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CAN BE YOUR Company Squandering Digital Opportunities?

Many companies today neglect to start to see the threats and opportunities that new digital technologies represent. They neglect to notice that customers are increasingly being attracted to data-driven services and experiences, plus they neglect to appreciate the growing value of data and digital ecosystems for his or her business. Five traps specifically create this digital myopia: the merchandise trap, the value-chain trap, the operational-efficiency trap, the client trap, and the competitor trap. The writer discusses each, alongside ways to prevent them.

A lot more than 60 years back, Harvard Business School professor Theodore Levitt famously argued that companies often fail since they focus so narrowly on services and products they forget to bear in mind the larger picture: what consumers actually want. Levitt called this issue marketing myopia, also it remains an issue even today. Increasingly, however, companies are fighting a fresh affliction, that i call digital myopia.

Digitally myopic firms insist upon seeking to products, services, and industry attributes for competitive advantage. They neglect to observe that in todays world, customer preferences have shifted from these attributes to new data-driven services and experiences, plus they neglect to appreciate the growing value of data and the ways that digital ecosystems might help them harness that data.

For recent years Ive been extensively researching the main topics digital disruption, and for the reason that work Ive identified the five main traps that firms have to look out for if they desire to avoid digital myopia. In this post, Ill discuss those traps and suggest methods to overcome them.


Firms in something trap believe products to be their only revenue source, plus they dont start to see the new and enlarged role that modern data is now able to occupy within their businesses. They rely only on episodic data that’s, data generated by discrete events, like the shipment of an element or the sale of something. Episodic data allows firms to monitor inventory levels or sales performance in various regions. Thats important, but increasingly, firms today have a chance to gather and make the most of interactive data that’s, data streamed continuously back again to them as users connect to their products. Data used to aid products, however now products could also be used to aid data.

Consider sensor-equipped smart inhalers, which demonstrate that shift. Smart inhalers can remind users to create them on trips. They are able to prompt users to take their regularly prescribed doses. They are able to detect specific irritants, such as for example dust, pollen, or mold. For consumers, these data-driven features add convenience and value, plus they may also save lives. For companies, they add new revenue streams.

In order to avoid product traps, firms have to start considering products as conduits for interactive data. Many firms already are achieving this. Some embed microchips within their products (like smart inhalers); others use apps or websites. Allstate Insurance, for instance, offers apps to track driving behavior, assess risks, and incentivize safety. Abilify, a medication for bipolar disorder, embeds ingestible sensors that enable relatives to see dosage compliance. Not absolutely all products can or ought to be built with sensors, needless to say, but firms should be open to the theory that what they provide consumers can transform with new developments in the rapidly evolving world of sensors and the web of Things.

The Value-Chain Trap

Firms belong to the value-chain trap by believing that their value chains limit their business scope. Traditionally, firms have assumed that sales and after-sales servicing represent the finish of these value chain.

However they dont. Consumers whove bought cars, in the end, need roads, gasoline stations, and independent providers. Consumers whove bought lights need sockets, wiring, and electricity. During the past, legacy business models rarely took such product complements into consideration, because doing this didnt make business sense. But sensors and the web of Things have created opportunities for firms to expand their scope by doing that.

How? By creating totally new consumption ecosystems that’s, networks that generate and share data and utilize it for connecting product users to third-party entities who is able to offer product users additional related services. If your vehicle includes a sensor that monitors what your location is and how full your tank is, once the time is right, it could alert you that youre running low and show you to a nearby gas station. Streetlight bulbs with noise sensors can detect the sound of gunshots, set camera feeds going, make 911 calls, and summon ambulances.

To take part in consumption ecosystems, firms must extend their value chains into digital platforms, which facilitate exchanges using real-time interactive data. Smart inhalers can monitor environmental triggers; toothbrushes can connect users to dentists and health insurers; floor cleaners can sense mouse droppings or termite activity and connect users to pest services.

In order to avoid falling in to the value-chain trap, firms must develop processes to track new consumption ecosystems and discover methods to build new digital platforms. Consider Dubai Ports, a shipping company whose traditional value-chain scope includes shipping goods through their port-to-port container services. However the firm is currently making plans to track emergent consumption ecosystems offering a large number of third-party entities who unload goods and make last-mile deliveries, plus they are developing new digital platforms that may share real-time data, such as for example expected arrival times, with one of these third-party entities. This enables them to coordinate complementary activities after their goods land and expand their traditional value chain and its own scope.

The Operational-Efficiency Trap

Consumption ecosystems could be unfamiliar to numerous firms, but production ecosystems aren’t.

In production ecosystems, firms turn their internal value-chain assets, processes, and entities into networks for generating and sharing data. They could simply utilize it to automate order intakes or billing. Or they could exceed that and use sensors, the web of Things, and artificial intelligence to generate lights-out factories where machines intelligently connect to each other and enable plants to perform for weeks at the same time with little human intervention an innovation that may save huge amount of money. Firms may also generate data-driven services. Thats what Caterpillar does: It is rolling out a number of sensors and technologies to track wear-and-tear data on a large number of bits of its equipment because they operate at a huge selection of construction sites. This enables the firm to anticipate component failures and provide predictive maintenance, both which help avoid costly delays.

Boosting operational efficiencies has its advantages, its clear, but if firms think that operational-efficiency enhancements will be the only or the very best usage of modern digital technologies, they could belong to the operational-efficiency trap. And when that occurs, theyll underutilize their production ecosystems.

Preventing the operational-efficiency trap requires that firms fully exploit the energy of modern production ecosystems and design their business models accordingly. They need to work out how to make their value chains into data-generating and data-sharing networks with techniques that drive new services. The mattress producer Sleep Number did that by creating smart mattresses that gather data on customers heart rates and breathing patterns, which after that it uses to track their sleep quality. The firm is currently working on which consists of data to recognize chronic sleep issues such as for example anti snoring or restless-leg syndrome, that may predict heart attacks or strokes. Such data-driven services have made Sleep Number not really a mattress producer but additionally a wellness provider.


Firms belong to a person trap if they think about customers only as people or groups who buy their products. Most legacy firms belong to this category: They will have yet to identify customers as resources of interactive data; they dont offer smart products; plus they dont have plans to transform their legacy customers into digital customers.

Some firms belong to the client trap as the status quo seems fine in their mind they believe their product revenues are sufficient. Others think that their economies of scale in manufacturing, branding, and distribution will maintain their competitive advantage. These kinds of beliefs can blind firms to the brand new opportunities and threats that data and digital ecosystems can introduce. They are able to also prevent firms from recognizing the rising power of network effects, which improve the value of something for an individual user when that product can be used by numerous others. Again, consider smart inhalers: The bigger the pool of digital customers and third-party data providers, the stronger the algorithms that smart-inhaler firm can form and, subsequently, the more precise the info and warnings that the firm may then send back again to consumers.

In order to avoid the client trap and reap the huge benefits that data and digital ecosystems have to give you, you first need to amass plenty of data. Thats challenging. Marshaling network effects thus becomes important, and doing this involves finding methods to incentivize and attract digital customers. Digital platforms such as for example Facebook and Google give their core platform away free of charge but generate revenues from select platform users, notably advertisers. Legacy firms must get creative and devise similar approaches, tailored with their business conditions. Before you declare this impossible in your industry, look at this: Only a decade ago, can you have imagined that firms available of earning inhalers, mattresses, and farm equipment would today all have business models that involve monetizing the network effects developed by their digital customers?

The Competitor Trap

Firms belong to the competitor trap if they believe their competitors to be only those that offer similar products and dont notice new digital competitors or competitors who contend with similar data. Thats what happened to legacy Chinese banks, which lately have allowed Alibaba and Tencent to usurp a big share of the marketplace in loans by using their powerful digital platforms for e-commerce, search, payment services, and social media. Even though legacy banks knew how exactly to sell money for specific needs, Alibaba and Tencent used their digital platforms to comprehend the broader contexts where people were utilizing their money and that gave them an edge that the legacy banks didnt notice until it had been too late.

In order to avoid falling in to the competitor trap, firms must find methods to track their digital competitors. Not absolutely all will undoubtedly be digital platforms. Some could be startups, among others could be familiar product and industry rivals who’ve transformed themselves into digital competitors, as Oral-B (P&G) and Sonicare (Phillips) did in the electric-toothbrush industry by producing smart toothbrushes offering data-driven services.

. . .

Sixty years back, authoring marketing myopia, Theodore Levitt encouraged firms to routinely ask themselves: What business are we really in? He asked that question within an era of products, value chains, and industries, nonetheless it remains worth asking today. In order to avoid digital myopia and the five traps discussed in this post, firms must answer that question with techniques which are pertinent to a fresh era of data and digital ecosystem.

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