In my first of two posts on this topic, I highlighted examples of how digital transformation can occur in simple and economical ways. Some consumer products (CP) companies are using minor investments and new technologies to differentiate themselves from the competition, and others are using new business processes to disturb the status quo.
Now, let’s take a look at some companies that are using digital transformation in more comprehensive ways to either displace competitors or disrupt the marketplace.
Displace: create new opportunities
A number of CP companies are using digital transformation to redefine both themselves and the categories in which they compete.
Under Armour is a great example. With the era of wearable technology approaching, the company made strategic investments in fitness-tracking technologies. In doing so, Under Armour transformed itself from an apparel and footwear company into a health and wellness company.
Today, consumers can combine Under Armour connected footwear and apparel with the company’s connected health tools and mobile apps to get detailed insights into their daily activity. They can track everything from their exercise intensity and step count during the day to their sleep at night, allowing them to improve not only their exercise routines but also how they feel.
This has given Under Armour a deeper purpose in consumers’ lives, from helping them perform better to helping them live better. What’s more, the company’s new Connected Fitness business – with nearly 190 million registered users and growing – is giving Under Armour entirely new opportunities to create partnerships and revenue opportunities that would not be possible through their traditional apparel business.
Nest is another example. Entering the market in the thermostat category, the company very quickly and radically changed the very definition of the category itself. Nest, which is owned by Google, changed consumers’ perceptions of what constitutes a thermostat, first by providing an Internet-connected appliance and then transforming the thermostat into a home-automation device via the Works With Nest program, which allows consumers to wirelessly connect the thermostat to other smart devices.
Now, consumers can do far more with a Nest thermostat than manage their home’s temperature. They can connect it to a smart outlet to automatically turn on lights, fans, or home audio systems when they come home. They can connect it to a smart oven to be notified if the oven is on when nobody’s home. Or they can connect it to their fitness-tracking wristband to wake up each day to the perfect temperature.
With these and many other capabilities, Nest has transformed itself from a thermostat company to a home-automation company. This has not only helped separate Nest from other thermostat manufacturers, but created an entirely new category in which the product can be sold. Furthermore, Google’s introduction of the Google Home only strengthens Nest’s appeal because of the devices’ mutual interoperability benefits.
Disrupt: change the game
CP companies can also use digital transformation to create an entirely new approach to doing business and forever change what competition looks like in their industry.
While this may not have happened yet in the CP industry, we have seen it in some adjacent spaces. iTunes, for example, capitalized on the rise of digital music to fundamentally change how consumers find, purchase, and enjoy music. And its impact reverberated across the music industry, changing everything from how music is made, marketed, and distributed, to how artists are compensated.
Netflix offers a similar story. Early on, the company used the Internet to connect with consumers and offer a subscription-based model for more convenient movie renting. This innovative approach helped Netflix compete with established brick-and-mortar rental chains. Then, as technology and bandwidth improved, Netflix leveraged its technical infrastructure, licensing rights, and consumer relationships to move to a streaming service. This changed how consumers watch movies and left traditional competitors behind.
As for what disruption might look like in the CP industry, we can only theorize some potential routes it might take. Perhaps we’ll see the sharing economy extend from cars and homes down to products. Or maybe an emerging technology, like 3D printing, will completely change how companies deliver products to consumers, or how consumers purchase and consume.
What are your thoughts? What do you think the future holds for the CP industry? Is there a CP category that you think is ripe for disruption? Feel free to share your thoughts and ideas in the comments section below.
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