THE THREE MISTAKES THAT ARE KILLING YOUR BUSINESS AND THE DIGITAL INNOVATIONS YOU NEED TO SURVIVE
Do you communicate and connect with customers the way they prefer, or do you stick with the same processes that worked 20 years ago?
The cost per handoff can be significant; can you afford to have your process delayed by a week?
How much more valuable would your product or service be if your customers could access it instantly? How big an advantage would this give you over your competitors?
Businesses who fail to innovate generate 12% less revenue, are 32% less profitable, and are worth 17% less, according to independent research carried out by MIT and Capgemini Consulting1 . With more than 500,000 new businesses created each year2 , SMBs face a tough environment in which only the strongest and most innovative survive. Like the shark, which suffocates if it stops swimming, businesses must innovate and grow, and in the face of rapid change, it is inevitable that some businesses will die.
Is your business moving fast enough to survive, or are you just treading water?
History is littered with the names of businesses that entrenched themselves in the status quo and refused to move forward: Xerox, MySpace, Kodak, Polaroid, Borders, and Blockbuster, to name just a few. We remember these businesses because they are large, but the truth is that for every Kodak, there are a 1000 SMBs who failed to survive,
and whose names we have forgotten. Xerox, for example, failed to see the value of innovation and paid a heavy price. Revolutionary technologies they created, such as the mouse and laser printer, weren’t brought to market. Instead, they allowed their competitors to use them. Today, Microsoft and Apple are household names, while Xerox has lived up to just a fraction of its potential. Even Microsoft is not immune. In 2005 Microsoft had a 95% share of the consumer computing market. Just one year later, having failed to predict the popularity of the smartphone, Microsoft was down to 49%. Today, Microsoft’s share of this market is at just 26%3 . SMBs are even more vulnerable to these mistakes, lacking the financial clout to help them survive. Slow, data-poor decision making, manual processes with time-consuming hand-offs, and a failure to connect with customers at their level are common and costly mistakes. Successful businesses innovate to survive, doing whatever they can to improve their service and their underlying processes.
According to Gallup, 71% of B2B customers are indifferent or disengaged4 . When you fail to engage your customers, you run a substantial risk of being replaced by a competitor, even if the quality of your products and services are good. For example, a recent customer of ours was losing business because every time a customer picked up the phone to request the status of an order, or the certificate of origin for a part, they’d have to wait 24 hours for a response. Customers were leaving for more responsive competitors. We built a customer portal which allowed customers to instantly find the information they needed. Not only were the customers happier but this also substantially cut down on the office time spent handling requests.
In another example, Starbucks’ growth caused countless independent small businesses to close. How was it able to do this?
CEO Howard Schultz and COO Kevin Johnson believe it is Starbuck’s digital transformation that has helped them stay ahead of their competitors, not their coffee5 . Starbucks is succeeding by connecting with their core customers, millennials, in a way that works for them. Without these innovations, independent coffee stores are facing an uphill battle; their service is slower, less convenient, and less relevant to their target market. With more than 20 million members, the app-based Starbuck rewards program, which also allows mobile payment, is fueling growth. 21% of payments are taken by mobile, and My Starbucks Rewards members spend three times as much as other customers. The recently announced 25th consecutive quarter of global store sales growth is proof that these innovations are working6.
Gallup found that high performing businesses that successfully engaged their customers experienced 50% higher revenue, 34% higher profits, and 63% lower customer attrition7 . Successfully engaging with customers in the future will require you to connect with millennials in the ways that they prefer, often through customer portals or mobile apps.
Businesses that rely on manual processes spend 63% more time capturing documents, waste 66% more time looking for information, and make 42% more errors than businesses that have efficient systems for capturing and sharing data8. In a typical business without one core integrated system, 83% of the systems can’t interact with one another, instead relying on busy employees transferring data manually9.
That’s exactly the problem one of our customers had. During one hand-off they experienced a delay of 24 hours because their accounts team had a constant backlog of work, and that was just one hand-off out of a total of 31 they counted! Overall their process was slowed by a week because of these inefficiencies.
We built them a system using a central database that removed these handoffs, substantially decreasing their cycle time and giving them a key competitive advantage.
By automating your processes, you can eliminate expensive mistakes and hand-offs, significantly reducing your cycle time.
Improving businesses through automation has been around since Henry Ford pioneered standardization. Digital automation is the next evolution of this key business strategy.
Companies can experience a boost of 5-6% in productivity and output by making use of Key Performance Indicators (KPIs) and Analytics, according to research from MIT10. The researchers found that companies with a culture of data-driven decision-making outperformed those that didn’t, enjoying a higher market value, in addition to the boosts to output and productivity.
A recent customer of ours, employing around 1000 people, found that they were losing tens of thousands of dollars a week in overtime payments because they lacked the real-time data necessary to make good decisions. The business provided managers with information pulled from several separate sources, a process that took a week. This delay prevented them from course-correcting quick enough, leading to excessive overtime payments.
A KPI dashboard provides them real-time visibility into their most important business processes, allowing them to substantially anticipate and avoid overtime payments and increase the speed of their decision making. A key component of good decision making is an understanding of KPIs; statistics that help businesses measure their performance against their strategic objectives. Financial reports done at the end of the month are about past business. When businesses make decisions on past information, it is like driving a car through the rear view mirror.
With real-time information, you drive your business looking through the windshield. Hazards and opportunities are more visible, enabling you to change your business accordingly. Real time information can significantly improve your decision-making speed: Businesses using an integrated system to manage and interpret their data experience a 36% decrease in the time it takes them to make decisions, giving them a vital strategic advantage over their competitors11.
Digital innovation holds the answer to these three mistakes. The right software and processes can help your business connect with your customers better, increase the speed of your decision making, and replace time-consuming manual processes.
The Great Innovation Robbery: Are You Getting Robbed by One-Size-Fits-None Off-The-Shelf Solutions?
Over the long term, being forced to use an inefficient process is much more costly than the 5 investment in a custom solution that supports your optimal processes. The implemention and configuration of off-the-shelf software, plus the impact on staff performance due to the changes to your processes, adds further insult to injury.
A custom solution matchs your ideal processes exactly, so the only changes you make to your unique business processes are ones you’ve identified as innovations to improve your business. For example, Tesla recently developed and implemented their own custom solution in-house in just four months, rather than spend a year or more configuring an off-the-shelf solution12. By saving months of time and getting their solution to market quicker, Tesla avoided the hidden costs of an off-the-shelf solution and ended up with a solution that better suited their existing processes.
For many businesses, like Tesla, it is better to choose a unique solution that fits the business than to change key processes to suit a piece of software.
What Skills and Resources Are Needed?
Digitally transforming your business processes requires someone that understands both your business and the technology available. An optimal solution requires both: understanding one or the other is not enough.
You will need skills and qualities such as process mapping, project management, software development life cycle experience, and a clear understanding of business.
1. Capgemini Consulting – The Digital Advantage: how digital leaders outperform their peers in every industry – https://www.capgemini.com/resource-file-access/resource/pdf/The_Digital_Advantage__ How_Digital_Leaders_Outperform_their_Peers_in_Every_Industry.pdf
2. Statistics Brain – U.S. New Business Statistics – http://www.statisticbrain.com/new-business-statistics/
3. Seattle Times – Goldman Sachs: Microsoft has gone from 97 percent share of compute market to 20 percent – http://old.seattletimes.com/html/microsoftpri0/2019853243_goldman_sachs_microsoft_os_ has_gone_from_more_than.html
4. Gallup – B2B Barriers to Organic Growth (Part One) – http://www.gallup.com/businessjournal/188993/less-one-third-b2b-customers-engaged.aspx
5. Diginomica – Starbucks settles into the front row of digital transformation – http://diginomica.com/2015/11/02/starbucks-settles-into-the-front-row-of- digital-transformation/
6. Seeking Alpha – Starbucks: Strong Growth Waves Expected – http://seekingalpha.com/article/3969924-starbucks-strong-growth-waves-expected
7. Gallup – B2B Barriers to Organic Growth (Part One) – http://www.gallup.com/businessjournal/188993/less-one-third-b2b-customers-engaged.aspx
8. Aberdeen Group – Handling Paper in a Digital Age: The Impact of Document Management – http://www.docstar.com/wp-content/uploads/2012/07/Aberdeen-document-management.pdf
9. Aberdeen Group – Simplify Life at Work with a Single System to Manage Your Business – http://www.culex.co.uk/media/Make-Life-Easier-with-ERP.pdf
10.Ebusiness.mit.edu – Strength in Numbers: How Does Data-Driven Decision-making Affect Firm Performance? – http://ebusiness.mit.edu/research/papers/2011.12_Brynjolfsson_Hitt_Kim_Strength%20in%20Numbers_302.pdf
11. Aberdeen Group – Handling Paper in a Digital Age: The Impact of Document Management – http://www.docstar.com/wp-content/uploads/2012/07/ Aberdeen-document-management.pdf
12. Mendix – Tesla CIO Builds ERP In-House in 4 Months, Says No Time for ERP Upgrades – https://www.mendix.com/think-tank/tesla-cio-builds-erp-house-4-months-says-time-erp-upgrades/