The Digitalization triumvirate: How incumbents survive

1. The incumbent´s curse

• Many argue that incumbent firms are too strongly committed to current operating models,
organizational structures and routine behaviors that inhibit them from embracing new
technologies
• Significant changes affecting incumbents require new ways of thinking and companies must
create dynamic business models that trigger self reinforcing cycles of growth
• Incumbents can use their own digital experience as a strategic evolutionary asset to engage
disruption positively, regardless of the source of disruption

2. Strategic inflection points

• Inflection points are opportunities for change
• Incumbents failed to recognize key inflection points and found themselves trapped by an
inbred inability or unwillingness to change even in the face of much customer frustration (e.g
online banking in the financial sector)
• Linchpin among a lot of disruptive start-ups has been digital technology
• New technologies challenge traditional business models and are rapidly changing and
reshaping markets – it can still provide opportunities for incumbent firms to enhance and
expand their product and service portfolios
• Incumbents are integrating digitalization into existing capabilities but have likely failed to
adequately take stock of its digital transaction platforms

3. Digitalization within the incumbent´s operating model

• disruption is less a single event than
a process that manifests itself over time
• Incumbent operating models are
compromised of the three types of digital
transaction platforms ( shown in the
figure) that facilitate exchange within the
business model´s triumvirate
• Doing business is no longer a linear
process but rather a triumvirate with all
three players holding equal power in the engagement
• Today, technology is the connecting force behind the creation of the business digitalization
triumvirate

3.1 Process digitalization

• It compromises the technological toolkits that companies use to interact with the channels
like salespeople, distributors etc.
• Goal of process digitalization is operational excellence with a focus on automating
information processes among employees internally so that engagement between channel
members and costumers are as informed as possible
• Process digitalization enables incumbent companies to support the customer journey, end-
to-end, back office-to-front office, whole also fending off the born-digital competition
• Done right it will provide a company with a wealth of customer information in the form of a
data triad that created value for the incumbent firms
 3.2 Communications digitalization
• Digital technology can improve customer service, reduce engagement costs and enable reach
• Digitalization provides companies with a vast amount of information about buyer behavior
• Communications digitalization is where channel members ca bring high touch to the
technology world
• The triumvirate´s goal in communications digitalization is high tech and high touch for
improved engagement and enhanced service

3.3 Buyer digitalization

• The goal here is making he customer feel a part of the company and the company a part of
the customer
• It enables companies and channels to target consumers with product information and
advertisements
• It also means that engagement must be in real-time so the audience does not lose interest
since the path to the purchase has been shortened dramatically

4. Incumbent digitalization of the triumvirate: An example

• For incumbents, operational excellence relied on the sales person´s ability to know and
understand his or her customers – digital marketplace has brought forth many changes to
what was once a liner relationship
• Process of digitalization has created a niche market of suppliers that enable direct selling
companies to operate successfully on the company channels
• Digitalization has reshaped the way incumbents in the direct selling marketplace think about
direct selling. Digitalization has not changed direct selling as a channel but rather merge the
best of traditional social selling with technology to create a high touch-high tech marketplace

5. The incumbent evolution

• To survive incumbents have to be digitally agile and take advantage of customers´ digital
expectations
• Incumbents often do not have to create a new form of digital but rather the incumbent likely
has ready access to digital disruption capability in-house or trough third-party vendors
• Incumbents should use their experience in an industry as a position of strength
• To remain competitive incumbents should:
• Embrace digital disruption as an opportunity;
• Understand the different types of digitalization within the digital triumvirate;
• Assess the existing business model to determine what needs to change;
• Capitalize on technologies the company has in-house and from the marketplace;
• Cross-pollinate digital ideas from other industries, companies, or business lines;
• Inspire digital disruption that leverages current products, strengths, or customers;
• Invest in requisite employee and channel member training;
• Pivot quickly as speed can be a strategic advantage;
• Develop a culture of digital prioritization

Powered by TCPDF (www.tcpdf.org)