Young Entrepreneurs, This Is Your Time. But, Are You a Digital Innovator?
The digital transformation age is upon us and digital innovators are questioning all aspects of current business models and creating brand new ones. Why is this happening? Where is our opportunity? Who is equipped to lead this transformation?
In the last 15 years, companies have built platforms or utilities on top of the internet and this is changing the pace of innovation. For instance, Amazon has created a cloud services business that is based on its infrastructure and processes that enables established firms and startups to rent their IT infrastructure and processes from Amazon. Amazon, because of its e-commerce business, has built a robust infrastructure that can handle heavy demand and has the spare capacity to let others use it. In addition to the infrastructure needs, companies can also rent their applications on-demand from companies like Microsoft, Salesforce.com, Workday, Hubspot, Yammer, Dropbox, Basecamp and others.
With these information technology building blocks widely available, entrepreneurs can innovate in several ways. The easiest approach is to automate whatever they do by using the modern platform. The second way is to improve the processes that are currently being used to make improvements in performance. The new way is to rethink the nature of engagement with their stakeholders and design new business models that disrupt the incumbents. This idea of using information technology to question, change and experiment with all channels of stakeholder engagement is what we refer to as digital transformation.
At the core of digital innovation is data. Take the case of Netflix. Let us look closely at how it interacts with customers and suppliers. The model before they arrived (Blockbuster) was for customers to identify a movie and then go into a store and look for the movie in which they are interested. Interaction with the customer entering the store was limited to a greeting and answering general questions. The newer model, introduced by Netflix, was for customers to use the internet and the website to search for the movie, get recommendations from friends, rate and review the movie, and have it delivered via postal mail. In this model, Netflix has an infinite memory of what titles appealed to a customer and the customer’s friends. It only had indication that the customer viewed the movie at least in part and the customer’s opinions about the movie if the renter took the time to tell Netflix. With the introduction of its streaming service, Netflix now has detailed information on customer viewing habits, beyond what customers likely know themselves. Using this data, it has not only become the producer of award-winning programming but it has disrupted the Hollywood entertainment and television industries.
Digital transformation is catalyzed by a type of knowledge worker that we refer to as a digital innovator. These digital innovators use the modern day infrastructure as Lego-like building blocks to build novel and interesting new products and services. They understand the starring role that data will play in both running the business and supporting customers and partners. Take a company like Uber. Uber has identified that there is variability in supply and demand for transportation services and created a platform for ride seekers and ride providers to find one another. Uber uses the mobile phone and its location information to get customer information, uses existing payment platforms, and AWS for its infrastructure needs. The magic building blocks that Uber adds is the one for dispatching and spot pricing and the data it collects on all participants in its ecosystem. By empowering riders and drivers with relevant data conveniently delivered through the smartphone, Uber is disrupting the ride sharing industry. But it will not stop there. It has now opened its APIs for third –parties like United Airlines and TripAdvisor to add Uber into their own applications.
What does the age of digital transformation and availability of re-usable infrastructure do for digital innovators?
Speeds time-to-market: High tech entrepreneurs rely on existing digital platforms to innovate. They use Application Programming Interfaces (APIs) and digital platforms to develop new products or services, as well as to distribute and sell them. Availability of these utilities reduces the time to market for products and services. Since all this is done on the web, they enjoy independence from location of their human resources but still collaborate on ideas.
Provides a low-cost, real-time network to test ideas: Entrepreneurs with an idea can describe an idea and get people in their target market to vote on them using platforms like Facebook and Twitter. In fact, crowdfunding sites are another avenue to test product ideas. As a result, entrepreneurs are faced with lower experimentation costs. With the low cost for infrastructure, entrepreneurs can launch their companies very quickly and test to see if there is truly a market for the idea. This is especially true for digital products or services.
Provides access to experts or mentorship: Today, it is possible to get many of our questions answered using social media enabled networks. The trick is to follow influential people and make connections with them. In addition, if you ask and respond to queries in LinkedIn and Quora forums, people take notice and reciprocate by answering questions posed by you. In addition, entrepreneurs have blogs and resources that are meant for other entrepreneurs to share and use. Example Onstartups.
Eases partner identification and access: In earlier times, when forming a partnership to create an ecosystem, companies had to get their legal department involved and sign contracts before experimenting with a partnership arrangement. Today it is possible for companies to build complex ecosystems by making their data and services available to third parties and tracking its usage. If they find that there is high usage, they can then negotiate terms and agreements. This is often referred to as “ubiquity first and revenues later” strategy.
It is the age of digital transformation but are you a digital innovator?
Co-authored with Sal Parise and Clare Gillan; Originally published on LinkedIn