According to researchers at MIT, one common mistake 47% of organizations make, which results in billions of dollars of lost revenue, is not having a digital-first strategy.
A digital workplace has the potential to revolutionize a company, making it more competitive, and granting it the ability to save a lot of money.
But that’s not all.
A digital workplace benefits internal productivity, engagement, and satisfaction. As a result, the savings and success experienced to produce a ripple effect that is transformative all the way to their consumers.
Most business executives tend to blame their tech averseness or lack of familiarity with cutting-edge IT systems as the one barrier that stops them from pursuing a digital transformation.
These executives should consider which of the two is costlier - upgrading their current knowledge base and process or the possibility of becoming irrelevant in the modern industry?
While you ponder over this question, we're about to dedicate this post to explore the costs of not adopting digital infrastructure and pitch some real-world examples of companies that had to bite the bullet.
The Costs of Not Going Digital
1. Competitive Disadvantage
With new digital-only companies swooping in and disrupting the industry at large, organizations need to keep up and update their digital capabilities to stay relevant and agile. Among the best-known examples of this phenomenon are Netflix and Blockbuster.
People have stopped walking into a Blockbuster video store to rent video games or movies. This brand name is a glaring example of a company that refused to adopt a digital-first approach – a mistake that cost them to go out of business.
Reed Hastings had approached the CEO of Blockbuster, John Antioco to ask for an investment of $50 million for his company Netflix. During this time, Netflix was simply a DVD mailing service that could be ordered online by customers.
Unfortunately for Antioco, he was of the opinion that the service Netflix offered belonged in a niche market and couldn’t possibly grow into a large-scale business. The real problem in Antioco’s case was that he couldn’t imagine a world without video rental stores, whereas Hastings visualized a world where digital transactions were a lot more convenient.
Ultimately, Antioco had to decline the offer and in no time, Blockbuster was closing its doors to the public forever. On the other hand, Netflix managed to be valued at $196 billion in 2020. To put things in perspective, their net worth put them in the same runnings as media giants such as Comcast ($210 billion) and Disney ($201 billion).
2. Inability to Gather Data From Digital Platforms
Consumers nowadays are a lot less loyal to brands than they were three decades ago. Be that as it may, what do you think this means for companies nowadays? Well, this means that companies nowadays need to work harder to promote loyalty by understanding their customers.
Enter consumer data. This data allows companies to design content, engage with consumers on various platforms (the ones that matter to them, of course), and continually learn what is effective and what isn’t.
Without having access to these invaluable insights, many companies will be prone to making detrimental errors in their strategies. A couple of years ago, JCPenney, a company that used to be a giant retailer, made this mistake and, therefore, met its untimely demise.
JCPenney had tried to replicate Apple’s ‘wow factor’ by implementing a makeover period for their brand. During this time, they transformed their pricing strategies and the structure of their store but forgot to weigh in the consumer analytics and research to support these changes.
It was the vision of JCPenney to transform themselves into an honest and minimalist brand, and they even went as far as changing their tagline and logo. The only problem here was that all of these changes were based on gut feelings and idealism; they weren’t based on consumer insights and current trends.
Once the rebranding process was complete, it was painfully clear for the company that their efforts were a complete waste. The first quarter after the rebranding recorded that JCPenney’s sales had decreased by approximately 20% and only about 16% of their shoppers agreed with their new vision.
3. Losing Relevance in the Modern Industry Landscape
Research suggests that digital transformation speeds up internal processes at least 5 times more than traditional businesses. Without establishing a digital presence, it is easy for businesses to feel like they are lost at sea whenever they employ fast-moving strategies.
Nowadays, a key factor of success is agility and the organization’s ability to quickly jump into trending and viral subjects, which is also known as ‘newsjacking’. A couple of years ago, when Apple released the iPhone 6, the buzz around this product was that it could bend easily.
Seeing this opportunity, the marketing teams at Kit Kat released a Twitter campaign that was intended to play off this viral topic. The famous chocolatier used hashtags in their Twitter captions which quickly started trending and also gained the attention of various news outlets in a matter of days.
Kit Kat’s ad copy read, “We don’t bend, we #break. #Bendgate #iPhone6plus. The wit of their content team combined with their digital approach managed to bring the company north of 25,000 retweets in no time.
4. Struggle to Hire and Retain Quality Staff
Currently, the largest demographic working in offices are millennials and, very soon, Gen Z is going to start working their way into offices.
Both of these generations were born into the digital age and in a world where technological innovation is considered to be an expectation as opposed to a novel idea. Therefore, when they will be given a choice, it is highly likely that these employees will choose to work for companies that have adopted a digital-first approach to workflows.
These aren’t just mere forecasts in a random blog floating on the internet. The increase in the ‘gig economy’ is proof of this fact and about 34% of Americans make up for these freelancers.
For the sake of further explanation, we can refer to the example of taxi versus Uber services and how each industry is growing currently. Since the majority of taxi companies have failed to undertake a digital transformation, they have begun to lose a large portion of their staff.
As a matter of fact, there are currently around 14,000 yellow cabs circling the streets of New York. In contrast, the cars connected to ride-sharing apps amount to about 160,000, with 80,000 of these specifically partnered with Uber.
This market imbalance is mainly because of the difference in productivity in both companies. Back in 2017, these ride-sharing apps were found to be outperforming yellow cab taxis by 65% more customers per month. It is only fair to assume that these numbers will have grown significantly since then.
Sure, yellow cab taxis may still be in business, but the fate of traditional cab and taxi services is quite uncertain as app-driven services continue to increase in demand.
5. Risk Losing Market Share
Businesses that do not expand or evolve beyond their traditional processes are going to find it harder to retain their market share.
A fitting example of this phenomenon can be seen in the case of Borders, a once-famous retailer for music, books, and magazines. This company was also unable to adapt to a digital-first approach to business, which cost them their market share and eventually also led to them closing operations.
Among the first mistakes Borders made was to merge their organization with Amazon. Without having much of a digital transformation internally, they had begun outsourcing their online books to Amazon.
This bookstore had failed to predict the popularity of e-books and, therefore, never managed to develop their own e-reader to compete against Amazon’s Kindle or the Nook by Barnes and Noble.
During the ’90s, the business of CDs was also booming, and Borders had also placed a lot of emphasis on their brick-and-mortar music stores. Since they were unable to pivot to online music, the more digitally isolated brands began capturing the majority of their market share.
Soon after, Borders began drowning in debt, and eventually, had to close the doors to its bookstore.
Now is the Time to Adopt Digital-First Strategies
Did you know that 2/3rds of all the CEOs in Global 2000 organizations plan to adopt digital transformation at the heart of their corporate strategy? By availing of this opportunity, you can reduce your risk of losing market share, the interest of customers, and, inevitably, your revenue streams.
We hope all of the above information motivates you to transition your company to a digital-first business. In doing so, your brand will be well on its way to making all the right decisions to reap the benefits of today’s digital era.
If you wish to learn more about the latest trends in digital marketing, visit my website or feel free to contact me to keep the conversation going.