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Digital
Transformation in a
Digital Economy
November 2014
Why it matters now: consumer demand
coupled with „exploding“ supply capabilities
Demand-Pull
Anecdote: The Chess Board
Supply-Push
Customer Savviness
Ubiquitous Connectivity:
Everywhere
Constant Connectivity:
Anytime, Always
Broadband Connectivity:
Mobile, Fixed, Cable
Multi-device: Phone,
Tablet, PC, other
(wearables), ..
Enabled Devices:
Multi-Channel: Online and
Offline
Computing Power:
Moore’s Law
Parallel worlds: Physical
and Digital
Data Processing and
Storage: Kryder’s Law
….
….
o
Chess invented in the Gupta
Empire in India during 6th
century CE
o
Emperor wanted to reward the
inventor -> the Inventor
humbly replied „Place one
grain of rice on the first field,
two grains of rice on the
second, four on the third and
so on … till all fields are filled“
o
By 32nd field about 4 billions
grain of rice, output of one
large field …. BUT …
o
By the 64th field about 18
quintillion grains of rice more
rice than ever produced
o
When it comes to digital
capabilities we are entering
the second half of the
chessboard!
The numbers: The Digital Economy is
happening all around us
Internet Users Globally (2014)
(in billons)
o Internet users globally -> 2.9 billion
o Mobile connections -> 7.3 billion
o Unique mobile subscribers -> 3.6 billion
o Mobile broadband subscriptions -> 2.3
billion
3.5
3
2.5
2
1.5
o Shipments of smart connected devices
-> 1.8 billion
o Connected CE /TV devices -> 1 billion
o Connected devices (IOT) -> 16 billion
1
0.5
0
2000 2005 2010 2014
Source: ABI, IDC, ITU, Internet World Stats, Internetlivestats, GSMA, Strategy Analytics
Case in point: Papal elections
And does it apply here?: Internet Usage in CEU
and Russia
Internet Users (2014)
(as % of population)
100
90
80
70
60
50
40
30
20
10
0
Czech
Rep
Croatia
Internet Users (mn) 8.3
2.8
84.4
6.4
11.2
4.7
2.925
Growth 2014 (%)
2%
10%
2%
2%
2%
2%
3%
Source: Internetlivestats
Russia
Greece Romania Serbia
Global
What it does: The Digital Economy enriches our
lives everyday
Information
Entertainment
o Instant & global access
to largest information
base in human history
o Instant & global access
to rich media content
and applications (text,
audio, video, …)
o Search (Google, …)
o Reference (Wikipedia, ..)
o Media (Newspaper,
Video, …)
o Books (Amazon, …)
o Commercial
o Education /Schooling
o ...
Amazon offers over 2.5
million e-books, even a
leading bookstore does not
stock more than 250,000
titles
o
o
o
o
o
Communications/
Social Networking
o Instant & global access
to family, friends,
contacts, …)
o Communications:
Music (iTunes,
Phone, SMS, Email,
Spotify,…)
…(Skype, WhatsApp, ..)
Video (YouTube, TV, …) o Social Media (Facebook,
LinkedIn, …)
Movies (Netflix, iTunes,
…)
o Forums, Blogs
Gaming (EA, Giant
o Email
Interactive, …)
o …
…
About 20 million songs
available on Spotify , even
an avid music fan would
have only had a fraction
Average number of
Facebook friends is 338,
few address books had that
number of addresses
What it does: Some challenging macroeconomic
impacts (GDP does not capture this)
Global Music Industry Revenues
(US$ billions)
25
20
15
o Digital Economy can create
deflationary pressure
o Growth in consumption and benefit
.…
o … coupled with decline in
generated revenues –> fall in GDP
indicators
10
5
0
2005
Source: IFPI
2009
2013
o Price declines: Media, Consumer
Electronics
o Free goods: Skype, WhatsApp,
Wikipedia
o Increased price and service
transparency: Comparison sites,
What it does: Digital Transformation pays off
for digital leaders …
Cost Reduction
Revenue Growth
o
More efficient Sales and
Distribution Channels
o
Higher revenues per
customer/higher customer
utilization of products
Rise of Direct Sales vs. Indirect
Sales Channels
o
More efficient Customer Care and
Servicing
o
Increased customer cross-selling
between products/to new products
o
Increased automation of
operational processes
o
Improved customer loyalty and
retention
o
More effective supplier
management
o
o
•
Improved customer acquisition
and marketshare growth
Average revenue upside of 5 – 15%
(with digital leaders growing digital
sales 2.5 * faster than laggards )
•
•
Average operating cost reduction of
9% (up to 20% in digitally-oriented
industries e.g. banking, insurance,
telecommunications)
Average bottom-line improvement of
around 30%
Source: McKinsey cross-Industry study on Digitization (2013)
Case Example: Upside for banks
Indicative Numbers
Improved customer
acquisition
o
Improved customer acquisition with superior digital offer,
potential marketshare gains of 0.2 to 0.3 % (absolute) p.a.
o
Improved customer retention with customer churn reduction
by 25 – 33% for mobile banking customer (vs. non-mobile
banking customers)
o
Improved customer base with stronger presence in younger
(< 45 years) and urban demographic; about 25 – 33%
(relatively) higher than normal country population distribution
o
Branch costs reduction of around 10-20% with branch
numbers being reduced by around 20% and staff going down
by about 20%
o
Development of new revenue sources from third party
promotion and transactions
o
Increased technology costs for superior user interfaces, ITinfrastructure upgrades and organizational/process
transformation
Better customer
retention
High quality
customer base
Lower branch costs
New revenue
sources
Higher technology
costs
How to achieve it: … but is often challenging
to realize
Typical Challenges and Pitfalls
Common Failure Points 1)
o Unclear KPIs and business case
around digital initiatives
Failure Point
% of
Respondents
o Multiple separate digital initiatives
without overall strategic direction
Lack of senior and
project leadership
23% / 19%
o Organizational dispersion and/or
isolation of digital initiatives
Limitations of existing
technology
infrastructure and ITsystems
22%
Failure to redesign
business processes
20%
Lack of available
functional and
technology talent
18% / 17%
Lack of organizational
alignment
17%
o Lack of leadership and talent for
digital initiatives
o Failure to effectively program
manage digital initiatives
implementation and progress
o Limitations of legacy
organization, processes and ITsystems
o Viewed purely as an IT-project
1) McKinsey Global Survey on Digitization Initiatives (2013),
850 C-level respondents
Perspective: A sense of optimism regarding
Digital Transformation in CEE and Russia …
Do you view the Digital Economy
more as an opportunity or as a
threat?
(% respondents)
100
90
80
70
60
50
40
30
20
10
0
Source: IDC, New Frontier Group (2014), Clevel respondents in 61 companies in CZ, RO,
SRB and RUS
Opportuntiy
o
o
o
o
o
Ability to reach more customers
Communicate beyond transactions
Collect feedback from customers
Target marketing campaigns
Improve operations and automate
business processes
o Improved collaboration among
employees
Threat
o Security and cyberthreats
o Increased price competition
o New competition through crossindustry moves
o New competition from international
players
o Start-ups with new business models
What to do: The Digital Transformation
Journey
Assessment and
Strategy
•
•
•
•
•
Define your
Digital
Strategy
Is your
business
strategy
digitally
proofed?
Ecosystem
change?
Touch-points?
Business
model
innovation?
Detailing and
Program Mngmt.
Organizational
Execution
Prototyping and
Piloting
•
Technology Strategy
•
•
•
•
•
Detail your digital
initiatives
Business case?
KPI? How do you
track?
Organizational
execution? Modify
processes?
Technology
strategy and
migration?
•
Test different
digital initiatives
in the field
How are they
received?
Learnings and
improvement
opportunities?
Fine-tuning?
Pilot and
prototype cycles
Implementation
•
•
•
Go to market
with innovative
digital
technology
solutions
How to market
and position?
How to sell and
service?
What we do: NFG with over 1800 people and
revenues of about € 200 million
new
frontier 2006 Vienna
Founded August 2006
group
and Headquarter in
17 Countries
Austria, Slovakia, Czech Republic, Slovenia,
Romania, Russia, Serbia, Turkey, Bosnia & Hercegovina,
Macedonia, Montenegro, Hungary, Poland, USA, Canada,
Australia.
Vienna, Austria
1800+People
Highly skilled workforce
in all major IT Solution areas
7 years
Fast growing regional IT solutions
player in the last 6 years through M&A
as well as organic growth despite the
crisis
What we do: NFG’s global footprint with focus
on CEU and EEU
Industries






Banking & Insurance
Telecom & Hightech
Energy & Utilities
Public & Health
Industry & Manufacturing
Retail, FMCG & Pharma
What we do: Digital Transformation Consulting
at NFG provides end-to-end support
Assessment and
Strategy
•
•
•
•
•
Define your
Digital
Strategy
Is your
business
strategy
digitally
proofed?
Ecosystem
change?
Touch-points?
Business
model
innovation?
Detailing and
Program Mngmt.
Organizational
Execution
Prototyping and
Piloting
•
Technology Strategy
•
•
•
•
•
Detail your digital
initiatives
Business case?
KPI? How do you
track?
Organizational
execution? Modify
processes?
Technology
strategy and
migration?
•
Test different
digital initiatives
in the field
How are they
received?
Learnings and
improvement
opportunities?
Fine-tuning?
Pilot and
prototype cycles
Implementation
•
•
•
Go to market
with innovative
digital
technology
solutions
How to market
and position?
How to sell and
service?
What we do: NFG unique proposition for our
clients
1o Passionate about Digital Transformation: Experience and history working
with clients on realizing Digital Transformations of their business
o Holistic view: Understanding Digital Transformation beyond pure SMAC
2
technology but as the execution of an adjusted and extended business
strategy to embrace the opportunities of the Digital Economy
3o End-to-end capability including piloting and prototyping: Results-driven
from Digital Strategy development to organizational execution to piloting and
prototyping to implementation
4o Strong track record of going to market with Digital technology solutions:
Successful and profitable implementation of innovative portal, cloud,
collaboration, marketplace and gaming solutions with our clients
5o Addressing typical failure points: Understand and have led clients through
failure points such as organizational, process and technology infrastructure
alignment
+o Focus on the region: 300 of 500 top enterprises in CEU/EEU and Russia are
our clients
Accelerating our Clients’ ability to realize Digital Transformation
What we do: Contact Details
Christian Terfloth
Head of Digital Transformation Consulting
Pottendorferstrasse 23-25/4/3/2
A-1120 Vienna
Mobile +49-175-290 5019
Tel
+43 1 890 46 23 – 10
Fax
+43 1 890 46 23 – 30
Email [email protected]
Web
www.newfrontier.eu
Shaping Future
Delivering Results