There’s a lot of buzz about moving an analog business into the digital world – but for whom, how and why? Digital offers something for all businesses, the key is to identify how deep it should be entwined in your business. In this article I explain how to find the right level of digitalization and how this creates business value.
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What drives an analog business into the digital world?
Depending on your market segment reasons may vary, but some general trends can be identified. Here are the five main reasons business start to digitalize its operations:
Customer behavior changes
In the early days of Internet, there was much debate over who would shop online or use a search engine. Today, several generations have been exposed to the internet in a very early age. For them digital is the first place to start searching for information, compare brands or buy something.
It does not really matter what you are selling, there’s probably a significant customer base that actively chooses digitally savvy providers over the traditional ones and it’s growing with every new generation.
Competitors force you
In 20 years, we have heard many times over the phrase “but our segment won’t digitalize” to witness it happen a few years later. Just check the media sector – a complete overhaul in some 15 years from selling paper ads to trying to survive by digital innovation.
Need a new logo for just a few bucks? Typically, companies think of digital business development in terms of cost (which is not wrong), but it is also an efficient way to seek cost savings. You could name almost any need and there’s a cloud service with various price points ready for it.
Digital has one big advantage over human: teach it well enough and it produces standard quality tirelessly. You still need humans, but those tedious tasks can be handed over to computer. For example, a few accounting agencies already use machine learning.
Create a unique and defendable competition advantage
There are several studies showing that by going digital, your business can grow faster, be more profitable and even disrupt. These companies are naturally eager to embrace digital innovations. If you want to get ahead of the competition, digital becomes a must have.
Digital Business Maturity Model helps going into digital
Every business is unique thus it makes no sense to automatically pursue the highest level of digital use. The Digital Business Maturity model from Sofokus is a practical tool that categorizes any business into one of the five levels: 1. Rookie, 2. Intermediate, 3. Advanced, 4. Transformer and 5. Pioneer.
The digital maturity model is a tool to identify a realistic way to leverage digital. This is achieved by first identifying the current digital maturity level, comparing it to the competition and finally setting a desired target level. You can achieve significant business benefits by moving up just one level of digital maturity.
You could argue that the first three digital maturity levels are achievable by any business. The first level is about the courage to try out, the second is about systematic use and the third one leverages digital in the core business processes.
The fourth level can be seen as a threshold for so-called digitalization. Digitalization means that in addition to using off-the-shelf software and services, the company is ready to rethink its core business through digital. That is also known as digital transformation.
Level 5 is not reached by most because it means creating a digital ecosystem and harnessing network effects for business, for example. The digital pioneers of their respective markets have built an ecosystem-driven revenue model and are growing so fast that it’s hard for others to keep up. Level five businesses are familiar to everyone in the media: Amazon, AirBnb, Facebook and so on.
Digital is for every business
Companies hardly discuss much about the necessity of sales or marketing, it’s more about applying them to their own business. A similar approach to leveraging digital eradicates the mystique and can provide an aha! moment.
Similarly, sales or marketing efforts are more successful when supported by the company strategy and culture. Digital works in the same way. In the lower maturity levels digital is more about clever use of software and services, but the biggest impact comes by transforming the company culture and strategy.
Therefore, looking at the starting and target levels of your business through the lens of digital maturity provides a more realistic and feasible framework for development. Every little step counts and before you know it, you’re reaching the next level of digital maturity.