COVID has accelerated the ongoing digital transformation of the world. Responding fast and agile is as vital as ever. However, many businesses still struggle to keep up. Adapting to the current situation might have been the easiest part of adjusting to a digital world. What comes now is the part of making it sustainable. How can one not just survive one or two years but decades?
Time has shown again and again that digitization is not the same as digital transformation. While digitization is just about ensuring business as usual, the ladder is about building a long-term, long-lasting impact and competitive advantage to succeed.
"Winning in the post-Covid world will require re-imagining not just how you work, but also what you do to create value in the digital era" – Paul Leinwand and Mahadeva Matt Mani, HBR.
The first step in making this advantage happen is to take a step back and rethink the current business model. What are we providing, who is the current customer, and how do we create value? Even though these questions seem simple, they bear great work. Competing in a digital world also means competing with the world as a whole. Suddenly your competitors are everywhere and not just the local store down the road.
This highlights the importance of finding a market segment. Simplicity is key. While big companies are energized by micro-segmentation, a smaller business does not and will not have those possibilities. Therefore the saying "rather dominate one segment and be best there than be average or bad in many segments." – Focusing the areas of services down to what is essential.
When it comes to what a business is providing, the most common answer is either a service or a product. That's not what the customer thinks, however. To the customer, it is all about emotions, convenience, and lifestyle.
A chocolate manufacturer doesn't offer chocolate; he offers enjoyment, luxury, and the feeling of happiness. After a long day, he offers that long-awaited reward, the joy of children after eating supper, the energy boost in the most stressful situations.
One of the best and most compelling examples of this is GE's aircraft division. They have had the insight that airlines don't care about the parts. They mainly want their planes to work. This introduced a new business model called "power by the hour." Airlines would not charge for the parts anymore but rather for the flying hours they enabled. Every hour that a plane flies with one of GE's tools, GE is making revenue.
So what is it a business is providing? It enables the customer to do or feel something special. It is not selling a product or service. In a digital world, this means that the question of how can we provide our product or service online moves to how can we still offer that advantage a customer gets out of the product or service.
Now that we know what we are providing. The question turns to who the customer is that we are serving. In these questions, the customer is always the hero. The business is simply enabling the customer to achieve what he wants. In a way, it is like bad man and robin. The company is working in the background, pathing a comfortable way for the customer to take. The customer wants to go from A to B, so the airline provides the journey and not a seat in a plane that flies. Lufthansa has the slogan "non stop you." It is directly appealing to the customer's needs. Going from A to B without interruption. At the same time, the slogan also offers a great insight about the companies customers:
What follows would be the creation of a persona. Besides the common questions of demography, biography plays a considerable role. Is the customer a first-time mom, a business person, or someone who greatly cares about the environment? Things like these matter the most and should significantly impact the creation of a new business model. In a digital world, this also means how familiar the customer is with technology. A great challenge will also be how to create trust through technology.
This question mainly follows up the customer's needs and answers them. Above all, convenience plays an important role. It doesn't matter what the customer wants; it should be convenient to get. This is also the reason why many customers move online. It is more convenient. Great examples can be found in the world of banking, where digital banks dispense of physical contact entirely and still offer the same personal service online. It is much more convenient for a customer to do everything in one place – the online banking app – rather than drive to a physical location, wait for a consultant to be available, and only then have their problem solved.
Another example is the insurance sector. Implementing AI has given customers a faster response for the formulation of their contracts. So how does a business create value? Besides fulfilling the customer's needs and enabling them to achieve what they want, it also provides convenience.
What stands out is that digitization is a must. Digital transformation, however, is about creating a long-lasting path of advantage and survival. The challenges of the digital world we find ourselves in are endless, but as we always say: "The Future is Now!" It is essential to start now.
"Markets change, and business models have to change in parallel. Success depends on constant business model innovation. By keeping a steady focus on targeting the right segment with the right business model, you'll create years of profitable growth."
– Jonathan Byrnes and John Wass, HBR
As markets change, so does your business model. In an era of post-COVID, this is essential to survive. Creating a business model starts with two main things: Choosing a market segment and finding a business model that provides your target customer with greater value than the competition.