Your business will start to see a drop in revenues at an increasing level in the next 12-24 months. Once it starts it may be too difficult to stop it. If you are lucky you may be able to reduce your indirect costs to survive and operate at a smaller scale otherwise you will go out of business as your P&L goes into the red.
Executives have been watching the space and waiting for triggers for too long, but they cannot wait too long. They have failed to act like leaders and even now don’t seem to be following the early movers. Digital transformation is not like a conventional innovation. With the right ingredients it can happen very quickly and at a very low cost and without, no amount of investment can help you.
Digital transformation is not about having a website or app, it is much more than that, it goes much deeper and wider. It’s about organising your IT systems, your workflows, your KPIs and most importantly your people to serve your customers in a new way. The app and website are the interface your customers will use to interact with you. The big magic happens hidden from the eyes, hence many organisations are not aware of what their competitors are doing behind closed doors. It is not like building a new store which takes 18 months and competitors can plan for it.
Most consumer product sellers in Trinidad and Tobago are experiencing difficulties with declining revenues and increasing costs. A mistake many executives are continuing to make is that this is a temporary situation due to COVID pandemic and in 6 months time things will get back to normal.
Nothing could be more wrong. The pandemic is not the reason, the pandemic has just acted as a catalyst to the inevitable. The fact is that elements have been in motion for the last 10 years and more and it is only now that the stars have aligned and the perfect storm of disruption is taking place.
If you want to see the future of Trinidad and Tobago in respect to consumer behaviour and consumer economy you only need to look at the history of the USA and EU. Too many traditionalists have a classic phrase “we are different, our culture is different, the people in Trinidad and Tobago like to touch and feel, like to do business in person, face to face”.
This is an incorrect and dangerous school of thought, everyone’s the same, all humans everywhere have the same fundamental characteristics. Behavioural sciences are discovering and taking advantage of these to gain a competitive edge. We all like to be efficient and search for convenience, we all like to do the minimum we need to do to accomplish our objective. It has always been like this.
The formula to change someone’s behaviour is that the benefit can not be marginal; it has to be of a magnitude of multiple factors higher than their current position for them to go through the pain of the change. It’s a simple pain vs benefit equation. The benefit after the change needs to be in multiple order higher than the pain we need to go through to achieve the benefit. As a change instigator you have two levers, either reduce the pain of change or increase the benefit of the change. The pain experienced to adopt the new change is known as friction and its understanding is fundamental to the success of any project.
A prime example of this is that Amazon was able to provide a significant value proposition to people in TnT that they started to purchase so much ($500million USD in 2016) that the government had to introduce an online tax. Are our purchasing decisions really that much different to the rest of the world? Consumers may take a different path and different speed but the end destination is the same, we are going online.
Coming back to our core issue here in TnT, over the last 10 years the ecosystem has been developing, slowly but surely. The credit card penetration has been increasing slowly, the online payment systems have been increasing, with Paypal, WiPay, PayWise and recently the decision of all the local banks to introduce the VISA debit card. Internet penetration is at an all time high, mobile penetration has been over 100% for a long time but mobile data penetration has been increasing as the cost of mobile data decreases.
Websites are more and more able to take online payments, there are more tech companies that are doing ecommerce websites, lots of online business is being done by social media, predominantly Facebook. Shipping/delivery companies are popping up every week. The ecosystem is vibrant and there is a lot of activity going on.
What the pandemic did was force the natural change to speed up, it forced everyone to react, and accept more pain to transition to online, and it has happened. Whatsapp was being used for a shopping cart and purchasing, can you imagine the contrast between using an Amazon type shopping cart and whatsapp, yet people were using and still are using whatsapp to place orders.
Retailers have seen the revenues and they are investing heavily into enhancing their online websites to improve the user experience. They are learning from their experiences and going through iterations of their online transaction flows, maturing the process and building up powerful competitive advantages over their competitors. Most of these people will NOT be going back, now that they have built up a level of trust and confidence and learned the skill to place online orders, they see the benefit. Infact Big Business is looking at the next generation of online services.
Every single retailer, distributor and manufacturer we have spoken to has recognised that online sales is coming and it will affect the economy, but they either don’t know how they should react or they are in the false belief that their business is different, they can continue as they are but it will affect others. At the same time there are forward thinking entrepreneurs and executives that are pushing forward into the digital space, developing their online strategic platforms. As the cost of getting online gets lower, there is less and less of an excuse not to go online.
It is my opinion that we are about 12-24months away from a significant shift to online. The ecosystem is developing and maturing at a phenomenal pace, there are new companies popping up to support the ecosystem, from online marketplaces, deliveries, apps, etc… It is true many will not succeed, like the dot com, but it is equally true that those that do survive, will eat up the traditionalists lunch, like the Amazons and Netflix.
If you are still thinking about a digital strategy then you are going down the route of Blockbusters and Sears, you are late. Your competitors are already ahead of you. The whole market is about to be totally reengineered, a massive disruption is about to take place. More fierce than what happened in the US, because there is pent up demand, we are not waiting for technologies to mature, it’s all there. We saw this in the mobile penetration market, when once the gates were opened and the market was liberated, our mobile penetration sky rocketed much quicker then what took place in the western economies. This was due to the pent up demand and we are in exactly the same position.
App and website are not a strategy, a real digital transformation plan will be obvious, it’s not just about having a sales channel online, it needs to provide a compelling value proposition to all those involved, and as each customer is different, each product is different, one size does NOT fit all. It is true that the 70% of the core technology for online commerce will be the same for most, but the 30% will be specific to sectors, vendors and products, and as such a real strategy will take this into effect and
The ROI on the correct strategy is obvious and short, the correct strategy will have a short, mid and long term phase and each component will deliver its own value. Generally your strategy will have two main components, one for optimisation and the second for growth, although they seem distinct, they are coupled together and work hand in hand.
Another mistake many executive teams are making is they confuse digital transformation with IT and technology and look to their inhouse IT people to provide them with a solution or a path. This is like asking a nurse to carry out a heart operation or a cardiologist to do brain surgery.
The IT field is vast like many other disciplines and digital strategy is a very new and specialist area within the IT field. For sure it is based around technical innovation but a real digital transformation is about business workflows, marketing, financials, behavioural science, risk mitigation and most of all HR and unless you fully appreciate and consider this, the chances of having a successful digital transformation strategy are low and much less of a probability of actually being able to execute it. The biggest challenges are not technical.