Why Does Transformation Happen Faster in Some Industries? Part 2
Article 41: The Physical to Digital Continuum
Technology is one of the biggest enablers of transformation across all industries. However, some industries are highly tech-enabled while others are still in the early stages of potential transformation. It’s easy to assume that some industries (Why Does Transformation Happen Faster in Some Industries? Part 1) are just more committed or have more money to spend, but the implied physical nature of an industry can significantly impact how quickly it moves along the physical/digital continuum.
Industries that will continue to require some physical presence often find it difficult to identify the right transformation path. For example, agriculture and manufacturing need physical farms and factories. Humans can’t eat digital bananas or wear digital clothing (yet anyway) or drive digital cars – we need these physical objects to be grown or fabricated. Meanwhile in industries like banking and entertainment, we can easily make purchases with digital cash or enjoy streamed videos.
When we examine industries based on both their digital potential and how far along that path they are, we see that most industries fall into one of two categories:
Digital Centric: These industries can be highly digital and are moving aggressively in that direction.
Digital Maximizers: These industries will never be predominantly digital and are moving more slowly towards their full digital potential.
It is important to note that the potential for 100% digitalization includes some degree of choice. For instance, while we don’t need to go to a movie theater to watch a movie (we could stream it at home), it can be enjoyable to have that physical option. Similarly, while we could buy everything from e-commerce stores, sometimes we prefer visiting a physical store.
The goal of Digital Transformation therefore should not be to make all industries 100% digital, but to remove all inefficiencies. In many cases, these inefficiencies arise because something is physical instead of digital. Take the Disney MagicBand example: in the 20th century, people assumed that waiting in lines at Disney was a fact of life. Lots of people want to go on the rides and so to make it fair, people have to wait their turn. The Magic Band made these lines virtual by scheduling people for a specific time, transforming an inefficient physical solution into an efficient digital one.
Given today’s technology (excluding science fiction items like Star Trek’s replicators or transporters), we see that industries with greater digital potential are further along the path–they’re more than halfway to their particular endpoint. Conversely, industries less likely to become fully digital lag behind–many are much less than halfway to where they can go. An exception is banking, which could be almost fully digital, but consumer preference and transition costs mean they maintain branches and physical cash.
Opportunities arise because Digital Maximizers, while never achieving 100% digitization, can leverage technology far more effectively than they currently do. These industries have seen Digital Centric sectors reap significant benefits from digitization and watched innovators in their own industries push boundaries. It’s time for these industries to rethink their customers’ needs and realize they’re not just selling strawberries–they’re selling strawberries with a longer shelf life. They’re not just selling a doctor’s time–they’re selling longer, healthier lives. They’re not just selling a house–they’re helping someone move into a new home. The core doesn’t change, but the value of the whole can be significantly higher.
Summary
Industries are not all equally advanced in their digital transformation journeys. The Digital Maximizers have a shorter path, but they are less far along. Those with a more digital vision have progressed further in their journey than those with less digital potential. This doesn’t mean other industries can’t progress as far, they just need more help to understand their current endpoint.
These industries can make significant strides in leveraging technology to transform but must invest in both vision and execution. They should look to other industries for ideas and to their customers for inspiration. They need to define what their industry looks like digitally transformed, because figuring out how to get there is the easy part.