I've long been amazed at the challenges organisations face in adapting to this hyper-connected digital age. Organisations of over 30, 50 or 100 years of standing are being outmanoeuvred by agile and innovative digital startups. This leads me to ask myself, will these digital slayers ultimately defeat the old guard?
To test this theory we ran a workshop at Digital Shoreditch event in London. To kick off the session we used insight from over 400 organisations collected by PA's Digital Barometer that looks at how they were adapting to the digital age. We showed that 78% of those respondents classify themselves as somewhere between 'Digital Dabblers' and 'Digitising Today'. Of that group, 62% have the ambition to create a new Digital Tomorrow for their organisations which could mean the creation of completely new propositions underpinned by digital, the creation of new value chains and radically new business and commercial models. This is great ambition, but here's the rub. Only 18% understand what this will mean for their businesses and less than 30% feel they have the right mindset to succeed. Given those damning statistics, what did our workshop feel the outlook was for the retail and banking sectors – will they conquer or succumb to the slayer? I drew on two of our sector experts, Simon Masters for Retail and Bruce Whitney-Low for Banking to introduce a good dose of sector insight to get the debate flowing.
We took a good look at the retail sector…
On one hand we see the likes of John Lewis growing revenue and profit in tough times with £1.4 billion of revenue from online sales and over 50% of those orders picked up in store. On the other, we see Amazon Retail struggling to make a profit each year and offline retailers with market leading net promoter scores and growing market share. A certain win for the traditional players then? No, the majority verdict was that traditional retailers would be overtaken by the slayers. This is because the digital bias of Gen Y and Gen I (middle children of the information age!) opportunities for digital personalisation, online convenience and flexible fulfilment options and in-time 3D printed goods create a strong case for the slayer.
So would the banking sector succumb to the same result?
Well, we ran this workshop at Digital Shoreditch in 2013 and the slayer conquered retail there but failed to defeat the financial services sector. So would the inertia and hubris of financial services make it immune from defeat or not? Well, to my astonishment the room voted overwhelmingly for the digital slayer. Banking scandals, real estate as a liability, legacy issues, lower cost to entry and the opening up of the market by the regulator fuelled this decision.
Reflecting on the result I feel the future could pan out differently. Whist certain categories of retail face significant threat from digital, it's up to the retailers to transform and deliver a superior experience to attract and retain their customers in store and online. Some categories will continue to shift online, but the physical experience remains a significant factor for many categories.
When 3D printing becomes mainstream and advanced enough we'll see another shift in the industry, but that's a good few years off for now. For banking and FS however, many of the traditional players will survive, but unless they disrupt and update their value propositions they'll be picking up the low value parts of the financial value chain whilst the digital slayers continue to grow customer advocacy and ownership, and create significantly higher margins through digital.
So, in short, much of this is in the hands of the financial and retail incumbents to adapt and change. Many are making great strides but are they enough? While you ponder that, have you thought about how digital could reshape your value chains or are you still focused and struggling with digitising the processes of yesterday while the slayers prepare to reshape the economics of your future?
To view Rob's presentation at Digital Shoreditch Festival, please click here.