Why Digital Transformation

Where were you in 1997? What business employed you and what were your priorities? How many of you were working on something related to the “internet” — and — if your were, was it for a startup or were you helping your business move into the digital age?

Twenty years ago, I joined a startup you probably never heard of with a business plan that today you would think is crazy. But back then, ~40% of a newspaper’s revenue came from classified ads and in the first half of 1997, classified ads contributed $7.6 billion to the industry’s revenue. Our mission was to help newspapers become digital starting with their classified ad business. We did this by taking in a feed of their classified ads, making the ads searchable, and then developing websites with the newspaper’s “look and feel”. Our technology enabled readers to find cars, jobs, homes, apartments, used stuff, legal announcements, and pretty much anything that would fit into a newspaper’s classified ad format.

We were ahead of the time. We were SaaS when back then it was called an “ASP”. We had a custom parser to filter ads that came from a newspaper’s pagination systems that filtered out all the custom markups used to format newspaper ads in print. We has the ability to skin a website before there was CSS. We had AI — a natural language processing engine tailored for classifieds to identify everything from the number of bedrooms in a real estate ad, to the make, model, mileage, and price of a car, to the job title and skills for the employment listing. Our search engine used faceted search to enable readers to drill down to the ads of interest before there commercial search engines had this capability.

Did we see EBay, Cars.com, Monster.com, HotJobs, Craiglist and many other sites that preceded them as competitors? You bet we did and so did our customers and investors. We were only starting to understand the Innovator’s Dilemma which published in 1997 and the term “digital disruption” didn’t become popular until about five years ago.

In fact, for the next few years newspaper ad revenue grew as the internet’s boom (bubble) economy drove up the demand to hire, relocate, and spend. But when the bubble burst in 2001, so did the newspaper’s effective monopoly on local ads, their high price points, and over the next decade many of their readers and advertisers. Disruption came from the early category entrants, but the lasting damage came later on when Google and later Facebook took over the ad space.

Digital Disruption Beyond Media

I’ve done several talks on Digital Transformation. Four or five years ago, most executives wrongly assumed that digital disruption was largely confined to media where bits and bytes were replacing paper, CDs and other media formats. Digital disruption occurred in media earlier than other industries because of how easy it was to transition the user experience to digital, the relatively low entry barriers for new businesses to disrupt parts of the media supply chain, and the relative instabilities in the business model of charging readers for subscriptions and advertisers to reach broad audiences. Media businesses didn’t move smarter and faster enough to cannibalize their legacy businesses, rebuild their customer experiences, and adapt to digital businesses.

These are no longer barriers in other industries. Digital transformation became a popularized term for comparing AirBNB to hotels and Uber to taxis. Digital disruption is happening across all sectors especially in banking, healthcare, education, government, and retail and also occurring in industries with less direct impact on end users such as manufacturing, construction, and logistics.

Why We Need Businesses to Transform

Do you work for a business with a long history of serving customers with integrity? A news outlet that’s committed to high quality journalism? A hotel chain that’s delivered great customer service to loyal customers for decades? An auto manufacturer that’s delivered new styles to three generations of drivers? The only hospital within miles of rural working class families that’s striving to cure patients safely while keeping their costs down. A construction company that’s been in the family for decades but now must work with 4D BIM models instead of architectural drawings on paper.

Startups can challenge these businesses and some will disrupt them, but many long standing businesses can’t easily be replaced. These businesses have to modernize their customer experiences, leverage automation to improve quality and lower costs, and experiment with new business models. To accomplish this, these companies have to learn and borrow techniques developed at software companies; agile practices to develop applications, cloud infrastructure with DevOps automation practices, citizen data science programs to enable a data-driven organization, portfolio management practices to help shift spending from legacy systems to innovation, sales and marketing automation to compete for new customers, and product management disciplines to research their market and deliver amazing customer experiences.

These businesses, led by their Chief Information Officers, Chief Digital Officers, CMOs, and CEOs need to be Driving Digital.

Isaac Sacolick (@NYIke) is the author of Driving Digital: The Leader’s Guide to Business Transformation Through Technology, which covers many practices such as agile, devops, and data science that are all critical to successful digital transformation programs. Isaac is a recognized top social CIO, a long time blogger at Social, Agile and Transformation and CIO.com, and is now president of StarCIO.

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