Unlocking the Four ‘Baskets’ of Value from the Digital Economy

Capturing value from the digital economy can be difficult to navigate and a somewhat overwhelming journey for many organisations — the rapid rate of innovation creating a wide spread of opportunities across each industry.

These opportunities are fuelled by the digital mega trends disrupting every organisation covering social media, cloud computing, channel integration, real-time analytics and smartphone penetration resulting in an unparalleled shift in consumer behaviour.

To help steer the ship through this digital maze, PwC suggest focusing your business strategy on the ‘four baskets’ of digital value.  These will ensure your organisation invests in the opportunities that matter most and deliver long term success.

The ‘four baskets’ of digital value include:

1. Revenue uplift – increasing sales through digital channels

2. Cost reduction – improving enterprise productivity through mobile and social technology

3. New monetization models – growing your business through new commercial innovations

4. Future value – investing in today’s generation for the future growth

1. Revenue Uplift

The explosion of digital channels has enabled many organisations to achieve substantial revenue uplift across their existing product streams through unparalleled access to new markets and customer segments.

In today’s era, traditional business models are being forced to transform in order to remain relevant to the changing consumer and competitive landscape. With smartphone penetration predicated to hit over 90 percent by 2015 in Australia, the global facebook user base now over 800 million users and the online shopping sector carving up to nine percent of retail spend in some countries, the use of traditional methods to engage and sell toall customers simply won’t work.

Organisations must leverage these new channels to increase product sales and engagement and deliver a true multichannel offering that increases average customer spend. True multichannel shoppers tend to purchase four times as much as traditional store only shoppers.

Leading global retailers such as Macy’s, JCPenney and Nordstroms, are enjoying the success of their investment in online, mobile and in-store ecommerce facilities, which has created an environment where the consumer has choice to shop, anywhere and anytime, resulting in revenue uplift across existing product lines while not cannibalising store sales.

Question to consider – How can your business capitalise on a multi-channel framework to enhance the consumer experience?

2. Cost Reduction

Digital technology has created significant opportunity with the rise of global collaboration, efficient communication processes and real-time connectivity. For organisations this same technology can be utilised to drive internal value through productivity efficiency, resulting in reduced operating costs and increased output.

Apple is a great example of a company that has leveraged the power of smartphone devices across its retail network, enabling employees to access and manage all operational requests through their internal iOS application including product checks, sales and customer management requests. This has created an empowered, efficient and knowledgeable retail workforce, resulting in more quality time spent with their customers at the point of sale.

Question to consider – Is your organisation creating obstacles for your employees or supporting them through efficient technology enabled processes?

3. New Monetization Models

The digital revolution is creating unlimited opportunities for innovation and commercialisation. New businesses are able to grow from garage start ups to global powerhouses within a few years, regardless of the competing industry. No matter what the size, businesses must be investing in the future and identifying new models, products and revenue streams to ensure long term success or risk being left behind.

Amazon, one of the world’s leading ecommerce organisations, is a perfect example of how a company can capitalise on the new opportunities presented by digital change. Founded in 1995, originally as an online book store, Amazon has now grown to serve over 30 million customers globally, diversifying their offer to include publishing, web services and even consumer electronics which they recently announced would be selling through physical retail stores starting with Seattle, USA.

Amazon’s growth clearly highlights the value derived from investing in new monetization models and is a great example regarding the imminent risks, traditional organisations face if they are too slow to change.

Question to consider – With industries converging and barriers for new entrants reducing, how will your organisation survive and still compete in the future?

4. Future Value

An organisation’s future value is derived from today’s investment in digital capability. This should not be under-estimated. We are already seeing investment analysts placing a greater emphasis on an organisations level of digital maturity when evaluating stock price recommendations; this ‘perceived’ value is just as real as revenue growth for any business.

The digital landscape moves at an increasingly rapid speed, whereby new opportunities created in the marketplace may be gone before they are clearly identified. CommBank (Commonwealth Bank of Australia), provides a current example of this, illustrating the value of investing for tomorrow today, as seen by the launch of their Kaching banking application.

Kaching is an industry leader in many ways, attempting to revolutionise the way payments are made through mobile devices and social media, enabling peer-to-peer and contactless payment through an iPhone application. Commbanks investment in this evolving space creates significant future value, positioning them as leaders and providing competitive advantages in technological capability and consumer mind share. Considering the global mobile payments industry is tipped to hit over 670 billion dollars by 2015, this current investment creates significant future value for the organisation.

Question to consider – What do you wish you had invested in five years ago, and what should you invest in now for the future?

* Note – this blog article first appeared on http://www.iStrategyconference.com, Feb 2012