Why do you need to think about the digital transformation of products and services? Selling your existing products in the digital channels is one challenge, but in the dot com and the web2.0 era, most companies have achieved this e-commerce capability – to some extent or the other. When competing with Amazon.com was the driving force, the imitators’ e-commerce capabilities ranged from clunky to passable.

Now, in the age of digital, the challenge is not just about selling something in a different channel. The goal and the challenges are two-fold: a) how to envision and launch digitally enabled products and b) for existing products as well as new digitally enabled products (virtual or real), what is the best way of enhancing the customer experience.

We will address the concept of customer experience transformation separately. In this article, the focus is some of the best practices in a digital transformation of products and services.

Digital Transformation of Products and Services

Digital Service Wrappers for Existing Products:

A digital service wrapper is to offer something to what is a hitherto brick and mortar service to make it more attractive to the existing and new consumers. Sloan Management Review cites two examples of digital service wrappers. “A national post office is creating a free digital mailbox attached to each physical mail address that companies can use as a substitute for a person’s physical mailbox. A business credit company is developing a digital business for some credit products that requires less involvement than their traditional high-touch offerings.”

The goal and the challenges are twofold: a) how to envision and launch digitally enabled products and b) for existing products as well as new digitally enabled products (virtual or real), what is the best way of enhancing the customer experience.

Another digital wrapper, that launched an entire industry is “Itunes” by Apple. It is arguable that the success of iPod is as much to do with the iTunes store as it is with the sleep design and sleeker marketing.
For your company, envision what can make the product more attractive that is digital and easily delivered and can augment the value proposition. Even if it is not revolutionary, the fact that you are trying will make the customer happy, and furthermore, after a few iterations or trials, you may have a winner on your hand.

New Digital Products and Services:

New digital goods and services are completely innovative and are new regarding the product or service, the delivery methods, the core value proposition, a new business model or a combination thereof. For example, the Amazon did not buy yet another data center but completely innovated on digitizing and offering what a new way of hosting  – the Amazon AWS. That new and seemingly arcane and technical service revolutionized and propelled the cloud business as we know it. Plus, today, AWS is approaching more than a $10 billion-dollar revenue a year for Amazon.

Digitally Modified Products and Services:

Digitally modifying a traditional product or service is another way to not only cannibalize the existing industry and be a disruptor but also generate a new wave of customers, who may not have bought the physical goods and services.

Audible did this very successfully by converting physical books to audio books. While the company may not have seen it, the advent of mobile phones changed the paradigm and made it more amenable to listening on the go.

And not to forget the good old Netflix. After destroying Blockbuster in its wake, Netflix reinvented itself by digitizing the media content and streaming the same.

So how can existing enterprises with a lot at stake, and the classic innovator’s dilemma at hand overcome the internal resistance and embrace the brave new world of digital products and services?

  • Data-driven Insights: Let data analysis of your enterprise as well the ecosystem it lives in guide your decision making.
  • Leapfrog: The whole success of industries in the past can be attributed to product proliferation and incrementalism. However, today there is a need to not be encumbered by the legacy of the past, or the comfort or the present, but focus on leapfrogging to the future. Forward thinking is a key value driver.
  • Experiment, but fail fast: Experimenting and failing fast is crucial in the digital age. Be agile in spirit. Do not design by committee and let every shiny new object be subject to the traditional product development and go-to-market approach. Rethink the old. Incubators, investing into other startups, a partnership with research institutions, acquihire of promising companies, hiring a new product development partner like say Pivotal Labs – all and everything should be on the table.

Is your company focused on Digital Transformation of Products and Services? Which digital products and services did you end up launching in the marketplace? Please share your experiences.

Learn more about the digital transformation of CRM and explore ideas for Transforming customer experience.