Last week I zoomed in on the more practical side of digital transformations, focused on the manufacturing industry[1]. This week, I would like to focus on the (B2B) service industry and their digital business transformations. As I have worked in different roles in the service industry –from media to logistics to banking- I have seen these steps take place and I would like to share these with you by looking at how the digital transformation is taking shape in the service industry.
In contrast to the consumption of goods, the consumption of services has less restrictions. Before, the use of services was restrained by the local nature of their consumption. In the old days, you would, for example, go to your local travel agency to book a trip. Digitalization changed the very nature of this ‘production’ and provision of services by introducing completely new technologies and service delivery platforms[2]. Now, we can all use technologies that are developed and rolled out everywhere in the world like AirBnB, Booking.com, Uber or Whatsapp.
As said before, there is no alternative to the digital transformation, as the digital transformation is crucial for surviving. Taking that in mind, it is shocking that McKinsey states that success rates of digital transformations do not exceed 26% and even digitally savvy industries like media and telecom are struggling[3]. Let’s focus on the service industry to see what is going on there.
Processes
The digital transformation is already under way for quite some time in the service industry. In many companies, the digital transformation started by digitizing[4] the operational processes or back office processes. This was the first and ‘easy’ step that a lot of companies took, for example by means of translating paper invoices to digital invoices.
During the digitizing of documents, the realisation came that also some improvements could be made to the processes itself. This lead to digitalization[5]. For example; harmonising processes around the globe or making processes more efficient by the use of technologies.
Next step is looking at the company and business model in a more profound way. The ‘real’ digital transformation. How can we align better with our customers? What are our competitors (or even companies in other markets) doing? We all know the examples of AirBnB disrupting the hotel market or Uber stirring up the cab market. How to prevent such new entrants from taking over your market? What does your digital transformation need?
Customer centricity & agility
Although the digitalization often started at the operational processes of a service company, it quickly realised it needs to align more and flexibly with the customer. Also, digital technologies change how we connect and create value with customers. The relationship with customers is now two way. Customers can review our company as well and influence our lead base[6]. Customer centricity is crucial here. It means being able to adjust to customer needs and basically get customers input fast. This usually means organizing the feedback of customers.
Organizations translated this close alignment with customers into working Agile (or SAFe[7]). Agile working means working effectively and in iterative feedback loops instead of waterfall. It means testing prototypes with customers and changing the product or service based on the feedback obtained during these tests[8]. Agility helps the organization to remain agile and react fast on changing customer needs.
Competition
Competition can come from inside our industry, but also from outside our industry. New digital companies can offer a service fast and could scoop your customers away. Even manufacturing companies are increasingly delivering services. John Deere for example offers precision farming instead of tractors. Or Rolls Royce that sells a service as the turbine hours in the air instead of the aircraft turbines itself[9]. Digital technologies are making it possible to offer these services, because it for example is easier to monitor the aircraft turbines with sensors and technology than it was before. This has implications for the level of innovations that is proceeding in your company.
Innovation & ecosystems
Since the competition is now more fierce and from more possible corporations, even outside the industry, it is important to create new services with added value for your customers. There needs to be a constant flow of innovations going on in your company. Organizing this, together with partners in an ecosystem, is key to keep a steady flow.
Omni-channel
Customers expect a seamless multi-channel experience when they contact your company. If they are contacting you in person, on Facebook, via Whatsapp, via your website, or any other way – customers expect to be treated the same way and get the same messages throughout all channels. Although this sounds logical and easy, looking at the scattered and legacy landscape of systems at a lot of companies, this poses to be a real challenge. Luckily with the digital technologies that are developed nowadays, it keeps getting easier to interface and connect the different (legacy) systems together and share the data so that the same personalized message can come across to the customer over all channels.
Data
Since the cloud, the storing of data is increasingly cheap, readily available and easy to use. The largest opportunity nowadays lies in the translation of the data into valuable, useful information[10]. The old adagio ‘garbage in equals garbage out’ still stands. It is essential to understand the basis of your data before you are able to interpret it and therefore you need to dig deep before being able to interpret data into information. New technologies like deep learning, machine learning or AI can learn from patterns in your data and translate this into useful information.
Inspiring example
An often asked question at service companies is: will we turn into an IT company? Or will we even turn into a fintech company or bank[11]? There is no silver bullet to surviving your company and the answer to the questions remain unanswered until now.
Fortunately there are inspiring examples of companies changing industries and showing what is possible when you use current technologies. Take for instance Lemonade; an American insurer. The speed with which Lemonade is capable of letting a customer know if their insurance request is accepted is surprisingly fast. It is in the range of minutes instead of days or weeks. The take out of your insurance is handled via phone messages, even submitting a claim can be done this way. Artificial intelligence handles the claim, it can even assess the amount of damage done based solely on pictures!
We are witness of exciting times and I cannot wait to see how the digital transformation at companies will develop!
In my next blog I will focus on digital transformations and ethics.
Please let me know what you think of this article by liking this article or putting your reaction in the comments. Thanks!
[1] Blog Digital transformation in practice – the manufacturing industry: https://www.linkedin.com/pulse/digital-transformation-practice-manufacturing-industry-anneke-veldink
[2] Source: Atlantis press – Transformation of the service industry in digital economy – https://www.atlantis-press.com/proceedings/mtde-19/125908835
[3] Source: McKinsey – https://www.mckinsey.com/business-functions/organization/our-insights/unlocking-success-in-digital-transformations
[4] Digitization is the conversion of analog or physical information to digital format – Read my blog – The origin and meaning of Digital Transformation: https://www.linkedin.com/pulse/origin-meaning-digital-transformation-anneke-veldink/
[5] Digitalization is is the use of digital technologies to enable or improve some business models or processes – Read my blog – The origin and meaning of Digital Transformation: https://www.linkedin.com/pulse/origin-meaning-digital-transformation-anneke-veldink/
[6] Source: Rogers, D.L. – The Digital Transformation Playbook, 2016.
[7] SAFe means Scaled Agile Framework – and SAFe is a framework of working agile for large corporations and enterprises – https://www.scaledagile.com/enterprise-solutions/what-is-safe/.
[8] Source: Lead innovation – https://www.lead-innovation.com/english-blog/agile-ways-of-working
[9] Source: Atlantis press – Transformation of the service industry in digital economy – https://www.atlantis-press.com/proceedings/mtde-19/125908835
[10] Source: Rogers, D.L. – The Digital Transformation Playbook, 2016.
[11] Source: a16z.com – https://a16z.com/2020/01/21/every-company-will-be-a-fintech-company/
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