Digital Transformation Needs to Happen Now

In 2000, DVD-by-mail upstart Netflix approached brick-and-mortar video rental giant Blockbuster with an offer to be acquired for $50 million. John Antioco, then the CEO of Blockbuster, declined, saying that Netflix was a “very small niche business.” While Blockbuster has been defunct since January 2014, Netflix is today valued at around $70 billion, making it the world’s 10th-largest internet company by revenue. It also has more than 51 million subscribers in the United States and more than 100 million subscribers worldwide.

But it wasn’t Netflix’s DVD-by-mail business model that ultimately sank Blockbuster; it was the former’s commitment to digital transformation and the latter’s resistance to it. Although Blockbuster, which had been in business since 1985, tried to introduce its own DVD-by-mail service in 2004, it was too little too late. Netflix started offering that service in 1997 and kept looking ahead from there, culminating in a 2007 shift from its original business model to an online streaming service (and now a content producer as well). Netflix embraced digital transformation and succeeded while Blockbuster fought it and failed.

Digital transformation and digital disruption go hand in hand. Although Netflix might seem to have built an empire overnight, Daniel Newman, principal analyst at Futurum Research and CEO at Broadsuite Media Group, points out that the company “was around for more than a decade before it really ate Blockbuster’s lunch.”

Newman adds that although “the most disruptive tech will sneak up on you,” there is “a difference between seeing it and ignoring it and having it truly disrupt without ever seeing it coming.” All companies need to embrace technology changes to remain competitive—or risk going the way of Blockbuster.

“Digital disruption is not an idea; it is a reality. It is the new form of ‘the only constant is change,’ with this change being digital and more accelerated than in the past,” says Christelle Aponte, director of enterprise services at technology consulting firm ForeFront.

Dale Renner, CEO at RedPoint Global, a data management and integrated marketing technology company, agrees, saying that “organizations cannot protect against digital disruption but rather must embrace it. They need to figure out what it means to their business model and either make the necessary changes or suffer the consequences of competitors doing it first.”

Digital disruption is often consumer-driven, notes Vala Afshar, chief digital evangelist at Salesforce.com. He defines digital disruption as “the change that occurs when new digital technologies and business models affect the value proposition of existing goods and services.” This disruption, he adds, “typically marks a change in consumer needs, and business leaders need to be attuned to these emerging needs in order to keep existing customers happy and uncover opportunities for acquiring new customers.”

BEYOND TECHNOLOGY

Although it is driven by disruptive technology, digital transformation goes deeper than mere technology alone. According to Aponte, digital transformation is often mistakenly thought of as a technical implementation in which a new system or suite of tools changes how businesses perform, when really it is a companywide process that involves both technology and people.

Newman agrees. “Digital transformation is best explained when it’s broken down as digital equals technology and transformation equals people,” he says. “Digital transformation is the investment in people and technology to drive a business that is prepared to grow, adapt, scale, and change into the foreseeable future.”

Experts say that data—and, by extension, the business intelligence gained from it—is the key differentiator in today’s business environment. According to Wilson Raj, global director of customer intelligence at SAS, the core of digital transformation is “the performance of all data that’s available to the business,” and “the winners and losers of digital transformation are ultimately determined at the data level.”

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