eCom is important but being ‘truly digital’ is more critical

While most of the companies today are making definitive shift (some by choice and most by the force of market) towards eCommerce, not everyone has become ‘truly digital’. This may not necessarily be wrong but sooner or later, every company will have to chart out a course for real digital transformation else they run the risk of being out-run and out-gunned by other nimble competitors.

There are several forces at play which are putting massive pressure on the legacy (or shall we say non-digital) business models.

a) eCom is accelerating at a frantic pace: Be it B2C or B2B business, the contribution of ecommerce is no longer in the ‘statistically less significant’ zone. Most companies see ecommerce taking 30%+ share over next 2-3 years.

b) Customer behaviors are changing: Digital adoption amongst customers is surging at a rapid rate thanks in large part to the pandemic which practically forced this behavior.

c) Crazy advancements in tech and data: The growth of 4G followed by 5G has made data cheap for the customers and computational power inexpensive for the companies. Advancements in AI and ML is leading to mind boggling automation and digital transformation all across.

d) Customers are more demanding than ever: Digital innovation has raised the bar of customer service to the next level. If companies cannot live up to those levels, customers are simply moving to the more nimble competitors.

e) Rising competition from the ‘digital natives’: Digital first companies are disrupting every sector possible & leading to significant threat for the incumbents. ‘Old’ and ‘tried & tested’ business models are being re-imagined.

How are legacy business responding to these forces?

The legacy business are surely responding to these forces, albeit with varying degrees of commitment and conviction. The most common response is to build ecommerce as an ‘add on’ to the existing business. They are setting up ecommerce as one additional/new channel of doing the same business and tasking a small eCommerce team to run the channel.

The flaw in this approach is that the resultant customer experience is sub-optimal, especially for the more ‘demanding’ digital customers’. Further, this approach also leaves a lot of value on the table – which the digital first companies can quickly grab and potentially take away the customer very soon.

What is really needed?

Today, companies need a complete transformation to ‘digitally driven commerce’. Mckinsey & Co calls this approach – NeXT commerce. This approach entails reimagining the complete business stack by keeping digitally driven commerce at the heart of the strategy and setting up people, process and technology around it.

The traditional ecommerce approach focuses largely on making the basic transaction of the product/service efficient. The step up needed here would be to look at all the customer issues and interest related to the product/service and set-up business process to cater to a broader set of digital experiences for the customer.

A good illustration of this approach as envisaged by the Mckinsey report on NeXT commerce is worth pondering upon.

As highlighted above, for a running shoe brand, it is no longer about just a transaction of a pair of shoes. But, it is about creating a complete set of experience around the running shoes which include things like how to run, where to run, who to run with etc.

Many companies have started doing this and reaping the benefits of customers who are more brand loyal than ever and therefore leading to greater share of mind and ultimately, the share of wallet.

How can companies accomplish this?

As highlighted earlier, being truly digital, will need significant commitment and alignment across the organization. What is stopping the legacy companies today are wide range of issues like lack of leadership commitment, channel conflict, internal politics, tactical focus, short term financial imperatives etc.

But, several companies have successfully paved the path from legacy business models towards NeXT commerce. Such companies have also reaped significant benefits. Here are some learnings from such success stories:

• Design led re-imagination of the current business processes, organization and technology to deliver NeXT commerce experience
• Headless channel strategy to ensure that all channels, especially the digital channel, are treated equally and more importantly the new age digital channels are not sacrificed
• Cultural shift in the people with single minded focus towards serving the customers
• Technology organization to be fully invested into the digital journey with rewards aligned to delivery customer outcomes
• Razor sharp focus on profitability