It doesn’t seem to add up. Why are the likes of Uber, Airbnb and JustEat having such a huge impact in their corresponding markets – threatening the status quo of businesses that have been around for years, brands that have taken decades to evolve and have masses of loyal customers? Why are only 61 companies from the inaugural “Fortune 500” list of companies created in 1955, still standing today? Why in 1956 was the life expectancy of a firm in the “Fortune 500” 75 years – when today, it’s only 15?
The answer lies with digital.
There is no denying that we are living in the golden age of mobile and it is clear to see the consumer’s love affair with everything digital, is not slowing down. In this hyper-connected world, we are no longer looking for new and improved digital capabilities – we demand them.
According to Fujitsu’s Digital Inside Out study into digital enablement in the UK, more than a fifth of UK consumers will now always opt for a digital-first approach when such service is offered – from online banking to online tax payments, and even one in five people would vote for a political party focused on digital policies.
This trend of digitisation has forever changed consumer behaviour and in response, company marketing strategies have changed too – adapting to cater to this digital demand.
Indeed, many of today’s heritage brands like Marks & Spencer, John Lewis, Tesco and Barclays Bank have all jumped on the digital bandwagon – broadcasting that their products and services can be accessed across an array of digital channels, around the clock. In fact, the Financial Services industry has excelled in supplying to this demand. According to Fujitsu’s findings, investment in digital has catapulted Financial Services as the people’s hero in digital offerings.
However, some heritage businesses are still falling behind their younger, fresh-faced competitors in terms of digital capabilities. This is because their back-end digital infrastructure is not keeping up with their front-end offerings.
The clean-slate benefit
The new kids on the block are covering all bases – offering customers the most up to date digital services, while adapting modern IT infrastructure internally. Due to the benefit of starting with a blank sheet of paper, start-ups can design their business based on a ‘digital first’ foundation.
Heritage businesses started in a different age, with operations and logistics systems built on the basis of people and cumbersome processes – when discount vouchers were made of paper and getting someone to sign up to a newsletter was someone standing on the street with a clipboard, taking addresses then logging them manually into a database. These and other legacy systems are difficult to move away from – tried and true processes on which these older businesses have built their success.
However, compared to their start-up counterparts, such an approach is slow, inefficient and costly. For heritage companies, their digital front ends are merely “lipstick on the pig.” Yes, that “pig” may be alive and well, so few CFO’s believe they can justify its replacement. However, if they want to compete with the “gazelles” of the farmyard, they must adapt more agile technology – crucial in this fast evolving world.
For example, some utility companies still have service agreements to answer customer complaints within ten days. That was acceptable in an era when most complaints were made in writing and responses were sent out by second class post. But in today’s interconnected age with the likes of email and social media, consumers want instant answers. Some of these “legacy” businesses have been built on a ten day window to log, process and allocate complaints to the right department; they simply do not have the back-end infrastructure to cater to today’s customer expectation. New entrants however, start from a different paradigm and can design their business models with today’s consumer demand in mind.
Think long term
After spending decades building up their technology infrastructures, heritage companies now need to decide which systems are past their expiration dates. It will be no easy feat. Moving from outdated applications to newer models is a complex, high-risk process but one vital for gaining the agility, cost-savings and ability to compete within an industry that they might have once dominated.
With the digital landscape continuing to develop, there are now more ways than ever before to interactively engage with consumers. To take advantage of this situation and keep up with this demand, businesses need to take a holistic approach to transformation and ensure there is investment in reactive digital solutions in the right areas – front and back – based on consumer demands.
