Winning Companies Embrace Digital Transformation Now
In today’s environment start-ups are upending incumbents. Identifying opportunities for digital transformation must be a high priority. Savvy organizations understand that innovation, when properly applied, can help even an average company create significant added value.
Consider, for example, a business-to-business supplier of auto parts that has always relied on a traditional sales force dealing with customers via phone, fax, and email. Now let’s apply innovation. It could be as simple as an enhanced digital presence, such as the introduction of a web-based interface, that now allows customers to check inventory and place their own orders online. An obvious yet effective innovation like this could lead to such value-adds as lower customer acquisition costs, improved customer relationship management, reduced selling and marketing expenses.
The same might be accomplished by applying digital innovation to a company’s supply chain management process. Or, by utilizing data from its ERP and CRM systems by leveraging the cloud may bring new ways to create value and enhance growth. These are all ways that digital innovation can create a more profitable, more efficient, more successful business—and the way that a firm valued at 8X EBITDA could ultimately be worth 10X.
By the same token, companies without a digital strategy may see their value plummet. Take, for example, a company
that lacks vital data about its customers. Perhaps the company is running its operations from Excel spreadsheets.
It doesn’t have the digital platforms to surface critical information and insights. It doesn’t know how much revenue is generated per customer and it has no way to forecast future revenue based on customer segments. Thus, a potential acquirer may think twice about investing in the business, or a lender may question the company’s ability to sustain and grow revenue over the term of a loan.
In today’s digital environment, the most successful companies are capturing information at a pace and volume never seen—and can make sense of it all in real time. This can provide significant competitive advantage. For example, unstructured datasets, including data from social media platforms, can help a company unlock previously unseen opportunities and identify previously unknown issues.
Some companies are differentiating themselves by aggregating masses of information from blog posts, Twitter feeds, and Facebook comments. They are then leveraging that data to build a better feature set for their next product release. This approach to analytics enables companies to quickly and accurately build the products and functionality that will have the greatest impact in the market.
A company can begin reaping the benefits of digital quickly and cost-effectively. The key is to start small, be flexible, and move quickly. By applying the tenets of agile development—rapid prototyping, continuous feedback, and constant iteration—companies can immediately put a digital strategy into action and reap benefits right away.
Successful digital transformations occur through continuous innovation—by radically changing business models and capabilities in measured steps, over time, and as resources allow. This agile approach empowers organizations to launch, learn and relaunch digital initiatives by swiftly reacting to changing market conditions and customer needs.
The digital world will continue to up the expectation ante. Companies that embrace agile digital transformation can radically change their business models, meet those demands head-on, and gain competitive advantage.
A digital strategy is no longer a nice to have—it’s a must have. Increasingly, there are only two types of companies: the disruptors and the disrupted. The right approach to digital can help an organization create a more profitable, efficient, and successful business—and ultimately increase its financial performance and value.
This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.