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Some Interesting Industry Examples of Digital Transformation

Steve Nash has twenty–five years across various business roles, leadership, strategy, strategic, entrepreneurship as well as philosophy

I have been analyzing digital transformation and have realized that it is not the end itself but a means to achieve an end. It can be leveraged or implemented across the business, to achieve real business goals, such as revenue growth, cost cutting, improving margin performance, enhancing worker productivity or achieving process efficiency. So key objectives of digital transformation are related to real business objectives of revenue, cost or productivity.

Some industry examples

In case of the retailer ‘Best Buy’, digital transformation has been about channel transformation, with digital now contributing 20% of total sales. Digital has become a very important and complementary channel to physical sales, indicating a significant online portfolio and robust digital sales and distribution model. Significant focus and investments in online and digital capabilities and omnichannel retail strategies have allowed the company to step up and keep pace with the changing retail industry dynamics and Best Buy’s total e-commerce sales contribution has grown from 7.5% of its total revenues in 2013 to 14.2% of total revenues in 2017 to 20% of total revenues today.

At The New York Times, the digital transformation has been about monetization of digital content as well as driving digital advertising revenues. Faced with falling revenues from print editions and declining margins, the company embarked on its digital journey in the year 2010. It decided to monetize online articles, moving from free articles to paid articles. Technology has been critical to support the digital transformation at New York Times, with various tools for web content management, infrastructure support, cloud and analytics.

In case of Lego Group, the transformation has been about utilizing digital as a product format, launching new and innovative products via the electronic media and merging the physical and digital products thematically. By turning to the toys-to-life market, or digital formats such as video games where physical action figures interacted with those on screen), Lego was able to stay relevant, and create a new niche in the evolving market for itself.

Then we also see the examples of FinTech companies and PayPal, that were born digitally i.e. their roots are digital so that the companies do not really have to transform themselves digitally or evolve themselves. With their totally digital models and lack of any physical centers or distribution offices, FinTechs become much more financially viable and at a distinct advantage as compared to banks due to lower costs of operations. As a result, FinTechs are able to operate at higher margins and pass on the benefits of lower costs to customers with lower transaction fees.

PayPal has grown exponentially. The total revenues of the financial technology platform have grown from $3.51 billion in 2010 to $17.8 billion in 2019, multiplying five times over almost ten years. The company has treated technology as a department or a division, rather than just a support function. Being born digitally, with technology as core, PayPal could build on and change their entire business model.

The FinTech revolution has disrupted the digital models of traditional banks and as such these institutions have been forced to embrace and embark on their digital transformation journey in order to drive revenue, cut down on expenses and stay relevant to cope up with the challenge from new age startups and payment disruptors. Here, was take the Bank of America, where digital transformation has been about customer experience, growth in its digital subscriber base and using the digital subscriber base as a channel for cross – selling new banking products and services. Investments in innovation, customer experience and operations allowed Bank of America to streamline operations, enhance user experience and even simplify its back –end business processes. The investments in digital and mobile preferences for the customer had resulted in higher customer satisfaction scores and more deposits, allowing BofA to reduce the overall branch count by more than 1,300 since 2012, from 2012 to 2018.

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Digital transformation as a survival strategy

All these examples reinforce the need for digital transformation and how it must be taken with the end objective in mind – such as some financial impact on the top line or the bottom line. Then, digital transformation needs to be looked at as a journey, rather than a one–time intervention. This journey will involve cross – departmental teams that come together to disrupt or overhaul or reinvent a particular business line, unit or a way of doing business, such as transforming the supply chain, sales channel or the end product itself. Along with the journey of innovation, digital transformation often entails initiatives to drive cost cutting, driving agility and flexibility such as cloud implementation. So digital transformation often becomes a survival strategy to start with, and then if done effectively, slowly allows a company to gain an edge over the competitors and be in a commanding position to lead the industry.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2022 Steve Nash

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