How to use Digital Transformation to create new markets
Can we describe as digital transformation all those projects that include digital technologies? Are we making a transformation if we do not change the consumer experience, the internal processes, the business model?
Car2Go, Uber, Airbnb, didn’t just use technology to make incremental improvements, they revolutionized the business model of their sector. Even companies operating in mature markets must strive to see beyond their business model because only incremental improvement does not guarantee a dominant position over time.
Let me explain with an example of an innovative (and hypothetical) product in a secular sector such as banking.
In the hypercompetitive market, who dares wins
Banks fear competition from Fintech startups. It’s understandable, the new players are more agile because they have no legacy system, they know how to take advantage of digital, their products are designed on users’ needs without the obligation to follow internal stratified processes (if your company is in a different industry you may find similarities).
The new Fintechs, however, don’t have the same solidity as the banks. They have never faced the difficulties of global economic crises, wars and other threats far more significant than usual competition. There is a long history of relationships between banks and its customers, there have been many ups and downs, but the bond is undeniable.
But be careful, if the customer feels the relationship as a barrier to evolution, the bond gets weak.
Think of the professional or small business that uses different products of their bank: current account, loan, advance bills, credit cards. These services generate an enormous amount of data that can be enhanced and transformed by the bank into valuable information for the customer.
I make an analogy with Google. Most of the communications generated by the various services we use, pass-through Gmail. For example, every time we buy a train ticket, Google extrapolates the data to show us the most relevant information: the route, the date, the time, the carriage, the seat number, the reservation code.
This data is automatically shown on the Google calendar. Google Trip app display cards of useful information about the destination. All this with no user interaction.
The current account is like Gmail, but the banks don’t exploit data to offer solutions to unexpressed or unserved customer needs.
Let’s go back to the professional and the small business. Let us assume that a research says that some users prefer to use spreadsheets instead of accounting software because they perceive it as too complicated for their needs.
It would be an opportunity to rethink the current account and turn it into an end-to-end solution that simplifies the financial management of a small business.
Create and send invoices, have a dashboard to check who paid and who is late, know the economic importance of customers and suppliers. These and other functions could be automated while others would require user intervention, but every interaction would be carried out in a single environment designed to simplify the workday.
The current account would compete with spreadsheets. It is the theory of Jobs to be Done.
What is the direction?
Digital Transformation unlocks a world of opportunities. Without a compass, there is a danger of wasting time and resources in attempts that come from assumptions (e.g., market research) or habits (e.g., follow the competitors).
Statistics about the launch of new products tell us a sad story:
- more than 50% of new products disappoint planned expectations
- only one new product in 100 covers development costs
- only one new product in 300 has a significant impact on customers’ purchasing behavior, on its category or on the company’s growth.
[Frost & Sullivan, 2013]
This is because innovative strategies are primarily guided by these four principles:
- product attributes (it has 25 functions more than competitors)
- customer characteristics (40-year-old professional, father and extreme sports enthusiast)
- trends (augmented reality is the future)
- competitive answer (others do this, we must do it too)
On the other hand, if we observe and analyze the user’s needs set, we can identify which of these are essential for them to but neglected by the current offer, distinguishing them from those irrelevant but excessively served by indistinct competition.
Is innovation risky?
Yes, but it is much riskier to give up.
Can we reduce risks?
Yes, if the user is at the center of all the product life phases:
- Strategy
- Realization (design, development, launch)
- Continuous optimization
The Digital Transformation achieve its full potential if it is inspired by the awareness of how customers measure the value of a service or a product. Jobs-To-Be-Done, Design Thinking and Service Design are some of the frameworks that help companies to lead innovation processes centered on consumers.
Let’s take advantage of this.
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