Have you ever thought about the consequences of a digital storefront for your logistics and back-end processing?
Did you know that, driven by the “segment of one,” customers observe a permanently increasing number of interactions while the value per interaction is decreasing?
Did you know that the lot sizes inside logistics execution behave similarly, with an increasing number of lots while the value and items per lot are decreasing?
This has severe consequences for core enterprise systems.
The business models of the future
Digital transformation is everywhere. The new consumer is empowered and expects personalized, intelligent products and services. Companies need to interact with these consumers in real-time, based on a 360-degree view, to satisfy them and meet their needs. The segment of one is the key theme. Competitive and regulatory pressure can serve as catalysts for operational excellence. This requires next-generation processes, which are highly automated and adaptive to support decision making in real-time.
Globalization is accelerated by evolving networks that increase the global reach of not only people, but companies as well. These business networks deliver scalable capacity, enable a “pay as you go” model, and are secure – driving more business with less effort. Furthermore, the use of digital technologies leads to improved science and technology progress, which enables rapid innovation. Fast adaptation of business strategies and fast innovation are key these days. Therefore, highly skilled people in cross-functional and cross-organizational teams are required and have to be driven by strong vision and leadership.
More than ever, it is of utmost importance to react to this state of the art accordingly and get prepared for the digital transformation.
Driven by the combination of ever-growing digitization and evolving consumer demands, digital transformation is the use of new technologies (cloud, mobile, data, and networks) to drive significant business improvements. This includes capitalizing on new opportunities as well as effectively transforming existing business.
The different approaches toward digital technology
Business is outcome-driven, not technology-driven. Depending on the line of business, executives have different views and priorities. Technology can be the catalytic enabler, though, if leveraged the right way. Here are some of the key recipes we have found in our co-innovation work:
1. Create value from data
The goal is to transform your business model based on data. Not only structured and internal data, but unstructured data that comes from outside the businesses, e.g., social networks and sensors. The potential for the Internet of Things has just begun. Based on the acquired data, not only can decision-making be improved but also new products or existing products can be enhanced digitally — creating a service-oriented approach.
2. Improve customer experience
To satisfy technology-enabled customers in these days, you need to listen and engage and deliver a relentless customer experience regardless of the channel. Consumers search for services that ease up their life significantly.
3. Digitize your core business
Establish faster, simpler and further automated processes to respond quickly to market changes and evolving customer behavior. Seamless integration across the entire value chain of your business is prerequisite to get real-time access to relevant information and to predict future actions.
4. Build a digital ecosystem
A strong ecosystem is the concrete base in an interconnected, networked world. Business networks offer the chance to communicate with suppliers and customers in a simple way, with automated transactions, enabling them to consume digital services.
5. Enhance digital capabilities
This approach starts with building up an agile platform allowing continuous delivery at scale. In a big data world, analytical capabilities play a critical role.
These are some of the key tasks that every enterprise needs to look at if they want to adapt to the digital economy. The most important one, though, is the digitalization of the core — and there are plenty of opportunities. Let me give you an example to illustrate this in more detail:
A digital store for a product was a typical prerequisite for fast market entry, because it delivered a digital buying experience, potentially extended with mobile commerce, easy navigation and ordering, as well as in-store payment. This describes the forefront, the engagement capabilities of the shop.
But what about the back end? There we are facing a number of limitations. Only weekly or in best case daily planning is possible, mainly due to batch fulfillment. This ends up in low flexibility for order changes and responses to unplanned downtime.
With end-to-end digitization, marketing in real time is possible, based on the “segment of one” approach, where customers get engaged on individual activities on all channels: Individualized advertisements or discounts, product configuration and recommendations, flexibility in changed demand, and much more.
The impact on the back end is even higher, thanks to one single lot size, a reality for many businesses already. Mass customization needs to be supported by real-time activities like fulfillment monitoring, processing of customer change process, responses to changed parts or configuration, and many more.
Remapping the way you run business is essential to get away from a stage of opportunistic adoption of digital technologies to a transformation of core business models. This will have an impact on competitiveness in the market and not only on TCO.
6. Opportunistic adoption or core transformation: It’s your choice
To meet these goals, a flexible core solution needs to offer breakthrough features for innovation.
7. Opportunistic adoption of digital technologies
At this stage, it’s about not going out of business. You normally do the first steps into digitizing the business. Both the impact on the business outcome and the level of transformation are low. It most often only touches the area of Total Cost of Ownership.
8. Systematic leverage of digital performance improvement
Here, the impact increases in both directions. Higher automation is achieved and processes are improved and matured.
9. Leverage digital to develop new competitive advantage
At this level, entire business processes can be changed end-to-end. This can change the entire strategy of the business, as optimized products and completely new products and processes support rapid time-to-market and scale.
10. Transformation of core business model
Here, we are at the highest level of transformation. The impact on the level of transformation as well as the business outcome is high. New business models can be created and thus new customers can be gained and new markets accessed.
But it depends on a company and the setup for digital transformation, especially on how far and how much it wants to transform.
Digitize your business, or get disrupted. Whatever your strategy is, you need to transform your core to deliver on your promise and the market expectations. Remapping and digitizing your business toward higher level of transformation requires energy, resources, and budget — but it will increase your company’s competitiveness and help prepare for future requirements.
Where are you on your digital journey? Share your experience and thoughts with us. We are interested in learning more.
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Want more insight on the digital transformation? See First Thoughts on the Future of Business – Business Networks.