Examples of 5 domains of Digital Transformation:

Customers, Competition, Data, Innovation and Value

Follow below some examples of Digital transformation (DT) based on the concepts of 5 domains defined by the book of David L. Rogers – The Digital Transformation Playbook ((April 5, 2016; Columbia Business School Publishing).

This author suggested that it is not about updating your technology however rethink their underlying assumptions in five domains of strategy: Customers, Competition, Innovation, Value and Data, then it will be possible to update your strategic thinking:

1) Customers – Exploit customer networks

After the mass production (one product to serve as many customers as possible) and mass communication (consistent message and medium to reach and persuade as many customers as possible at same time) called mass market, in the digital age, it is changed to customer network. In this model, customers are dynamically connected and influencing others, shaping business reputations and brands, then their use of digital tools is impacting how they discover, evaluate, purchase, and use products and how they share, interact and stay connected with brands.    Based on these changes, it is necessary to rethink the traditional marketing funnel and reexamine the customers´ path to purchase, close of all steps including social networks, search engines, mobile or laptop screens, to walking into a store, to asking for customer service in a live online chat.

The example that I want to share is a digital bank in Latin America that prepared all process of their customer path to be electronic without traditional contact with persons, so they prepared the mobile app to receive a self-photo of the customer, a copy of the document ID and all the communication about the process to be a customer. Everything was good until I had a problem with my PIN (Personal Identification Number) of the debit card, I needed to call to a traditional “no digital” process and had a huge difficult to receive a new PIN, anyway at the end of the day, I am satisfied with my customer experience and see the evolution in the happy path with few opportunities in the exception path.

2) Competition – Build platforms, not just products

The second domain of digital transformation is how businesses compete and cooperate with other firms, and based on the tradition, these concepts were seen as binary opposites, compete with rival business and cooperate with supply chain partners, generating the Digital “disintermediation”, when the longtime business partner may become our biggest competitor after serving our customers directly. Nowadays, we see a World of fluid industry boundaries, including asymmetric competitors, companies from outside of an industry that look nothing with it however offering value to these customers, as well as cooperation with a direct rival due to interdependent business model or mutual challenges from outside this industry.

About this domain, I want to comment about two strong movements in Latin America, the first is about the creation of marketplaces of bigger retails to offer the products of different companies in virtual shops creating the opportunity of these sellers to connect with a huge market of customers. Then the challenge is to maintain the quality expected by these users considering the retail brand, that in many cases it is still not a reality at moment. The second is about the food delivery movements in the World with hard impact in the many LATAM cities (not only in the capitals cities of each country), they generated a local competition between the mobile apps, as well as between the restaurants of same platform. However for the restaurants created an easy way to stay in contact with a different public that maybe it was impossible with the traditional marketing and media vehicles, even knowing that the competition is just a click away.

3) Data – Turn data into assets

This domain is about how businesses produce, manage and utilize information. Traditionally data was produced in a variety of business’ own process – manufacturing, operations, sales and marketing with this resulting data used mainly for evaluating, forecasting and decision making. Nowadays, we are faced with a data flood, with many different sources, including every conversation, interaction, or process inside or outside these businesses, generated by a river of unstructured data from social media, mobile devices and sensors on every object in a company’s supply chain. These “big data” permits new kind of predictions, discover unexpected patterns in business activity, and unlock new sources of value. Based on this, data is a vital part of how business does this operation process, differentiates itself and creates new value in the market.

There are many examples of companies in Mexico, Colombia and Brazil that improve their businesses with smart use of the data with success cases in Customer experience, Fraud prevention and Security Analytics. Then I want to comment the case of one of Top 5 insurance company of Brazil who implemented an analytic solution to confirm that the payments and indemnities are precise, valid and conformity avoiding fraud, waste and abuse. After only a year in deployment of this initiative, the company was realizing almost USD US$0.3 million (BRA R$1.2 million) in savings per month.

4) Innovation – Innovate by rapid experimentation

The innovation process, when new ideas are developed, tested, and brought to the market by businesses, it was traditionally managed with a singular focus on the finished product, based on the analysis and intuition of managers, considering the expectation to avoid the high cost of failure. Nowadays, the start-ups have shown that digital technologies can offer very different approach to innovation, one based on continuous learning through rapid experimentation, and then it is easier and faster to test ideas and receive market feedback since the beginning of the innovation process. This new approach of innovation is focused on careful experiments and on minimum viable prototypes that maximize learning while minimizing costs. Assumptions are validated with real customers and products are developed iteratively though a process that saves time reduces the cost of failures, and improve organization learning.

A great example of it is the five-days process named The Design Sprint, famous by the use of the Google Ventures’ “internal entrepreneurs” with the focus to answer critical business questions though design, prototyping and testing ideas with customers. They suggest that on Monday, you will map out the problem and define the important place to focus. On Tuesday, you will sketch competing solution on paper. On Wednesday, you will make difficult decisions and organize your ideas into a testable hypothesis. On Thursday, you will hammer out a high-fidelity prototype. And, on Friday, you will test it with real customers. One week to deliver something that can be reviewed and rebuild in the next weeks in a continuous improvement, following the Voltaire proverb that “The best (perfect) is the enemy of the good”.

5) Value – Adapt your value proposition

The way that customers perceive a brand defines the value proposition of the companies. Traditionally, a firm’s value proposition was seen as fairly constant, because the products may be updated, operation process improved, marketing campaigns refreshed but the basic value offered by a business was assumed to be constant and defined by its industry. The successful business includes a clear value proposition, finding a point of market differentiation and focused on executing and delivering the best version of the same value proposition to its customers month after month. Nowadays, the only sure response in a business environment is the path of constant evolution, on way to extend and improve the value proposition to its customers. On this way, adapting is the best response when change becomes a matter of life or death, businesses need to focus on enjoy emerging opportunities, staying ahead of the curve of change.

The example about evolution of the value proposition is Amazon that started offering only books in 1994, after with the expertise and digital sell process by e-commerce included many other products of many different departments, about 2006, offered IT environment by Cloud computing for other companies, in 2015, after discovered the need of generating own logistic company to offer their services to other, after named Amazon Air and Amazon Prime Air. Finally, the interesting about this company, it is the name Amazon considered a place “exotic and different” by the founder Jeff Bezos, as well as start with A, probably a top in alphabetized list. Furthermore, he was inspired by the biggest river of the World, the Amazon River, considering that he expected to make his store the biggest bookstore in the World. So for us in Latin America it is a reason to be proud considering that this river connects Brazil, Colombia y Peru.

 

In conclusion, it is clear that the 5 domains of Digital Transformation can help the companies, entrepreneurs and professionals to rethink their traditional environments with focus on the adaptation with the new demand of the Digital World.

And what examples of Digital Transformation do you have?

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