Some must always have the latest version; others hide behind their paper newspaper. Our children grow up quite naturally with it and don’t know it any other way. In recent years, digitalization has turned things upside down: the distribution of knowledge, communication and the shaping of public opinion. It has swept across many sectors like a tsunami. For some, the water is still up to their necks.
Some people still think that it will pass by. “I believe in the horse. The automobile is a temporary phenomenon,” they said 100 years ago. Even though tourists here in Vienna still enjoy a nostalgic journey through the city center on a horse-drawn carriage, today’s everyday life is dominated by cars. Not least due to higher environmental awareness and the congestion of the streets, we are also experiencing a massive upheaval in this industry. Just like in other areas of life, the focus is shifting from the proud possession of a “holy tinplate” to the satisfaction of the need for mobility – with massive effects on the industry, which is trimmed to cost-effectively tailor a tinplate dress to the customer’s body.
But let’s look at another industry that is more advanced in the process and that everyone knows – the music industry. The American music association RIAA publishes the development of sales figures very nicely on its homepage:
We see in this curve the effect of digitalization: the whole last century the revenue came from the sale of physical media. From 1985, the CD replaced the long player and cassettes in the mass market, but the new medium hardly changed the business model. When the MP3 compression algorithm began its triumphal march at the turn of the millennium, the business collapsed. Panic-stricken, they tried to save the melting profits. The first reaction was to set up regulatory walls. Files were copyright protected and pirates were prosecuted.
The criminalization of customers, however, was not particularly conducive to business. The chart shows very clearly that streaming providers took over the business in 2010 and that sales are now yet back on the level of the good old days. Today it is also convenient to have a Spotify, Apple or Amazon music subscription at home. Much better than before, because you can choose from the entire music pool. All in all, I spend even more on the product “music” than before. I didn’t afford one CD a month back then. However, the competitor landscape in the industry has changed completely. In the meantime, completely different companies are big players.
This development is exemplary, but it is spread across all industries: photography, newspapers, travel. It has even arrived in the public sector. The digital transformation is gradually affecting all industries and changing them sustainably. Elementary questions also arise in society when dealing with them – above all in the protection of privacy vs. convenience.
Incidentally, the financial sector is still trapped amid upheaval. Especially in the retail sector, the old understanding of a house bank is fading away and banks are looking for their place in the future money business.
So, what to do when the digital tsunami comes. Jo Caudron has described 5 steps in his book “Digital Transformation”:
- Insight: recognize the problem
- Impact: What does this development mean for my company? Am I prepared?
- Scenarios: What can I do?
- Business case: How can I implement this; how does it pay off?
- Trend watching: what do others do, how does everything develop?
For the analysis of the impact, he uses 5 drivers that shed light on different aspects.
Ultimately, the central question is: What needs will my customers have in my area over the next few years and how can I best address them? So, the focus needs to shift away from the own storage shelf to the understanding of the customer.
The customer’s needs to determine the product. In this respect, we do well to understand it precisely and to align our company accordingly.
How about you?
Do you already privately use the results of digitalization?
How far has digitization progressed in your industry?
Is your company already digital?