Digital disruption - Top 3 tips
We in the middle of wave of digital disruption that it is affecting many industries. I see no signs of this slowing, in fact, from my perspective, I only see it escalating. Sensors, AI, drones and IOT are the poster children of this revolution. If your industry is already seeing the impacts then read on, if not, then start worrying, it is happening, just not in plain sight.
At a party recently my friends were saying they missed Blockbuster ($2 Tuesdays). Blockbuster is a classic example of digital disruption. Netflix used existing internet infrastructure to reduce costs, increase scale and create customer intimacy. Netflix own the distribution channel and are now moving up the value chain to producing content that they can deliver (and prioritise) to capture more value. Overall, they beat the competition with their business model. I went to Blockbuster for years and they never gave me a recommendation. They had the data but never used it !
Here are some tips on how you can avoid being the next Blockbuster.
1) First look to create differentiation in your product or service.
What is the degree of commoditisation ? If your product is highly commoditised, look for a way to enhance it. Pedometers have been around for years. Fitbit now has a market cap of US$7B, enough said. Remember when milk was just ‘milk’, now the supermarket freezer has many different options and they all come from the same cows.
Is the customers problem complex? Combining a physical product with a digital service makes it difficult for competitors to copy. Take GE's aircraft business, engines are complex and difficult to manage. GE put's thousands of sensors and used engineers across the planet to remotely manage and monitor them. Can you combine a physical product with a digital offering to make it more valuable?
Can the quality of the service be improved ? Maybe blockbuster should have read this one. Your business may have a gold mine of customer data. Customers get personal engagement from players such as Apple and Amazon. How can your business, drive better services?
2) Look at the scope of your service or scale of your product.
What can be centralised? John Deere has long been considered to be the leading innovator in agriculture. Their farm equipment is spread across the planet. Last year they launched a Machine Health Monitoring Centre for their global machine fleet. In this centre, are their best and brightest. How can your business look to centralise parts of your business?
What can be digitised? Centralising parts of your business is useful. However in order to leverage it, you need to consider how to digitalise part of your service or product. How can your product or service be represented in digital form, this could be achieved by simple sensors or by more advanced methods such as creating a 'digital twin'.
3) Finally, is there money enough to be made from all these adjustments? If not, then back to step one. Assess the revenue and product potential of your options
Which half of the offering has the most profit potential? With a physical product backed by a digital service, which element has the greatest potential? Once you have digitised your product or service, can the digital service subsidies the physical product (or vice versa).
Which should lead the customer purchase, the product or the service? We are now seeing many industries being disrupted where the digital form is the face to the customer. The airline industry transitioned maybe two decades ago. The travel agent used to the only way to book a flight. Now customers use the web as their first choice before a travel agent is engaged. Could the digital side of your business be the new face to the customer?
While much of this may sound theoretical, I hope I've managed to challenge your thinking. If you aren't thinking about exploiting digital in your business, you can bet that your competitors are thinking this way.
Brad Parsons is CEO and Founder of MOVUS, are building the FitMachine - 'A Fitbit for Industrial Machines'. Find more information at www.movus.com.au
*FitMachine is a trademark of MOVUS ** Fitbit is a trademark of Fitbit.com