The transformation of business models into the digital age

Disruptive innovation can hurt if you are not the one doing the disrupting. - Clay Christensen

We live in an age of disruption. We can see, breathe, and smell innovation-led disruption in every walk of life. Innovative companies with disruptive business ideas are shaking up established business models, forcing proven business models, products, and services to rethink and change their approach. It is no longer sufficient to focus only on product and process innovations. It is also crucial to re-evaluate the entire business strategy, including organization, resources, and partners. Digitalization is an indispensable cog in this wheel as it offers opportunities to be more innovative, especially at a strategic level. In recent months, we have discussed this topic with many decision-makers from various industries. This article will summarize some of our findings.

What is driving digitalization?

The Covid crisis forced companies to take the digitalization highway. Industries adopted digital technologies, and companies suddenly faced the challenge of reaching their customers and partners online and connecting their employees with digital office solutions. They are still struggling with this.

Evolution taught us that not the strongest survive but those who can best adapt to change. Companies that already anchored digitalization in their strategy before the pandemic have an advantage. The companies that see little need for action and are hesitant to digitize face more significant challenges. This applies across both the private sector and the public sector.

How are industries embracing digital?

How do companies manage the digital transformation of their business models? What are the stumbling blocks?

Let’s get the answers from our interviews with some Austrian companies from various sectors.

Banking

As compared to other industries, banks have been relatively slow in their digitization activities. The surveyed banks are still busy modernizing their IT infrastructure even as some strict regulatory requirements hamper the digitization projects. Further, the topics of data protection and ESG criteria (Environmental, Social, Governance) make high demands and tie up resources. Digital technologies are not being used proactively to be transformative and innovative. Instead, they are being used reactively to remain competitive. Slowly but surely, an agile, change-oriented organizational form has also begun to take some shape in the banking industry.

Energy & Utilities

The pioneers in the E&U sector have begun transforming and ushering their organizations into the digital age. To stay competitive, they must integrate innovative technologies and rethink their services. With cooperation from innovative start-ups, E&U can ensure a seamless digital transformation by introducing digital, smart electricity meters and entire transformations using electromobility. Another example of the transformation of E&U business models is the energy communities, where the new rules of the European Commission put the citizens at the forefront of the energy transition.

Transport & Logistics

"Industry 4.0" is already well-established and encompasses the digitalization of production processes and logistics. Discussions with our customers have shown that digitalization of production processes and logistics within an organization is more pronounced than transport logistics. One reason for this is that inter-company transport in the supply chain is often more complex. This holds true for the optimal distribution of goods, collection or processing of driver and vehicle information, efficient loading and unloading processes, and route planning in real-time. Such processes also involve many participants who do not always see the advantages of digital networking.

Due to its closeness to the term "Industry 4.0", "Transport Logistics 4.0" has also developed a lot in recent years. It focuses on rethinking the value chain as per data and networking-based digital transformation. As with banks, in addition to the inclusion of state-of-the-art technologies such as IoT, big data, and AI, development in the corporate culture is also imperative. Digital transformation must be the default approach in every person‘s mindset. And it is important to create this mindset among the employees.

Education

While people have discussed about a digital master plan for education in Austria for years, hardly anything has happened. From a shortage of infrastructural equipment to the lack of necessary skills among the educators in dealing with the end devices, learning programs, platforms, and the pedagogical aspects— the Covid crisis has shown just how far we still are from actual digitalization. Digitization does not only mean making textbooks available as PDFs. The teaching content should be supplemented with audio-visual elements through digitalization and adapted to the learning progress of each individual by using artificial intelligence.

In our customer environment, private universities have a forward-thinking approach to digital teaching as compared to others. They focus on integrated learning for years, in other words, the combination of e-learning with classroom teaching. They combine it with a consistent transformation to the cloud and a range of digital learning platforms.

What are the other success factors?

Rethinking existing value chains, realizing new digital business models, and adopting modern technologies place new demands on management and leadership. Regardless of the industry, our clients have reported an intensive examination of aspects such as cloud computing, data protection, and security. A new aspect – especially in the transformation of business models in the digital age – is developing existing management systems concerning enterprise risks, quality, environment, and sustainability or CSR.

Another question came up repeatedly in our discussions: Digital innovations are required but how do we get the right talent?

A shortage of IT experts poses great challenges for domestic companies. Many choose the path of training within the company to develop their skills. Concepts such as "open innovation" or "co-creation" - in other words, the inclusion of external persons or institutions in innovation, are helpful. These can include IT service providers, start-ups, universities, and partner companies, where the expertise complements each other optimally.

The road ahead

Although digital transformation-led business innovation is evident in Austrian companies, there are significant differences in the novelty of the ideas and their realization speed. Developing existing business models incrementally and step-by-step, disruptive approaches were not as prevalent among the surveyed companies. This is also because radical approaches can often have impacts that transcend a company's limitations, making it necessary to have effective cross-company collaboration. It is important to have an organization that is geared towards agility, with an open culture and flat hierarchy. Never has the role of the CIO/CDO and other digital leaders been as crucial in shaping the future of organizations as it is today. Digitalization is already yesterday's news. The way forward is to have new digital business models beyond pure technological digitalization and become the new normal.