The key to digital transformation and the most powerful question you can ask yourself is “what would your business look like if you started it today?”. It’s such a provocative question that it draws a defensive reply. Nearly everyone on the planet understands that knowing what they know now, knowing what technology is now here, being aware how consumer behaviours have changed, in hindsight they would have done things somewhat differently.
Every business today is the aggregation of hundreds or thousands of key decisions over time. Choices and investment we must accept both to be entirely logical, well reasoned, well intentioned, and well informed, but have led to each company being at best not perfectly placed, and at worst entirely unfit for today or the future.
When you look at most businesses the problems go to the very core of a company. They may have an extremely solid and valuable brand but are running on central technology so old and so poorly understood that nobody dare touch it, let alone replace it. A legacy of patches, workarounds, middleware and fixes that just about work on a good day.
A company may have wonderful customer service, a great reputation, but be performing a role that seems increasingly commoditised or redundant in today’s era, let alone the future. A company may have a business model that just won’t be sustainable for much longer as business dynamics change.
Faced with such fundamental and existential threats, in an era where innovation and digital transformation is key to garnering favourable press and satiating shareholder or stakeholder needs, companies understandably offer the easiest type of digital innovation to carry out, that which is fastest, cheapest, least risky and most apparent.
We have to work to what people expect, not to what we can most easily achieve.
Airlines still may have a booking system based on code written in the 1960s, which is creating entire system-wide limitations, but will choose to update an app that sits on top of it. Grocery stores may need to entirely rethink their distribution and logistical supply chain, but may stick a robot in a store in San Jose to signal to the press they are forward thinking. Fashion retailers may need to entirely rethink their store presence, but will stick in some smart changing rooms and iPads into some branches.
Digitalisation versus digital transformation
For me, there is a key distinction between digitalisation and digital transformation. Digitalisation is taking existing processes, existing business models, existing systems and applying new technology and new thinking like oil to them. Digitalisation is adding video phone kiosks to car rental pick-up locations, it’s a grocery store using pickers at night to fulfil ecommence orders, it’s a bank building an app to let you scan checks to pay into your accounts.
Digital transformation is to rethink everything in a business around the possibilities and behaviours that new technology make possible. Hotels have now been entirely rethought around the culture of Instagram, fast-food restaurants that have all workflows and interior design built around the need to deliver to customers efficiently or allow them to order ahead via an app. Companies like Casper or Warby Parker that sell mattresses and glasses direct to customers that have destroyed the assumption that people need to try them out in a store first.
How to start your transformation journey
There are four areas all businesses should before embarking on a digital transformation journey
- What is your role in people’s lives?
What is your business really in the business of? Are you a car maker or a mobility provider? Are you a credit card or a membership club like Amex? Are you a computer company or a maker of experiences? Why do banks really exist today and in the future? What can you do to provide more meaning and relevance in people’s lives?
2. Map out new consumer behaviours and expectations
If we can see an Uber’s location in real time, we don’t accept a four-hour window for a repair person. If we’ve never waited online to pay for items, we won’t accept queues in-store. If we can text our contents insurance provider, we find it out of place when our bank makes us fax something. Technology changes our behaviours and expectations across all categories, we have to work to what people expect, not to what we can most easily achieve.
3. Consider regulations and the grey areas
Banking is known to be hard to innovate in because of firm rules and regulations, but where are the spaces to exploit? WeChat Pay can store users’ money and pay interest but is somehow not a bank. From payment systems like TransferWise to communal loans from Kiva, many disruptive services seem to explore the grey areas of rules and regulation.
4. Build a new solution around new tech
Based on a firm understanding of the role, the consumer expectations and legal framework, what new technology can you layer in to produce game-changing results? What happens when loans are collateralised or approved based on social media profiles and reputations? What happens if mortgages and land deeds are built on the blockchain? How can facial recognition and a smile rather than a signature act as the approval mechanism?
Not every industry in the world is going to change fast but waves of change are coming from mobile devices, new security protocols, new business models and companies that exploit the new and lax regulation. Banking is set for more change than most, so what would you rather do? Make the smallest changes you need to do to stay relevant, cut costs and hope for the best, or understand what’s coming, invest in the latest thinking and technology and propel yourself into the future?
Tom Goodwin is executive vice-president and head of innovation at Zenith USA. He is also the author of Digital Dawinism.