail banking were now “moving quite fast”.
“For incumbents, the drivers are defending their customer base, cutting costs and making themselves appear more relevant and modern,” says O’Shaughnessy. “New firms, on the other hand, are trying to steal market share and scale up to become bigger. So there is a polarisation there.”
While the low capital investment required to employ online technologies and cloud services is making it easier for startups to make money out of their new ideas, more established firms are finding that they need to experiment to get it right.
William Fellows, research vice-president at analyst firm 451 Research, says: “The biggest challenge for many companies is cultural – organisational resistance, conventional budgeting and the like. There is also the issue of where you put your money down and which digital initiative is the best use of your resources.”
A key consideration, whether the company culture supports it or not, is how to introduce change quickly rather than risk being left behind. As a result, an increasingly common approach is to set up joint ventures with third parties, create internal incubator/accelerator models to support new ideas, or even just set up a skunkworks project, says Fellows.
“It’s not really a technology problem,” he says. “There’s lots of technology out there already. It’s really more about how you use and implement it in order to take advantage of new opportunities.”