There’s a lot of talk nowadays about Digital Transformation, with a number of people pushing the need to innovate and transform. So here is my advice for business leaders.
The e-business story: a lesson from history ?
Remember back in 2000 ? This was the time when the internet was really starting to take off. There were many people very excited about the opportunities that this new thing called the internet could bring for organisations – hence “e-business”.
There were even a number of trade magazines devoted to e-business.
At the time I was working in IBM, as Global Marketing Communications Manager. My key focus was to launch IBM’s new e-learning solution globally. Except we weren’t allowed to use the term “e-learning” because, the IBM CEO Lou Gerstner (with amazing foresight) dictated that “e-business” was really a passing phase. And he was completely right (although we all complained at the time of having to talk about Distributed Learning Solutions when our competitors and customers were talking about e-learning).
e-business was not, in the long term, a revolutionary change. It was just a new way of doing business which, after a few years has become business as usual. (And, not surprisingly, the e-business magazines are no more).
So what’s different about Digital Transformation in 2017 ?
Roll forward to 2017. The vast majority of businesses have a digital presence, they have websites, social media etc and they may even have eCommerce capability.
So why the interest in digital transformation ? In my experience, I think the focus on digital transformation is really about fundamental changes in business models. Let me give you an example.
Digital transformation in the Publishing Industry: Brave New World
When I started my project at Ricoh Europe to target the Publishing Industry in 2014, I was genuinely surprised how much people were much concerned about digital transformation. I was told that this was all due to consumers buying eBooks instead of printed books. The key symptoms were:
- print book sales were falling
- new technologies (ie ebooks) were growing rapidly
- Publishers were losing money and asking serious questions about their business models
However in just a few years the situation seemed to settle down, and the mood changed from pessimisim to optimism.
- book sales have stabilised and have even started to increase in some categories
- ebook sales had reached a plateau and stabilised
- And, last but not least, many Publishers have started to make money again.
So what has happened ? Well, this is how I interpret it.
Consumer behaviour has been changing…:
People’s buying habits have been changing. There are many things competing with books: music, film, and other entertainments. Publishers have had to respond to this new situation.
An inefficient supply chain model has been made more efficient
The traditional supply chain was organised around buying books in bulk from China, and storing in large warehouses. It was not uncommon for up to 30% of stock to remain unsold. This was OK so long as Publishers were making money….
However the adoption of the latest digital print technologies has meant that Publishers can now almost print to order. As a result, they have significantly reduced inventory (and costs), speeded up time to market and opened up new revenue opportunities from backlist titles.
eBooks have carved out a niche
The launch of the Kindle and other ebook platforms, along with subsidised prices for eBooks created an accelerated demand for ebooks. Initially this caused significant disruption for Publishers. However, as soon as the subsidies ended, eBook sales have reached a plateau.
The new normal
I think it was the MD of HarperCollins at the Futurebook Conference in 2015 who coined the phrase “The new normal” – a great expression ! What has happened is actually not digital transformation – it’s far more profound than that.
To me, the new normal isn’t about transforming the business to make it more digital: no more than mainstream businesses became e-Businesses after 2000. Rather it’s about responding to market changes, and adapting the business model. It’s also about taking advantage of all innovations such as digital print – not just IT.
The book publishers of 2014 still make most of their money selling books. Now they can expand their revenues by selling a wider range of books, printed more cost-effectively using digital print technologies. They can offer a wider choice of formats to their readers – print and ebooks. And they can reach their end-users directly using Social Media.
What’s not to like ?
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