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Making a Case for Digital Transformation: Part II

digital transformation

In my last blog post, I covered an example of why you should take digital transformation seriously. I looked at Tower Records - a disrupted business, within arguably the first disrupted industry, Media and Entertainment. Interestingly, according to McKinsey's latest research, this is now the industry with the deepest perceived digital penetration, at 62% (see diagram below).

McKinsey Chart

I’m now turning my attention to other end of the scale. If we believe McKinsey's research, automotive and assembly, together with CGP, are the two laggards when it comes to perceived digital penetration, at 32% and 31%, respectively. So, what does a ‘digital laggard’ industry look like? Here art three quick points of view for automotive (spoiler alert: digital still hits hard).

Car Manufacturers are Becoming Tech Companies

Without doubt, the automotive industry is undergoing significant disruption. This is primarily from electrification and autonomous driving;

  • Electrification: Last month, Volvo announced it would go all electric, saying that every new car will have an electric powertrain available from 2019.
  • Autonomous Driving: According to Intel, self-driving cars will create a $7 trillion-a-year industry by 2050.

But we’re also seeing new business models for automotive, enabled by digital. We have Uber, obviously - which itself has spawned a new lexicon (we’re being ‘uber-ized’). But we also have vehicle sharing apps; Zipper, Zimride, Liftshare amongst many others. And we can see other digitally-enabled transformations such as; in-car infotainment, new traffic services, and other ‘who-knows-yet’ models and services enabled through new levels of connectivity, infrastructure and channels (incl. voice activation). I wonder what our in-car experience will look like in 10 years? I doubt my six year old daughter will ever learn to drive, never mind buy a car.

Tech / Digital Disruption is Attracting New Players

In April 2017, Tesla glided past Ford in market value. The following month it was GM’s turn to be overtaken. Tesla is now the largest U.S. car maker by market capitalization. This seems absurd when we compare the business stats below. Ford and GM are automotive titans that have built nearly 1 billion cars between them in a history spanning more than a century. Tesla is less than 15 years old and has never made a profit.

Q2 Chart

Car Companies are Having to Reinvent Themselves

Ford Motor Company is 114 years old. When they established their innovation centre, they didn’t build it in Detroit, their headquarters. They set-up in Silicon Valley, with the tech start-ups. They’re still struggling to keep up. This recent graphic from the Financial Times shows car makers are continuing a downward trajectory of global brand rankings, at the expense of the rising tech stars. If you thought digital was hype, or major car manufacturers could easily keep up, think again.

Digital vs Car Companies

According to McKinsey, the automotive industry is perceived to be one of the least digitial industries - but I’m not seeing it. It looks like digital penetration is well underway and will completely overhaul this industry. So, what can automotive learn from digital and what can Digital learn from automotive?

Customer Journeys

When thinking of a customer journey in the context of the automotive industry, most people probably imagine some sort of road-trip. In digital, however, we talk of customer journeys as being the primary lens through which customer experience professionals and digital marketers think about planning and building the customer experience. It is here, the automotive industry needs to focus to understand what’s driving customer experience (pun intended). A journey now means the entire brand experience, from initial consideration, to active evaluation, to the moment of purchase, to the post-purchase experience and the loyalty loop. Digital needs to play end-to-end.

Digital Factories

And what about digital learning from automotive? The automotive industry is the mainstay example of mass-production using an assembly line. It was Henry Ford who used the conveyor belt to increase speed of car production by 800%, in 1913. The very image of a “factory” depicts standardized components, processes, and management that work in a hyper-efficient factory automation mode to assemble, deliver, operate, and govern. Now the concept of a factory is gaining ground within digital.

Acquia has used the term factory for it’s multisite SaaS solution for the last few years. In May 2017 McKinsey published a report: Scaling a transformative culture through a digital factory. This both chimed well with Acquia’s messaging and endorsed the term factory. A digital factory is a highly efficient platform, or approach to assembling, manufacturing, and running the foundation for digital experiences. Organizations that are implementing digital factories are realizing a newfound efficiency, allowing them to bring sites and digital experiences to market twice as fast than they could before, using factory automation and a standard approach.

In summary, it’s surprising to me the automotive industry ranks as one of the least perceived digitally penetrated industries. It looks both digitally disrupted and transformational from here. It’s clear this industry needs to learn from digital and learn quick. This industry requires a reinterpretation of the term customer journey. But digital can also learn from the automotive industry. The concept of a digital factory continuing to gain ground.

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