This has meant sudden change for many businesses, but it also sets a new tone: those companies that have successfully embedded digitisation are more likely to succeed in the long term. Growth-focused investor Dougal Bennett provides some insight into how businesses can turn digital challenge and complexity into long term opportunity.
Even before the pandemic, the statistics looked remarkable. We’ve created 90 per cent of all the data in the world in just the last two years; almost 4 billion people worldwide now use the internet; more than a quarter of the global population are active on social media. And we see the impacts of this accelerated digitisation all around us. High street stores are closing as shoppers switch online; newspapers have been eclipsed by digital media; the “FAANG” giant technology companies are worth more than $3 trillion. And now those who viewed digital commerce as a secondary channel, urgently need to reprioritise their business with a digital commerce focus.
The need for rapid change feels crushing for many. Every business aspires to be the Amazon of its sector rather than suffer a “Kodak moment” – the company went from being the largest photography business in the world to bankruptcy after failing to embrace digital technology, despite having been a pioneer in the field. And this polarisation between those who have caught the digital wave, and those that have not, will become even more apparent in the post Covid world.
So, where to start? Many businesses know that transformation offers huge opportunities to “do it better, cheaper, smarter”, to unlock new growth potential and to secure competitive advantage. They get the dangers of doing nothing, though some have had a digital reality foisted upon them before they were in a situation to deal with it. When facing so many options and limited resources – time and money, as well as a range of challenges imposed by Covid-19 - it can be difficult to be decisive.
At Dunedin, we’ve worked with many of the businesses in our portfolio to confront the digital dilemma. This is the first in a series of articles reflecting on the lessons we’ve learned so far and those that we will learn in the weeks and months ahead as businesses everywhere adapt. For while many businesses were initially focused on getting through the worst of the Covid-19 crisis, they are also thinking about the future. And as growth-focused investors who work with businesses to create value over time, we recognise the importance of a long-term strategy. Here are four steps to help businesses make the most of an increasingly digital reality:
1. Look through many different lenses
Taking a step back from your business and trying to see it through other people’s eyes will often be a revealing process; it can help you to think the unthinkable and ready yourself for dramatic change.
For example, will customers still find your product or service relevant in three or five or 10 years’ time? Has what they want and need from you already started to change as a result of the recent pandemic– and how might the digital revolution accelerate that process? Could you serve them more efficiently and effectively by doing something radically different to what you do today?
What about your rivals, both now and in the future? Would it be possible for a new entrant in your market, starting with a clean slate, to design a more digital version of your business that starts to attract your customers?
Don’t forget other stakeholder groups. For instance, what are the businesses in your supply chain doing in the digital arena and how might that affect you. What does digitisation mean for your cost base?
What about employees? Does your current workforce have the skills and experience necessary as your business contemplates new models? Will you need the same sized workforce in the future? And are your staff ready for new ways of working – to embrace digital tools, to maintain security and to operate more remotely. Would it be possible to train them using digital tools more cost efficiently and more regularly?
The idea here is to look at your business from the point of view of all its most important stakeholders. Their views will inevitably be coloured by their own take on how the world is changing, what’s important to them in the future, and how they want to go on working with you.
For example, Dunedin worked with same-day-courier business Citysprint over a number of years to assess and respond to the digitisation of its (and its customers’) world. The High Street has been hit by online retailers, such as Amazon, which offer fast and precise delivery options to customers, out-competing on convenience. For the brick and mortar retailers to survive they have needed to find equally dynamic delivery solutions. Citysprint recognised this shift in buyer behaviour and over the last couple of years has invested in new systems and capabilities to provide its customers with competitive solutions.
2. Look little and often
The second step towards understanding the digital opportunity is to concede that there is just too much going on around your business for it to be practical to take in every piece of information in one go. It’s tempting to plan a huge strategic review, to be followed by a major change initiative, but in practice you’ll inevitably miss key nuances if you go for a single deep dive.
Instead, aim to dip in and out over time to build up your knowledge across different areas of potential change; you can then focus in on the issues you consider to be most relevant to your business. This is all the more important given the speed of digital change in every industry; you need to see how trends are gathering pace, or falling short, over time.
If you look little and often, you’ll start to build up a picture of how your industry is being shaped by digitisation – and to uncover the connections between what often appear to be disparate factors in this shift. That will help you work out what the implications are for your business with much greater sophistication.
In 2014, Dunedin invested in EVCam, a manufacturer of high technology cameras that are used to see inside oil and gas wells. Since then, we have worked with the company to regularly assess how digitisation of oilfield services is evolving, offering opportunities for EVCam to broaden its service offering and build enhanced competitive advantage.
By understanding how oilfield service companies were beginning to use digital oilfield data for problem identification, EVCam was able to tailor a suite of novel digital diagnostic services. These address a range of common downhole problems, such as water ingress and wellbore deformation, and crucially blend visual camera analysis with other digital data streams that enhance the quality of the problem-identification, and therefore the quality of the solution. It was only possible to design new services that EVCam was confident would be well received once the new digital landscape had been looked at from many angles over a reasonable period of time.
3. Have an enquiring mindset
Be curious, but also be sceptical. With so much information out there, and so many different opinions, it’s important not to fall into the trap of assuming that every bit of intelligence is relevant or appropriate to your business.
The key lies in the “so what” question. You will see many bold claims and dramatic declarations, but do different areas of technology or emerging trends in digitisation have real implications for your particular business, or the sector in which it operates, now or in the future?
That said, you should also be prepared to think laterally – to be imaginative about how certain types of change might be applied differently in the context of your own business. Recent social distancing requirements have brought this into sharp relief. Could you adapt examples of digitisation in one area elsewhere for different types of benefit in your business, from the back to the front office?
Dunedin recently exited from an investment in Kingsbridge, a group of specialist insurance companies, which focus on the contractor and freelancer end markets. By tapping into the ideas of some of the younger members of the company’s IT team, as well as listening to the wishes expressed by some of its individual contractor customers, a novel idea was floated. Why couldn’t an insurance product be created that was delivered at low cost, via the website, and which could be switched on or off by the customer, as they needed it?
This enquiring mindset ultimately led to a totally novel internet-led approach to providing insurance to the contractor and freelancer markets, appealing particularly to younger customers who are quite used to procuring all manner of goods, services or banking in this way.
4. Don’t be afraid to seek help
The senior leaders of the business may not always be best-placed to take charge of the digital agenda. By definition, they’ve spent more time in the business working in the way it does today and may therefore find it difficult to break out of current mentalities. They may be older and less familiar with new technologies elsewhere in their lives. But even if you do feel confident about digitisation, seeking support and advice from those with additional expertise will pay off.
There are many different ways to do that. For example, some businesses are now setting up digital advisory boards, comprising tech-savvy specialists able to apply their knowledge to help that company. In turn, some executive recruitment firms have recognised that there is an opportunity to help their clients assemble such an advisory board. One example is Ridgeway Partners, which has helped a number of companies to address the ‘digital knowledge gap’ at Board level by helping them recruit experienced and diverse individuals to form a digital advisory capability.
Other recruitment firms are encouraging their clients’ senior leaders to undergo digital training and education. FWB Park Brown, for example, launched a joint venture with Edinburgh Business School to help non-executive directors and Board members to learn about emerging technology areas such as artificial intelligence, data science and fintech. Alternatively, the start-up accelerator group CodeBase now offers senior executive members of established law firms access to learn from the very innovators who are harnessing the new technologies that underpin the digital revolution. They have designed and now run a LawTech Bridge programme which breaks down the barriers between law firms and start-up ventures. This creates a space in which opportunities for law firms to ‘do things differently’ can be imagined and created.
Finally, don’t forget informal networks either. Try and get to know some of the key journalists and industry commentators in your sector. Check out what academia is publishing that might be relevant. Talk to providers of new digital products and services in your own industry and beyond. It’s all about equipping yourself to make the best possible decisions for your own business. As you embrace these changes and focus on growth, working with the right investor could be a key part of that process.