Published: 17. 2. 2016 in Blog

The four levels of digital adaptation

Improving growth in disruptive times

What does the digital economy mean to traditional companies?

Digital economy for traditional enterprises mean the expansion or redesign of their 
existing business model and the introduction of new values, customer segments, products, services and channels to increase profit. These internal changes shall be based on the combination of a classic approach and internet capabilities.

Threat and opportunity

That is why the digital economy is at the same time an opportunity and a threat for traditional enterprises. The threat comes from not reacting and time and protecting the existing customer base from three competitive sources:

  1. New disruptive startups, as they use new digital business models to grab part of the market;
  2. Global players, as their entrance to the local market has low entry tag;
  3. Companies from other industry verticals that can use their communication channels and customer base to expend into new business.

For example, the dollarshaveclub.com startup is stealing part of Gillette customers. PayPal, Google, Apple and other global companies all have their mobile wallets and payments apps and are penetrating new geographies and taking away business from local banks. Retail (Tesco) or telecoms (Telenor, Polkomtel, MTS) are starting banking operation as much as banks (Tinkoff) are venturing into online insurance.

An additional threat is the change in customer needs and habits, who now constantly search for more convenient offerings. If, properly approached, this recession and disruptive times represent a growth opportunity for traditional enterprise. But it is not an easy task.

After many years investing in optimizing internal processes, it is not so easy to adapt to the new reality, where everything turns around customers. The right approach is an open and transparent communication and collaboration with the customers. Connecting to customers and exposing all internal secrets to the outside world are not easy steps. But they are obligatory ones if a company is to achieve growth in the digital economy. Many companies are considering their website, where they push all information about their company and products to their clients, as their entry into digital economy. But, then, they are seriously surprised that it is not giving the planned results. In order to understand the opportunity of digital economy, we came up with four stages of digital adaptation as a measure for companies on their way to digital. Of course stage 0 means that a company is not present on the internet, which is very rare case nowadays.

The four levels of digital adaptation

Level 1: Simple web presence

The company has a website, where it pushes static information about itself and its products and services. Although the company is paying attention to design and content, there is no real communication and collaboration with customers. Benefit of such online presence is limited and depends on uniqueness and value of products and services. For most of the companies this is a must cost, but it is a limited opportunity for growth and new business through the digital channel.

Level 2: Sharing internal information

Website has an interface to one or more internal applications. Examples are internet banking sites or shipment tracking systems. There is a significant benefit for both customers and company and there is a reduction of cost of operation. As soon as it becomes standard for the industry, it is no longer a competitive advantage. There are limited capabilities for additional growth, if this channel is not used for direct communication and collaboration with customers and for added value offerings.

Level 3: Customer Collaboration

Real two-way communication and collaboration is added to improve user experience. The goal is to assure a great user experience across all channel, on any device and from anywhere. Omni-channel combines in-store, through partner channel or direct online collaboration with customers. Customers are engaged: they collaborate, participate and share. Communication is personal and relevant for customers (based on analytics) and assures that values and the interest of customer are accounted for.

Level 4: Sharing smart, the internet of things

Getting user permission to collect data about user behavior and activities in application, via social networks, mobile devices or additional sensors and devices. The promise for the user is high value, personalized service and information based on analyses of collected data. The benefits for the company are the increase in profit by raising value for the customer and offering the right products and services to the right customers at the right time.
If the company is able to achieve the stage four, their chances for new growth opportunities are high.​

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Branislav Vujovic

Branislav Vujovic

President New Frontier Group
Strive to become better

Branislav Vujovic is founder and also president of New Frontier Group and has overall responsibility for the New Frontier Group, with special focus on Innovation, M&A strategy, group strategy and investor relationship.

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