Another example—Hertz will rent you a car to get from place to place. They have a nice app, an intuitive website, and helpful kiosks at their locations, but these are all e-commerce. Hertz’s fundamental value proposition hasn’t changed for the past 30 years. You go to the car rental facility, get the car, drive it around, and return it later to the same place, all the while getting charged by the day. Having an e-commerce-based digital reservation is certainly beneficial because it saves the customer the effort of a phone call and saves the company money as well.
But Zipcar (now part of the Avis Budget Group) does it differently. They park their cars all over the city and use GPS to know where the cars are. They let you reserve a car “near you” on the street, unlock the car with your phone, drive where you need to go, and leave it possibly someplace else, where it can then be grabbed by another customer when they need it. This enables Zipcar to charge by the hour, with many customers potentially using the same car in the course of a single day. At its core, the business is digital. If the cars could not be connected to a wireless network and the customers did not have full touchscreen computers right in their pockets, the model would never work. While they still need cars, Zipcar does not need traditional rental centers, and they make car rental practical for a segment of customers for whom the traditional model does not make sense.
Uber takes this even further. Similar to Zipcar, you use an app to reserve an Uber. But Uber has used a totally different model to digitally mobilize individuals with a car, spare time, and a desire to earn a few bucks. They don’t actually need to own any vehicles or employ any drivers. Instead, they act as a kind of “dating service” for people who want rides and people who want to provide them. Airbnb does something similar for hospitality.
These businesses are centrally reliant on digital infrastructure for their consumer value proposition and business models. Hence, they are “digitally driven” companies. In fact, Uber takes it so far that the digital infrastructure is nearly the entire capability of the company. The rest is effectively outsourced.
Other companies with inherently digital business models include Netflix, Google, Facebook, and eBay. Now, a contrarian might say, “Wait a minute, those are all ‘internet tech’ businesses, so, of course, they are ‘digital.’”
But Google’s fundamental value proposition is really that of a research library. eBay’s is that of a giant store or swap meet. And Netflix’s is that of a video rental store or a multiplex.
So, while it’s true that digitally driven companies at times feel as though they are “tech companies,” a close look at their core value proposition often reveals that they are fundamentally fulfilling a long-standing product or service category, just in a new way. These example businesses aren’t selling technology, like Cisco or Oracle. They are digitally driven manifestations of some other kind of company, such as entertainment, transportation, or telecommunications. That’s what it looks like when businesses in those industries are digitally driven.
Digital transformation is about making your company “digitally driven.” This means that your approach to selling and delivering your products and services becomes intrinsically tied to a digital world. Companies that are thriving today have benefited from this approach, and so will you if you understand what “digital transformation” really means and are able to develop strong digitally driven capabilities.