Digital Transformation Strategies
Digital transformation strategies are crucial to reaching digital maturity. This is the second Part in our Digital Transformation post series. You can read the first post of our Digital Transformation series here. In this part, we look at three digital transformation strategies, each used by market leading businesses to leverage digital to drive results.
Three Digital Transformation Strategies
Digital transformation can fundamentally be understood as the strategic application of digital technology to enhance the customer experience. There are many ways in which technology can impact on the customer’s experience, and the following examples highlight some of the different digital transformation strategies that successful organisations are exploiting.
John Deere – Get to the Customer’s Real Need
John Deere is perhaps the last company that springs to mind when you think about disruptive technology innovation and digital transformation strategies. However, over the last decade, the agricultural hardware manufacturer has developed a name for itself in the tech world as a leading example of digital innovation. One of the reasons for this is their proven ability to continually dig deeper into the needs of their customers. This has allowed them to deliver industry-leading products which exploit cutting-edge technology to add real value to their stakeholders.
The key to John Deere’s success is the use of data to continuously refine the company’s understanding of their customers' real needs. Of course, their customers continue to rely on tractors and harvesters – but this is only a part of the story. Fundamentally, their customers are constantly looking for ways to become more productive and profitable and, increasingly, to do so in the face of growing climate challenges. Deere’s existing product line remains important to achieving this mission but is no longer enough. The new goal is to improve productivity, profitability, and sustainability using “intelligent connected machines”.
The company’s new generation of agricultural machines now includes sensor and WiFi technology, and they have delivered a digital platform which can provide a holistic view to farmers of conditions in the field. The use of AI enables the machinery to adapt to these conditions by optimising the behaviour of the machine. For example, the combination of cameras and computer vision in John Deere’s latest generation of crop sprayers enables the sprayer to identify and specifically target weeds, reducing the use of herbicides by up to 90% and minimising crop damage and chemical costs as a result. The newest combine harvesters from John Deere include features to automatically compensate for wetter conditions during harvest. And their yield management platform enables farmers to upload data from this years’ harvests to make recommendations that will enhance next years’ harvest.
By understanding the customer’s real needs, john Deere has extended beyond their traditional focus on agricultural machinery to provide a comprehensive suite of products and services that work together to provide significant added value for their customers. In doing so, they have secured their position at the cutting-edge of their industry.
Nespresso – From Products to Experiences
A complementary strategy for digital maturity has been demonstrated by another unlikely pioneer – Nespresso. A decade ago, Nespresso were known as manufacturers of high-end coffee machines. The selling point was that the output was better than anything any alternative coffee machines provided. Today, however, the word Nespresso is most likely to conjure up fantasies of drinking amazing coffee in glamorous settings – perhaps in a leather-clad, luxury boutique; maybe on a veranda overlooking the Italian countryside. The company is now associated with an experience, rather than the product.
This is no accident. Nespresso has invested heavily in a powerful combination of brand-building activities – the aspirational TV campaigns featuring Hollywood’s beacon of sophistication, George Clooney; the high-end stores, modelled on wine bars, complete with mood lighting and leather décor; the feel of opening the capsule box that comes with each machine. Underpinning all of this is a powerful combination of technology to drive a consistent feel across every touchpoint with the brand, all designed to give you a powerful sense that your tastes are being personally catered for guaranteeing perfection.
Digital transformation strategies were a key element to this transition. Nespresso utilised a strong omni-channel strategy, supported by AI and big data to create the experience rich approach. Nespresso works hard to ensure they can capture details of every contact between the customer and the business regardless of the sales channel (online, in store, mobile, vending machines), and to centralise this data in one place. This provides them with a comprehensive picture of your tastes and buying habits as a customer, and – combined with artificially-intelligent personalisation and recommendation techniques – to better tailor your next experience with the company. Tap your membership card in a Nespresso store, and an employee will likely upsell you an additional product – and it will probably get your interest because, if you’re a regular customer, that recommendation is powered by a rich understanding of your coffee-drinking needs.
It’s a great example of the importance of emotion in the digital transformation process, and of the way in which traditional forms of advertising can be coupled with technology enablers to create a consistent emotional experience for customers at every touchpoint. You know it’s a sales pitch, but it makes you feel great, so of course you’ll spend a bit more. What else?
Uber – Streamline Your Industry
Of course, no discussion of digital transformation strategies would be complete without mentioning Uber – arguably the business that is most responsible for putting digital transformation on the roadmap. We all know the story – tech-savvy insurgent uses mobile technology to disrupt an industry by offering a better user experience than the existing mobile apps.
However, to really understand why Uber have been so phenomenally successful, it’s important to understand the way in which existing market players were impeded by the structure of the industry. Prior to Uber, it was rare for taxi companies to own their own technology. The industry was broadly divided between four groups of actors: the independent drivers; the licensed operators who owned the fleets; technology companies who provided the dispatch technology that enabled the distribution of bookings from the licensed operator to their fleets; and booking platforms, or apps, such as they were at the time.
The consequence of this was that every booking flowed across up to four organisational boundaries – from the booking app, to the licensed operator, into the dispatch system, and out to the driver. These organisational boundaries created significant challenges with respect to data sharing and inhibited the ability to orchestrate and co-ordinate the passenger’s end-to-end experience.
Given these challenges, it has proven almost impossible for existing players in the industry to compete with Uber. They cannot respond with anything near the quality of booking experience that passengers have come to expect. Licensed operators who were seeing profits dwindle as Uber began to encroach on their turf, and who had relied for years on off-the-shelf solutions from the dispatch companies, simply lacked the budgets, expertise and time to develop comparable technology. The dispatch systems – used to dealing with on-premise setups (often run on servers in the taxi office) – were unable to move quickly enough to build for the scale, transparency or intelligence that the Uber experience required. And drivers were often highly reluctant to provide information about their location for fear that this could be used by the licensed operator to monitor their performance.
By contrast, Uber exploited the growth in mobile technology at the time to eliminate any dependence on the existing structures. Instead, Uber opted to control and streamline the entire end-to-end process through two apps – one for drivers and one for passengers – and a marketplace which connects the two. This simple choice has proven immeasurably powerful precisely because it eliminated the organisational boundaries that impeded the competition and gave Uber all the data they needed about driver and passenger location to power the experience that we are familiar with today.
The third potential strategy for companies looking to achieve the digital edge is operational streamlining. Identify the ways in which established structures impede the ability of existing players to provide great customer experience. Then look for the ways in which emerging technology can eliminate or significantly overcome those barriers. This strategy will leave competition floundering and give you a free run at the market (at least for a period).
Read Part 3: Digital Transformation: Problems and Solutions
Read more about creating great marketing strategies.
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