Most of us are aware that if our business is to have a long-term future, then some form of digital transformation must take place.
Now, contrary to popular opinion, installing a new software package or revamping the business operations model doesn’t indicate “digital transformation”…
Your CEO can’t point to that and proclaim “Look, we’ve done it! Digital transformation!”
No, it’s much, much more than that.
Digital transformation is about fundamentally changing your organization – both culturally and technologically – to better deliver value to your customers.
The online, connected, digital world we live in has substantially raised the bar at which customers measure us against. They expect things to be done right and to be done quickly.
So if you’re not meeting customer expectations, then you can be sure they’ll move on to someone who will…
But what does digital transformation look like in practice?
Let’s look at a few examples of how some household names were able to overcome the biggest barriers to digital transformation and reshape their business.
Table of Content
Examples of Digital Transformation
I’m going to walk you through seven examples of digital transformation in the following areas:
- Logistics and Operations
- Customer Experience Gap
- Customer Engagement
- Economic Model
- Product or Service
Logistics and Operations (UPS)
A great example of digital transformation is UPS.
The American shipping and supply chain management company used digital tools to synchronize its operations and logistics strategy to better meet customer demand.
Now, the two customer experience challenges UPS faced were:
- Fast delivery
- Real-time package tracking
They managed to improve both through the effective use of big data analytics and AI (artificial intelligence).
Firstly, UPS developed a tool to manage its fleet system called ORION (On-road Integrated Optimization and Navigation).
The machine learning software’s algorithms create optimal routes for delivery drivers using data coming in from the field (package deliveries, pickup times, past route performance, etc.).
With the average UPS driver making over 135 deliveries per day, any ongoing route optimization is going to have a huge impact on customer experience.
Not only that, but ORION also helps reduce the company’s carbon footprint.
On average, ORION saves UPS about 100 million miles, 10 million gallons of fuel, and $50 million.
UPS’ EDGE (Enhanced Dynamic Global Execution) is a collection of a dozen or so ongoing projects that leverage data to improve internal operational processes.
For example, the system helps engineers decide how and where packages should be sorted, how trucks should be loaded, and even when they should be washed…
An initiative to come off the back of EDGE is the equipping of Bluetooth receivers to delivery trucks to reduce the likelihood of misloaded packages.
The receivers warn workers if a parcel is placed into a vehicle that’s not headed to the package’s destination.
Network Planning Tools
UPS’ final digital transformation project, NPT (Network Planning Tools), is designed to streamline the flow of packages within the UPS network.
Again, by analyzing real-time data NPT helps engineers identify and eliminate bottlenecks, decide on optimum delivery transport, how and where shipments should be combined, etc.
Ultimately, UPS has saved millions of dollars in operational expenses but more importantly met and exceeded customer expectations.
Customer Experience Gap (McDonald’s)
Digital transformation could also be called “customer-led transformation”.
Because essentially, it’s about realigning your organization to meet customer needs through digitization.
Now, the digital era has completely changed the field we compete in. Customers demand more of us as they become accustomed to the instantaneous delivery and consumption of goods and services.
Unfortunately for us, this means customer experience gaps will likely have opened i.e. a giant void between what they expect and what you’re delivering.
This is something McDonald’s realized fairly quickly.
Rather than “make fast food, faster” the McDonald’s team wanted to reduce the customer experience gap by innovating the customer journey.
They decided to do so by focusing on CX (customer experience): Improving in-store, drive-thru, and home delivery (ordering, payment, mobile) systems.
So, they began to ask themselves (and customers) where those gaps were widening.
How could they improve the in-store ordering process? Could customers perhaps order via their mobile devices? Would that reduce waiting times? What about in-store digital ordering kiosks? Would that be something customers are interested in?
And what about drive-thrus? Is it safe to integrate ordering into a smart car ecosystem?
In McDonald’s case, digital technology such as interactive ordering units, AI drive-thrus, and smart mobile app experiences have helped them reduce that customer experience gap.
Customer Engagement (Dominos)
When thinking of digital transformation examples and the innovative use of technology, pizza probably isn’t the first thing to come to mind.
However, Dominos is a standout example of digital transformation done right.
Back in the mid to late 2000s, the organization found itself amidst a crisis.
Customers complained that:
- The product tasted “cheap,”
- The crust was more akin to “cardboard,”
- The sauce tasted like Ketchup…
- It was a “poor excuse for a pizza company”
Not only that, but stock prices were also plummeting. The future wasn’t looking so bright for the Pizza delivery company.
However, led by CEO Patrick Doyle, Domino’s turned things around. They acknowledged their pizza sucked, brought in a focus group, and identified what needed to be done to improve the product.
This was marked by the launch of their “Oh yes we did” campaign.
In a short video, executives read out some brutally honest feedback on camera, much like an episode of “Mean Tweets” on Jimmy Kimmel:
After speaking with the focus group, Doyle also identified the need for stronger customer engagement and improvement throughout the delivery process.
To do this, Doyle gambled on digitization. He believed that building rock-solid IT/R&D divisions would allow the business to invest and develop new digital innovations.
As such, Dominos became the first delivery company to launch its “Pizza Tracker” – technology to keep customers updated on the progress of their orders.
Shortly after, their IT team launched a mobile application in 2011 through which customers could make their orders. This quickly became the dominant ordering channel.
In 2015, they went a step further by launching Anyware – a system that allows customers to order from any number of devices, including Amazon Echo, Google Home, Siri, Smartwatches, Smart TVs, Slack, Facebook Messenger, and Twitter.
If you’re still doubtful of the impact digital transformation can have on your organization’s success?
Consider that between 2010 to March 2017, Domino’s share price massively outperformed those of tech incumbents such as Amazon, Apple, Facebook, and Google.
Economic Model (Dropbox)
The advent of digital technology has completely transformed traditional economic models for operating a business.
This is why we now see so many SaaS (software-as-a-service) companies dominating their respective industries.
In fact, all of the Blitzscaling patterns for business model innovation derive from SaaS organizations:
Think of the now common subscription model used by companies such as Netflix, Spotify, and Dropbox.
It’s a major departure from the traditional enterprise software economic model; selling permanent licenses for on-premise software and charging for annual maintenance costs.
This old, rigid model accrues enormous overhead costs and requires significant investment in field operations staff. Consequently, licenses had to be in the six-or seven-figure range, and customers locked into 5-year contracts to make the model work.
Subscriptions on the other hand are far more flexible, can be renewed on a monthly basis, and provide vendors with larger market access and better distribution.
Another digitally-enabled economic model is Freemium, with Dropbox one of its premium examples.
The idea is a free version of the product is used as an enticing “tool” to attract a critical mass of users, while a paid version of the software with additional features allows businesses to make money once its value is clear.
A type of try before you buy model.
Dropbox used this model to attract over 200 million users with a simple proposition:
Everyone who enters a username and a password gets 2 GB of cloud-based storage for free.
If you need more space, you can opt to upgrade for $9.99 a month and 2 TB of storage.
Product or Service (Netflix)
A mistake many executives make is they focus so heavily on the product, that they forget about the customer need it’s actually serving.
As the customer experience evolves, so must your product. If not, you risk the customer experience gap widening until eventually, you’re left irrelevant (and without any customers).
The most famous example of this is of course Blockbuster and Netflix.
The video rental company’s monumental rise and fall is a warning to all of what should happen if you fail to adapt to a rapidly changing customer need.
Between 1985 and 1992, the video rental chain grew from a single brick and mortar shop in Dallas, Texas, to over 2,800 stores.
At its peak in 1994, Blockbuster was acquired by Viacom for $8.4 billion.
All seemed to be going along swimmingly.
In fact, in 2010, Netflix co-founders Marc Randolph and Reed Hastings approached Blockbuster CEO John Antioco about a merger proposal, where they’d manage and expand the store’s online services.
Antioco laughed them off…and the rest, as they say, is history.
In 2010, Netflix signed deals with studios such as Sony, Paramount, Lionsgate, and Disney. That same year, Blockbuster filed for bankruptcy.
Hastings predicted as far back as 1999 that the future of media was in online streaming, saying:
“Postage rates were going to keep going up and the internet was going to get twice as fast at half the price every 18 months.”
Netflix Business Model Canvas
So, how was Netflix able to survive when Blockbuster did not?
Because they never lost sight of the true value they offered customers; delivering affordable home entertainment.
They were able to identify a shift in customer needs and use digital tools to close out that customer experience gap, transforming from a DVD mailing service to a fully-fledged digital media giant.
Infrastructure and Scaling (Spotify)
Sometimes in order to meet customer needs, organizations must be willing to adapt, change, and scale their processes internally.
One of the standout examples of this is Spotify.
The music streaming service doesn’t operate a traditional, hierarchical structure. Instead, they’ve opted for a model that encourages experimentation, efficiency, and accountability.
The “Spotify Model” is similar to an Agile “Matrix Organizational Model”; engineers and team members reporting to a single area (product owner) but work within a cross-functional team.
That is to say, people are grouped into Squads, where people with different skill sets collaborate to deliver a great product or feature.
This is the vertical dimension in the matrix, and where people spend most of their time.
The horizontal dimensions are for sharing knowledge, tools, and code. For example, it’s good practice that certain roles (Python, JS engineers, etc.) align on best practices and organizational standards.
Another way to look at it is:
- Vertical dimension as “what”
- Horizontal dimension as “how”.
This Agile structure has led to what Jason Davis and Vikas A. Aggarwal referred to in their HBR article as complex continuous innovation.
Spotify, at first glance, might seem like a simple music-streaming service. You log in, search for a song, playlist, or genre you like and hit play.
Of course, the reality is that delivering these features requires an extremely complex combination of behavioral prediction algorithms, innovation, and seamless cross-departmental collaboration.
So successful is the “Spotify Model” at identifying opportunities and adapting them quickly to the platform, that they’ve been able to keep the mighty Apple at bay.
Higher Education (ThePowerMBA)
The current MBA system as we know it is broken.
Let’s face it, they’re insanely expensive, available to only a handful of people, and in most cases, require putting your life on hold for 2-3 years.
It’s a gamble most professionals can’t afford (literally and figuratively) and explains why MBA applications to traditional business schools continue to tumble year after year.
This has left the door ajar for ed-techs such as ThePowerMBA.
Thanks to digital technology, they’ve been able to reverse the economic equation with an innovative new business model.
Rather than target a privileged few, ThePowerMBA’s business program is an affordable alternative for anybody looking to advance their professional career.
The program is made up of a series of video lessons – covering management, digital marketing, strategy, entrepreneurship, finance, and accounting – recorded and distributed using modern technology.
This makes ThePowerMBA’s higher business education model scalable without sizable investment. The programs are sold without incurring the primary costs of the traditional brick-and-mortar model:
- No classrooms
- No buildings
- No campuses
- No recurring wages for lecturers.
Thanks to reduced overheads, ThePowerMBA can offer students high-quality content from world-class business leaders such as Eric Ries (co-founder of The Lean Startup) and Steve Chen (co-founder of YouTube).
And because these 15-minute classes are available from any mobile device, the content can be consumed as and when it suits students.
Another perfect example of customer-centric digital transformation.