9 Digital Innovation Myths
A new article published in conjunction with La Fosse Associates: The nine Digital Innovation Myths by Kristine Kirby, Managing Director of Digital for Pragma.
Kristine was previously E-commerce and Multichannel Marketing Director for Monsoon Accessorize, E-commerce Director at Hackett and Home Shopping Director at Fat Face.
Read the article here
Myth One – Digital innovation and digital transformation are the same.
Transformation is the moment you commit to digital, whether that’s integrating ecommerce with the rest of the company or making tough decisions about which parts of your staff are not digitally native, and therefore are no longer fit for purpose. Ask the important questions – do you know your KPIs? Your customers? Do you have a transformation strategy? Are you clear on the limitations of your tech stack, or do you have a robust legacy system that can still be used for a few years?
With clear answers, you can move forward to innovation. Answer the crucial question: how can you stay as competitive as possible in an increasingly crowded market? Innovation can be incremental – referred to as ‘marginal gains’ in Formula 1. Finding a solution to a minor problem can increase conversion, engagement, or any of the other elements that move the dial. These opportunities are everywhere. Always keep your customer front of mind – how can you make your company more useful to them, so you can build loyalty and repeat business.
Myth Two – Innovation involves creating an Uber or a Deliveroo.
Innovation doesn’t always involve disruptive products and services. I’m always on the lookout for ‘wedge’ businesses, which create another cash-flow angle from a process that was already being carried out internally. One example is Buzzmove, a house-moving business who realised they were creating a digital record and value of items, which had great worth in insurance. The data gathered in the packing process became more valuable than the original business. Many more businesses will get created this way – Blockchain is a simple example because its distributed ledger lends itself to wedge models.
Myth Three – A business can commit to digital innovation without changing the wider company.
Innovation permeates the entire company, setting a new foundation to grow from. Businesses must agree a budget, set clear KPIs and make changes to management or modify managerial technique, alongside comprehensive adjustments to supply chain and planning methods. A strategy is a living, breathing organism, and needs to be consistently refreshed. No three-year plan is ever right beyond 18 months – three years ago, we couldn’t have anticipated the impact of Alexa, Google Play or Augmented Reality (AR).
You need flexible management who emphasise collaboration and cross-business pollination. House of Fraser’s recent figures have been shocking, largely due to their rigid management style, amongst other factors. It’s the management’s responsibility to bridge communication issues between people who have grown up natively digital and those that haven’t, but are willing to learn.
Businesses must adjust to suit ‘millennial’ job expectations. Experiences and learning are more valued, which drives an increase in career movement; some to gain experience in complimentary areas, and some in vastly different ones. Institutions will lose the employee knowledge bases built on decades of experience, leading to increased dependence on external trusted partners to sensecheck or develop strategy, carry out research, or encourage.
Myth Four – This means that all past strategy needs to be scrapped.
It often means that multiple strategies need to align in one strategy. A customer’s Lifetime Value is still important, using the Pareto principle that proves you get 80% of your revenue from 20% of your customer base. Data analysis enables differentiation between customers; a Tier 1 influencer may make minimal purchases, but a massive impact driving Tier 1 buyers, each of whom spend thousands annually. Customer data enables us to make our client strategies much more focused and relevant: we can run an algorithm which identifies the top 5% and tailors a CRM and loyalty scheme which reflects a customer’s purchases.
Myth Five – Implementing digital will drain your resources.
We’re in the second-wave of digital. You don’t need to buy an IBM or a SAP – there are brilliant open-source ecommerce platforms like Shopify and Magento. Newer retailers can compete with larger ones, without the albatross of legacy systems holding them back. The cost of digital strategy will be made back several times over, provided you have a considered strategic partner, and use those specialists to help co-develop it.
Focus on spending time rather than money – no matter how savvy the business, it takes several months to gather sufficient data about customer behaviour, product sales, etc. Devote time to content: customers should know who you are, where you are, and what you offer them, your USP and ‘ease’ factor. Customers are time-poor, so businesses which try to make a customer’s life easier, with a compelling offer tailored to their life, will always lead.
Sticking hard-and-fast to rigid company targets is the wrong way to go – digital moves fast, and flexibility must be built into any strategy.
Myth Six – Digital can be separate from the rest of the business.
Sometimes CEOs allow digital implementation to be a key talking point, but it never gets off the ground. Why? Because it’s rarely native – if you’re doing digital correctly, your entire work force is engaged, from the top down.
Some companies try to address the issue of transformation or innovation by hiring a CDO. This is like trying to plaster over cracks in the wall – do they have a budget, authority, the right to issue directives? Do they have a team? Why are you are hiring them besides saying that you have a CDO? For their role to truly add value, they must be given a wide role and business support from the board, C-Suite and below.
Another method is to have innovation ‘hubs’, often located in London to target the best talent, even when the business is based elsewhere. It’s impossible for them to do anything meaningful because they are untethered from the business. All they can do is come up with ideas, but they too frequently lack the tools to ensure any innovation is based in the art of the possible.
Myth 7 – Data analysis is just used to show us where we have gone wrong.
Having a truly innovative attitude to data means not being restricted to looking for problems and identifying who is culpable: ask bigger questions than ‘why didn’t we sell as much of product X as we expected.’ Use data to improve the user experience – like implementing variants of emails, a CRM programme, a loyalty programme, or even creating in house algorithms to automate a large part of curation for the customer.
Constantly pursue relevance: tailor ‘special offer’ emails to arrive when a customer is most likely to be online shopping, and have the products based on their behaviours or cohort. Personalised touches like this increase audience engagement, help build customer loyalty and lead to higher rates of data exchange because the customer can see the value they get from sharing data.
Myth Eight – Private Equity investment horizons restrict them from investing in digital.
Sometimes PE house’s concern for a portfolio’s EBITDA can mean they hold fire on digital. They will have carried out due diligence, but many factors are difficult to assess comprehensively until they are on the ground in the business. However, I’ve noticed more PE representatives at digitally-focused events, and many houses are becoming more knowledgeable as their recruits are becoming younger.
They’re coming around to the idea that if they let the companies invest in the early years, not only will the asset grow, but the sales will continually uptick, and they will end up with a higher and more stable valuation. Private equity is savvy, they know that they have a window on a business, and if the case can be shown, they will invest in tools and technologies that reap large dividends – both financially, and also via customer loyalty. Made.com is a brilliant example of this.
Myth Nine – There’s nothing left to play for.
The market is so wide – It’s been predicted that ecommerce will comprise 30% of the UK’s retail in six years, and 25% of that in the US. By 2027 it is said that over $1 trillion USD will be generated annually via digital shopping and services.
Within 3 years, Amazon, Alibaba and eBay will control 40% of the earth’s ecommerce. As all are marketplace models, this is an opportunity – if you are a new business that has found a niche, go for it.
Whilst marketplaces are great in early days to build awareness and reach a wide audience, owning your customer is key, and some of the customer is ceded to the platform. The merchandising is done by the platform, so you cannot gather data, create tailored loyalty programmes or understand why something is selling. Also, the feeling engendered by the crafted content on a brand’s actual website differs from the purely factual approach that marketplaces offer. Tread carefully and think about why you are doing it, for how long, and how you would ideally be selling if you had unrestricted funds and talent.