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article imageLeaders of digital transformation rarely ‘own’ anything

By Tim Sandle     Aug 9, 2017 in Technology
The continuing innovation with digital technology is requiring companies, be they long-established or fierce startups, to rethink their business models, types of products and the way that services are offered.
Incremental digitalization, digital transformation or digital disruption?
Digital transformation is seen through the demise of long-established companies and brands and the birth of many new ones, with new companies harnessing the opportunities that digital technology presents. Digital disruption reflects the change that occurs when new digital technologies and business models impact on the value proposition of existing goods and services. However the types of digital changes we’re experiencing are interpreted — the world is not standing still. One interesting aspect of these quickly changing elements of business is that leading digital businesses are pushing ahead despite a lack of any physical product.
Some examples have been drawn up by Cranfield School of Management researchers Peter Thornton and Rob Lambert. They single out:
The world’s largest accommodation provider owns no real estate (in this case, Air BnB).
The biggest phone company on the planet owns no telecommunications infrastructure (this is WhatsApp).
The company valued as the world’s most lucrative retailer has no inventory (Alibaba).
The most popular media owner creates no content (the ubiquitous Facebook).
What is now the largest movie house owns no cinemas (Netflix).
The biggest software vendors do not write their own apps (Apple, Google).
The most successful recruitment agency is online (which is LinkedIn).
The world’s biggest taxi company owns no taxis (Uber).
Transportation app Uber is seen on the iPhone of limousine driver.
Transportation app Uber is seen on the iPhone of limousine driver.
With permission by Reuters/Lucy Nicholson
Calling out one of these, the taxi industry has been considerably disrupted by the appearance of Uber, Lyft and others. These startup companies have harnessed digital technology and have latched onto something consumers desire. The old business model of having to stand on a street corner and wait for a taxi has been replaced through the customer being in control of when the taxi arrives. In addition, app-based cars are generally cheaper and their arrival can be tracked in real time. To add to this, payment is typically virtual.
What is the consequence of these models for startups? Firstly the typical high costs of entry into the market are no longer present. An idea can be developed through a digital platform and put in place far more quickly by adding it to existing assets, be that a car (in the case of the Uber tracker) or developing an app. A different direction for a model is with big data analytics and data science, using scientific methods, processes, and systems to extract knowledge or insights from data. This information can be used, for example, to help retail companies to better understand their consumers and purchase patterns. The ability to take data and to be able to understand it, to process it, to extract value from it, to visualize it, to communicate it, is likely to continue to be a very important skill in the next decade. In the last two years, for instance, it is estimated that nine times more data has been created than in the entire history of humanity up to that point.
While more and more businesses understand the need to go digital  recent reports show that many are ...
While more and more businesses understand the need to go digital, recent reports show that many are lagging behind.
Robbert Noordzij
Broadly there are three main areas that new businesses can engage with, as identified by Daniel Philpot, from OgilvyOne Business:
New technology – (Digital technology and IT systems)
Engaging with customers – (Digital marketing)
Entirely new ways of doing business – (Digital transformation)
Where successful startups can succeed is in using the inherent advantages that come with being a new venture in order to disrupt markets and gain tangible advantages over established market leaders. Opportunities exist in almost every major sector. Perhaps the most important thing a startup can do is to place data as the driving force behind major decisions, with prioritization given to data collection, data collation, and data analytics. This data should be used to reach and appeal to the target customer base.
If you want to read more about how start-ups and small businesses can engage with the digital transformation process, see the Digital Journal article "Why small businesses need to consider digital transformation."
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