Digital Transformation – what actually is it?
The threats have been going around for a while now: ‘If you don’t digitally transform your company your business will die’. But what does it actually mean? Should I build an ecommerce website for my brick-and-mortar shop? Should I put ads in Facebook and on Google rather than in the newspaper? Should I send promotional emails to potential customers rather than stuffing flyers into mailboxes?
Well, that’s actually not it. ‘Digital’ here refers to a much bigger picture.
The main cornerstone of digital transformation is the extensive collection of real-time customer data, and the analysis of these data to improve customer experience so they buy more of your stuff.
Let’s take as example your shopping experience in a retail pharmacy (traditional) vs. shopping at an online pharmacy (digital).
Say for example, every month you buy a 30-day pack of vitamin C. There is no point driving to the mall just for your vitamin C, so you just pop into any retail pharmacy outlet when you’re out shopping anyways – you just walk in, get your stuff, pay and walk out. Sometimes you buy late because you forgot, or the pharmacy is out of your favourite brand.
Then you decide to buy your vitamins online. You go to Google, search for an online pharmacy and click thru to their website. You put your vitamin C into your shopping cart and proceed to check-out. Since this is your first visit you have to create an account (name, address, email, phone number). Before you make the payment you will see a section ‘You may also be interested in…’ or ‘Customers who bought this also bought…’. You decide to pick up some of the joint cream for your aching knee from the recommendations. You pay and it gets delivered two days later.
What you may have hardly noticed is that the website’s machine learning capabilities just kicked in. Based on your shopping behaviour you were given personalized product recommendations. But it doesn’t end here. After 25 days you receive an automated email from the online pharmacy reminding you that your 30-day supply of vitamin C is about to run out, inviting you to return to stock up. And because you bought the knee joint cream earlier you receive an automated WhatsApp, inviting you to a free talk about knee pain that the retailer is organizing. These processes are all automated and are designed to give you highly personalized, valuable customer service. The more you shop at the online retailer the more details the machine learning algorithm will know about you, and the better service it will be able to provide. This will eventually lead to you buying more from this particular online pharmacy than you would have bought from the retail pharmacy in the mall.
In this simple example your personal data (name, address, email, phone number) and behavioural data (products viewed, products purchase) were collected and used to provide highly specific service for your individual needs. This level of personalization is nearly impossible to achieve in a traditional retail environment.
The pharmacy in the mall would need to ‘digitally transform’ their operation by also developing an online presence. Only then would it be able to provide this level of value to their customers, which eventually would increase their (online) sales and reduce their overheads (online = no shop rental).
In addition, the online pharmacy can also use their historical purchase data analysis to predict future buying patterns, so products can be automatically ordered from a supplier before they run out. For example, every year some regions in Malaysia become flooded. This causes people to buy more anti-diarrhea medication during those times. The online shops artificial intelligence could monitor seasonal weather patterns and order more charcoal tablets when a monsoon is approaching, allowing for just-in-time delivery of the new supply.
To sum it up, a major part of digital transformation is really about collecting as many customer specific data as possible in order to provide the best personalized value. The consumer will appreciate this level of individual service by buying more. Another part of digital transformation is to use data for predictive analysis tools in order to be ready before the business actually knows it.