By Giorgio Heiman
The digital revolution is transforming the way businesses operate. The advancement of technology and the convergence of media are destroying traditional business models and the businesses that survive in the new environment either have to be disruptors or ensure that their business models are disruption proof. Almost no industry will remain untouched by these developments.
The newest and most successful businesses have adopted the platforms that have emerged in the new millenium of mixed mixed social, mobile, information, big data and cloud technologies (or “SMIC” like many people refer to) where convergence blurs the lines between the digital and physical worlds. IT Industry Analysts IDC refers to this adoption as “the Third Platform. Gartner calls it “the Nexus of Forces”.
In the digital world, the time between creating the concept of a new business idea and bringing it to market has shrunk dramatically, as has the cost of developing it. Although relatively new, examples of these disruptive technologies are already abundant, and businesses and CIOs should be thinking about how they can be used to achieve business benefits.
In the healthcare industry, for example, technology is used to create benefits for both the consumer and producer with the use of 3D printing in the production of tailor-made hips for hip replacements. An X-ray of the individual’s existing hip is taken and an exact replica is created. This has not only ensured a much higher success rate and a better quality of life for the recipient, but also delivers considerable cost savings for the health care industry in general.
In the automotive industry manufacturers are legally obliged to keep replacement parts for cars for ten years after they stop production. This demands a massive amount of investment in warehousing, where the parts can gather dust whilst sitting on shelves for a long time. Ford has found a way to avoid this by using 3D printing on demand which reduces the number of spare parts that they need to keep in their inventory by 40%. That is a huge saving for the automotive industry and a testament to the disruptive technologies that are delivering business advantage.
Traditional Industry boundaries are being completely redefined, and in parallel old industries are modernizing and adopting completely new business models. A good example of this is John Deere, a leader in producing machinery and products linked to the land. In the beginning they produced only farming equipment, but the company is now adapting their offer to a new environment that supports precision farming.
By connecting machines and bringing intelligence to logistics management they are helping farmers to reduce their unit costs, enhance their overall management ability, reduce their environmental and carbon footprint. They also added to their service offering access to agronomic data, thus enabling better farming decisions and squarely entering into an innovative and new business. The full potential of these advances are still emerging, but it is clear that enormous business advances can be made. This is quite a different business model from one that used to produce tractors and tillers.
Another example of business model innovation is Nike who are undergoing a digital transformation of their business that is delivering big advantages. Nike used to be in the business of making sports equipment. Today, Nike have squarely entered the health care industry by creating a range of wearable devices including electronic wristbands that track fitness activities alongside creating a series of conversations with their customers around their personal health and fitness. Nike has firmly broken away from being a brand-led apparel company and has transformed itself into a tech, data and services company.
One of the biggest contributors to business disruption is the advent of intermediation, or the sharing economy, as it is also known. The level of interconnectedness enabled by current technology allows people to share resources with others when they are not using them.
A prime example of how the sharing economy develops through opportunities brought by digital transformation is the success of the recent rental property start-up, Airbnb, a trusted community marketplace for people to list, discover, and book unique accommodation around the world online or from a mobile phone direct with the property owner. The company was founded in 2008, and by the beginning of 2015 it claimed to represent more than 17% of the hotel room supply in New York and more than 10% in London. Amazing when you consider they own no stock or inventory, but have managed to become an exchange platform through digital technology that has allowed disruption and challenge to the long-established hotel industry.
This is also true of Uber, which is now disrupting the traditional taxi industry business model. We have even invented a new word, “Uberisation” to describe the situation where existing traditional business model that has been around for a century, is being fundamentally challenged in a very short time frame.
Machine to Machine and the Internet of Things are key drivers in the new digital landscape. The distribution of connected objects, the supply of services that add value to those objects, particularly in the health and wellbeing field or in the connected home field, and the management of data related to connected objects through an open intermediation platform are game-changers.
The interactions between products and machines can increase enterprise efficiency and create new business opportunities. Prototypes for intelligent supermarket carts that are aware of your location are in the process of being developed. These carts could be connected to other connected devices in your home, such as your smart refrigerator that monitors stock levels in the fridge and automatically places an order via the shopping cart to replenish food. The cart could potentially know that on the previous day you went to Epicurious.com online and looked at a particular recipe. It could then advise on the ingredients for your recipe. It could also tell you what other people in your area are buying from the supermarket. An entirely new platform for micro marketing will be at the disposal of the business and from this custom-made offerings and customer interaction can be harnessed for profit.
Digital transformation brings new and exciting opportunities for business, but the business must act fast, and be flexible and agile enough to grasp the opportunities. Unless they do, they will fail.
- Giorgio Heiman is vice president of Orange Business Services Africa
- Email TechFinancials.co.za at [email protected]