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Digital Business Is Here: How Will You Compete?

Mitch Lee< Mitch Lee September 5, 2017

How can we compete with Amazon? That’s the million dollar question for most retailers – and other companies should be asking the same. B2B or B2C, large enterprise or small business, every brand would be well served to take a look at the many things Amazon has done right over the years. While you may not directly compete, there is a lot to learn from how this technology company giant has redefined retail and ecommerce.

Digitization continues to disrupt virtually every industry. In my last post, I talked about MoviePass and their new $10-a-month subscription model. Using the most powerful profit lever – price – the company shook up the 100-year-old motion picture industry and began building a massive database of movie goers. With data being king, the company now has significant opportunities to partner with other companies not directly in the motion picture industry.  Think of the obvious things – activities related to a “night out at the movies” – restaurants, ride share companies, florists, etc.  And then try to imagine what insights can be drawn from that data to make the “night out” that much more enjoyable and effortless.  Then, work on your breakthrough, radical connection: convert those insights to adding value into all those non movie-night transactions.  There are tremendous new revenue streams coming from the ability to deliver a premier customer experience. In the age of digitization and increasingly savvy customers with high expectations, experience is the name of the game.

Amazon understands the importance of customer experience. What started as a smart ecommerce strategy (‘because you bought this book, you might also like this book’) has now grown into an intimate understanding of their customers, what they value, at what price, and when and how they want to engage. Armed with this customer insight, Amazon can not only meet customer expectation, they can deliver perfect-fit experiences that encourage brand loyalty.  Even to the point of charging an annual fee for the privilege of perhaps having purchases show up a day or so earlier. Prime much?

Fruits Grocery Bananas Market

Amazon Transforms Whole Foods

Take the recent Amazon acquisition of Whole Foods for example. When Amazon bought the specialty grocer, they immediately implemented changes they believe to be a better fit for customers, including last week’s announcement of significant price cuts on certain items. (Items that drive store traffic, but that’s a topic for another day.) They have also announced they will extend special in-store discounts to Amazon Prime members and allow online order pick up and returns to be made at the grocer. Amazon is not only building a solid omnichannel approach with Whole Foods customers, they are creating a valuable customer experience.  And one that is sticky: if you thought shopping at Whole Foods was difficult for competitors to match, imagine how much harder that will be with data-driven insights.

Each of these strategies are made possible by data that tells Amazon what customers’ value. And that insight is made possible by digital business. Improved efficiencies and reducing costs will always be important elements of your profitability but even more valuable to your bottom line is understanding your customers and responding with the right offer at the right time at the right price.

Consider taking a page from Amazon’s playbook and digitize your business processes because any steps taken toward digital business are well worth it. According to a new study by SAP, 80% of companies that have undergone ‘digital transformation’ efforts reported increased profitability compared to 53% of companies who did not. And a strategy of “do nothing” has no viability – especially for established companies.  A new study by McKinsey shows digitization enables competition – making it easier than ever for new entrants to bring their offers to market.   That means more pressure revenue and profit growth. Current levels of digitization have already taken out, on average, up to six points of annual revenue and 4.5 points of growth in earnings before interest and taxes (EBIT).   It’s more work than ever just to “stay even.” And most boards aren’t interested in “staying even.”

Maybe you are one of the lucky ones – you don’t have to compete directly with Amazon. For now, anyway.  But if you think you are safe, check out the B2C story unfolding with Google Express partnering with Walmart as one way to better compete, and realize that digital transformation moves very quickly. Applicable business processes will jump the gap from traditional B2C to areas that were once reserved for big, heavy B2B organizations.  But remember, we are all fighting for customers – no matter where you are in the value chain. As Amazon raises the bar and customer expectation grows, we all need to rise to the occasion.