Response Design Corporation: Kathryn's Blog

Defining the Digital Firm
Laudon and Laudon (2007, p. 7) define the digital firm as:

"A digital firm is one in which nearly all of the organization’s significant business relationships with customers, suppliers, and employees are digitally enabled and mediated. Core business processes are accomplished through digital networks spanning the entire organization or linking multiple organizations.

Digital firms sense and respond to their environment far more rapidly than traditional firms, giving them more flexibility to survive in turbulent times."

Why Pursue Digital Status?
Webber (2007) describes six customer-focused reasons why firms pursue a digital strategy. Because most customer contact organizations have not achieved digital status, companies can use these characteristics to evaluate how this strategy can benefit them. Once a company is on the path to becoming a digital firm it can use these benchmarks to assess how far they’ve come.

1. Providing faster, easier, smoother customer interactions. Once a customer has experienced digital speed, he asks, "Why should I tolerate an inferior experience from a traditional supplier?" If a company is not providing this kind of experience, the customer will switch to one who does.

2. Focusing on the most profitable, digitally enabled customer segment. More and more customers are becoming digitally enabled. Customers who are willing to communicate digitally and self-serve are increasingly more profitable to companies. If organizations can’t accommodate the digitally enabled customers then that organization will end up with a customer base that typically spends the least and costs the most to serve.

3. Using “digitally enabled” connections to drive speed. Customers will expect speedy interactions and delivery because speed is infectious. Remember the quality revolution phenomenon? First customers realized they could have a quality car. Next they wanted a quality everything. Once customers know that they can get an answer today or have something delivered tomorrow, they will ask, "Why can't I have everything tomorrow?" For the digitally enabled company the answer is "You can." Or consider the email response requirement of customers five years ago versus today. The standard used to be that companies would respond to customer emails in 24 to 48 hours. Today, if the customer does not get a response within the hour or two, he is likely to re-contact the company (increasing the cost to the company. Organizations that become digitally enabled and promise speedy interactions and delivery are going to win.

4. Decreasing complexity and giving customers back their time. Customers’ lives are increasingly complex and their time is precious. Digital interaction gives them the opportunity to navigate through that complexity on their own terms. By interacting with digitally enabled companies, customers move from simply completing a transaction to finding value in each transaction they do. The result for the organization? Higher revenues. Webber says that people spend more when they sell products to themselves.

5. Utilizing “digitally enabled” analytics to revise customer segmentation schema. Soon old customer segmentation schema will not work. Digitally enabled customers are creating niches that companies never knew about. As consumers buy things faster and assume more control over the entire experience, they start displaying new and different behaviors. Their past behavior stops predicting future behavior. The challenge of the digital firm is to use its analytics to detect emerging customer segments that require new and different ways to serve them.

6. Creating valuable, real-time intelligence. Webber says, “A company that manages its business through averages is a company waiting to be hammered.” The real-time intelligence that is available through every digital connection is a competitive advantage. The challenge is to create valuable intelligence and not just information. A digitally enabled company can understand its “over” and “under” performing areas in real time. Companies that continue to manage using historical averages will fail. Webber (2007) says, “A company that can harness the output of digital information to speed up its operations is going to outperform competitors, create new standards, and make a lot of money.”

As most contact center professionals know, transitioning to a digital organization requires a tremendous investment of resources. While most organizations can gain substantial benefits from becoming totally digital other organizations may benefit most by investing in a partial transformation. Management must have a good business case before investing. To be a successful digital customer contact organization, the digital strategy must be clearly defined and eloquently implemented.

Have you decided what digital investments you are (and are not) going to make? Why or why not?

References:
Laudon, K. C., & Laudon, J. P. (2007). Management Information systems: Managing the digital firm (10th ed.). Upper Saddle River, NJ: Prentice Hall. ISBN: 9780132337748.

Webber, A.M. (2007). Are You on Digital Time? Fast Company. Retrieved June 8, 2008, from http://www.fastcompany.com/magazine/22/digitime.html