Winning in the Digital Economy

Winning in the Digital Economy

     
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About the Commentator
  • Dominic Field
    Dominic Field is a partner and managing director in the London office of The Boston Consulting Group. He is a global leader within the Marketing, Sales & Pricing practice and the global coleader of the marketing topic.
 

Winning in the Digital Economy

Marketing & Sales, Media & Entertainment
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  • Your company has a Facebook page. Your sales team is experimenting with mobile commerce, and your marketing team is working on some really cool apps. You own a smartphone and (mostly) know how to use it. You must be on your way to winning in the digital economy, right?

    Well, not quite. As long as those digital efforts remain tactical and fragmented, your company is most likely missing out on the full potential of today’s opportunities. There is a better way to tackle the digital opportunity, but it requires leadership from the top and participation by every business function. The trick is to go beyond just adopting the latest technology trends. Instead, capitalize on the full potential of those trends to transform your business model—and your bottom line.

    A Changed Relationship

    Over a billion Internet users have gone mobile. The explosion of social media such as Facebook and Twitter is transforming how we connect. Information is instantly broadcast around the world—dramatically altering the fortunes of companies and even governments. Entire industries are being upended: in the U.S., e-books are outselling conventional books online, and in South Korea, commuters can shop for groceries by taking photos with their smartphones of products shown on posters in the subway.

    All this adds up to a fundamental change in the relationship between companies and their customers. Technologies and devices such as cloud computing, social networking, smartphones, and RFID and bar-code readers are creating an information “arms race.” Customers are more empowered and influential than ever before: they can compare prices and quality, voice their opinions, generate Web content, and weigh in on new product ideas and ad campaigns. But these changes also present companies with new opportunities. With access to more detailed, real-time information on potential buyers—and better ways to reach them— businesses can improve on everything from innovation to customer service to marketing.

    The key is to cut through the hype. Many companies make the mistake of blindly jumping on the latest hot trend instead of creating a true digital strategy. As a result, they end up with vast amounts of marketing data or thousands of Facebook followers—and no idea of what to do with them.

    Guidelines for Success

    What does it take to succeed in this new digital world? For starters, it’s important to recognize that the new technologies have implications for all aspects of your business—strategy, IT, sales and marketing, product development, operations, and organizational structure and capabilities. This means that people at all levels of the business must begin to think differently and work together in new ways. Based on our experience in a wide range of industries, we’ve identified six success factors that can help move your company forward:

    • Make digital transformation a senior-level priority. Given its broad scope and strategic importance, digital transformation must be driven from the top. The CEO of Procter & Gamble has stated publicly that his goal is for P&G to be “the most technology-enabled company in the world.” And leaders’ actions must support their words. Activities on the digital front must be part of the executive agenda, not just assigned to younger members of the staff. What’s more, the executive team must show its commitment by allocating resources and monitoring results.

    • Rethink your business model. When was the last time you bought a record album? The business landscape is littered with industries and business models that didn’t adapt to changing times. To avoid this fate, explore how to leverage new technologies for a competitive advantage, develop a deep understanding of how your customers are using new digital channels, set up regular brainstorming sessions, and look beyond your own industry for inspiration. Take a page from Barnes & Noble. As other bookstores flirt with extinction, the company has made a long-term investment in its website and e-commerce strategy. Its Nook e-reader successfully competes against the Kindle and the iPad, and has captured 22 percent of the U.S. market and 27 percent of e-book sales.

    • Listen, look, and learn. Take stock of your digital-information sources and ensure that they are connected, so that you can listen carefully to customers, suppliers, distributors, competitors, and employees. Monitor customer complaints and desires, searching for unmet needs and for patterns and anomalies that might trigger new insights. Sports-drink maker Gatorade set up a war room with dedicated staff to monitor and respond to blogs, Twitter feeds, and Facebook posts.

    • Think big, but start small. Small doesn’t mean lacking strategic ambition, it simply means manageable in scope. Smaller efforts are more sharply focused and quickly executed. Commit to experimenting, rigorously analyze successes and failures, and apply the lessons learned. It may take multiple tries before your company gets it right, so celebrate small wins and encourage risk taking and noble failures. Success at smaller projects also builds momentum and positive energy.

    • Transform the whole, not individual silos. Companies that try to tackle digital transformation only in functional silos will never capture the full scope of the opportunity. It’s not enough for the marketing department to increase spending on social media, for the IT team to upgrade the analytics software, or for the sales force to start using tablets in the field. Instead, companies need to understand the ripple effects of digital across the organization, and create overlays and processes to ensure end-to-end coordination.

    • Keep your eye on the horizon. Game-changing transformations don’t happen overnight, so a having a multiyear time horizon is critical. Set clearly defined long-term goals and budgets, and track actions against plans. Identify and develop any new skills and changes in organizational structure or culture that your company needs in order to succeed.

    The digital world is fundamentally affecting the relationships between companies and their customers, providing both sides with the information needed to make smarter and more rapid decisions. It’s a complex and sometimes uncertain equation. Only with the right strategic approach and a “no hype” attitude can companies make the right decisions to win in the digital economy.

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