Insights on the “Impact of Digitization” – A Clive Angel Blogpost
Digitization of the traditional business landscape provides NEW opportunities for businesses to leverage and at the same time benefit:
To utilise machine learning to create unbiased and non-emotional data points to determine appropriate customer strategy. The result – increased revenues as a result of an upward shift in the demand curve.
To transform from product-centric pipelines into customer-centric and services driven platforms. The result – increased operational margins as focus shifts from supply and costly production to the provision of high margin, instant services tailored to user needs.
To access and leverage the diverse and free expertise of the crowd as opposed to relying on the costly and specialized expertise of employees. The result – access to immediate and inexpensive expertise driven by a wide range of interested users as opposed to technicians with niche knowledge demanding high salaries.
To convert suppliers into customers and customers into suppliers thereby broadening the marketplace for all participants. As a result of network effects and the ease of access promoted the exchange of services and information becomes seamless. The result of a vibrant self-servicing marketplace.
Digitization shifts management’s focus from the product to the customer: Customer-centric platforms will replace product-focused pipelines. The benefits of a platform strategy are shared by all users of the platform and include the following:
Marketplace effects – whereby platform economies aggregate supply and demand
Dynamic pricing – platform economies generate data points resulting in dynamic pricing.
Network effects – platform economies deliver increased liquidity, product innovation, impact pricing strategies
Self regulation – customers and suppliers curate behaviour, service quality, reliability and trustworthiness providing reassurance for all users. Curation is essential to optimize value for all parties.
Increased customer loyalty – platform economies create personalized and tailored experiences while increasing switching costs for customers.
Digitisation creates an “opensource” focus resulting in externally sourced diverse skills and expertise replacing internally focused specialized management teams resulting in the following business transformations:
Centralized management structures are replaced by decentralized user-driven open-source processes.
Limited in-house core competencies are replaced by accessing the vast expertise available from anyone interested in participating to earn income and/or share knowledge.
Management driven decision-making is replaced by having numerous data sets analysed by machine learning to produce an informed and analytical basis for decisions making.
Time-consuming and costly production-driven supply is replaced by real-time demand creating through customer engagement and feedback.
Digitisation impacts the product vs customer relationship in a business strategy:
Product centric businesses are built around the organization of production and assembly lines – critical thinking and order are key drivers
– whereas –
Customer-centric organizations are built around servicing the customer, building sustainable relationships and converting them into revenue. Subscription services with add-ons and upsells are key drivers of a customer-centric business model.
Digitisation impacts management strategy, the business and its users:
Executive management becomes the customer service champions, the customer becomes the centre of business strategy. Management strategy shifts from a product pipeline focus on a user-centric platform-driven marketplace. A platform economy is driven by network effects whereby all users of the platform benefit from each other’s input and feedback. Buyers have the potential to become sellers, sellers are converted to customers. All users have the opportunity to participate in curating platform behaviour and services. This results in user-generated feedback which further improves the quality and relevance of the customer service offering via the platform.
Platform economics positively impacts both customers and suppliers; previous once-off customers are transformed into loyal platform members benefiting from increased platform interaction.
Suppliers of previously once-off service offerings are transformed into ongoing annuity income streams generated via the platform.
Platform owners shift from earning unpredictably once-off revenues into earning reliable annuity income streams.
January 11, 2019