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The Six Shifts Behind the Digital Transformation of Business

What to keep a close eye on over the next decade

Anyone that has a say in steering a business to success – from the fabled entrepreneur in his or her garage to the CEO of a large multinational – is looking for a niche in their chosen market. They want to design a product or service that is nigh on impossible for other firms to copy, and is desired by a wide swathe of customers eagerly willing to exchange their cash for it.

But entrenched businesses – as the lucky firms that finally find themselves in this position are called – have always and will always face technological disruption and uncertainty, and it’s an understandable and all too predictable response to fight back. In 17th-century France, for example, the button makers’ guild petitioned the government to crack down on cloth buttons made by weavers. Fast forward three centuries, and in 1990s America, movie studios raised copyright concerns that postponed introduction of the DVD player.

Avoiding change, though, is impossible. And these next few decades will be an era of sweeping change. One of the biggest and most disruptive forces behind all this change is digitization, and the faster companies stop resisting and work out ways to take advantage of it, the more likely they are to still be operating 15 or 20 years from now.

This means understanding the trends shaping the digital landscape and understanding how those trends will affect different industries, business models, consumer preferences, and workforce changes.

Six Shifts to Monitor

For corporate strategists, and other custodians of a company’s long-term future, it will pay to consider six big shifts, and think about the risks and opportunities they present. Once you understand these, you can swim with the current instead of against it.

  1. Data reliance is deepening: Data availability has increased, as has the amount of data itself. But more information can be too much of a good thing. Managers are worried about drowning in data and succumbing to analysis-paralysis. Customers too, rely more on data and conduct more research.

    ExampleGE’s industrial internet.

  2. Demand for personalization is increasing: The importance of individual identity over the idea of a homogeneous collective has long been a tenet of Western society. Yet, with the growing presence of digital technology, this trend takes on an entirely new character. Customers want simple personalized experiences from services and they want the ability to customize products. Data availability and new channels accelerate this demand and provide companies the ability to further tailor products to individuals.

    On the other hand, consumers don’t want to feel like they’re being constantly tracked or “stalked;” companies face the constant risk of “going too far.”

    ExampleUnder Armour printing customized shoes.

  3. The line between products and services is blurring: Products are turning into ongoing “experiences.” Subscription and bundling business models will continue to grow, as will the amount of customer data collected.

    Nearly 70% of over 2,400 business leaders expect their organization to prioritize adding services to existing products over developing new products by 2020.

    ExampleCaterpillar’s analytics-based services.

  4. Machines play an increasingly large role in work: The robotic apocalypse is still far off. But in the meantime, machines will conduct increasingly complex tasks.

    Automation will continue to conquer new territory in work and in the workforce, disrupting employment, but also increasing the need for new STEM talent. The impact of all this will vary a lot among different sectors and parts of the world (see chart 1).

    ExampleWatson diagnosing patients.


    Chart 1: Automation and its predicted impact on the workforce  Source: CEB analysis


  5. Formerly clear lines between corporate functions and roles are blurring: Interconnectivity is not limited to devices. Relationships in organizations also grow more complex as companies adapt and become more flexible.

    Cross-functional and cross-industry initiatives are required to respond to new challenges. The workforce will also become more flexible and acquire more diverse skills to accommodate more malleable roles.

    ExampleHeineken merging Sales and Marketing.

  6. Change is accelerating, large firms are not: With customers wanting things on-demand, new machines increasing speed and efficiency, and start-ups exploiting new digital technologies, large companies are struggling to keep up.

    These firms are hampered not only by their size and complexity, but also by their incumbency. Established business models, a duty to shareholders, risk aversion, and regulatory mechanisms all increase the inertia of larger firms while smaller firms can scale-up their business models quickly.

    ExampleBanks facing hurdles to keep pace with mobile P2P payments.

 

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