Adapt or die: how to thrive in a digital economy

How can traditional business models—some with brand power and extensive networks established over decades—survive digital disruption?

The answer is simple: adapt or die.

A digital success story: Starbucks

Starbucks shows how an effective digital strategy can drive growth. Founded in Seattle in 1971, the now-global coffee chain has built up a loyal digital customer base through its popular mobile app. This user-friendly, customisable app provides members of the Starbucks Rewards program with challenges and rewards that can be put towards free items in-store. Users can order and pay ahead, claim free in-store refills and access member events and deals.

It’s a strategy that’s working: Starbucks Rewards membership continues to rise, growing 14 per cent in Q1 to 16.3 million and delivering 40 per cent of sales. It’s also the most popular digital payments app in the US, beating out Apple and Google Pay for the top spot. 

But the company isn’t resting on its laurels. It has plans to introduce in-app delivery options in some locations and a coffee traceability feature that tracks the journey of Starbucks beans from farm to cup.

A digital disaster: Kodak

It’s surprising to think that Kodak invented the digital camera back in 1985. Synonymous with film photography, Kodak was a household name in the latter half of the twentieth century. The company’s revenue peaked at US$16 billion in 1996, just before disruption came via digital cameras. Kodak had the opportunity to embrace this new market but remained overly committed to its legacy business of film. The result? In 2012, the company filed for bankruptcy. It was a dramatic fall for a company that had once been a global market leader.

As these two examples show, a shift to a digital business model isn’t guaranteed to succeed. Here are seven tips to help businesses on their first foray into a digital market.

Seven tips to thrive in a digital economy

1.     Innovation won’t happen without a digital strategy. It is critical that you develop a strategy to compete in today’s digital economy. A digital strategy should be a reference point for all digital investment decisions to ensure new technology delivers value to the business. It needs to tie digital development to organisational objectives.

2.     Successful digital transformation requires the development of a new digital business model to run alongside the existing core business. It’s important to invest sufficient resources in both the established operation and the new digital arm.

3.     Identify risks from the market and your competitors–not just start-ups, but also from established players who are also actively engaging in digitisation.

4.     Digital transformation requires a re-design of organisational structure. Digital companies are lean, agile organisations that possess a digital-first culture that fosters creativity, collaboration and experimentation, and that uses failure as a learning tool to drive innovation.

5.     Leadership plays a crucial role in any digital transformation. A 2017 McKinsey report found that the addition of a team member with digital experience as one of the keys to a success digital transformation. It also found that the leadership team’s commitment to the transition was vital to its success, as was the creation, where possible, of roles specifically designed to manage the transformation.

6.     Data is incredibly valuable in a digital economy – think of it as the fuel that drives your business strategy. Data can be used to enhance decision-making or it can be monetised. “Data’s ability to help drive operational performance and create new revenue streams is critical. Think about data first and everything else afterwards, look at Netflix and its now ubiquitous binge-watching model.

7.     Invest in the right technology. Research shows that the most successful digital reinventors adopt a full range of technologies across their organisations’ critical applications and processes.

To find out how to push your business forward, contact one of Morris FInance business specialists today on (03) 5223 3453.