The internet has opened up opportunities for companies to go global. At the same time it has turned every other local company into a potential competitor.
In an increasingly complex and competitive business environment, businesses face the challenge of standing out but surviving. Competing in a digital age requires different business models, organisational patterns and cultural change. SMEs are often too busy in their day-to-day operations to focus on the future.
To begin, we should differentiate Digital transformation from digitisation (the conversion) or digitalisation (the process). Digital transformation is more than just about “going paperless.” It is not simply enhancing and supporting traditional methods of doing business, or enabling us to just work more efficiently and effectively.
Digital transformation is the overall societal effect of digitalisation, the technologically induced change. The outcome of a successful digital transformation is business transformation. Digital transformation is the process that gives companies the opportunities to develop new types of innovation and creativity that lead to new growth opportunities.
The Web has enabled connections to be made anytime, anywhere. Crossing across geographical boundaries, the internet has allowed people to join together into communities based upon like interests or beliefs. Leaders who understand the power of such connectivity can leverage on it. One of the best ways for a business to help foster community as a business strategy is to think of their organisation as platform.
The key to success in a digital economy is the ability of companies to transform their business into a digital platform and then to leverage on that platform to build the surrounding ecosystem necessary for growth.
Learning From Amazon
Amazon’s spectacular growth has been attributed to its ability to capitalise on its digital channels to build an ecosystem of buyers, partners and suppliers. Digital transformation has allowed Amazon to make a business transformation that captures value by making available its core capabilities to multiple stakeholders. It changed its business model from “1-sided markets” to a complex “N-sided” model of an ecosystem. By not positioning itself as a retailer, but rather as a digital retail platform, Amazon allowed other retailers to sell their goods on its platform and to leverage off the same warehousing, distribution and logistics capabilities that it has.
To the customer, this meant a broader range of retail offerings and increase value. For the retailers, they benefited from the hypereconomies of scale. The ecosystem of retailers built around Amazon’s digital platform accounted for about 50% of products sold through Amazon.com. Half of its merchandise is sold by millions of independent merchants who bear most of the costs of distributing orders, and Amazon collects about 15 percent of the price of their merchandise. 1 Technology has enabled Amazon to power their transformation, from being a retailer into being a digital platform that supports an ecosystem. Amazon broke its $100 billion record in sales for the first time in 2015.
To successfully execute a digital platform, companies have to bear three things in mind:
- The platform has to be incubated and takes time to develop its initial capabilities.
- The platform is not a distinct and separate entity that the organisation migrates to. It is an organic part of the organisation transformation.
- The delivery is in incremental phases and requires a blended approach.
If you are considering how your business can leverage digital capabilities to seize growth opportunities and new markets, we have a digital advisory team that can help you begin the Digital Transformation journey.