Forbes names Bain term Digical top 10 trend for 2015

16 January 2015

Earlier this week, Forbes released its top ten business predictions of 2015, including ‘digical’ on #2, a term recently coined by consulting firm Bain & Company. But what is being digical? delved into Bain’s report, finding out that ‘digical’ is the phenomenon of a merged digital and physical. According to the consultants, the phenomenon is expected to have a massive impact on diverse industries and businesses across the globe.

In a recently release survey report, titled ‘Leading a Digical transformation’, covering 300 diverse businesses, Bain & Company explored the growing fusion between offline and online. Bain found that it is no longer a question of only digitalisation or only the traditional “analogue” modes of engagements, but that the future transformations of businesses and product innovation will require offering users a joint physicaldigital experience; the combination of digital and physical elements create wholly new sources of value. The phenomenon dubbed ‘digical’.

Leading a Digital transformation

Business transformations
Human beings are active experiential beings, engaging with things, touching and playing are part of an engagement with our environment and other people. Digital technologies often have a passive element, they present information and while allowing us to play with the information, the concepts are not tacitly grasped; the other is not seen. Bain, in their survey of the fast paced digital “revolution” that has swept many segments of social interaction, note that care must be taken to not overstep one or the other domain – an element of both, electronic information and physical interaction, needs to be part of the innovative spectrum businesses develop in their engagement with people.

According to the advisors, the demand for the phenomenon they identify will intensify over the coming decades, and digical products and services are already spreading throughout a number of industries and changing the landscape in which competition occurs. Bain finds that the demand on transformation toward digical innovations and engagements may follow some key trends:

• The impact ranges widely: Industries occupy remarkably different points on the transformation curve. Change has been more than three times as extensive in media, technology and telecom industries as in oil and gas, mining and construction. Other industries are spread out across the curve.

• The biggest change is yet to come: The next several years will bring far more innovation to most industries than they have seen in the past. Automotive, insurance and many other businesses are poised on the verge of far-reaching Digical transformation

• Wild cards can affect the pace of change: Some industries—but only some—will be held back by external factors such as regulatory measures.

Projected Digical transformation by industry through 2020

Mastering the game
Of the 300 companies surveyed, digical innovation struck few as a surprising development. However, for 80% of those businesses, little enough attention had been placed on transforming their products or services into digical innovations. Bain’s analysis explores the way companies are responding to the digital physical development, finding that Digical innovators in virtually every industry pass through three quite different stages of development.

Most companies are just getting started and come in different shapes and sizes according to the report, with pioneers in slow moving industries as well as those behind the times in quickly developing arenas. Beginners are still figuring out how to experiment with new Digical fusions while maintaining their core business. They are still trying to identify their customers’ needs and frustrations. They may be slow to innovate, and they are likely to have a lot of money invested in older technologies. Their organization is probably siloed and their culture conservative. 

Typically companies in the Intermediate stage have already launched some Digical initiatives. Instead of merely responding to threats from rivals, they are out to beat the competition. If that requires making big investments in new technologies or seeking out new customers, so be it. The future may be scary, but in an Intermediate’s view, it can’t be avoided. Though many Intermediates still have only average infrastructure capabilities, they are testing and learning aggressively. Organisationally and culturally, they view Digical goals with enthusiasm, though individual units may be protective of their unique skills in this area. Executives of Intermediate organisations often create new performance metrics (such as loyalty or market share of the most attractive Digical customers) to focus the efforts and build confidence in the new direction.

Your next steps depend upon your companys situation

Companies that have reached the Expert stage have usually been at it awhile. They perceive the possibilities of the Digical revolution, and they have moved from competitor benchmarking to customer path breaking. They have the integrated systems and tools required to enable change, and they invent new capabilities as they go. Organisationally, they are one team, with a unified culture and few skill gaps. Typically, experts don’t rest on their laurels—they realise that their own innovations face constant threats from newer ones. As a result, they constantly test new approaches and push the limits of what’s possible. Digical is no longer an add-on; it is part of the way they do business.


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Four ways digitalisation is transforming car brands and dealers

16 April 2019

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”