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December 16, 2013
Why is digital changing business?
By: Mark McDonald

Digital refers to a set of technologies changing people, customers, industries, companies, products and services. Digital technologies include mobile computing, social media, business analytics, big data, cloud, sensor networks and the like. These technologies have been coming ‘online’ over the past five years and are reaching a critical mass that is changing business.

Digital changes business because it makes customer and business resources information intensive and connected. Digital technology applied to people, equipment, information etc., creates opportunities that were either impossible or uneconomical in the pre-digital world. The result is a wave of changes that increasingly face executives and corporate leaders.

Digital creates new business logic by changing customers. Customers change business priorities and values from inside-out to outside-in. New ways of thinking evolve the business and technology relationship and new demands for future success. That is why digital is changing business.

Digital is changing customers at the start

Digital technologies are customer oriented technologies. Prior technology was process oriented and transaction focused. Digital technology builds on top of transactions to concentrate on information and relationships. This is a fundamental reason why digital changes business. This change is often overlooked because it disrupts everything, but the logic is simple. Technologies that change customers revolutionize business.

Digital customers are different. According to our own and other research studies, digital customers are better informed, more demanding, more discriminating and more likely to change products and services when they have a poor experience. The result is a multi-trillion dollar annual growth opportunity created as customers switch products and services.

Digital customers represent the future. Digital is where customers expect you to be and where they look for your products and services. Customers expect you to have a presence at the time, place and context of their present need, else the business goes to someone else.

Customers define business on their terms

Business is a voluntary exchange, particularly whenever customers have information and choice. Customers have both in the digital world. This creates an ever changing digital economy with few incumbents giving leaders ability to redefine value and success provided those definitions start and end with the customer.

Digital is finishing what the Internet started. E-commerce pricing and product transparency is evolving into contextually heavy business services, consumerization and disruption. Digital is where business will be in the future with more than six billion mobile phones, billions on social media, and trillions of dollars in the online economy.

Digital customers are not objects in the business models. They are the subjects of their own story where you provide the actions (verbs) that lead to value. Just as our parents ‘xeroxed’ copies or “fedexed’ packages we will use new verbs in the digital world beyond googling, tweeting and facebooking.

Executives can no longer work from the inside-out telling people what to buy and remain effective. Digital business leaders recognize that digital turns the world outside-in.

Business must change its perspective and think from the outside-in

Business must change the way they think, act and learn in a digital world. Inside-out thinking provides clear plans and paths for growth and results as executives see the world they want to see. Executing inside out strategies guarantee success so long as the world works exactly as planned. Learning inside-out means avoiding failure and not learning at all. If a career marked by four wins and zero losses is better than one with eight wins and two losses then you live with the limitations of an inside-out perspective.

Think outside-in, start and more importantly finish with the customer. Use analytics and experiences to see the world for what it is. Act by placing emphasis on customer experience, their value and engagement. Finally, learn by recognizing customer and market dynamism values and applying the lessons of missed plans to create a better future.

Outside-in thinking changes the relationship between business and technology

Digital Business represents a radical revolution in the relationship between business and technology. Business and technology had a linear relationship. Business stated requirements and technology built to those requirements thereby enabling the business. Today the relationship is bi-directional and dynamic. Business still has requirements. But more importantly technical innovation creates new opportunities resulting in an iterative dialogue rather than a requirement specification. Evidence of this change is everywhere in IT from calls for shorter cycle times to agile development methods.

Business used technology to execute its processes in service to the customer. Now, customers use technology in service to themselves. Customers incorporate products and services at will and to meet specific needs. The shift is dramatic and revolutionary. We cannot call them ‘users’ any longer. They are people with technology selecting based business services rather than following IT enabled business processes.

Five things to get right in the digital world

Companies no longer control the customer. People use digital technology to engage and build their own experiences and meet their needs. Just look at your own smart phone. It is filled with task based apps rather than end-to-end applications. It is one way of seeing how digital is changing business.

How leaders forge links between customers, information, technology and services determines success in the digital future. Those links form five things executives must keep in mind in the digital world.

  1. People are everything, everyone and everywhere at all times. People become customers when they choose your products and services. If they lose their status as human and become customers or walking wallets, you lose your ability to create a compelling experience. People and their individual choices shift the balance of attention in just about every market. That is what much of the digital marketing fuss and the future of work is all about.

  2. Experience is everything. Experience is the reason why people continue their relationship with you, your products and services. Winners deliver the best experience. They win in terms of revenue growth and profitability. That is why customer centricity is a hot topic and product silos are under threat.

  3. Information is elemental. Information is the source of context, the proof of experience, the prism separating activity from results. Leaders confront the world the way it is – outside-in, rather than rationalizing it from the inside-out. Understanding, presenting, manipulating and acting on information is how leaders gain flexibility and efficiency in a digital world.

  4. Turn infrastructures into a platform that provide differentiated solutions from the same set of information, business and customer resources. Google, Amazon, Facebook are all platforms for understanding, change and growth. Transforming rigid channel/product/process infrastructures into platforms creates the yield on three decades of IT investment and operations.

  5. Learning is the new license to operate. Digital accelerates the pace of change as billions of people make billions of decisions every day. Controlling a market is vanity, leaving you vulnerable to those who know, think, feel and act with the market rather than against it. That is what makes the digital world dynamic and creating opportunity all the time.

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