Business Strategy Imperatives
The Hybrid Business
The pandemic is widely considered to have accelerated the “digitalization” of the economy. This trend has now well passed the “tipping point” where there is no going back. This digitized state is reflected in the fact that the top digital stocks in the S&P 500 have collectively more than doubled since the pandemic began while stocks of companies with limited digital impact have eked out only small gains. The AFATMAN[1] group of stocks alone has soared in value from $4Tn to almost $8Tn in the last twelve months.
The main impact of the digitalization phase of industry transformation is the formation of new value propositions and business models that frequently leverage capabilities built in the Internet of Things (IoT). It is not the end of the digital road, however. The next step is digital transformation, where digital technology transforms everything: value propositions, operating costs, the economics of the business, the organization itself.
The best way to thrive in this rapidly changing landscape is to embrace and leverage digital divide. Since successful digital-first companies tend to tackle the single most important impediment to commerce – friction! – they are well positioned to continue to gain share against their more “analog” competitors, who have a harder time reducing the number of process steps and delays and adapting their offerings to markets which are digitally enabled. Such frictional elements detract from the customer experience by increasing transactional complexities, mismatches with needs, or other inconveniences. So what are companies whose value proposition depends on the analog world of real assets and real people to do?
[1] Alphabet, Facebook, Apple, Tesla, Microsoft, Amazon, Netflix.
Hybridization
The answer is hybridization of everything: space, value propositions, customer engagement, product development, operations, logistics. etc. The way to do this is to identify and eliminate through digital capabilities as many sources of friction in purchasing and using a product or service. Such a program touches every part of the business.
Reducing business friction involves taking an experience approach into all customer interactions: experiences that reduce friction in all aspects and touchpoints. Reducing friction increases perceived value, drives meaningful differentiation and loyalty, leading to real revenue gains along with lower costs. In this way you can repurpose and recharge not just real assets but the whole business.