Digitization is the one megatrend for virtually every business these days. Entire markets are turned upside down or even simply swept away, entry barriers are torn down, and previous rules of doing business are shaking. Digitization is a Tsunami washing away those who will not be willing to embrace change and to play a new game
Top managers are more and more aware of this new threat. Many initiatives have been started on Business Model Innovation. Reinvent the business, create breakthrough innovation, disrupt the own foundations of previous success, get out of the box – you can hear this from almost everywhere and everyone.
Thanks to business model enthusiasts and conceptual visionaries like Yves Pigneur and Alex Osterwalder, a whole new taxonomy and grammar of strategic thinking has been put in place. This new school based on design thinking and collaboration is exactly the toolbox we need, in order to really think differently and come up with really new stuff.
Working in Business Model Innovation initiatives and projects, we constantly come to the point where digitization is the one pressing issue. How can we identify the impact and opportunities digitization has for our business model?
By taking a closer look we have identified key areas of disruption from digitization. There are four of them – maybe more. Let’s look at those four:
The most common one would certainly be the “Process Disruption”. We see many processes undergoing a dramatic change and transformation. Take for example retailer processes. Enabled through digital technologies and the service offers currently developing around mobile payment, big players such as Amazon, Starbucks or Tesco are set to revamp the way consumers purchase and pay and how companies organize these processes internally. Or look at the current developments around 3D-Printing – based on digital models products can be produced upon demand and specific request as well as at decentralized locations. A firm such as MakerBot strongly believes that these developments will dramatically change the way we purchase, produce, and create products. In a similar vein, digital visualization techniques may change apparel purchasing processes as they allow for consumers to flip through a large array of products, try them on digitally and put their images on any social network to briefly check their friends opinion – Macy’s, the US warehouse chain, is today already probing such approaches.
Also, we often see what we call “Convenience Disruption”. We understand that new ways of brining value to the customer by rethinking convenience aspects of offerings is a fundamental trend. For instance, mobility is about to be redefined by concepts such as Car2Go by Mercedes or MyTaxi. The convenience both offers provide in purchasing individual mobility is so persuading that every other alternative for urban transportation services becomes inferior. This is truly a convenience disruption.
Our observation leads us further to what we call “Collaboration Disruption”. Looking at the most innovative companies on earth, we see that these rely on entirely new, open and collaborative ways of reinventing their products and services. Lego, the toy maker, for instance, developed a new robot kit “Mindstorm” based almost entirely on the input and creative power of external users. These new possibilities of digitally facilitated collaboration become so powerful that no company can ignore this trend.
Perhaps most interesting is the “Intelligence Disruption”. Companies like McKesson – a US pharmacy wholesale and service company – are redefining their business with a whole new approach using data to generate outstanding value for their customers. Or look at WalMart, the gigantic US retailer. In their WalMart Labs they created several customer facing services which utilize the vast amounts of data WalMart collects every day, such as a Facebook-integrated purchase suggestion and operation APP.
Every company has access to huge data today. Transforming raw and massive amounts of data into intelligence based customer value creation potential can be a game changing strategy.
Our small framework of Digitization admittedly may not cover all the angles of impact digitization has on businesses, yet it touches upon the most dominant ones we observe in our daily work with clients. The framework provides the opportunity to comprehensively analyze the impact digitization has on business and lays the foundation for the creation of your own respective strategic options. Every new business model in development or under construction should have an answer to digitization at least in one of the described categories.