Digital Transformation is About Customers Not Technology
The growth of digital platforms that connect billions of users has fundamentally changed the way that we live, work, conduct commerce, and communicate.
- Over 1B smartphones have shipped every year since 2013. The global installed base of smartphones has now reached 2.8B devices.
- Facebook’s audience has eclipsed 2B monthly active users (June 2017)
- YouTube has 1.5B logged in viewers that spend over an hour per day watching videos on mobile devices (June 2017)
- Amazon delivered over 1B items during the 2016 holiday season. As of 2014, Amazon processes over 4B transactions per month to manage order fulfillment.
Amazon, Google, Facebook, and Apple have given users unprecedented choice and control over their buying decisions and consumption habits. The days of companies reaping profits by having better information than their customers or through exclusive control of distribution channels are largely over.
The emergence of digital platforms has degraded the economics of the music business, changed how TV is consumed and delivered, and shuttered shopping malls across the country. While digital disruption has impacted media, entertainment, and retail industries first, the promise and threat of digital are making its way through every industry. This reality is what underpins the rise of digital transformation as a discipline and area of focus for digital consultancies.
Many consultancies define digital transformation as the application of digital technology to streamline supply chains, deliver innovative products and services, and reinvent business models. While the application of digital technology is certainly a key contributor to digital transformation, we think this definition misses the fundamental point.
Walk West believes digital transformation is the strategic application of design thinking and digital technologies to deliver superior value for customers and key stakeholders. The reason digital transformation is taking place is because customers and employees have adopted digital platforms and technologies at scale and as a result, new needs, wants, and pains have emerged.
The availability of digital technologies has also changed the way enterprises configure themselves to deliver customer value. Harnessing this opportunity requires bringing together functions and departments like marketing and IT at the same time to determine how to improve operations and customer experience. This is at the heart of what digital transformation is really about—business model reinvention.
True Digital Transformation Requires New Business Model Approaches
Proposed by Al-Debei and Avison in the European Journal of Information Systems and supported by Alexander Osterwalder in Business Model Generation, a business model consists of 4 main dimensions.
- Products and Services (Offerings, Target Customers and Their Preferences)
- Networks (Partnerships)
- Architecture (Core Resources and Configuration, Key Activities)
- Finances (Revenue and Cost Structure)
In order for the application of digital technology to be transformative, it must address at least one of the main dimensions above and preferably multiple dimensions at the same time. This will make the transformation more defensible from a competitive point of view.
To cement this point, I have taken examples from healthcare to demonstrate how digital technology has been applied to impact business models. While there is significant promise in combining data and artificial intelligence, there are few examples that are evidence-based. Startup Care At Hand is among the few that has generated data that is correlated to improvement in outcomes.
Healthcare and Digital Transformation
How Care At Hand Uses Non-Clinical Workers to Power Analytics
If there is a market that is ripe for disruption, it is healthcare. According to the Centers for Medicare and Medicaid Services (CMS), healthcare spending in the United States is more than $3.2 trillion a year—and accounts for nearly 18 percent of the U.S. gross domestic product.
Startup Care At Hand, acquired by Mindoula in 2016, is attacking one of the chief areas of inefficiencies in the US healthcare system. The Agency for Healthcare Research and Quality (AHRQ) in a 2014 report indicates that roughly $44B dollars was spent in unplanned hospital readmissions.
Care At Hand took advantage of an untapped resource to gather data to monitor patient health between hospital or provider visits—health coaches that are part of community-based organizations and home health aides. The platform captures information about patients by administering smart surveys to these workers.
Here are the key business model elements impacted by Care At Hands:
- Products and Services Innovation – Increasing the utility of home health workers by enabling the collecting data typically provided by doctors and nurses
- Network – Enabling partnerships between community-based organizations and hospital systems by providing data typically only collected as part of an electronic health record (EHR)
- Key Activities – Development of a predictive analytics platform to detect signals that indicate readmission risk
- Finances – Generating ROI by implementing technology to turn home health aides from cost centers into a source of value. By providing home care workers with tools to monitor patient health and behaviors, Care At Hand has been able to deliver the following results when implemented in community-based organizations:
- 39.6% Reduced Readmissions
- 257% Return on Investment
- $9,056 Reduced Medicare A Spending/Beneficiary/Year