What began 10 years ago in the retail and ecommerce space, sparked off by the likes of Amazon.com and eBay, is now here in every sector of the economy. Digital disruption is not only coming, its already here! We know this when new start-up companies grow customer acquisition and value faster than traditional ones in a matter of just a few short years. So how are they doing it when the worlds largest taxi company (Uber) owns no taxis, the largest accommodation provider (AirBnB) owns no real estate and the worlds most valuable retailer (Alibaba) owns no inventory? The answer is they are focusing on transforming the customer experience, not building their brands.
In my top trends for Asia Pacific in 2016, I headlined my predictions with traditional Enterprises will transform in digital natives. So the question is how should traditional enterprises respond?
In the face of constant exhortations to “digitise or die”, it is important for traditional businesses to understand that digital transformation presents an opportunity for them to pull ahead, rather than a threat of extinction. And in addition to providing customers the experience they expect, they can improve their productivity and profitability.
Harnessing digital transformation for productivity involves creating a workplace culture where the digital generation – the Gen Ys and emerging Gen Zs – can thrive. This means empowering them with new digital tools for collaboration and workplace productivity, and being open to new practices such as the crowdsourcing of ideas to drive innovation and value creation. This will help businesses to attract talent and address the skills shortage and productivity issues that are hampering growth.
Digital transformation also presents enterprises with new avenues to pursue profitability. Here in Asia Pacific an excellent example is the Online-to-Offline (O2O) opportunity, which is about creating an online presence and using it to drive customers to offline channels of engagement such as physical stores and events. Consumers today, for instance, are more likely to buy a product based on friends’ recommendations on social media than a billboard that is placed along a highway.
The quest to bridge the gap between online and offline commerce is set to be a dominant force in Asia’s retail landscape in 2016. According to a Forbes report, the Chinese O2O market is more than $150 billion in size with just 4% Internet penetration, pointing to a huge potential for growth.
Mobile wallets play an important role in the O2O value chain. Besides being a convenient mode of payment, they are also able to store points, cards, coupons and other loyalty incentives to drive O2O traffic. Traditional financial institutions are already making their move in this space. HDFC Bank, a leading card issuer in India, recently announced the launch of a digital wallet and an electronic marketplace for online merchants.
IDC is predicting a “mega transition” in digital transformation in 2016. Enterprises will “flip the switch”, committing to a massive new scale of digital transformation and 3rd Platform technologies (mobile, social, cloud and big data) as they jostle for leadership positions in the hyper-digital economy. By the end of 2017, 60% of the top 1,000 enterprises in the Asia Pacific will have digital transformation at the centre of their corporate strategy, said the research firm.
Like private sector organisations, government too is not immune to digital disruption. Singapore recently announced the restructuring of two statutory boards to form the Infocomm Media Development Authority as part of a concerted effort to seize the opportunities of ICT-media convergence and ride the digital wave. In Australia, the federal government has signalled that it is serious about digital, with the establishment of its national Digital Transformation Office.
The pace of digital disruption is accelerating, and we have seen how it is impacting every function across the organisation, from HR to marketing to finance. Digital transformation cannot, therefore, be the sole responsibility of the CIO or the IT function; it has to be a team sport. And like all team sports, when the objectives are clear, morale is high and every player pulls their weight, the chances of scoring will be high. Remember, digital disruption is not a death knell but a wake-up call.