Digital Transformation to Improve your Value Proposition
Digital transformation is the application of technology to radically change the way we lead our lives. Smartphones and ready access to information are great examples of such transformation. Try to recall the last time you used a pay phone, the Yellow Pages or a paper map.
At the enterprise level, digital transformation involves changes meant to fundamentally evolve a business or how customers interact with the business. Too often, however, organizations undertake digital transformation projects and emerge with, perhaps, a new web site or mobile application that scarcely provides some marginal benefits or improvements to the customer’s experience.
Let’s review some examples of companies who have succeeded and analyze the themes they have in common.
The rise of the ATM
Back in the 1970s, banks began adding automated teller machines (ATMs) to their local branches for customers to use. At first, they were limited in functionality and provided only a small set of alternatives to interacting with a human teller. The banks who didn’t hop on the ATM bandwagon bragged in advertisements, they didn’t have ATMs. Implicitly, they were suggesting the interaction with a human was preferable to interacting with a machine, yet 30 years later there are banks existing only as ATMs with human tellers for customers to interact with.
ATMs have almost completely supplanted human tellers for simple bank transactions (withdrawals, deposits, transfers, etc.). Bank customers of today understand the convenience and expediency of interacting with ATMS. They are able to use an ATM 24 hours a day to do simple transactions and prefer to perform these type of operations with machines. The introduction of ATMs transformed the banking industry.
From Travel Agents to Travel Sites
A similar story has unfolded in the travel industry. Years ago, if one wanted to book a vacation , they would call a bunch of airlines individually, figure out the best price, then call one back and book the cheapest flight. You would then have to do the same for a hotel, rental car and maybe even tourist attractions you wanted to reserve in advance. Alternatively, you could talk to a travel agent who could do this on your behalf. Using tools exclusive to their trade, such as the Sabre system for example, they could easily uncover a better fare than customers could find on their own.
Today, people rarely have to pick up the phone or contact a travel agent. Expedia and other companies have created tools which quickly gather information for numerous flights, vacation packages and travel promotions to their customer’s fingertips. They can sort through their options and compare prices for the best deals without ever having to interface with another human being. Travelers understand they can depend on these sites or apps as a one-stop destination to plan and book their entire trip, and have learned to expect to be able to do so with ease. The innovation of these sites evolved the industry and how travelers plan their trips.
Challenge the need for Brick and Mortar
In the case of Amazon and Zappos, the pattern is similar but more surprising. Amazon started out selling books. Clearly, the ability to order and receive any book, by mail, within a few days was significantly more convenient than having to visit multiple bookstores or having to contact book publishers. Amazon, of course, did not restrict itself to books; it soon started selling everything. Initially, this concept was met with skepticism; who would buy something on the Internet they hadn’t seen and touched? In the case of Zappos, skeptics would say that shoes couldn’t possibly be sold over the Internet. How would people know if they fit?
Amazon and Zappos have both succeeded in fundamentally changing their industries by removing the risk of being stuck with a bad product, both have amazing return policies and super fast shipping capabilities. If you don’t like what you ordered, you can easily and quickly return it with no questions asked.
Amazon has also proven customers are willing to trust customer-authored reviews and will buy just about anything over the Internet if they can see others were satisfied with the product. Product reviews are continually monitored and the most prized reviews come from customers who have purchased the product. Suspicious product reviews are taken down.
Disrupting Transportation and Hospitality
As a final example, let me explain the phenomenon driving the success of Uber and Airbnb. Both of these services have been the targets of complaints by established interests in their industries. Taxi operators, for example, complain Uber drivers are not vetted by the government and might be dangerous drivers or might assault their passengers. Similarly, hotel operators protest Airbnb hosts are not licensed to operate in the hospitality industry and may be providing an unsafe environment or substandard services.
The irony is customers of Uber and Airbnb prefer these companies over traditional providers because they provide better/safer/cleaner services. If Uber and Airbnb aren’t licensed or vetted by the government, how can they provide better service?
The answer is customer reviews on Uber and Airbnb are significantly more effective than any government licensing process. Every Uber driver is aware of the importance of providing good service. Every Airbnb host knows without good customer reviews, no one will want to stay in their rentals. Customers understand the value provided by government regulation is more than offset by the accuracy of customer reviews not to mention the lower prices and better service provided by Uber and Airbnb.
Improving the Value Proposition
In all of the cases I’ve discussed, the key ingredient to successful digital transformation in their respective industries is how they used technology to challenge the fundamental “value proposition”. In the case of banking and travel, the upstarts challenged the notion humans were needed for simple well defined operations. In the case of Internet retailing, the upstarts challenged the value provided by local brick-and-mortar operations by providing excellent return policies. In the case of taxi services and hospitality, the upstarts challenged the value of government regulation and licensing to guarantee a clean and quality experience.
Why does this matter? By understanding each individual customer’s pain point cues and anticipating their desires with improved insight to provide relevant and timely interactions, customer adoption and loyalty skyrocket.