In the last issue of the Business Bulletin we had a chance to discuss what challenges and opportunities digital transformation can bring to businesses. In this issue, we discuss how newly established businesses can get on the ‘digital-wagon’ and use their ‘newness’ to their advantage over established, large and blueprint- heavy organisations where change can take a while to take place.
Digital transformation has many market leaders struggling to adopt new tactics, investing in technology and reshaping their company culture to effectively engage customers. Meanwhile, the leanness, flexibility and agility of successful start-ups allows them to do just that, whilst disrupting the markets they invest in. Start-up companies establishing new rules, making waves and going against the status quo is something that has caused major disruption to many industries. Digital transformation hinges on a few key concepts, and market disruption and start-up culture are a few of the major ones. Great examples are the success stories of Uber in the transportation industry, and Airbnb in the hospitality industry.
These are what newly established, small companies must use to their advantage in order to successfully disrupt markets, gain competitive advantage over established market leaders and create new norms. These norms can then effectively engage digital customers at every touchpoint in the customer experience lifecycle. Therefore, start-ups that can recognise markets ripe and ready for a digital disruption can use that information to their advantage as a way to guarantee success.
Everyone wants their start-up to be the next Netflix, the next Airbnb or Uber, but how can you recognise a market ready for disruption? Here are a few signs to look out for:
- Identify markets where power is consolidated, and a small number of companies dominate the industry. When companies adopt an oligopolistic behaviour, their incentive to innovate is low with a greater incentive to preserve the past. This means that with the emergence of digital transformation, a newly established competitor can cause these large companies to stumble, with their size working to their disadvantage when it comes to changing and adapting to new technologies- something that is not a problem for start-ups.
- Identify markets where consumers are using outdated technology. Markets where the major players are stuck using old technology are usually ripe for disruption. As in the point above, companies that have no incentive to evolve, usually have customers urging for something new that can meet their needs and wants better and faster. Establishing a new company with that in mind, can lead to higher customer satisfaction which can help a start-up gain ground.
Digital transformation will affect every industry, so it’s important for start-ups to understand the role they play in influencing this transformation in their respective markets, and then use that knowledge to their advantage.
So which key elements of digital transformation can start-ups use to their advantage?
- Invest in people, your most important resource to drive change. It’s not technology that changes the world, but people. Hence, a company’s human capital is its most vital asset. Bring people into your team that have a multitude of skills, are agile and technologically friendly.
- Remain adaptable and embrace flexibility. Adaptability is vital for a successful start-up, as it’s a competitive advantage over many larger established companies where change is very slow, and agility is not their best feature. This must also be reflected in the workforce, which must be flexible and adaptable.
- Create company culture that reflects everyone. It’s important to open company culture to all employees, to make sure it reflects the core values of its human capital, and the reasons that inspired you to start the business but also choose the specific group of people to work with.
- Listen to your customers, focus on the data. By valuing the data and the information it provides for your target customer preferences, you can ensure that the focus remains on customer experience. This means your company also remains relevant and adapts according to their needs.
In summary, whilst it is also important to monitor market trends and gaps where a new start-up can use to become established and successful, it is always important to remember that focusing on human capital, customers and the data is what establishes a successful new start-up, where digital transformation will be applied using these key resources to disrupt established markets.