Your monthly blog and industry news roundup - Highlights
To stay relevant in the digital economy,technology, media & telecommunications companies must evolve on two fronts: externally and internally. The trick is that they must do both in tandem — and many find this difficult.
External evolution relates to the role the company is playing to help propel the digital wave forward. Namely, what new and game-changing digital products, services and business models is the company innovating and bringing to market successfully? This type of evolution is also about how the business positions itself among its competitors in the digital market and responds to new market demands and rapidly changing consumer expectations. Are those approaches effective? How does the company know?
Internal evolution, meanwhile, is about the ability of the organisation to strategically transform its business processes, technology infrastructure, workforce culture and more to compete effectively in an increasingly digital age. Evolving internally is vital to supporting the company’s external evolution. Yet business leaders don’t always make that association.
At some companies, external dynamics — shareholders’ views, consumers’ sentiments, market perceptions about the company’s brand or reputation — are the impetus for external evolution. To respond, these businesses are constantly channelling resources into developing new products, services or campaigns, often at the expense of addressing internal issues that could cause the business to falter, or even fail, over time. Siloed business processes and weak cybersecurity practises are examples of such issues.
In other organisations, too much change is undertaken too quickly, both internally and externally. These businesses launch sweeping digital initiatives that aren’t backed by well-thought-out strategies. They also fail to evaluate the competitive landscape thoroughly. They focus on trying to outpace known and well-established rivals, and overlook or underestimate emerging players that have the potential to disrupt the marketplace and erode their market share.
In both examples, these businesses are making digital journeys with blinders on. One group is focused on short-term wins that don’t spark meaningful or lasting change. The other group is barreling toward a finish line in a race without an end, paying little or no attention to emerging threats and changing conditions in the field around them. In either case, the decisions these companies make are unlikely to position them for long-term digital success. I suggest a better approach below.
Look inward first
Using technology to improve operations internally is one way for companies to further their digital transformation and bring it to a broader scale. Evolving internally builds a safe foundation that can support their external evolution. For example, a business that has the right digital processes in place and is not burdened by legacy IT systems undermining its agility can score a number of operational successes — from simplifying or automating repetitive or labour-intensive business processes to implementing new tools to enhance workforce communication and collaboration. These successes can then be translated externally into the ability to innovate quickly, deliver better service to customers and meet the expectations of stakeholders.
I recommend reading Protiviti’s white paper, Catching the Digital Wave of Change, which explains how the way a business embraces technology can, in turn, help to change the way employees and customers perceive the organisation. Change from the inside shines to the outside.
Tear off the blinders
When setting the strategy for a digital initiative, businesses must analyse the markets in which they are operating, as well as the competitor landscape. In their quest to achieve digital transformation, they must be careful not to miss what’s happening in the “ecosystem” around them.
Ron Adner, a professor of strategy and entrepreneurship at Dartmouth College’s Tuck School of Business, explained in a 2016 Harvard Business Review article that the “nature of disruption is changing … [and now] occurring at the level of ecosystems,” rather than at the product or service level. He posited that businesses need to “approach their competitive strategy with a wide lens that captures ecosystem dynamics” if they want to succeed in an Internet of Things world.
Adner pointed specifically to the example of a well-known company that produces imaging products with its historic basis in photography. That company’s long and painful journey to becoming a digital company as an example of what can happen when leadership “does not appreciate the dynamics of the broader ecosystem around it.” The company did not respond fast enough or appropriately to changes in the digital imaging ecosystem, and it cost the company dearly. Adner wrote that the “lesson for today’s leading firms is that risk lies not only in a lack of attentiveness to disruptive change but also in embracing the wrong part of the change.”
I don’t have much more to add to Adner’s insight other than to say that wearing blinders — not looking at the whole picture — in the digital era is likely to cause a company to lose or never find its way. Businesses may miss the right moment to pursue transformation or make the wrong decision about how and what to change. And no matter how innovative the business may be today, if it’s focused only on achieving one type of change or pursuing only one goal blindly, it’s bound to be overtaken or pushed off the track by competitors in the future.
Retailers, Tech Firms and Financial Services Providers: It’s Time to Shape the Future of Mobile Payments — Are You Ready?
The global mobile payments market is projected to reach US$780 billion by the end of 2017, according to research firm TrendForce. That figure seems impressive until you consider that the ability to pay for goods and services with a mobile device has been a reality for years. It’s been nearly a decade since Starbucks, one of the biggest mobile payments success stories to date, launched its app and rewards program. And recent research by the Mobile Economic Forum found that one-fifth of global consumers have made a mobile payment in-store. Given the exponential growth in smart device innovation and adoption over the past decade and consumers’ inherent desire for convenience and speed when making a purchase, it is logical to think that the mobile channel would dominate as the avenue for payments by now. It’s where we’re headed, to be sure. But some formidable obstacles have been impeding the growth of the industry, such as:
- Persistent concerns about fraud, privacy and security: Even though most consumers are aware of “digital wallets” — apps on smartphones that store credit card information and facilitate mobile payments — many remain wary of the risks. Fraud has been a problem, with weak authentication practises and identity theft at the root of many incidents — including those involving well-known brands like Apple Pay and Samsung Pay.
Consumers also worry about how companies are collecting and using data, including purchasing history and even geolocation. How and if that sensitive information is being protected from hackers is yet another concern. Tokenisation helps to secure valuable transaction data, but data stored in digital wallets or merchants’ payment systems may still be vulnerable. Also, new entrants to the market may lack the security sophistication needed to protect sensitive data from compromise.
- Bad timing: When solutions like Apple Pay, Google Wallet and Android Pay were being rolled out by mobile manufacturers and tech providers a few years ago, EMV chip card technology was also hitting the market. Retailers were initially confused, and frustrated, about whether to adopt mobile payments or EMV chip card technology. Most prioritised the latter. Now, adoption of that technology is near-universal in retail, even though EMV chip card transactions are slower than mobile payments or even traditional credit card payments.
- Lack of a consistent experience: Merchants of all types have been racing to launch their own digital wallets. But it is unlikely that many will achieve long-term success with their ventures because consumers are already overwhelmed by choice in the market. Plus, these offerings are diverse, which means the mobile payments experience for consumers also varies. That works against efforts by retailers, and the mobile payments industry to engage consumers and convince them to pay with their smart devices at every opportunity. And there’s another ingredient for mobile payments success that not all retailers can capture: A key reason that apps from brands like Starbucks, Taco Bell and Dominos are so popular is that consumers do business with these retailers frequently — sometimes daily.
- The fact that old habits die hard: One more dynamic that’s working against mobile payment adoption is the simple fact that it’s still easier and faster, in most cases, for consumers to pay for goods and services with cash, debit card or credit card. They’re comfortable with these methods, so they’re in no hurry to change. And many businesses that offer mobile payment options fail to do enough to incentivise consumers to make the switch — for example, they don’t provide compelling rewards to customers who use their app frequently.
A Growing Swell of Expectations From Consumers
The picture is not all bleak. There are other strong trends in motion that will help to drive mobile payments innovation as well as consumer adoption and use of these solutions. Here are some of the dynamics to watch:
- New shopping trends will help mobile payments grow — a lot. Showrooming — where consumers examine merchandise in a traditional brick-and-mortar retail store or another offline setting and then buy it online, sometimes at a lower price — is just one example. It’s a retail experience that’s made for mobile — and it’s expanding as large e-commerce players like Amazon and Microsoft get in the game. Retailers can use mobile payment apps to incentivise shoppers to buy items in the store by offering discounts, special rewards or free delivery.
- Mobile shopping apps are becoming more experiential for consumers. The core purpose of a mobile payment service is to facilitate transactions, of course, but that’s not enough to engage a consumer. Mobile shopping apps are evolving to help customers discover and research products before they are at the store and then help them locate those products while they’re in the store. These apps can also store shoppers’ receipts, gift cards and shopping lists; present discounts and coupons; enable comparison shopping; make the checkout process simple and fast, and more. Look for customer loyalty programs to evolve, as well; for instance, using data insights, a retailer could offer individualised incentives to mobile shoppers and reward them for specific behaviours.
- A friction-free experience is becoming an expectation, fast. Mobile payments success hinges on creating a simple, seamless, value-adding and branded customer experience. Leading players in the person-to-person (P2P) payments space are setting the standard for the frictionless consumer experience — and winning over mobile-minded millennials. Recent research from Bank of America found that 62 percent of millennials use a P2P service.
Entrants in the P2P space are also focusing on the back end, trying to simplify operations and bake in security wherever possible without undermining the consumer experience. Good infrastructure that supports a secure and seamless customer experience is essential to the future of mobile payments. In the coming months on the blog, we’ll be exploring topics that retailers, technology companies and financial services providers, specifically, should consider when developing their mobile payments strategy. These topics include operational effectiveness, risk and compliance issues, technology strategy, and security and data privacy. Each of the industries mentioned above has an important role to play in helping to shape the evolution of the mobile payments industry. It will be through their collaboration, cooperation and innovation that the mobile payments experience can become what businesses and consumers alike envision it can — and should — be.